Friday, December 23, 2005

Interstate power merger Florida Power and Light (FPL), Florida's leading electrical utility, has announced it would acquire Constellation Energy Group in an $11 billion deal. Maryland –based Constellation in additions to being a power utility (Baltimore Gas & Electric) and a major generator (through coal and nuclear plans), is also a major energy trader. Constellation has plants in New York, Pennsylvania, Illinois, and California. The two US power utilities may well be pioneers in an expected rash of upcoming mergers and acquisitions. According to a New York Times article ("Power Company Is Said to Agree to Buy Another for $11 Billion" 12/19/05): The deal marks the first interstate merger among two power companies since Congress passed a bill this summer repealing a Depression-era law that limited such deals. Analysts expect a wave of similar mergers in 2006. Local power monopolies were among the most strictly regulated of US businesses, from, an antitrust point of view. That watchfulness is over, so you can expect to see growing national power utilities. Opportunities abound, as some power companies are flush with cash, while others such as California’s Calpine and Georgia-based Mirant declare bankruptcy. Other American power industry deals this year have included: Duke Energy's $9 billion purchase of Cinergy Corporation NRG Energy's $5.8 billion acquisition of Texas Genco. Investment firm Berkshire Hathaway's $5.1 billion deal for PacifiCorp through its MidAmerican Energy Holdings The $12.2 billion purchase of New Jersey’s PSEG by Illinois-based Exelon Why the rush to merge? Aside from the glory and profit for the executives involved, electrical rates are going up and those companies not over invested in eth wrong type of technology (natural gas) can do very well. There is the issue of power line broadband we have already discussed, and with it the chance to make money on services in addition to simply providing electricity. Electricity has been slow in joining the energy bonanza of the past few years, but it is catching up fast.     3:39:48 PM

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