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 It looks like Constellation Energy Group and Florida Power and Light weren't meant to be together. The duo called off their $12.5 billion merger agreement Wednesday, Oct. 25, uncertain of gaining regulatory clearance in Maryland, where Constellation hangs its hat. The stalled merger comes weeks after Chicago's Exelon Corp. and New Jersey's Public Service Enterprise Group Inc. scrapped plans for their $17 billion union.
The Deal's Donna Block may have said it best: "Hardball politics and utility deals just don't mix. ... The scuttling of these two major deals makes it clear that dealmaking in the sector will come at a cost, as regulators grapple with soaring power prices and the effects of deregulation." CHARGED UP FPL announced it would acquire Constellation for about $11.4 billion in stock on Dec. 19, 2005. The proposed marriage would have created the largest energy provider in the U.S. Terms of the deal called for Constellation shareholders to receive 1.444 shares in the new company for each share owned, while FPL shareholders were to swap their shares on a one-for-one basis. The merger would have combined FPL's strong suit of generation capabilities with Constellation's retail and wholesale network. But in the end, it all came down to politics. As The Deal's Scott Stuart wrote in September: "Constellation has been a political football between the Democratic state legislature and Republican governor in Maryland. The legislature attempted an end run around the state utility commission, which was controlled by gubernatorial appointees, by passing a law firing its members and appointing new ones, dominated by legislative appointees." POWER FAILURE At the heart of the Consellation-FPL debate was a 72% electric rate increase by Baltimore Gas & Electric Co., Constellation's regulated utility.
POLITICAL CONVICTIONS In August 2005, the Public Utility Company Holding Act of 1935, a law that restricted utility mergers, was repealed in an effort to make acquisitions easier. But, Maryland state regulators have instead continued to interject, making things difficult. Even without a merger, Constellation and FPL look like they'll be OK.
It seems even huge utilities subscribe to the notion that "it is better to have loved and lost..."
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