EDF beat to Constellation

25 September 2008

MidAmerican Energy Holdings has reached a tentative agreement to acquire Constellation Energy. Under the agreement, MidAmerican will purchase all of the outstanding shares of Constellation Energy for a cash consideration of approximately $4.7 billion, or $26.50 per share.

The 18 September announcement came less than ten days after EDF announced it had increased its stake in Constellation Energy from 4.97% to 9.51%, through the acquisition of shares on the market. In July 2007, EDF and Constellation formed Unistar, an equally-owned joint venture set up to build and develop nuclear power stations using EPR technology in the USA.

Announcing the deal, MidAmerican Energy Holdings president and chief executive officer Gregory E Abel claimed the acquisition would not affect Constellation’s plans for new nuclear build. “MidAmerican is very comfortable with, and committed to, Constellation Energy’s current strategic plan. We intend, as with all of our investments, to allow Constellation Energy to operate autonomously as it pursues its long-term goals,” Abel said. “Constellation Energy’s premier fleet of nuclear assets, and its Unistar joint venture with EDF, complements MidAmerican’s ongoing commitment to environmental initiatives, including investments in hydro, wind and geothermal energy,” he added.

In January this year, MidAmerican Energy Holdings subsidiary MidAmerican Nuclear Energy dropped its plans to build a new nuclear plant in Payette County, Idaho. Then, Bill Fehrman, president of MidAmerican Nuclear Energy Company, said: “Consumers expect reasonably priced energy, and the company’s due diligence process has led to the conclusion that it does not make economic sense to pursue the project at this time. The decision is based on economic considerations and not on issues related to the suitability of the Idaho site.”

Constellation Energy chairman, president and chief executive officer Mayo A Shattuck III said the deal with MidAmerican, which is expected to be closed within nine months, “is in the best long-term interest of our investors, employees and the customers and communities we serve.”

MidAmerican is 87% owned by Berkshire Hathaway, the largest shareholder and CEO of which is Warren Buffett – the world’s richest man, according to Forbes.

On 19 September, EDF International together with Kohlberg Kravis Roberts (KKR) and TPG Capital submitted a joint offer to the Constellation board of directors.

KKR are owners of Luminant (formerly TXU) who recently submitted the first COL application for the 1700MWe US-APWR design.

Introducing renewable energy unavoidably leads to higher electricity prices

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