Dow Jones News Service, also citing a
confidential source, said Wednesday that FPL's board
could vote on the proposal this weekend and announce the
deal as early as next week. The Times said
several important points still needed to be hammered
out, leaving open the possibility that the plan could be
delayed or collapse.Wall Street responded favorably
to word of the proposal. Constellation's stock rose
$4.83 a share, closing at $61.10. FPL's stock advanced
only slightly, closing at $43 a share, up 13 cents.
The news came one day after executives from Florida
Power & Light Co., the state's largest electric company,
told The Palm Beach Post that the 2005 hurricane
season would cost between $800 million and $900 million.
The company plans to ask state utility regulators for
permission to sell bonds, which customers would pay back
over a 10- or 11-year period with an average monthly
surcharge of $1.60.
But whether it's $11 billion or another amount, the
money that FPL Group uses to buy Constellation Energy
would not come out of the pockets of the utility
company's 4.3 million residential and business
customers. FPL Group instead would probably issue new
shares of stock as well as borrow the money from large
investment companies.
"Nobody is expecting Florida ratepayers to fund the
acquisition of a Baltimore business," said David Parker,
a Tampa-based utility analyst with Robert W. Baird &
Co., who said the merger would have little effect on the
utility's customers here.
"You're really not going to see much here," Parker
said. "Most of the change, if anything, would be in its
unregulated side of the business, which is outside of
Florida, so I wouldn't expect to see much impact, if
anything."
FPL Group's unregulated unit, FPL Energy, operates
power plants in other states. These so-called merchant
plants sell the power they produce on the open market
and do not have rates set by a utilities commission.
Analysts say the merger, which would need the
approval of shareholders and federal regulators, could
be complete in 12 to 18 months. The Florida Public
Service Commission does not have any authority over
utility mergers, spokesman Kevin Bloom said.
The deal would make FPL a utility giant with
operations from Maine to Florida on the East Coast, as
well as throughout the United States. FPL Energy owns
solar and wind operations across much of the Midwest and
Southwest as well as a nuclear power plant in Seabrook,
N.H.
"They would be much bigger, particularly in the
Northeast," Parker said. "FPL can operate plants better
than anyone else, and they will bring that expertise."
Constellation's roots go back nearly 200 years, to a
company that later became Baltimore Gas & Electric, the
nation's first electric company. Constellation built
Maryland's first nuclear power plant, at Calvert Cliffs
in the southern part of the state, in 1975.
The company later began pursuing independent power
plants and eventually became the nation's top seller of
wholesale power.
"Constellation is a well-run company with a good
team," said Parker, who said the same about FPL. "Wall
Street likes the company, and it would only get better,
and FPL would only get better, if this happens."
Adding the 10 power plants of Constellation Energy,
which have a total generating capacity of 12,000
megawatts, would more than double FPL's power capacity,
said Tim Winter, a St. Louis-based analyst with A.G.
Edwards & Sons.
The deal also would significantly strengthen FPL's
nuclear power production, something that Florida Power &
Light President Armando Olivera told The Post
on Tuesday he'd like to see.
"FPL would be far better off with more coal and more
nuclear," he said, referring to the utility, which gets
about 38 percent of its fuel from natural gas and
20 percent from nuclear power.
Both FPL and Constellation are a part of NuStart LLC,
a group of utilities that is planning to build the
nation's first nuclear plant in 30 years.
"You could have a nuclear team that would create
synergies," Winter said.
This isn't the first time FPL has tried to buy a
major utility company. The company agreed to buy Entergy
Corp. of New Orleans in 2000, but the plan fell apart in
the closing stages after FPL said it was unhappy with
Entergy's financials, and Entergy executives countered
that the merger was looking more like a hostile
takeover.
News of the failed merger, which was called off in
2002, hung around for nearly two more years, after five
shareholders sued eight former and current executives of
FPL Group to return the $62 million they received in
bonuses for the deal. Both sides settled in August 2004
when executives agreed to return $22.25 million to FPL.
The FPL-Constellation deal is the fifth merger of
utility companies to be discussed nationally during the
past 12 months.
"It's perfectly logical," said Winter, who, along
with other analysts said he couldn't confirm the deal
was taking place. "FPL has long been considered an
acquirer."