Constellation Energy to Sell Downstream Gas Business

Constellation Energy announced it has reached a definitive agreement to sell its Houston-based downstream natural gas unit to Macquarie Group. Terms were not disclosed.

The pending divestiture is one of several strategic initiatives the company has undertaken in recent months to reduce risk in its merchant businesses and improve liquidity through the return of posted collateral. The agreement is subject to standard terms and conditions, and is expected to close in the second quarter of 2009.

In a related transaction, Constellation Energy and Macquarie Cook Energy, Macquarie Group’s existing North American gas trading business, announced that they have signed a letter of intent under which Macquarie Cook Energy would supply natural gas to Constellation Energy’s Louisville, Ky.-based retail gas division, Constellation NewEnergy Gas.

“The pending sale of our downstream natural gas business and the recently announced divestiture of our international commodities business illustrate that we are making substantial progress in de-risking our business and rightsizing our merchant businesses in light of current economic conditions,” said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. “Completion of these transactions will meaningfully improve our near-to-mid-term liquidity position. We continue to assess the ongoing capital requirements of our merchant businesses with an eye toward reducing risk, stabilizing risk-adjusted returns and optimizing the value of our premier generation assets and leading customer supply businesses.”

On Jan. 20, 2009, Constellation Energy announced the divestiture of its London-based international commodities unit to an affiliate of Goldman Sachs; the transaction is expected to close by the end of the first quarter of 2009.

The company will provide a comprehensive update of its current and projected liquidity and collateral positions as part of its 2008 fourth quarter and full year earnings conference call on Feb. 18, 2009.