Constellation in joint nuclear venture

The Baltimore Sun

Constellation Energy Group said yesterday that it is teaming with Electricite de France SA, the world's largest operator of nuclear power plants, to develop and invest in a fleet of new nuclear reactors that if licensed would be among the first new ones in the U.S. in a generation.

The stated-controlled French company will invest $625 million in a joint venture with Constellation called UniStar Nuclear Energy LLC. UniStar plans to license and build reactors based on a French design being adapted for the United States.

EDF, based in Paris, also will be able to acquire up to 9.9 percent of Constellation's outstanding shares over the next five years.

Constellation's stock climbed $1.12 yesterday to close at a record $96.22 per share.

"They are sending a signal to the market that they are serious about us and also sending a signal that they are in this for the long haul," said Michael J. Wallace, executive vice president of Constellation and co-chief executive of UniStar.

EDF will become an equal partner with Constellation in UniStar, giving it rights to invest in a half-dozen nuclear reactors the Baltimore energy company has on the drawing board. EDF joins Paris-based AREVA SA, the world's largest designer of nuclear reactors, and global engineering and construction firm Bechtel Group Inc., which joined UniStar in 2005.

"For Constellation to be successful, we need to be able to attract a broad group of investors in these plants, and first and foremost of those will be EDF," Wallace said.

Constellation is among a handful of large energy producers vying to be leaders in the nuclear industry's revival.

No nuclear reactors have been licensed in the U.S. in 30 years, and it remains to be seen whether UniStar and other energy companies will succeed in getting the regulatory approvals and financing needed to build new plants. None has committed to building any new reactors yet.

Constellation hopes to build the first new reactor adjacent to its Calvert Cliffs nuclear plant in Lusby, at a cost that could exceed $5 billion.

Other new reactors are planned for Constellation's Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Plant, both in Upstate New York. In addition, Ameren Corp., of St. Louis, PPL Corp., of Allentown, Pa., and Amarillo Power, of Texas, have signed deals to develop reactors with UniStar.

Wallace said the company is in talks with "several" more buyers interested in developing plants with UniStar.

Industry officials say they are waiting to see whether the federal Energy Department develops a package of tax breaks and loan guarantees that will help spur development. Loan guarantees were called for in the 2005 Energy Policy Act, but the Bush administration has yet to offer a program that satisfies the bankers who must finance nuclear projects. Final regulations establishing the loan guarantees are expected later this year.

The financial backing of EDF, which operates 58 nuclear plants and is Europe's leading energy producer, will give Constellation more credibility with lenders and potential buyers of new plants, analysts said. But company officials and analysts said it will still need a favorable package of federal loan guarantees to succeed.

"It sounds like there might be some promise to this, although the nuclear resurgence is in its nascent stage right now and the level of opportunity remains to be seen," said Paul Patterson, an analyst with Glenrock Associates.

paul.adams@baltsun.com

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