By Peggy Hollinger in Paris
Published: December 17 2008 02:00 | Last updated: December 17 2008 02:00
Warren Buffett, the US billionaire investor, could bow out of the battle for Constellation Energy after his MidAmerican Energy utility group said it would not try to outbid EDF of France.
Constellation"s directors were due to meet yesterday to decide whether to accept a $4.5bn offer from EDF for 50 per cent of its nuclear power generation business or go with a rival lowball $4.7bn offer from MidAmerican for the whole group.
EDF sent its formal offer around midnight on Monday after a week of talks over the details of the French company"s offer. EDF sources said they were expecting a response after the Constellation board meeting.
The EDF board met all day on Monday and is scheduled to meet again today at which it will discuss any response should one be forthcoming. It will also discuss other issues including next week"s deadline for European Commission approval of EDF"s acquisition of British Energy.
EDF offered $4.5bn for 50 per cent of Constellation"s five reactor facilities and up to a further $2bn for other non-nuclear assets on December 3, in an effort to secure its strategic position in the US with its chosen partner.
The French group owns 9.5 per cent of Constellation after creating a joint venture to build four of its new-generation EPR reactors on the US company"s sites.
Constellation was meant to become EDF"s platform to tap into the expected US nuclear revival, with a large proportion of the country"s 104 reactors coming up for renewal.
However, this strategy was thrown into doubt when Constellation fell victim to the turmoil created by the collapse of Lehman Brothers in September. The exposure of the group"s energy trading arm sparked serious liquidity concerns and Constellation was forced to accept a rescue bid from Mr Buffett at the 11th hour to avoid breaching bank covenants and bankruptcy. Mr Buffett offered an immediate $1bn cash injection and $4.7bn for the group in a cleverly structured deal that will leave him with a profit of up to $600m should EDF win the bidding.
As of yesterday afternoon, that seemed the most likely outcome, though people close to EDF said nothing was certain until the Constellation board made its recommendation.
David Sokol, MidAmerican chairman, told CNBC television that his group would not counterbid.
"The structure of the transaction [proposed by EDF] is not one we would be comfortable with," he said.
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