Electricite de France SA, the largest shareholder in Constellation Energy Group Inc., would support the sale of the company as relations between the partners sour, said a person with knowledge of the matter.
EDF, which rejected inquiries about a sale in the past few months, has reversed its thinking amid a dispute over its joint venture with the Baltimore-based company, said the person, who declined to be identified because the talks are private. While EDF would like a change of control or new management at Constellation, it won’t actively pursue a sale, the person said.
The shift by Paris-based EDF may prompt takeover interest, and a new owner could salvage the companies’ partnerships, said the person. EDF owns about 8.4 percent of Constellation and holds a board seat after it entered into a $4.5 billion deal two years ago to acquire half of the company’s nuclear assets. The deal prevented an acquisition by MidAmerican Energy Holdings Co., a unit of Warren Buffett’s Berkshire Hathaway Inc.
It’s not clear a bidder for Constellation will emerge, in which case EDF would have to find another way to repair a deteriorating situation. Relations between the two worsened when Constellation said Oct. 9 that it was abandoning negotiations on a $7.5 billion loan guarantee for their joint venture’s Maryland reactor because it creates too much risk. The two sides are also in dispute over a $2 billion put option on non-nuclear plants.
‘Clean Exit’
“A clean exit out of the U.S. would be our preferred option for EDF,” Sofia Savvantidou, a Citigroup Inc. analyst, wrote in a note to clients. “This breakdown in relationship might be the trigger.”
EDF shares fell as much 3.4 percent to 30.34 euros in Paris today. They traded at 30.56 euros at 3:42 p.m. local time. The stock has declined 27 percent this year, compared with a 5.1 percent drop in the benchmark CAC 40 index.
Constellation rose 6 cents to $32.36 at 9:47 a.m. in New York Stock Exchange composite trading.
EDF, which already took a provision of 1.1 billion euros ($1.5 billion) this year related to its Constellation holding, may further write down the value of U.S. assets “if an exit strategy is engineered,” according to Savvantidou.
A spokeswoman for EDF and a spokesman for Constellation declined to comment.
EDF is fighting the option Constellation has to force it to buy non-nuclear plants for as much as $2 billion, people familiar with the situation said last month. EDF has told Constellation it would view the exercise of the put option as a hostile move that would jeopardize their venture, the people said.
Scaling Back
Henri Proglio, EDF’s chief executive officer who took over last year, has been scaling back his predecessor’s international expansion plans to reduce debt. In July, Proglio agreed to sell EDF’s U.K. power networks for 5.8 billion pounds ($9.2 billion) to a group led by Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd.
Constellation and EDF created the UniStar Nuclear Energy venture in 2007 for as many as four nuclear reactors at the Calvert Cliffs plant in Maryland, and in New York. At the time, EDF’s former CEO, Pierre Gadonneix, was seeking to develop and operate 10 reactors around the world by 2020.
“Interest in EDF’s portion of the joint venture will be robust,” Dorothea Matthews, an analyst at CreditSights Inc. analyst, wrote in a research note.
Dominion Resources Inc., Duke Energy Corp., Entergy Corp., Exelon Corp., MidAmerican, NextEra Energy Inc., NRG Energy Inc., Public Service Enterprise Group Inc. and Sempra Energy were mentioned as possible acquirers of the stake by Matthews.
“While we do not comment on market rumor or speculation, we have been clear that we do not plan on acquiring merchant assets,” Dominion spokesman Ryan Frazier said.
Spokesmen at Duke and Entergy declined to comment, as did a spokeswoman from MidAmerican.
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The shift by Paris-based EDF may prompt takeover interest, and a new owner could salvage the companies’ partnerships, said the person. EDF owns about 8.4 percent of Constellation and holds a board seat after it entered into a $4.5 billion deal two years ago to acquire half of the company’s nuclear assets. The deal prevented an acquisition by MidAmerican Energy Holdings Co., a unit of Warren Buffett’s Berkshire Hathaway Inc.
It’s not clear a bidder for Constellation will emerge, in which case EDF would have to find another way to repair a deteriorating situation. Relations between the two worsened when Constellation said Oct. 9 that it was abandoning negotiations on a $7.5 billion loan guarantee for their joint venture’s Maryland reactor because it creates too much risk. The two sides are also in dispute over a $2 billion put option on non-nuclear plants.
‘Clean Exit’
“A clean exit out of the U.S. would be our preferred option for EDF,” Sofia Savvantidou, a Citigroup Inc. analyst, wrote in a note to clients. “This breakdown in relationship might be the trigger.”
EDF shares fell as much 3.4 percent to 30.34 euros in Paris today. They traded at 30.56 euros at 3:42 p.m. local time. The stock has declined 27 percent this year, compared with a 5.1 percent drop in the benchmark CAC 40 index.
Constellation rose 6 cents to $32.36 at 9:47 a.m. in New York Stock Exchange composite trading.
EDF, which already took a provision of 1.1 billion euros ($1.5 billion) this year related to its Constellation holding, may further write down the value of U.S. assets “if an exit strategy is engineered,” according to Savvantidou.
A spokeswoman for EDF and a spokesman for Constellation declined to comment.
EDF is fighting the option Constellation has to force it to buy non-nuclear plants for as much as $2 billion, people familiar with the situation said last month. EDF has told Constellation it would view the exercise of the put option as a hostile move that would jeopardize their venture, the people said.
Scaling Back
Henri Proglio, EDF’s chief executive officer who took over last year, has been scaling back his predecessor’s international expansion plans to reduce debt. In July, Proglio agreed to sell EDF’s U.K. power networks for 5.8 billion pounds ($9.2 billion) to a group led by Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd.
Constellation and EDF created the UniStar Nuclear Energy venture in 2007 for as many as four nuclear reactors at the Calvert Cliffs plant in Maryland, and in New York. At the time, EDF’s former CEO, Pierre Gadonneix, was seeking to develop and operate 10 reactors around the world by 2020.
“Interest in EDF’s portion of the joint venture will be robust,” Dorothea Matthews, an analyst at CreditSights Inc. analyst, wrote in a research note.
Dominion Resources Inc., Duke Energy Corp., Entergy Corp., Exelon Corp., MidAmerican, NextEra Energy Inc., NRG Energy Inc., Public Service Enterprise Group Inc. and Sempra Energy were mentioned as possible acquirers of the stake by Matthews.
“While we do not comment on market rumor or speculation, we have been clear that we do not plan on acquiring merchant assets,” Dominion spokesman Ryan Frazier said.
Spokesmen at Duke and Entergy declined to comment, as did a spokeswoman from MidAmerican.
http://jodnet.blogspot.com
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