U.S. Power Giants Ink $11Bln Deal

NEW YORK -- The parent of Florida Power and Light agreed to acquire the Constellation Energy Group for about $11 billion on Sunday, according to people involved in the talks.

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.

The boards of both companies approved the transaction, the people involved said, and they were expected to announce the deal Monday. Robert Gould, a spokesman for Constellation, declined to comment, and a spokesman for the FPL Group did not return a call seeking comment.

For FPL, the deal is a strong wager on nuclear and coal power. About half of the electricity at Constellation's plants is generated by nuclear and about a third by coal. Those energy sources are cheaper than natural gas, following a surge in natural gas prices this year after hurricanes damaged production platforms in the Gulf of Mexico.

Constellation, which has roots stretching back to the early 1800s in Baltimore as one of the city's first electricity providers, has also made a successful foray into energy trading, surviving a crisis in that field triggered by the collapse of Enron four years ago. Since then, Constellation has emerged as one of the strongest energy traders, competing nimbly with elite investment banks and hedge funds that have built large energy trading operations.

The two companies are somewhat similar, with both relying heavily on regional utility units for much of their revenue, FPL in Florida and Constellation in Maryland. But the deal would substantially broaden FPL's geographic reach. In addition to its base in Maryland, Constellation controls power plants in New York, California, Illinois and Pennsylvania. FPL had already been benefiting from Florida's fast-growing population.

FPL's chairman and chief executive, Lewis Hay, is expected to continue as the chief executive of the combined company, people involved in the deal said; Constellation's chairman and chief executive, Mayo Shattuck, will become executive chairman.

Under the terms of the deal, shareholders of Constellation will receive about $62 per share, at least partially in stock, people involved in the deal said. Shares of Constellation jumped more than 10 percent last week after The New York Times reported that the two companies were in talks. Shares of Constellation closed on Friday at $61.62, and shares of FPL closed at $42.95.

The transaction extends a heady year for deals in the power industry, following Duke Energy's acquisition of the Cinergy Corporation for $9 billion; Berkshire Hathaway's purchase of PacificCorp for $5.1 billion; and NRG Energy's acquisition of Texas Genco last month for $5.8 billion. Energy companies have been using growing amounts of cash and higher share prices to seize on a pivotal moment for assets that just a year or two ago were considered too risky to touch.

The year ahead may bring even more deals, following the relaxation of laws restricting utility ownership. Some analysts, however, have said that companies may be paying too much for assets that might lose their allure if energy prices were to drop.