Selling off American infrastructure assets to foreign investors

[Guest Made in America]

This just gets me sick to read, but Americans have to stop their governments from selling out.

 

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By Dennis Cauchon, USA TODAY

 

 

States and local governments across the USA are preparing to cash in valuable public assets for one-time windfalls that could reap tens of billions of dollars.

 

 

Illinois hopes to get at least $10 billion by selling its lottery and an additional $15 billion for leasing all or part of the 274-mile Illinois Tollway. Missouri plans to auction its student loan portfolio. Pennsylvania is considering leasing its highways, and Chicago is studying a plan to lease Midway Airport to private investors.

 

 

The deals would let governments collect billions of extra dollars without raising taxes but would reduce their future revenue.

 

 

Investment banker Carol Rein of UBS Securities says foreign investors like government assets in this country because similar investment opportunities in Europe and Australia have been successful. Assets such as toll roads and water systems are attractive to investors because they have little competition and generate steady revenue.

 

 

States hope to get high prices because of strong investor demand, and at the same time rid themselves of operations that private enterprise might operate better. In return, investors will manage the enterprise and pocket future revenue. The proposed deals vary widely, from outright sales to leases ranging from 25 to 99 years. Some come with restrictions, such as limits on raising tolls, that lower the price investors pay.

 

 

The rush to sell assets was sparked by one deal: Chicago received $1.8 billion - twice the next highest bid - from a Spanish-Australian investment group last year for a 99-year lease of its 4.4-mile Skyway. The deal turned what had once been a money-losing elevated highway into a windfall that was used to reduce the city's debt and create big budget reserves. In April, Indiana made a deal to get $3.8 billion in exchange for a 75-year lease of the 157-mile Indiana Toll Road.

 

 

Government watchdogs say they support many of the asset sales but worry that some states plan to use the money to start expensive programs that will need money long after the original cash is gone.

 

 

"How the money is spent is more important than what price they get," says Laurence Msall, president of the Civic Federation, a Chicago group that promotes cost-effective government. He says Illinois should use any windfall to help the state's troubled pension plans, which have a $39 billion shortfall, worst in the nation.

 

 

Instead, Illinois Gov. Rod Blagojevich plans to use the lottery money to start universal preschool, build schools and buy an annuity that replaces lottery profits for 16 years. "The money will kick-start something that needs to happen and build a bridge to funding in the future," says Illinois budget director John Filan. The Illinois lottery made a $615 million profit last year.

 

 

Filan says a privately run lottery can compete better against casinos and Internet gambling. "Government is not very agile in competitive businesses that require huge investments in technology," he says.

 

 

Fred Giertz, a budget expert at the University of Illinois, says the wisdom of asset sales depends on a state's financial discipline. "You're spending money now that you would have gotten later," he says.

[Guest Pauli]

I was bouncing around on the web and found this old post. I wish I had seen it sooner. I am scared that our government is selling everything. Now our nation is selling its nuclear reactors to foreign companies. What is up with that. I thought we were not getting along with the French????

[Guest LAW_*]

Are you referring to the Calvert Cliffs Nuclear Power Plant (CCNPP) located in Lusby, Calvert County, Maryland.

 

The plant has two 2700 megawatt thermal (MWth) Combustion Engineering Generation II, two loop pressurized water reactors. A third one is in discussion

 

The Calvert Cliffs 3 project, owned and operated by UniStar (a joint venture between Constellation Energy and EDF), was selected by the U.S. Department of Energy as one of four projects to enter the final phase that will result in the awarding of a portion of the $18.5 billion in loan guarantees for new nuclear power construction.

