Constellation Energy and EDF Form Joint Venture for Developing Next-Generation Nuclear Facilities in the United States and Canada
BALTIMORE, July 20 -- Constellation Energy (NYSE:CEG) and EDF today announced a strategic joint venture focused on the potential development and deployment of the first fleet of new nuclear power plants in the United States and Canada in nearly three decades.
Constellation Energy and EDF will form a new nuclear holding company, known as UniStar Nuclear Energy, LLC, designed to develop, own and operate new U.S. and Canadian nuclear projects. Constellation Energy and EDF will each own a 50 percent interest in UniStar Nuclear Energy. EDF will invest up to $625 million into UniStar Nuclear Energy, while Constellation Energy will contribute the subsidiary companies and interests that it has independently created and owns as part of its pre-existing UniStar Nuclear line of business.
Constellation Energy's contribution to the venture also includes the right to develop possible nuclear projects at its Calvert Cliffs Nuclear Power Plant in southern Maryland, and Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Plant in upstate New York. The next-generation U.S. Evolutionary Power Reactor (USEPR), based on AREVA, Inc.'s advanced nuclear power plant design, will be the joint venture's prime reactor technology. In September 2005, Constellation Energy and AREVA, Inc. formed a joint enterprise which has now assumed a leadership position in the U.S. nuclear renaissance.
This agreement to form the joint venture between Constellation Energy and EDF follows a Memorandum of Understanding announced on June 1, 2006, under which both companies agreed to work together on the development of advanced EPR-type nuclear power plants in the United States.
"We are extremely optimistic about the future of this joint venture. This alliance, which is based on the strength of the business model developed by AREVA and Constellation Energy during the past two years, is in the enviable position of establishing and achieving meaningful milestones as we progress toward the goal of constructing the first fleet of new nuclear power plants in the United States and Canada in nearly three decades," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. "Constellation Energy strongly believes nuclear power must play a prominent role in our nation's energy future, which will be vitally important in helping America achieve its goals of reducing greenhouse gas emissions and moving toward greater energy independence. The combination of Constellation Energy's extensive nuclear ownership and operating experience in the U.S. and EDF's unmatched global leadership in the nuclear arena positions UniStar Nuclear Energy at the forefront of America's nuclear power renaissance. Many milestones lie ahead since we've yet to make a commitment to build. But this alliance represents a major accomplishment. It allows us to move forward confidently, leveraging the considerable value of our complementary strengths and operational capabilities, while also maintaining our highly disciplined, risk-managed and value-driven approach to new nuclear."
Pierre Gadonneix, chairman and chief executive officer of EDF Group, declared: "We are extremely pleased to partner with Constellation Energy -- one of America's pre-eminent nuclear operators. This agreement confirms EDF's interest in the U.S. nuclear power renaissance and participation in increasing the availability of safe and secure nuclear power which produces no greenhouse gas emissions. EDF will contribute to the joint venture its unparalleled expertise and experience as the operator of 58 nuclear reactors for more than 20 years in France and the investment in the new EPR under way in Flamanville. EDF Group will thus participate in the promotion of the EPR technology developed by AREVA and its deployment in the United States. This alliance builds on the cooperation between AREVA and Constellation Energy of the past two years within UniStar, which enabled the EPR to be recognised as an innovative and competitive solution."
As part of its $625 million commitment, EDF will make an initial cash investment of $350 million into UniStar Nuclear Energy. Subsequent EDF investment under the agreement will be based on pre-established milestones, including $175 million related to the filing of construction and operating license applications at existing Constellation Energy nuclear sites. Constellation Energy and EDF also have signed a cooperation agreement to review potential joint development in the United States.
Additionally, an eight-member board will be established with equal representation from both companies and chaired by a representative from Constellation Energy. An independent advisory board that will provide transparency to the U.S. government also will be established for additional governance purposes.
In connection with this strategic alliance, EDF may purchase up to 9.9 percent of Constellation Energy's outstanding common shares in the open market during the next five years, with a limit of 5 percent ownership during the first 12 months of the agreement. As part of this investor agreement, EDF will have the right to have an observer at meetings of the Committee on Nuclear Power of the Constellation Energy Board of Directors.
The boards of directors of the companies have approved the terms of the joint venture. The transaction is also subject to review by certain U.S. regulatory agencies.
Corporate Profiles
Constellation Energy (http://www.constellation.com/), a FORTUNE 200 company with 2006 revenues of $19.3 billion, is the nation's largest competitive supplier of electricity to large commercial and industrial customers and the nation's largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of more than 78 generating units located throughout the United States, totaling approximately 8,700 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland.
The EDF Group, one of the leaders in the energy market in Europe, is an energy specialist that is active in all the businesses of electricity: production, transport, distribution, energy supply and trading. The Group is the leading electricity producer in Europe. In France, it has mainly nuclear and hydraulic production facilities where 95 % of the electricity output involves no CO2 emissions. EDF operates over 1,200,000 km of low and medium voltage overhead and underground electricity lines and around 100,000 km of high and very high voltage networks. The Group is involved in supplying energy and services to close to 40 million customers around the world, including more than 28 million in France. The Group generated consolidated sales of euro 58.9 billion in 2006, of which 42 % in Europe excluding France. Net income (Group share) stood at euro 5.6 billion, with net income from ordinary operations at euro 4.2 billion. EDF is listed on the Paris Stock Exchange and is a member of the CAC 40 index.
First Call Analyst:
FCMN Contact: aaron.koos@constellation.com
Source: Constellation Energy
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