Baltimore-based Constellation Energy Group said yesterday that it has agreed to sell most of its London-based commodities business as it continues to divest itself or wind down much of the operation that was the source of its credit troubles.
Terms of the deal with an affiliate of Goldman Sachs were not disclosed. The international unit - including its coal and freight operations and European trading units - has 120 employees, nearly all based in London.
Constellation is shoring up its finances and reducing its liquidity risk, while it focuses more on its traditional energy business after facing down a near bankruptcy late last year.
Constellation abandoned last month a $4.7 billion takeover deal with Warren Buffett's MidAmerican Energy Holdings Co. in favor of a proposed nuclear venture with France's largest utility. Electricite de France agreed to pay $4.5 billion for half of Constellation's nuclear power business, allowing Constellation to remain an independent, publicly traded Baltimore company.
Constellation repaid last week a $1 billion emergency loan, plus $5 million in interest, to MidAmerican, which provided the immediate cash infusion to avert a bankruptcy in mid-September.
Mayo A. Shattuck III, chairman and chief executive officer of Constellation, said the pending sale of its international trading business is one of "several strategic initiatives" the company is pursuing to strengthen its balance sheet.
Besides putting that business up for sale last year, Constellation also put its Houston-based natural gas-trading business on the market. Constellation is also pursuing the sale of its "upstream" gas portfolio, subject to market conditions.
"Marketing conditions continue to be difficult, but we're actively reducing capital consumption and cash flow risk, and right-sizing the business to address the realities of the new financial and economic environment," Shattuck said in a statement. "Completion of these near-term activities should position Constellation Energy to earn solid risk-adjusted returns while reducing earnings risk and variability."
Constellation's London-based trading operation is expected to be folded into Goldman Sachs' existing commodities group. The sale is expected to close by the end of the first quarter.
Shares of Constellation fell 76 cents yesterday, or almost 3 percent, to close at $26.85. Shares of Goldman fell $13.85, or almost 19 percent, to close at $59.20 amid a broader sell-off of financial stocks.