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The Nuclear Option
by Jeffrey Cane
Dec 3 2008
Dec 3 2008
French giant challenges Buffett with a $4.5 billion offer.
Crude oil prices have slumped to three-and-a-half-year lows, but the push for nuclear power is picking up momentum, nearly three decades after the accident at Three Mile Island.
The latest sign that nukes are attractive again is a possible takeover battle between one of the world's richest investors and one of the biggest utility companies. Électricité de France, the biggest operator of nuclear reactors, is offering $4.5 billion for half of Constellation Energy Group's nuclear business in an effort to torpedo a bid from Warren Buffett.
State-controlled E.D.F., which already owns 9.5 percent of Constellation, is presenting its offer as a joint venture with Constellation. Its plan values Constellation at a much higher price than Buffett's bid of $4.7 billion for the whole company that was made in September. E.D.F. has been busy extending it global presence, agreeing to buy British Energy Group in September for nearly $19 billion.
The move could trigger a bidding war for Baltimore-based Constellation, which owns three nuclear plants and half of nuclear-plant-development company UniStar Nuclear Energy.
In the United States, there has been no new application for a plant that was subsequently built since 1973, but the appetite for low carbon emissions and a political desire to reduce the United States' intake of imported energy is making nuclear energy look attractive. More than 20 companies are seeking permission from a number of states to build some 32 plants. Jeff VanDam noted in the February issue of Condé Nast Portfolio that utility companies are also taking advantage of a 2005 law that provides tax credits and risk insurance to companies that build nuclear plants. But building a nuclear plant is expensive: The reactor alone costs more than $2 billion. And the current credit crunch could make financing very difficult to obtain.
Energy is a big part of Buffett's portfolio. His MidAmerican Energy Holding Co. owns utilities and gas pipelines. But Constellation would have been his first big step into the nuclear sector.
Buffett typically does not enter into bidding wars. And after recent setbacks with his investments in Goldman Sachs and General Electric, he may be prepared to retreat on the nuclear font.
The latest sign that nukes are attractive again is a possible takeover battle between one of the world's richest investors and one of the biggest utility companies. Électricité de France, the biggest operator of nuclear reactors, is offering $4.5 billion for half of Constellation Energy Group's nuclear business in an effort to torpedo a bid from Warren Buffett.
State-controlled E.D.F., which already owns 9.5 percent of Constellation, is presenting its offer as a joint venture with Constellation. Its plan values Constellation at a much higher price than Buffett's bid of $4.7 billion for the whole company that was made in September. E.D.F. has been busy extending it global presence, agreeing to buy British Energy Group in September for nearly $19 billion.
The move could trigger a bidding war for Baltimore-based Constellation, which owns three nuclear plants and half of nuclear-plant-development company UniStar Nuclear Energy.
In the United States, there has been no new application for a plant that was subsequently built since 1973, but the appetite for low carbon emissions and a political desire to reduce the United States' intake of imported energy is making nuclear energy look attractive. More than 20 companies are seeking permission from a number of states to build some 32 plants. Jeff VanDam noted in the February issue of Condé Nast Portfolio that utility companies are also taking advantage of a 2005 law that provides tax credits and risk insurance to companies that build nuclear plants. But building a nuclear plant is expensive: The reactor alone costs more than $2 billion. And the current credit crunch could make financing very difficult to obtain.
Energy is a big part of Buffett's portfolio. His MidAmerican Energy Holding Co. owns utilities and gas pipelines. But Constellation would have been his first big step into the nuclear sector.
Buffett typically does not enter into bidding wars. And after recent setbacks with his investments in Goldman Sachs and General Electric, he may be prepared to retreat on the nuclear font.
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