 

On December 17, 2008, Constellation Energy agreed with a deal to sell half of its nuclear energy assets for $4.5 billion to Électricité de France (EDF)

 

Constellation Energy and EDF Group Enter Definitive Investment Agreement

 

12/17/08

 

EDF Development Inc. to acquire 49.99 percent interest in Constellation Energy's nuclear generation and operation business for $4.5 billionAgreement includes immediate $1 billion cash investment in Constellation Energy and option to sell to EDF Development Inc. up to $2 billion of non-nuclear generation assetsConstellation Energy to remain independent publicly traded companyInvestment by EDF Development Inc. enhances Constellation Energy's long-term stability and liquidity positionTransaction extends EDF Group's nuclear expertise in U.S.Transaction expected to close in six to nine months.

 

BALTIMORE & PARIS -- Constellation Energy and EDF Development Inc. (a wholly owned subsidiary of EDF) announced a definitive investment agreement under which EDF Development Inc., will acquire a 49.99 percent interest in Constellation Energy Nuclear Group, LLC, for $4.5 billion. Constellation Energy Nuclear Group owns 3,869 megawatts of nuclear generating capacity, which consists of the Calvert Cliffs Nuclear Power Plant in Maryland, and Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Power Plant in New York. EDF Development Inc.'s interest in Constellation Energy Nuclear Group will be structured as a new joint venture between the companies, separate from the existing UniStar joint venture.

 

Under the terms of the agreement, EDF Group will also make several key investments to strengthen Constellation Energy's liquidity position:

 

EDF Development Inc. is making an immediate $1 billion cash investment in Constellation Energy through the purchase of newly issued Constellation Energy Series B non-convertible cumulative preferred stock, which will be surrendered to Constellation Energy upon closing of the transaction and credited against the $4.5 billion purchase price for EDF's interest in Constellation Energy Nuclear Group.

 

To provide Constellation Energy with additional liquidity support, EDF Development Inc. and Constellation Energy have entered into a two-year asset put option that allows Constellation Energy to sell to EDF up to $2 billion of non-nuclear generation assets.

EDF Group has provided Constellation Energy a $600 million interim backstop liquidity facility, which will remain available until receipt of all regulatory approvals relating to the transfer of the non-nuclear generation assets that could be sold under the asset put option or the date that is six months after the date of the investment agreement, whichever is earlier.

 

"This agreement with EDF Development Inc. provides an opportunity for Constellation Energy shareholders to achieve greater value for the company's significant asset base," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. "The investment also provides the liquidity support to stabilize and grow our business as an independent public company dedicated to serving our customers across the country. EDF Group has been a proven partner of ours in the development of new nuclear plants in the U.S., and we welcome their involvement in the ownership of our existing fleet. As the largest owner of nuclear plants in the world, EDF Group brings experience, scale and financial strength to Constellation Energy's future."

 

In the U.S., EDF Group and Constellation Energy have an existing partnership through their UniStar joint venture to build, own and operate new nuclear generation. EDF Group is also a leading provider and developer of wind and solar generation in the U.S. through EDF Energies Nouvelles' U.S. subsidiary, EnXco.

 

EDF chairman and chief executive officer Pierre Gadonneix said: "This agreement further illustrates the strong relationship between EDF Group and Constellation Energy with the shared objective of leading the nuclear renaissance in the U.S. EDF Group and Constellation Energy intend to develop four Evolutionary Power Reactors (EPR) through the UniStar joint venture with the immediate focus on breaking ground for Calvert Cliffs Unit 3 as soon as the regulatory process allows, perhaps as early as 2009."

 

"EDF Group has long believed that there are significant benefits to be realized between the development of new nuclear assets and the operation and ownership of existing nuclear facilities, such as those owned and operated by Constellation Energy," continued Gadonneix. "Through this agreement, we can capitalize on these benefits and EDF Group's nuclear expertise to drive further growth to the benefit of shareholders, customers and employees of both EDF Group and Constellation Energy.We look forward to working further with Constellation Energy in the development of new nuclear generation in Maryland, New York and beyond. This agreement will contribute significantly to non-CO2 emitting energy generation in the U.S."

