Constellation and EDF Part Ways

We did not follow stories about Constellation Energy and its decision not to accept a loan guarantee on terms offered by the government because no one story really moved the initial news forward. Too much speculation, too little substance can create considerable drama but not much in the way of useful information. But today, the story generated some facts:

Constellation Energy settled its dispute with French utility giant Electricite de France on Tuesday, selling its half of a joint venture to develop new nuclear power plants and dropping its threat to exercise an option to force EDF to buy a dozen aging fossil fuel plants.

Note the word “dispute.” That’s drama. Note the word “force.” That’s false, as there was a contractual arrangement between the two companies to bring about this result, thus no force required.

Beyond that, this Washington Post story makes clear that EDF means to move forward with nuclear energy. As you might imagine, this is a pretty complex parting of the ways. Here’s how Constellation describes the division:

Under the terms of the agreement, EDF will acquire Constellation's 50 percent ownership in UniStar for $140 million. Upon completion of the transaction, EDF will be the sole owner of UniStar. In addition to sites for Calvert Cliffs 3 and a potential fourth reactor at Calvert Cliffs, which are both held by UniStar, Constellation will transfer to UniStar potential new nuclear sites at Nine Mile Point and R. E. Ginna in New York State. Constellation will provide some contractual services to UniStar to facilitate a smooth transition. With the sale of its share of UniStar, Constellation will no longer have responsibility for developing or financing a new nuclear plant at Calvert Cliffs 3.

UniStar is a joint project between EDF and Constellation to design and build reactors at Calvert Cliffs and the other sites mentioned above. EDF, as a foreign-owned company, can design but not build or operate reactors in this country without a partner to provide a majority stake.

Another detail is that Constellation is the entity that requested and turned down the loan guarantee as offered by the Department of Energy. To date, it has not withdrawn the loan guarantee application and has not closed the door to another DOE offer. That’s another detail.

Further to the terms of the agreement, EDF will transfer to Constellation 3.5 million of the shares that it owns in Constellation and will relinquish its seat on the Constellation board.

Back and forth.

Constellation will terminate its rights under the existing put option and, as a result, will not sell any of its plants to EDF.

That’s the “force” referred to above. It was apparently not contingent on Constellation accepting the loan guarantee, but in any event has become irrelevant. The idea was that EDF would assume ownership of several non-nuclear properties but now will not.

The ownership structure of the companies' existing Constellation Energy Nuclear Group ("CENG") partnership remains unchanged with Constellation holding 50.01 percent ownership and EDF maintaining 49.99 percent partner status.

This is another jointly owned company through which Constellation and EDF own several plants together, including Calvert Cliffs, Nine Mile Point and R.E. Ginna. This joint ownership remains intact, though, as noted above, Constellation has ceded land at each site to UniStar so the latter may build reactors there if it chooses to.

The news creates a new baseline going forward. There will be announcements from EDF and Constellation to explain how each company will proceed consequent to this baseline.

Calvert Cliffs Nuclear Power Plant.