Constellation Divesting Assets

Constellation Energy Group Inc. (CEG) and EDF Development Inc. recently announced that the U.S. Nuclear Regulatory Commission (NRC) has approved the investment structure and license transfer related to EDF’s investment in Constellation Energy Nuclear Group LLC.

EDF Development Inc. -- the wholly owned subsidiary of French energy major EDF S.A. -- is planning to acquire 49.99% stake in Constellation Energy’s nuclear assets for $4.5 billion. Subsequently, EDF’s interest in Constellation Energy Nuclear Group will be structured as a new joint venture between the companies.

The deal has received the necessary federal approvals and clearance from the New York Public Service Commission. However, regulatory approval from the Public Service Commission in Maryland is pending. A final decision will be taken by the Maryland Public Service Commission in October 2009.

Constellation Energy is pursuing the divestment of its nuclear assets to improve liquidity position and strengthen balance sheet. The company has more than $1.5 billion of debt lined up for maturity this fiscal year. The debt-loaded company with a debt-to-equity ratio of 134.6% after the first half of fiscal 2009 dished out $143.9 million in interest expenses during the second quarter compared to only $78.8 million in the year-ago quarter.

Based in Baltimore, MD, Constellation Energy supplies energy products and services to wholesale customers as well as retail commercial, industrial and governmental customers in North America. It is a North American energy company that includes a merchant energy business and the Baltimore Gas and Electric Company (BGE), a regulated electric and gas public utility in central Maryland. Its merchant energy business is a provider of energy solutions.

Constellation Energy also has other non-regulated businesses, which design, construct and operate heating, cooling and cogeneration facilities for commercial, industrial and governmental customers throughout North America. Moreover, it provides home improvements, service heating, air conditioning, plumbing, electrical and indoor air-quality systems, besides providing natural gas to the residential customers in central Maryland. We maintain our market Neutral recommendation on the shares.

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