Constellation Energy Group Inc. (CEG) is offering to immediately transfer its half of a joint venture to develop nuclear power plants to partner Electricite de France SA (EDF.FR) for what it says is below market value, according to a letter sent to the French state-owned utility Friday.

Problems with the five-year-old joint venture known as UniStar emerged last week when Constellation dropped out of an application for a federal loan guarantee for the partnership's first project, citing high government financing costs. The withdrawal put in doubt the development of a new reactor at the Calvert Cliffs nuclear plant in Maryland, while prompting a surprised EDF to offer to buy out Constellation's interest.

Constellation proposes a transfer "at well below the market value in order to rapidly enable the [Maryland] project to move forward," Michael Wallace, Constellation's chief operating officer, wrote in the letter.

He proposed the transfer of Constellation's interest for $1 plus $117 million in reimbursements. Constellation's exit would allow EDF to move forward with building the Maryland reactor. The Calvert Cliffs project is scheduled to be one of the nation's first new reactors after a decades-long drought in nuclear-power development.

The Baltimore power company stated in the letter that the transfer of its UniStar stake isn't connected to a second dispute between Constellation and EDF that's flared up in recent months. EDF, however, has linked the two disputes in its buyout proposal.

The second rift is over whether the French company is required to buy 12 power plants--most of them coal-fired--from Constellation for as much as $2 billion. The disputed requirement is part of a larger deal brokered in 2008 in which Constellation sold nearly half of its nuclear-power business to EDF as a way to avoid bankruptcy. The so-called put option expires at the end of this year, and EDF is threatening to sue if it is forced to make the purchase of the plants.

An EDF spokeswoman said the company was reviewing Constellation's letter.

In a letter to Constellation on Wednesday, EDF said its offer to buy out Constellation from the UniStar venture is contingent upon Constellation not exercising the put option, and the EDF spokeswoman said Friday the company still stands by that position.

Yet because Constellation has yet to exercise the put and offered to sell the UniStar stake, there could be an opening to possibly negotiate a settlement, although it's too early to say whether that would be possible, people familiar with the matter said.

Constellation in its letter wrote that the put dispute is a separate issue and should be resolved separately. Constellation hasn't yet made a decision whether to exercise that option, a company spokesman said.

As for new nuclear development, EDF and Constellation have invested $817 million in the Maryland project. Constellation said it is backing out of the Maryland project because construction costs are hard to justify given the sharp drop in power prices and the lack of an energy policy that puts a price on carbon.

Constellation Energy shares were recently down 5 cents at $32.75.

-By Naureen S. Malik, Dow Jones Newswires; 212-416-4210; naureen.malik@dowjones.com

(Gina Chon of The Wall Street Journal and Geraldine Amiel of Dow Jones Newswires contributed to this article.)
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