 

In connection with the new joint venture, Constellation Energy and EDF Development Inc. each will appoint five members to a new Board of Directors, with a casting vote on matters related to safety, security and reliability to the chairman of the new joint venture (a U.S. citizen) appointed by Constellation Energy. The vice-chairman of the joint venture board will be appointed by EDF Development Inc. In addition, EDF Group will have an observer seat on Constellation Energy's Board of Directors, and, upon closing of the transaction, will have the right to designate one director to Constellation Energy's Board.

 

The agreement announced today reflects an amended offer from EDF Group, which follows the company's initial proposal to Constellation Energy's Board of Directors on Dec. 2, 2008. Upon careful consideration, and in consultation with its financial and legal advisors, Constellation Energy's Board has determined that the revised EDF Group proposal is in the best interests of Constellation Energy's shareholders. In conjunction with the agreement, MidAmerican Energy Holdings Company and Constellation Energy have jointly terminated the prior merger agreement, as separately announced today.

 

As a demonstration of its commitment to the U.S. nuclear renaissance, and in particular, Maryland's future role in that renaissance, EDF Group will move its U.S. headquarters to Maryland. EDF Group will also invest $20 million in a new visitor and environmental center at Calvert Cliffs, consistent with the companies' focus on breaking ground on a third nuclear unit at Calvert Cliffs as soon as the regulatory process allows.

 

Additionally, as part of its commitment to Maryland, EDF Group will invest $36 million in the Constellation Energy Group Foundation to support future charitable endeavors for the long-term benefit of the Baltimore community and the state of Maryland.

 

The transaction is not subject to a financing condition. EDF Group will finance the transaction, including the agreed liquidity arrangements, through corporate funds and credit facilities.

 

The companies expect to receive the necessary regulatory approvals for the acquisition of EDF Development Inc.'s interest in Constellation Energy's nuclear generation and operation business and close the transaction within six to nine months. The companies will work closely with Maryland regulators to make them fully informed of the transaction's details. Approval from Constellation Energy's shareholders is not required.

 

J.P. Morgan is acting as exclusive financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor, to EDF.Morgan Stanley, Rothschild, Credit Suisseand UBS Investment Bank are serving as financial advisors, and Kirkland & Ellis LLP is serving as legal advisor, to Constellation Energy.

 

Constellation Energy and EDF Group Investor Call

 

Constellation Energy and EDF Group will host a conference call at 12:00 p.m. (EST) on Wednesday, Dec. 17, 2008, to review the agreement. To participate, analysts, investors, media and the public in the U.S. may dial (888) 455-2894 shortly before 12:00 p.m. The international phone number is (773) 681-5899. The conference password is ENERGY. A replay will be available approximately one hour after the end of the call by dialing (888) 482-2240 or (402) 998-1365 (international).

 

A live audio webcast of the conference call, presentation slides and the press release will be available on the Investor Relations page of Constellation Energy's Web site. A webcast replay, as well as a replay in downloadable MP3 format, will also be available on the site shortly after the completion of the call. The call will also be recorded and archived on the site.

 

About Constellation Energy

 

Constellation Energy, a FORTUNE 125 company with 2007 revenues of $21 billion, is the nation's largest competitive supplier of electricity to large commercial and industrial customers, and the nation's largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of 83 generating units located throughout the United States, totaling approximately 9,000 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland.

 

About EDF Group

 

The EDF Group, one of the leaders in the energy market in Europe, is an integrated energy company active in all businesses: production, transport, distribution, energy selling and trading. The Group is the leading electricity producer in Europe. EDF's nuclear production capacity, the largest in the world, consists of 58 power plants on 19 sites.In France, it has mainly nuclear and hydroelectric power plants where 95% of the electricity output involves no CO2 emissions. EDF's transport and distribution subsidiaries operate 1,246,000 km of low and medium voltage overhead and underground electricity lines and around 100,000 km of high and very high voltage networks. The Group is involved in supplying energy and services to more than 38 million customers around the world, including more than 28 million in France. The Group generated consolidated sales of EUR 59.6 billion, (or $81.06 billion1), in 2007, of which 44% originated in Europe excluding France.EDF is listed on the NYSE-Euronext Paris stock exchange as one of the largest market cap companies.

