Dec. 4 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear reactors, said it was “approached” by Constellation Energy Group Inc. shareholders who were unhappy with a bid from billionaire Warren Buffett.

EDF, which owns 9.5 percent of Constellation, yesterday offered to pay $4.5 billion for half of the U.S. utility’s nuclear business.

The French company wants to gain generating capacity in North America and scupper a rival bid from Buffett’s MidAmerican Energy Holdings Co., which agreed Sept. 18 to buy all of Constellation for $4.7 billion, amid investor concern the financial crisis could wreck its energy-trading business.

Some investors “were just not comfortable with the price,” Chief Financial Officer Daniel Camus said during an investor day in London. “We think we are on solid ground.”

EDF’s offer would force Constellation to invest in nuclear power, which would mean less free cash flow, while MidAmerican’s bid “should probably deliver a more stable dividend trend,” Peter Wirtz, analyst at WestLB in Dusseldorf, said in a report today. He raised his rating on EDF to “hold” from “reduce.”

“EDF’s approach is acceptable for the entry into the U.S. market,” the report said, estimating the French utility will pay a premium of more than 50 percent, or $1.6 billion, on the fair value of Constellation assets.

EDF lost 3.2 euros, or 7.2 percent, to close at 41.15 euros in Paris trading today.

‘Best Interest’

EDF’s Chief Executive Officer Pierre Gadonneix sees no reason why the offer won’t meet with a favorable reception, since it would provide “managerial certainty” as well as cost savings.

“It would transform EDF into a nuclear operator in the U.S., giving geographic and competency synergies,” Gadonneix said.

EDF’s intervention is an attempt to “cherry-pick” Constellation’s best assets, MidAmerican Chairman David Sokol said yesterday in an interview in New York.

“We believe the merger agreement is in the best interest of stakeholders,” Sokol said. “We have a signed merger agreement. We have no intention to alter our bid.”

EDF is proposing a 50-50 venture that would own Constellation’s five reactors and pursue development of at least four Evolutionary Power Reactors, new models that are capable of producing about 1,600 megawatts of electricity.

Rising Costs

The Paris-based power producer today said costs to build an EPR in Flamanville, Normandy, have risen 20 percent from an initial estimate because of higher prices for components.

The cost of building the reactor has risen to 4 billion euros ($5.1 billion). EDF said similar plants planned for the U.S. would cost about the same.

The utility began construction last year on a new- generation nuclear reactor at Flamanville designed by Areva SA, the world’s biggest atomic plant maker.

The project in Flamanville is a gauge of EDF’s ability to export the technology.

“Using a comparable method, the estimated cost for a U.S. EPR is close to the costs presented for Europe,” it said.

Constellation agreed to the deal with MidAmerican after its stock plunged 58 percent in three days on credit concerns following the bankruptcy of Lehman Brothers Holdings Inc., a major energy trader. Constellation shareholders are scheduled to vote Dec. 23 on management’s agreement with MidAmerican.

Up Front

Under EDF’s offer, Constellation would get $1 billion up front and the other $3.5 billion upon closing. Baltimore-based Constellation is the largest U.S. power marketer.

EDF estimates that terminating the accord with MidAmerican would drain $2.4 billion in liquidity, to be replaced by EDF.

MidAmerican would walk away with a 9.9 percent stake, $593 million in cash, and $1 billion of senior notes paying 14 percent interest, Constellation said in an Dec. 2 SEC filing.

The cash portion includes a $175 million breakup fee. Constellation would also have to return any unused portion of a $350 million credit line.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net

Last Updated: December 4, 2008 12:46 EST