Constellation Energy provided an update on its previously announced plans to increase available liquidity and reduce risk in its commodities businesses. Constellation Energy announced that the closing of the previously announced credit facility has been extended to no later than Nov. 26 and currently expects to receive total commitments from the banks of approximately $1.0 billion to $1.25 billion. The company also announced that it is exploring other alternatives with MidAmerican Energy Holdings Company and other parties to provide additional liquidity of up to $750 million. The combination of the credit facility and additional liquidity would meet the original intent to raise $2 billion of liquidity.
“The progress Constellation Energy has made on our strategic initiatives to reduce risk and improve liquidity further stabilizes the company,” said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. “We are making the prudent decisions necessary to bolster our liquidity and realign our business to succeed in these challenging market conditions. Even as we continue working toward the successful completion of our merger with MidAmerican, we are actively seeking to reduce risk, capital spending, and ongoing expenses in the business, while at the same time executing on key strategic initiatives.”
Based on the $1 billion cash investment in Constellation Energy by MidAmerican, the progress to date on reducing risk in its commodities businesses, and current credit market conditions, Constellation Energy, UBS Loan Finance LLC, and RBS Securities Corporation have agreed to delay the close of the previously announced $2 billion credit facility. The company and the banks have signed an amended commitment letter that extends the commitment period through Nov. 26, during which time the company will work with the banks to determine the final size, terms, and conditions of the credit facility. Upon closing, the company expects that the amount of the credit facility will be less than $2 billion. The company currently expects to receive total commitments from the banks of approximately $1.0 billion to $1.25 billion, which when combined with the other alternatives being explored, would meet its original intent to raise $2 billion.
“Constellation Energy continues to pursue a clear strategy to improve its liquidity position in the face of very challenging conditions in the financial and energy markets. We are working diligently to complete the merger, which will restore financial stability to Constellation Energy and Baltimore Gas and Electric,” said Greg Abel, president and chief executive officer of MidAmerican Energy Holdings Company.
On Aug. 27, the company outlined strategic initiatives to increase available liquidity and reduce business risk. Specifically, the company said it intended to reduce portfolio scale and exposure to business activities that require contingent capital support, divest its upstream natural gas producing assets, and sell or recapitalize its international coal and freight businesses. These initiatives are progressing along the expected timeline.
“Despite the very challenging credit environment, we are making significant progress toward meeting our liquidity needs. We believe the combination of the $1.0 billion investment by MidAmerican, the expected size of the credit facility, and the progress toward and expected impact of achieving our strategic initiatives provides sufficient liquidity to manage our business and successfully close the merger,” said Shattuck.
About Constellation Energy
Constellation Energy (http://constellation.com), a FORTUNE 125 company with 2007 revenues of $21 billion, is the nation’s largest competitive supplier of electricity to large commercial and industrial customers and the nation’s largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of 83 generating units located throughout the United States, totaling approximately 9,000 megawatts of generating capacity. The company delivers electricity and natural gas through Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland.