PEG Public Service Enterprise Group Inc

Constellation EnergyGroup Inc. (CEG) has terminated a deal to sell Quail Run natural gas plant in west Texas to High Plains Diversified Energy Corporation. The company has now decided to retain ownership of the plant, which provides power to the west zone of the Electricity Reliability Council of Texas.

In December 2010, Constellation Energy had signed an agreement to sell the plant for $185.3 million. The plant, with a capacity of 550-megawatt is a modern, efficient, well-managed asset, that will provide energy to support customers in west Texas as well as those served by StarTex Power. Recently, Constellation Energy has entered into a definitive merger agreement to acquire StarTex Power in an all-cash transaction of $142.5 million.

Earlier this month, Public Service Enterprise Group Inc. (PEG) had also terminated its agreement to sell a natural-gas fueled power plant in Texas as the buyer failed to arrange the required finance for the purchase. High Plains Diversified Energy Corporation had agreed to buy the 1,000 MW plant for approximately $335 million.

Constellation Energy remains diversified between contractual generation, regulated distribution and competitive supply, which help the company to minimize the impact of volatile commodity prices on its costs.

However, this is already accounted in the company’s valuation, leaving little opportunity for upside from the current level. Moreover, significant Maryland exposure, risks in the merchant power space,and pending regulatory casescontinue to restrain valuation in the near term. The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

Constellation Energy is a leading competitive supplier of power, natural gas and energy products and services for homes and businesses across the continental United States. It owns a diversified fleet of generating units and is a leading advocate for clean and environmentally sustainable energy sources, such as solar power and nuclear energy.

 
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