Chicago, Dec. 19 (Reuters): The boards of FPL Group Inc and Constellation Energy Group Inc have approved FPL’s $11-billion acquisition of Constellation, a source familiar with the situation said on Sunday. A formal announcement of the deal was expected Monday, the source said.
The terms of the deal, which will create one of the nation’s largest power generators, could not be immediately confirmed.
But The Wall Street Journal, citing “a person with knowledge of the matter,” said it was an all-stock deal that would value Constellation at somewhere between $61 and $62 a share. Shares of Constellation, which operates Baltimore Gas & Electric, closed on Friday at $61.62 on the New York Stock Exchange. In contrast, shares of FPL, which operates Florida Power & Light, closed on Friday at $42.95 on the NYSE.
An FPL-Constellation merger would create a top-tier US power company with operations all along the US East Coast and more than 30,000 megawatts of power generation.
It would also be the first major industry deal to be announced since Congress passed an energy bill that includes the eventual repeal of the Public Utilities Holding Companies Act, or PUHCA, which put limits on utility combinations. The deal would give FPL access to Constellation’s merchant energy operations, which sell power at competitive rates, and accounted for more than 80 per cent of the company’s earnings in 2004.
Power companies have been consolidating after years of shedding assets, slashing debt and refocusing on their core operations in the wake of Enron’s 2001 bankruptcy and the subsequent collapse of the electricity trading market. Analysts have said they expect the deal to face few regulatory hurdles and to close in as soon as a year.
FPL found itself in a showdown with the attorney general of Florida earlier this year over proposed rate hikes, ultimately settling for little of what it had requested.
The company also came under fire in the wake of Hurricane Wilma, which ravaged its service territory and left many customers without power for weeks. Some in the community charged that FPL had not spent enough money on maintenance before the storm, a charge the utility denied.
