Exelon Corp.’s $7.9 billion acquisition of Baltimore’s last remaining Fortune 500 company cleared its final regulatory hurdle Friday with the conditional approval of the deal by the Federal Energy Regulatory Commission.
On Feb. 17, Maryland’s Public Service Commission gave its approval for the Chicago-based firm to take over Constellation Energy Group, the parent company of Baltimore Gas & Electric Co. The Nuclear Regulatory Commission signed off on the deal a few days before that, and the other approvals — including from shareholders from both companies — preceded that.
FERC conditionally approved the deal but the conditions are unlikely to affect the deal. The PSC’s conditions hew closely to an agreement hammered out in December between the companies and Gov. Martin O’Malley.
“Constellation has resolved the FERC investigation,” Constellation CEO Mayo A. Shattuck III said in a statement. “We are putting it behind us and moving forward with our merger with Exelon. While Constellation disagrees with the FERC staff’s claims, we believe it is in the interest of all parties to settle this case and avoid expensive, protracted litigation.”
The FERC settlement includes payment of penalties related to Constellation’s energy trading transactions in New York wholesale energy markets from September 2007 to December 2008. Under the settlement, Constellation is to pay a $135 million civil penalty.
The company will also pay $110 million in “disgorgement.” A total of $6 million will go to six regional grid operators to improve their surveillance and analytic capabilities. The remaining $104 million will seed a fund, administered by a FERC administrative judge, that will make payments to state agencies that make claims on behalf of consumers.
“We believe Constellation’s trading practices in question were lawful portfolio risk management transactions,” Shattuck said in the statement. “The company admits to no wrongdoing in this case. Even so, these practices do not reflect Constellation’s trading operations today, nor in the future.”
Prior to the FERC approval, a deal with Maryland regulators included a $100 rate credit to all BGE customers that is to be paid within 90 days. Exelon must invest $113.5 million over three years into a fund to provide energy efficiency and low-income energy assistance to BGE customers. Exelon also will need to develop between 285 and 300 megawatts of new generation within the state.
Of the total amount, 120 megawatts will come from a primarily natural gas-fired plant, which needs to be online by December 2015. Exelon will also need to develop 125 megawatts using alternative renewable resources, like wind or solar power. The deadline for completion is January 2022. Exelon will also have until December 2015 to add 30 additional megawatts of solar generation in Baltimore and other jurisdictions.
The new generation condition is meant to help protect Maryland consumers from higher rates since Exelon will now have a greater market share in the regional power grid.
Other conditions include keeping staffing levels the same at BGE and at two power plants the companies must sell off, for a two-year period. The PSC could also require divestiture of BGE if Exelon files for bankruptcy or allows its credit rating to drop six levels below investment grade.
The Constellation name will live on as the companies’ competitive power division, which will be headquartered in a $120 million building to be constructed at Harbor Point in Baltimore. Constellation will move from its current headquarters on Pratt Street at the Inner Harbor.
The building is slated for completion in 2014, and is being planned to achieve Platinum LEED status. The tower will have up to 400,000 square feet of office space and a 70,000-square-foot trading floor, 3,000 parking spaces, 600 residential units and 150,000 square feet of retail space. An 11-acre park, including a tournament-grade lacrosse field as part of a new U.S. Lacrosse complex, is also expected to be built at the site.