 

UniStar Nuclear Energy, a Delaware limited liability company, is jointly owned by Constellation Energy (CEG) and Électricité de France (EdF), a builder and supplier of nuclear power plants in Europe.

 

Constellation Energy and EDF Form Joint Venture for Developing Next-Generation Nuclear Facilities in the

United States and Canada

 

BALTIMORE, July 20, 2007 – Constellation Energy (NYSE: CEG) and EDF today announced a strategic joint venture focused on the potential development and deployment of the first fleet of new nuclear power plants in the United States and Canada in nearly three decades.

 

Constellation Energy and EDF will form a new nuclear holding company, known as UniStar Nuclear Energy, LLC, designed to develop, own and operate new U.S. and Canadian nuclear projects. Constellation Energy and EDF will each own a 50 percent interest in UniStar Nuclear Energy. EDF will invest up to $625 million into UniStar Nuclear Energy, while Constellation Energy will contribute the subsidiary companies and interests that it has independently created and owns as part of its pre-existing UniStar Nuclear line of business.

 

Constellation Energy's contribution to the venture also includes the right to develop possible nuclear projects at its Calvert Cliffs Nuclear Power Plant in southern Maryland, and Nine Mile Point Nuclear Station and R.E. Ginna Nuclear Plant in upstate New York. The next-generation U.S. Evolutionary Power Reactor (USEPR), based on AREVA, Inc.'s advanced nuclear power plant design, will be the joint venture's prime reactor technology. In September 2005, Constellation Energy and AREVA, Inc. formed a joint enterprise which has now assumed a leadership position in the U.S. nuclear renaissance.

 

This agreement to form the joint venture between Constellation Energy and EDF follows a Memorandum of Understanding announced on June 1, 2006, under which both companies agreed to work together on the development of advanced EPR-type nuclear power plants in the United States.

 

"We are extremely optimistic about the future of this joint venture. This alliance, which is based on the strength of the business model developed by AREVA and Constellation Energy during the past two years, is in the enviable position of establishing and achieving meaningful milestones as we progress toward the goal of constructing the first fleet of new nuclear power plants in the United States and Canada in nearly three decades," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. "Constellation Energy strongly believes nuclear power must play a prominent role in our nation's energy future, which will be vitally important in helping America achieve its goals of reducing greenhouse gas emissions and moving toward greater energy independence. The combination of Constellation Energy's extensive nuclear ownership and operating experience in the U.S. and EDF's unmatched global leadership in the nuclear arena positions UniStar Nuclear Energy at the forefront of America's nuclear power renaissance. Many milestones lie ahead since we've yet to make a commitment to build. But this alliance represents a major accomplishment. It allows us to move forward confidently, leveraging the considerable value of our complementary strengths and operational capabilities, while also maintaining our highly disciplined, risk-managed and value-driven approach to new nuclear."

 

Pierre Gadonneix, chairman and chief executive officer of EDF Group, declared: "We are extremely pleased to partner with Constellation Energy -- one of America's pre-eminent nuclear operators. This agreement confirms EDF's interest in the U.S. nuclear power renaissance and participation in increasing the availability of safe and secure nuclear power which produces no greenhouse gas emissions. EDF will contribute to the joint venture its unparalleled expertise and experience as the operator of 58 nuclear reactors for more than 20 years in France and the investment in the new EPR under way in Flamanville. EDF Group will thus participate in the promotion of the EPR technology developed by AREVA and its deployment in the United States. This alliance builds on the cooperation between AREVA and Constellation Energy of the past two years within UniStar, which enabled the EPR to be recognised as an innovative and competitive solution."

 

As part of its $625 million commitment, EDF will make an initial cash investment of $350 million into UniStar Nuclear Energy. Subsequent EDF investment under the agreement will be based on pre-established milestones, including $175 million related to the filing of construction and operating license applications at existing Constellation Energy nuclear sites. Constellation Energy and EDF also have signed a cooperation agreement to review potential joint development in the United States.

