Constellation Energy CEO Eyes Purchases Of Power Plants

Constellation Energy Group Inc. (CEG), flush with cash from the recent sale of nearly half of its nuclear business, wants to buy power plants in Texas and the Northeast U.S., the company's chairman and chief executive said Tuesday.

In a telephone interview, Mayo Shattuck said Constellation has more than $1 billion of cash that could go to plant purchases in the next one to three years, adding that the market for power plant deals looks favorable. He is comfortable with the scale of the company's power-plant fleet in the East's 13-state PJM Interconnection, the country's largest electricity market, but wants to cut the amount of collateral it must post in areas where it has retail customers and no plants.

"It is going to be very helpful to our collateral position," Shattuck said.

In recent months, several generators have said they'd like to pick up plants in the depressed U.S. power market, with Calpine Corp. (CPN), NRG Energy Inc. (NRG) and PPL Corp. (PPL) expressing interest. Deals have faced hurdles, however, as buyers and sellers can't agree on price. Although power demand and wholesale electricity prices have dropped substantially from highs reached in mid-2008, plant owners aren't yet being forced by investors or creditors to sell.

Constellation last month completed the $4.5 billion deal with Electricite de France SA (EDF.FR), capping off a turbulent year in which the power generator and owner of Maryland's largest utility--Baltimore Gas & Electric--faced the possibility of filing for bankruptcy protection. Shattuck said a majority of the money raised through the deal would go to strengthen the company's balance sheet and maintain its credit ratings.

But he also envisions expanding the company's power-plant fleet so it can rely more on its own generation rather than buying from wholesale-power markets to supply retail customers. As a retail supplier, Constellation operates as a middleman between power suppliers and customers. Having plants to back up these supply contracts with actual electricity supplies will allow Constellation to cut the amount of cash it needs to tie up as collateral.

Shattuck said its regional supply needs, not the type of fuel a plant uses, will determine what sort of plants the company buys. Fluctuating fuel prices and increased focus on emissions of pollutants and greenhouse gases have led power-market participants to closely watch how power companies are balancing their generation fleets.

Shattuck said that the company would focus on buying assets rather than whole companies. It will also consider buying such renewable-power assets as wind farms, since it markets renewable power and other products to its retail customers. He added that Constellation is becoming more active in renewable power in Maryland, which has growing requirements for power to come from clean generation. In the last month, the company announced plans to develop a large-scale solar facility in the state, while also acquiring a wind-power project there.

Shares of Constellation were recently trading up 16 cents at $35.25.

-By Mark Peters , Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

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