Power Engineering - FPL Group and Constellation Energy to Merge

20 December 2005 - Two of fastest-growing energy companies in the USA, FPL Group and Constellation Energy, on Monday announced plans to merge creating Nation's largest competitive energy supplier and its second-largest electric utility.

The companies said that they have signed a definitive agreement to create the nation's largest competitive energy supplier and its second-largest electric utility portfolio.

The transaction will create a company with a market capitalization of approximately $28bn (based on current market values), combined annual revenues of $27bn, and $57bn in total assets. The combined company will be named Constellation Energy.

Upon consummation of the merger, FPL Group shareholders will own approximately 60 per cent, and Constellation Energy's shareholders will own approximately 40 per cent of the combined company. Based on both companies' previously communicated earnings expectations, the transaction is expected to be accretive to both companies in the first full year of combined operations, excluding transaction and integration costs and the positive effects of purchase accounting.

Ratings agency Standard and Poor's (S & P) reacted to the planned merger favourably. "We believe it would create a stronger platform for growth in unregulated operations, including a more balanced fuel mix, geographical diversity and lower operating costs." With roughly half of the combined company's earnings expected to be derived from regulated operations, S & P said it did not expect any significant change in dividend payout or growth

The combined company will maintain dual headquarters in Juno Beach, Fla., and Baltimore. It will have approximately 21 750 employees and will serve more than 5.5 million electric customers in Florida and Maryland and 625 000 gas customers in Maryland. Its competitive wholesale and retail businesses will serve thousands of commercial, industrial and utility customers, including 72 of the FORTUNE 100 companies. Its generation portfolio will be the nation's largest, exceeding 45 000 MW. It will be the third-largest nuclear plant operator in the United States, owning and operating seven nuclear power stations with eleven units, including FPL Group's pending acquisition of the Duane Arnold nuclear station.

Lewis Hay, III, currently chairman, president and chief executive officer of FPL Group, will become chief executive officer of Constellation Energy. Mayo A. Shattuck III, currently chairman, president and chief executive officer of Constellation Energy, will become chairman of the board of Constellation Energy upon completion of the merger and will also head the combined company's competitive energy business. The Constellation Energy board will be composed of 15 members, nine of whom will be named by FPL Group, and six of whom will be named by Constellation Energy. Thirteen of the company's board members will be non-executive directors.

"This historic transaction will create growth potential for the combined enterprise that exceeds what our two companies could have achieved separately," said Hay. "It brings together two strong, successful industry leaders with extensive and complementary assets and skill sets, combining the best of the regulated utility and competitive energy sectors."

"We will build scale in our generation fleet by more than doubling our competitive generation assets and will leverage that increased scale with our customer-facing businesses and world-class risk management. Most importantly, we are creating an enterprise extraordinarily well positioned to create shareholder value by seizing growth opportunities with our unique combination of people, assets, strategic vision and financial strength," said Shattuck.

Add RSS Feed