Constellation Energy and EDF Group Enter Definitive Investment Agreement
Wednesday December 17, 10:35 am ET
EDF Development Inc. to acquire 49.99 percent interest in Constellation Energys nuclear generation and operation business for $4.5 billion Agreement includes immediate $1 billion cash investment in Constellation Energy and option to sell to EDF Development Inc. up to $2 billion of non-nuclear generation assets Constellation Energy to remain independent publicly traded company Investment by EDF Development Inc. enhances Constellation Energys long-term stability and liquidity position Transaction extends EDF Groups nuclear expertise in U.S. Transaction expected to close in six to nine months
BALTIMORE & PARIS--(BUSINESS WIRE)--Constellation Energy (NYSE: CEG - News) and EDF Development Inc. (a wholly owned subsidiary of EDF) today announced a definitive investment agreement under which EDF Development Inc., will acquire a 49.99 percent interest in Constellation Energy Nuclear Group, LLC, for $4.5 billion. Constellation Energy Nuclear Group owns 3,869 megawatts of nuclear generating capacity, which consists of the Calvert Cliffs Nuclear Power Plant in Maryland, and Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Power Plant in New York. EDF Development Inc.’s interest in Constellation Energy Nuclear Group will be structured as a new joint venture between the companies, separate from the existing UniStar joint venture.
Under the terms of the agreement, EDF Group will also make several key investments to strengthen Constellation Energy’s liquidity position:
EDF Development Inc. is making an immediate $1 billion cash investment in Constellation Energy through the purchase of newly issued Constellation Energy Series B non-convertible cumulative preferred stock, which will be surrendered to Constellation Energy upon closing of the transaction and credited against the $4.5 billion purchase price for EDF’s interest in Constellation Energy Nuclear Group.
To provide Constellation Energy with additional liquidity support, EDF Development Inc. and Constellation Energy have entered into a two-year asset put option that allows Constellation Energy to sell to EDF up to $2 billion of non-nuclear generation assets.
EDF Group has provided Constellation Energy a $600 million interim backstop liquidity facility, which will remain available until receipt of all regulatory approvals relating to the transfer of the non-nuclear generation assets that could be sold under the asset put option or the date that is six months after the date of the investment agreement, whichever is earlier.
“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 A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. “The investment also provides the liquidity support to stabilize and grow our business as an independent public company dedicated to serving our customers across the country. EDF Group has been a proven partner of ours in the development of new nuclear plants in the U.S., and we welcome their involvement in the ownership of our existing fleet. As the largest owner of nuclear plants in the world, EDF Group brings experience, scale and financial strength to Constellation Energy’s future.”
In the U.S., EDF Group and Constellation Energy have an existing partnership through their UniStar joint venture to build, own and operate new nuclear generation. EDF Group is also a leading provider and developer of wind and solar generation in the U.S. through EDF Energies Nouvelles' U.S. subsidiary, EnXco.
EDF chairman and chief executive officer Pierre Gadonneix said: “This agreement further illustrates the strong relationship between EDF Group and Constellation Energy with the shared objective of leading the nuclear renaissance in the U.S. EDF Group and Constellation Energy intend to develop four Evolutionary Power Reactors (EPR) through the UniStar joint venture with the immediate focus on breaking ground for Calvert Cliffs Unit 3 as soon as the regulatory process allows, perhaps as early as 2009.
“EDF Group has long believed that there are significant benefits to be realized between the development of new nuclear assets and the operation and ownership of existing nuclear facilities, such as those owned and operated by Constellation Energy,” continued Gadonneix. “Through this agreement, we can capitalize on these benefits and EDF Group’s nuclear expertise to drive further growth to the benefit of shareholders, customers and employees of both EDF Group and Constellation Energy. We look forward to working further with Constellation Energy in the development of new nuclear generation in Maryland, New York and beyond. This agreement will contribute significantly to non-CO2 emitting energy generation in the U.S.”
In connection with the new joint venture, Constellation Energy and EDF Development Inc. each will appoint five members to a new Board of Directors, with a casting vote on matters related to safety, security and reliability to the chairman of the new joint venture (a U.S. citizen) appointed by Constellation Energy. The vice-chairman of the joint venture board will be appointed by EDF Development Inc. In addition, EDF Group will have an observer seat on Constellation Energy’s Board of Directors, and, upon closing of the transaction, will have the right to designate one director to Constellation Energy’s Board.
The agreement announced today reflects an amended offer from EDF Group, which follows the company’s initial proposal to Constellation Energy’s Board of Directors on Dec. 2, 2008. Upon careful consideration, and in consultation with its financial and legal advisors, Constellation Energy’s Board has determined that the revised EDF Group proposal is in the best interests of Constellation Energy’s shareholders. In conjunction with the agreement, MidAmerican Energy Holdings Company and Constellation Energy have jointly terminated the prior merger agreement, as separately announced today.
As a demonstration of its commitment to the U.S. nuclear renaissance, and in particular, Maryland’s future role in that renaissance, EDF Group will move its U.S. headquarters to Maryland. EDF Group will also invest $20 million in a new visitor and environmental center at Calvert Cliffs, consistent with the companies’ focus on breaking ground on a third nuclear unit at Calvert Cliffs as soon as the regulatory process allows.
Additionally, as part of its commitment to Maryland, EDF Group will invest $36 million in the Constellation Energy Group Foundation to support future charitable endeavors for the long-term benefit of the Baltimore community and the state of Maryland.
The transaction is not subject to a financing condition. EDF Group will finance the transaction, including the agreed liquidity arrangements, through corporate funds and credit facilities.
The companies expect to receive the necessary regulatory approvals for the acquisition of EDF Development Inc.’s interest in Constellation Energy’s nuclear generation and operation business and close the transaction within six to nine months. The companies will work closely with Maryland regulators to make them fully informed of the transaction’s details. Approval from Constellation Energy’s shareholders is not required.