Constellation Energy to split operations
First, the Board approved a plan to split Constellation Energy Group into two stand-alone publicly traded energy companies. Under this plan, we intend to separate our unregulated merchant energy businesses (wholesale power marketing and generation operations) from our retail services businesses, including our regulated electric and gas utility, Baltimore Gas and Electric (BGE).
The business separation plan is intended to enhance shareholder value. The separation of the businesses will illuminate the specific investment advantages of each emerging company and allow investors to make decisions based on a clearer assessment of each company's balance of risk and return.
Upon separation, the holding company of the merchant energy businesses will retain the name, Constellation Energy Group. The holding company of the retail services businesses will become BGE Corp. This separation allows each company to focus on their respective business and market opportunities. Shareholders will own shares in each company when the transactions are completed.
Second, the board also approved a move to allow Goldman Sachs to become an equity owner of up to 17.5% of our merchant energy business.
To fund an aggressive growth plan for the merchant energy business and to ensure the reliability and stability of BGE Corp., the board also announced the intention to change the annual dividend policy effective April 2001.
Constellation Energy Group will maintain its current dividend through January 2001. Then in April 2001, in a move closely aligned with the separation plan, our annual dividend is expected to be set at $.48 per share. After separation, BGE Corp. can be expected to pay out dividends similar to other premier companies in the retail energy sector. The new Constellation Energy Group, as a growing merchant energy company, expects to initially reinvest its earnings and not pay a dividend in order to fund its aggressive growth plans.
The board has also announced that Edward A. Crooke is returning after taking early retirement on January 1, 2000 from his position of Vice Chairman of Constellation Energy Group. Mr. Crooke has remained active on the company's board since retirement and has continued to be instrumental in shaping the company's growth and retail strategies. He will resume the position of Vice Chairman until the separation. He will then become Chairman, President and CEO of BGE Corp. Christian H. Poindexter will continue as Chairman and CEO of Constellation Energy Group. After the separation, he will retain this position in the new merchant energy company.
The board also named two Co-Presidents of Constellation Energy Group, effective immediately: Charles W. Shivery, President and CEO of Constellation Power Source Holdings, Inc., and Eric P. Grubman who is joining Constellation Energy Group from Goldman Sachs. At Goldman Sachs, he was a senior level investment banker with broad experience in mergers and acquisitions and the energy industry. Mr. Shivery and Mr. Grubman will continue in their roles after the separation.
Frank O. Heintz will continue to serve as President and CEO of BGE. The Board of Directors also elected Robert J. Hurst, Vice Chairman of the Goldman Sachs Group, Inc., to Constellation Energy Group's board effective immediately. Two managing directors from the commoditities trading side of Goldman Sachs, Timothy J. O'Neill and Richard M. Ruzika, will assume positions on the merchant energy company's board after closing of the transaction with Goldman Sachs.
Edited by Stephen Heiser