Officials with Constellation Energy and FPL Group have stopped meeting about plans to integrate staff and operations for a proposed merger, Constellation CEO Mayo Shattuck told employees and the Securities and Exchange Commission Wednesday.
Political turmoil over Constellation subsidiary Baltimore Gas and Electric?s planned 72 percent residential rate hike, to take effect July 1, is jeopardizing the merger, Shattuck said.
In a message to employees, Shattuck said: “? We have, for the time being, ceased FPL merger integration activities.”
He added: “While we still believe strongly in the proposed merits of our merger, we are disappointed in the ongoing political controversy in Maryland.”
However, Shattuck said, “Our merger approval process continues in the normal course.”
Shattuck?s correspondence was sent to SEC regulators.
At stake is an estimated $11 billion merger of Baltimore-based Constellation Energy with Florida-based FPL Group. If completed, the merger, first announced in December, would create a powerhouse utility company capable of buying, selling and producing energy in key markets.
FPL officials agreed that because of the current uncertainty, staff should focus on everyday operations instead of on integrating the companies.
The companies had hoped to have the merger approved by federal and state regulators in the third quarter of 2006. Shattuck?s correspondence sought to soothe anxious workers and shareholders nervous about future profits at Constellation.
“I spent the past week or so speaking at employee meetings across the company, and one of my goals was to reinforce the point that Constellation Energy will thrive and grow with or without this merger,” Shattuck said.
He added: “While we remain hopeful that our merger with FPL can move forward, we think the prudent thing to do is put our integration efforts temporarily on hold while the political issues are being resolved.”
Shattuck?s message to employees follows Baltimore Circuit Court Judge Albert J. Matricciani Jr.?s decision May 30 ordering the Maryland Public Service Commission to hold new hearings to determine whether BGE?s planned 72 percent rate hike is justified.
Matricciani criticized the commission in his decision, saying commissioners did not consider what potential savings could result from the merger and how those savings could impact residential electricity rates and planned rate hikes.
The commission has scheduled public hearings in July to review details of the proposed merger.
Sequence of events
» Dec. 19, 2005: Constellation Energy and FPL Group announce plan merger to create nation?s largest competitive energy supplier
» May 25, 2006: Florida Municipal Power Agency said merger may harm Florida?s energy competition
» July 12, 2006: Maryland Public Service Commission holds first of several hearings on merger