 

Additionally, an eight-member board will be established with equal representation from both companies and chaired by a representative from Constellation Energy. An independent advisory board that will provide transparency to the U.S. government also will be established for additional governance purposes.

 

In connection with this strategic alliance, EDF may purchase up to 9.9 percent of Constellation Energy's outstanding common shares in the open market during the next five years, with a limit of 5 percent ownership during the first 12 months of the agreement. As part of this investor agreement, EDF will have the right to have an observer at meetings of the Committee on Nuclear Power of the Constellation Energy Board of Directors.

 

The boards of directors of the companies have approved the terms of the joint venture. The transaction is also subject to review by certain U.S. regulatory agencies.

 

There is controversy on a potential $87 million buyout for CEO Mayo A. Shattuck III if he leaves the company.

[Guest MD Democrat]

http://www.google.com/finance?chdnp=1&...:CEG&ntsp=0

 

President Obama needs to investigate Shattuck's compensation package.

[Guest Ron_*]

The truth is the United States cannot manufacture forged steel for large projects like these. We abandoned modernizing Bethleham Steel and other steel factories. Now heavy forging capacity is only available in China (China First Heavy Industries) and Russia (OMX Izhora), along with new capacity emerging in South Korea (Doosan), and France (Le Creusot), and it's being planned in the U.K. (Sheffield Forgemasters) and India (Larsen & Toubro).

 

What gets me is that news media will not discuss this issue. Instead I am bombarded with news of the death of famous child molester.

[Guest seeks 13]

Why did our parents let this happen?

[Guest jessivehadit]

Joe Smith started the day early having set his alarm clock (MADE IN JAPAN) for 6 a.m. While his coffeepot (MADE IN CHINA) was perking, he shaved with his electric razor (MADE IN HONG KONG). He put on a dress shirt (MADE IN SRI LANKA), designer jeans (MADE IN SINGAPORE) and tennis shoes (MADE IN KOREA).

 

After cooking his breakfast in his new electric skillet (MADE IN INDIA) he sat down with his calculator (MADE IN MEXICO) to see how much he could spend today. After setting his watch (MADE IN TAIWAN) to the radio (MADE IN INDIA) he got in his car (MADE IN GERMANY) and continued his search for a good paying AMERICAN JOB.

 

At the end of yet another discouraging and fruitless day, Joe decided to relax for a while. He put on his sandals (MADE IN BRAZIL) poured himself a glass of wine (MADE IN FRANCE) and turned on his TV (MADE IN INDONESIA), and then wondered why he can't find a good paying job in.....AMERICA.....

[Guest Prophet 1978]

Anyone who thinks that the Federal Reserve and the Obama administration has been keeping the Economy stable is missing out on an important and underhanded thing that has been happening everywhere: Transfer of wealth. We are a service nation now and half of our country no longer owned by its people, the workers.

[Guest Anonymous]

It's obvious this would've happened eventually. With most goods being produced in other countries such as China, etc., our country would settle for something else. Even though America helps different countries by buying these goods, they feel they're helping by selling out? The question is, how are the different states actually going to be spending this money? It concerns me for the next generations that there will be less funding with schooling, and higher taxes being persued (as if they're not high enough). The country is selling itself, faster and faster, we barely even own it anymore. Perhaps the economy isn't as stable as people had thought Obama would make it.

 

What happened to the industrialized country we used to be? Where everything was made by us, and put together by us, and all countries wanted OUR stuff. It's changing drastically, and I believe it's allowing those countries to misinterpret the strength we have.

[Guest Journey]

The 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. The Dragon is now supreme.

[Guest Faded Glory]

The United States needs an industrial policy with regard to automobile, aerospace, shipping, and steel industries, which are vital to national and economic security.

[Guest Steve St. Aubin]

The United States needs an industrial policy with regard to automobile, aerospace, shipping, and steel industries, which are vital to national and economic security.

[Guest Guest]

You are 100% correct, imho.