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FPL, Constellation in advanced merger talks

FPL Group Inc., parent of the Florida Power and Light utility, is in advanced talks to acquire Constellation Energy Group Inc. for more than $11 billion, The New York Times reported Wednesday.
/ Source: Reuters

FPL Group Inc., parent of the Florida Power and Light utility, is in advanced talks to acquire Constellation Energy Group Inc. for more than $11 billion, The New York Times reported Wednesday.

Citing people briefed on the talks, the newspaper said an announcement of an agreement could come as soon as this week or early next week, but cautioned that the negotiations could take longer or break down entirely.

Several important points still need to be worked out, the report said.

Constellation Energy has a market capitalization of about $10 billion, based on Tuesday’s closing stock price.

An FPL-Constellation merger would create a top-tier U.S. power company with operations all along the U.S. East Coast and more than 30,000 megawatts of power generation.

A deal would also give FPL access to Constellation’s merchant energy operations, which sell power at competitive rates, and accounted for more than 80 percent of the company’s earnings in 2004. Constellation is also the parent of the Baltimore Gas & Electric utility.

The deal would be the latest in a string of multibillion-dollar acquisitions in the U.S. utility industry over the last year. Power companies have been consolidating after years of shedding assets, slashing debt and refocusing on their core operations in the wake of Enron’s 2001 bankruptcy and the subsequent collapse of the energy trading market.

Duke Energy Corp. in May announced the $9 billion acquisition of Cinergy Corp., and Warren Buffett’s Berkshire Hathaway Inc. Tuesday agreed to buy the PacifiCorp utility from Britain’s Scottish Power Plc for $5.1 billion.

In December 2004, Exelon Corp. agreed to pay $13.2 billion for New Jersey’s Public Service Enterprise Group Inc.

FPL’s Florida Power and Light unit provides electricity to more than 4.2 million residential and business customers in Florida. The company also has a wholesale energy unit that was responsible for about a quarter of its 2004 earnings.

Both FPL and Constellation have significant nuclear portfolios.

Officials from the two companies were not immediately available for comment.

If the companies agree to merge, it would be the first major deal between power companies with substantial regulated operations since Congress repealed a 70-year-old law that was meant to regulate utility mergers this summer.