Wall Street analysts are becoming nervous and cautious about the planned $11 billion merger of Maryland-based Constellation Energy and Florida-based FPL Group, two utility companies.
New developments, including Baltimore Circuit Court Judge Albert J. Matricciani Jr.?s May 30 decision ordering Constellation subsidiary Baltimore Gas and Electric and state regulators back to rate-hike discussions, haven?t helped Wall Street confidence.
And Constellation CEO Mayo Shattuck III?s recent announcement that talks between the two utilities about merging staff and operations have stopped further eroded Wall Street confidence.
In April, Fitch Ratings said the deal between the Maryland Public Service Commission and BGE over phasing in a 72 percent residential rate hike might spark a ratings upgrade.
“Fitch has reviewed the proposal and finds that the terms of the plan, if implemented, would remove near-term uncertainties and stabilize the credit profiles of BGE and Constellation Energy,” Fitch said in its report.
The reported added that adoption of the plan could result in BGE?s rating outlook rising to stable from negative.
Ari Kagan, a certified financial adviser with Fitch, said Thursday that his firm is now concerned about what sort of new deal evolves from Constellation?s talks with the Public Service Commission.
“If a dramatically different order comes out of the proceeding, that could change our perspective,” Kagan said.
“The door is not closed on the deal. There is still the possibility it won?t happen.”
Constellation and FPL officials had hoped to have preliminary federal and state regulatory approvals by the third quarter of 2006.
But Amin Bishara, vice president of North American utility practices for Capgemini, a business consulting and technology firm, said the third-quarter hope was probably too optimistic.
