Jay Hancock: Bloomberg: EDF supports a sale of Constellation

From Jay Hancock's blog:

Take this with a truckload of salt. One anonymous source tells Bloomberg that EDF Group would support the sale of one of Maryland's biggest corporate citizens, Constellation Energy, parent of Baltimore Gas & Electric. The French EDF, which holds a large stake in Constellation, is in the process of divorcing Constellation over their troubled joint venture to build a third nuclear reactor at the Calvert Cliffs electricity plant.

EDF has several reasons to rattle this saber. 1) It's mad at Constellation for what EDF describes as Constellation's unilateral withdrawal over the weekend from the Calvert Cliffs project. Unable to obtain satisfactory government financing guarantees for the project, Constellation told the Energy Department it would no longer pursue the guarantees. 2) It's pressuring Constellation boss Mayo Shattuck not to exercise an option to sell EDF several older, fossil-fuel electricity plants for perhaps $1 billion more than they're worth. The option is a vestige of a 2009 deal in which EDF outbid Warren Buffett in a deal to rescue Constellation from bankruptcy. After having saved Shattuck's job a year ago, EDF, by seeming to agitate for a Constellation sale, now threatens it.

3) EDF owns 8 percent of Constellation's common shares and nearly half of its existing nuclear plants. An outright sale of Constellation would bear a good chance of letting EDF unload these assets at better prices than if it sold them in pieces. Bloomberg, however, puts a potential sale in a different light, quoting the source as saying that a new Constellation owner could salvage the partnership with EDF. That seems even less likely.

In any event, 8 percent of the common shares and one seat on Constellation's board aren't very effective tools for EDF to put Constellation in play. And with the story quoting only one anonymous source "with knowledge of the matter," it's hard to tell how serious EDF is about this.

jay.hancock@baltsun.com

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