October 14, 2010 4:04 am

EDF offers to buy out Constellation

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EDF of France has offered to buy out its partner Constellation Energy from their joint venture to develop new nuclear plants in the US, so long as Constellation decides not to exercise its option to sell conventional generation assets to the French company for up to $2bn.

In a letter to Constellation, EDF said it was determined to press ahead with the $10bn project the two companies had been developing together at Calvert Cliffs in Maryland, and said it had “an obligation to pursue every reasonable avenue to keep this project alive”.

Constellation said at the weekend it had been forced to pull out by the high cost of government loan guarantees to protect the project’s financing.

The two companies have so far spent $600m on their Calvert Cliffs 3 development.

On Wednesday, EDF offered two options to keep the project on track: either it would buy out Constellation’s 50 per cent stake in their Unistar new nuclear joint venture, “at fair market value”, or it would bear 100 per cent of the risk of developing Calvert Cliffs 3 until construction begins.

However, both offers were conditional on Constellation agreeing to drop the put option, agreed in 2008, which gave the US company the right to sell coal, gas and hydro power stations to EDF for up to $2bn.

The two companies have been in an acrimonious dispute over the option, which was agreed as part of the rescue of Constellation when it ran into trouble during the financial crisis. The option expires at year-end.

Thomas Piquemal, EDF’s executive vice-president for finance, wrote: “By its terms, the put is not exercisable under present circumstances, and it was never intended to be so exercisable, as Constellation has itself stated in numerous regulatory filings.”

Analysts have estimated that the value of the 12 power plants named in the put option is now much less than $2bn.

EDF also stressed the benefits that the Calvert Cliffs 3 development would bring to the region, including 4,000 jobs.

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