FP&L – Constellation deal cancelled
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.
