French firm seeks to upset Buffett’s bid for Constellation Energy

Associated Press
Published: September 26, 2008

A French nuclear power company is upping the ante for Constellation Energy Group Inc., offering to pay $35 per share for the Baltimore-based wholesale power supplier in hopes of unseating a deal Constellation made last week to be sold to MidAmerican Energy Holdings Co., a unit of Warren Buffett’s Berkshire Hathaway Inc.

Constellation Energy is a 50-50 partner in UniStar Nuclear, the company that has chosen Areva-NP’s evolutionary power reactor for construction at four sites. The company has already applied for a license to build and operate that reactor in Maryland.

Constellation Energy Group

MidAmerican Energy Holdings

Electricite de France

The offer from Electricite de France SA, which the French company made on Friday and disclosed in a statement on Monday, is $8.50 per share higher than the $26.50 per share price that Constellation agreed to last week.

EDF, which already owns 9.5 percent of Constellation, said it was making the offer in conjunction with private equity firms Kohlberg Kravis Roberts & Co. and TPG Capital.

EDF called the offer from Berkshire’s MidAmerican Energy Holdings Co. inadequate, but Mayo Shattuck, Constellation Energy’s chairman, president and chief executive, told analysts Monday the company has accepted what it considers the best offer.

Shattuck said on a conference call that Constellation favored the deal with MidAmerican because it provided an immediate cash injection and a higher degree of certainty on certain issues such as regulatory approval.

Constellation’s shares rose $1.44 or 5.6 percent to $27.20 in heavy trading on Monday, well off the utility’s 52-week high of $107.97 reached Jan. 8.

MidAmerican Energy announced Thursday that it would buy Constellation Energy for $4.7 billion and give it an immediate $1 billion infusion. The deal came after Constellation’s shares plummeted and liquidity concerns had analysts worried that the company would go out of business.

EDF, a major operator of nuclear power plants, is owned mostly by the French government and is leading power producer in Europe. It has a joint venture with Constellation to build four next-generation nuclear reactors.

In addition to offering $35 per share for Constellation, EDF also said it would make an immediate $1 billion investment in the company.

Any such deal would come with headaches, however. Nuclear Regulatory Commission rules prohibit outright ownership of Constellation Energy’s five reactors by a foreign company. Constellation has two reactors in Maryland and three in upstate New York.

MidAmerican bills itself as a global leader in energy production from sources including natural gas, hydroelectric, nuclear, coal, geothermal and wind. The company, with more than $12 billion in annual revenue, distributes energy in the U.S. and U.K. consumer markets, with approximately 6.7 million electricity and gas customers. Its subsidiaries include California utility PacifiCorp.

Constellation supplies electricity to large commercial and industrial customers. It also manages fuels and energy services on behalf of energy intensive industries and utilities and owns 83 generating units in the U.S.