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Wednesday, December 03, 2008
Constellation Energy Gets Bid From Electricite de France
FOXBusiness
Electricite de France SA said Wednesday it’s proposing to acquire 50% of U.S. wholesale power generator Constellation Energy (CEG) for $4.5 billion, challenging plans by a subsidiary of Warren Buffett’s Berkshire Hathaway (BRK.A) to take over the company.
After rejecting a full takeover bid for Constellation Energy in October, the France-based energy giant offered to gain a 50% ownership interest in Constellation’s nuclear operations through a joint venture.
EdF shares dropped after the proposal was made; they were down 6.2% at 10:00 am in Paris trading, but recovered to end the day down just 0.5% at EUR44.35.
According to EdF, which already owns 9.5% of Constellation, the offer totals about $52 per share, which represents a 96% premium to the existing $26.50-a-share takeover offer by Buffet’s MidAmerican Energy Holdings Co.
Constellation and MidAmerican declined to comment. EdF representatives were not available to comment.
EdF’s offer provides for an “upfront” cash investment of $1 billion and an option for Constellation to sell up to $2 billion in non-nuclear generation assets.
EdF expects that it could be approved for the acquisition within six to nine months.
Constellation, North America’s largest nuclear energy company, operates three nuclear power stations with five reactors based in Maryland and New York. A full 61% of energy generated by Constellation is nuclear. Coal, oil, and gas account for 35% of Constellation’s assets and renewable energies such as solar, geothermal, and hydro power make up four percent.
Maryland-based Constellation said Tuesday it would have probably filed for bankruptcy protection without an immediate $1 billion infusion from MidAmerican, which could give MidAmerican some leverage in any takeover battle.
In a U.S. regulatory filing, Constellation warned that unstable market conditions make the deal with MidAmerican necessary. MidAmerican announced its offer to buy Constellation for $26.50 per share in September, along with the $1 billion cash injection.
EdF proposed $35 per share in October, calling MidAmerican’s offer for Constellation insufficient.
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Everyone would agree they see more "Made in Taiwan/China/Japan/etc..."tags than "Made in the USA" tags for the past several years. Well, that "Made in _____" tag on your clothing has an economic term sewn into it: trade deficit. A trade deficit happens when one country buys more goods than it sells to other countries.
For example, if the entire United States (all 300
million of us) made only 100 shirts this year, and if all of China made 100 shirts, some of those shirts would be traded between
us- we would sell a few to China, and vice versa. But a trade deficit happens when one country sells more shirts than another.
China, in this example, could sell 85 shirts to America. The U.S. could sell 55 shirts to China. So, in this trade, China
sold more shirts to the United States, 30 more in fact.
Most businessmen and economists believe that most trade deficits
aren't a bad thing; it's just part of trade, and at some point trade between two countries should balance out eventually.
The big exception is the U.S., which buys vastly more stuff than it sells, and has done so for decades.
Why does this matter? Well, in order to buy those shirts, you need money. And if you are buying more shirts than you're selling shirts, you're losing money. If you're a business, you won't be in business much longer.
But, countries aren't businesses. They are, well, countries, and can print all the money they want. People who deal with currencies, or each country's version of money, look at trade deficits as one way to find out how much each country's currency is worth. If you have to print more money, each dollar you print can possibly lower the value of the other dollars out there. Like stocks, you can buy and sell currencies on what's called the foreign-exchange market (or, if you want a buzzword for the office, say Forex market).
Well, because the U.S. has been buying a lot of stuff from China for many, many years, China holds a lot of U.S. dollars. If China were to sell those dollars on the market at some point, well, it wouldn't be very good. The U.S. dollar's value would fall -- making imports and traveling abroad much more expensive.
Trade deficits are usually a good thing, because it shows that the global economy is working. It's just when a trade imbalance gets too high where economists and investors start to become concerned.
