U.S. Settles With Exelon Over $7.9 Billion Constellation Takeover Deal

The U.S. Justice Department agreed to let Exelon Corp. carry out its $7.9 billion acquisition of Constellation Energy Group Inc. (CEG) on condition that Exelon sell three electricity-generating plants in Maryland.

The department announced the agreement today shortly after it filed a lawsuit in U.S. District Court in Washington alleging the takeover would eliminate competition and lead to an increase in wholesale electricity prices for consumers in Mid-Atlantic states. The agreement must be approved by a federal judge.

“Competition in wholesale electricity markets is vital to the economic well-being of consumers and businesses,” Sharis Pozen, acting assistant attorney general for the department’s antitrust division, said in an e-mailed statement. “These divestitures will preserve that critical competition for the benefit of electricity customers throughout the mid-Atlantic.”

Exelon expects to complete the transaction early next year, Christopher Crane, who’ll become chief executive officer of the combined company, said today in a statement announcing the settlement.

The deal would create the largest U.S. utility owner and power generator. Sale of the three Baltimore-area plants was included in the initial takeover announcement by Chicago-based Exelon on April 28 to reduce the combined company’s market share in PJM Interconnection LLC, the largest U.S. power market.

Exelon on Oct. 11 announced additional terms for sale of the plants had satisfied the market monitor of PJM.

Maryland Accepts

Maryland’s governor and energy department also accepted those terms as part of a Dec. 14 settlement. That state’s utility regulator is scheduled to decide on the deal Feb. 17.

Exelon already has approval for the transaction from regulators in Texas and New York. It had asked the Federal Energy Regulatory Commission for a decision by Jan. 5.

Exelon announced the takeover of Baltimore-based Constellation in April. It will gain stakes in five nuclear reactors and become the largest U.S. electricity marketer. Exelon is the largest owner and operator of U.S. nuclear plants, and owns electric utilities Commonwealth Edison in Chicago and Peco Energy in Pennsylvania.

Constellation owns utility Baltimore Gas & Electric. Most of its revenue comes from retail sale of electricity in states that allow competition, a business assembled and expanded by Chief Executive Officer Mayo Shattuck after the collapse of energy trader Enron Corp. in 2001.

If completed, the deal will be Exelon’s largest transaction. Exelon has tried unsuccessfully three times to buy other power companies since 2003, and Constellation has been the target of two failed bids. A $14.8 billion sale of Constellation to NextEra Energy Inc., the largest U.S. wind-power generator and owner of Florida’s largest utility, collapsed in 2005, with NextEra citing interference by officials in Maryland.

The case is U.S. v. Exelon Corp. (EXC), 11-cv-02276, U.S. District Court, District of Columbia (Washington).

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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