Constellation Energy Wants 'Rational' Result In EDF Sale Option

Constellation Energy Group Inc. (CEG) seeks a "rational" agreement with Electricite de France SA (EDF.FR) in a dispute over the possible sale of a dozen U.S. power plants to the French energy giant, a Constellation executive said Wednesday.

Constellation Chief Financial Officer Jonathan Thayer, speaking at a Bank of America Merrill Lynch conference, said the two sides should work to reach an agreement in which Constellation can realize the value of its sales option without EDF having to absorb losses from the deal all at once. He added Constellation is mindful of its ongoing nuclear power partnership with EDF, while knowing Constellation shareholders expect the company to capture the value of the sales option.

Constellation Energy agreed in late 2008 to sell nearly half of its nuclear-power business to EDF after the financial crisis nearly drove the Baltimore company into bankruptcy. As part of the deal, Constellation received a put option that allows it to sell 12 power plants, most of them coal-fired, to EDF for up to $2 billion. The option expires at the end of the year.

The option could net Constellation a hefty return since it would be selling the plants at what analysts see as well above their current market value. Yet by exercising the option, Constellation could damage its relationship with EDF, since the companies are planning to build reactors in the U.S. through the partnership. The option was put in place as a backstop to ensure Constellation had ample liquidity in the wake of the financial crisis.

In an interview earlier this month, EDF Chief Financial Officer Thomas Piquemal cautioned that "Constellation must weigh between a potential immediate profit and the value of its partnership with EDF."

EDF has hired Lazard Ltd. (LAZ) as an adviser as it explore its strategic options on the put option, a company spokeswoman said this week.

Constellation and EDF are planning to build a new reactor at Calvert Cliffs Nuclear Power Plant in Maryland. It's one of the leading U.S. nuclear projects, yet Constellation has said it will shelve it by the end of the year if it isn't able to secure a government loan guarantee for the multibillion-dollar project.

Thayer said the after-tax gains for Constellation in exercising the sales option is estimated at $1.4 billion.

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

(Geraldine Amiel in Paris contributed to this report.)

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