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Atomic Insights

Atomic energy technology, politics, and perceptions from a nuclear energy insider who served as a US nuclear submarine engineer officer

FP&L – Constellation deal cancelled

October 27, 2006 By Rod Adams

The planned merger of Constellation Energy Group into FP&L has been cancelled at the request of the Constellation board of directors due “continued uncertainty over regulatory and judicial matters in Maryland.”

Last month, for similar reasons, a planned merger between Exelon and Public Service Enterprise Group of Newark, NJ was also cancelled. It appears that the rate of electrical utility consolidation will not be as rapid as some observers have predicted.

Both of these failed mergers involved substantial nuclear generating assets on both sides of the merger. Instead of resulting in two very large companies, there will remain four companies each with smaller market capitalization. When I heard Skip Bowman of the Nuclear Energy Institute (NEI) speak a month or so ago, he mentioned that one of the issues that is restricting the development of new nuclear power plants is that the capital investment required for each plant is too large a fraction of the market value of utilities that would purchase them.

Leaders in the utility industry have been planning mergers partially in order to build a larger capital base so that the large plant purchases that they think are necessary will be less risky from a financial point of view. It seems that there is some friction that will slow the process of making this plan a reality.

There are certainly other options available, but M&A (merger and acquisition) activity does not seem to be the most workable solution when all external factors come into play.

Filed Under: Uncategorized

About Rod Adams

Rod Adams is an atomic energy expert with small nuclear plant operating and design experience, now serving as a Managing Partner at Nucleation Capital, an emerging climate-focused fund. Rod, a former submarine Engineer Officer and founder of Adams Atomic Engines, Inc., one of the earliest advanced nuclear ventures, has engaged in technical, strategic, political, historic and financial discussion and analysis of the nuclear industry, its technology and policies for several decades. He is the founder of Atomic Insights and host and producer of The Atomic Show Podcast.

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