Constellation cancels deal with Buffett unit, OKs French deal

Constellation Energy ceg said Wednesday it will sell half of its nuclear power business to French state-controlled nuclear power company EDF for $4.5 billion, scuttling a $4.7 billion offer from a unit of Warren Buffett's Berkshire Hathaway brka/brkb for all of the company.

Constellation Energy Group of Baltimore had agreed to the $26.50-a-share bid by Buffett's MidAmerican Energy Holdings of Des Moines, back in September. The deal, which included a much-needed $1 billion capital infusion, came after Constellation's shares plummeted amid liquidity concerns that had analysts worried the nation's largest wholesale power generator would go out of business.

But Electricite de France, already Constellation Energy's largest shareholder with a 9.5% stake, had complained that MidAmerican's offer shortchanged the company. EDF then offered to buy all of Constellation for $35 a share but backed off that proposal in October. Earlier this month it made its own $4.5 billion bid for Constellation's reactors in Maryland and New York. The transaction could lead to the only foreign ownership stake in U.S. nuclear plants.

"This agreement with EDF Development Inc. provides an opportunity for Constellation Energy shareholders to achieve greater value for the company's significant asset base," said Mayo Shattuck III, chairman, president and chief executive of Constellation Energy.

EDF's offer for half of Constellation's nuclear business includes an immediate $1 billion cash infusion and an option for Constellation to sell up to $2 billion of non-nuclear generation assets to the French company in a transaction expected to close in six to nine months. Unlike the deal with MidAmerican, the offer from EDF allows Constellation to remain an independent company.

Constellation's nuclear business includes three nuclear power stations with five reactors in Maryland and New York. Nuclear power accounts for 61% of Constellation's total electricity generating capacity of 8,700 megawatts. The companies already have a joint venture to plan new nuclear projects in the U.S.

Constellation's non-nuclear assets include coal- and natural gas-fired electric plants, as well as oil and renewable energies such as solar, geothermal and hydro power.

Even without completing the deal for Constellation, MidAmerican still comes out well. Constellation will have to pay MidAmerican $593 million in cash — including a $175 million termination fee — and issue MidAmerican 20 million shares, or 9.9% of its stock. The preferred stock that MidAmerican bought with its $1 billion infusion will be converted into a loan with a 14% interest rate that will have to be repaid in a year.

Constellation shareholders had been expected to vote on the deal Tuesday. The transaction already had received several regulatory approvals.

The deal is just the latest in a string of acquisitions for EDF, the world's largest owner of nuclear power plants and Europe's leading power producer. In September, it said it would buy British Energy Group, Britain's biggest electricity producer, for $18.5 billion. It also has bought controlling stakes in two North Sea gas fields from the British unit of U.S. company ATP Oil & Gas in a deal to expand its natural gas supplies and has invested in a Turkish wind farm company.

MidAmerican wished Constellation well on its deal with EdF.

"We were pleased to have been able to quickly provide a significant amount of capital that was critical to Constellation Energy as they went through unprecedented financial times," said Gregory Abel, president and chief executive of MidAmerican.

MidAmerican Energy distributes energy in the U.S. and U.K. consumer markets and has approximately 6.9 million electricity and gas customers. Its subsidiaries include California utility PacifiCorp.