With its stock price plunging, Constellation Energy agreed Thursday to sell itself to an energy company owned by one of the world’s greatest investors, Warren Buffett.
MidAmerican Energy Holdings said it had agreed to buy Constellation Energy for $4.7 billion. That’s about $26 per share of the company. At the beginning of the year, Constellation was trading for more than $100 a share. On Monday, it was trading for nearly $60 a share.
What the Baltimore Sun (where Constellation is headquartered) called a credit crisis made worse by possible speculation plunged the company into a financial crisis. Debt ratings agencies acted during the week to downgrade Constellation’s credit rating, making it much more expensive for Constellation to borrow money to deal with its problems. Buffett, the investor known as The Sage of Omaha, deployed one of the companies under his Berkshire Hathaway umbrella to scoop up the energy company at a bargain price.
“MidAmerican has been a wonderful steward of its energy assets and the acquisition of Constellation Energy, when completed, will prove beneficial to all constituents,” said Buffett in a news release.
Constellation owns the Nine Mile 1 and 2 nuclear power plants in Scriba, and is in the early stages of deciding whether to build Nine Mile 3. It has proposed two plants, one here and one in Maryland, and had planned to build one of them. The company isn’t talking about the status of its plans yet, but MidAmerican said it will let Constellation work without interference as the merger moves towards a closing date. Constellation also owns the Ginna nuclear plant in Wayne County.
In a statement released Friday afternoon, State Assemblyman Will Barclay (R-Pulaski) said he will try to make sure that the jobs and pensions at the plant are not harmed by the merger:
“The news of this buyout may be beneficial for the area in light of Constellation’s recent financial problems. However, prior to supporting such a takeover, I will urge state regulatory officials to ensure that the buyout will not jeopardize the operation of the plants and that the workforce will be protected.
“I look forward to learning more about the proposed buyout and working with state officials to ensure that the Oswego nuclear plants will continue to provide the electricity and jobs that the area needs,” Barclay said.
A merger agreement between MidAmerican and Constellation is expected today, but the deal will take up to nine months to close. Federal and state regulators have to sign off on it first, and their investigations may be lengthy and expensive.
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