SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 20, 2000
Commission File Exact name of registrant IRS Employer
Number as specified in its charter Identification No.
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1-12869 CONSTELLATION ENERGY GROUP, INC. 52-1964611
1-1910 BALTIMORE GAS AND ELECTRIC COMPANY 52-0280210
Maryland
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(State or other jurisdiction of incorporation for each registrant)
250 W. Pratt Street, Baltimore, Maryland 21201
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (410) 234-5000
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. Other Events
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On October 23, 2000, Constellation Energy Group, Inc. ("Constellation Energy" )
announced: (1) a plan to separate its merchant energy business (which includes
wholesale generation and power marketing) from its retail services business
(which includes Baltimore Gas and Electric Company), (2) that it had entered
into an agreement with an affiliate of The Goldman Sachs Group, Inc., ("Goldman
Sachs") under which Goldman Sachs will invest in Constellation Energy's merchant
energy business, and (3) that Constellation Energy will reduce its common stock
dividend effective April, 2001. Further information regarding Constellation
Energy's business separation plan and the reduction in its common stock dividend
is set forth in the press release attached hereto as an exhibit.
Pursuant to an agreement signed October 22, 2000 (the "Agreement"), Goldman
Sachs will acquire up to a 17.5% interest in Constellation Energy's merchant
energy business, which will be consolidated under a single holding company
("Holdco"). Goldman Sachs will also acquire warrants to purchase up to 13% of
Holdco's common stock (subject to certain adjustments), exercisable 6 months
after Holdco's common stock becomes publicly available, for $60 per share.
Goldman Sachs is acquiring its interest and the warrants in exchange for $250
million in cash (subject to adjustment in certain instances) and certain assets
related to the power marketing and trading business. At closing, the existing
services agreement with Constellation Energy's power marketing and trading
company will terminate. Goldman Sachs' interest is subject to dilution to the
extent that Constellation Energy makes additional capital contributions to the
merchant energy business.
As part of the Agreement, Goldman Sachs has agreed to refrain from competing
with Constellation Energy in electric power generating and marketing businesses
in North America until October 31, 2003, with certain exclusions for certain
electric trading activities, the ownership and operation of gas and electric
transmission and distribution businesses, and merchant banking activities. In
connection with this restriction, each party must offer the other an opportunity
to participate in the electric generating business in Europe if the offering
party intends to seek third party investors in such a business. Goldman Sachs
has also agreed not to acquire any securities of, or to attempt to influence the
control of, Constellation Energy or Holdco in any manner prohibited by the
Agreement and the other documents executed in connection with it, until the
earlier of five years after closing or one year after Goldman Sachs' interest in
Holdco (excluding any shares it may acquire upon exercise of the warrants) falls
below 8.75%.
Constellation Energy also has agreed to participate in the electric power
generating and marketing business in North America only through Holdco until the
earlier of October 31, 2003 or the date the separation of Constellation Energy
is completed.
The Agreement entitles Goldman Sachs to have two directors on Holdco's board
(which shall consist of twelve total directorships), and obligates Goldman Sachs
to vote its shares in favor of all Board nominees for director. Goldman Sachs
may not sell its interest without the prior consent of Constellation Energy
prior to the later of December 31, 2002 or 6 months after the
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separation. Following such date, Goldman Sachs may generally transfer Holdco's
securities, subject to certain restrictions, including that no person or group
acquires more than 5% of such securities.
If the separation has not occurred by October 22, 2002 or if Constellation
Energy proposes to enter into a transaction prior to that date whereby control
over Constellation Energy would change, then Goldman Sachs has the right to put
its interests in Holdco (and the warrants) to Constellation Energy for a total
consideration of 7 million shares of Constellation Energy common stock and $500
million in cash. Constellation Energy has the option to pay all of the
consideration in cash (including the 7 million shares). Constellation Energy
also has the right to repurchase Goldman Sachs' interest and the warrant on the
same terms as Goldman Sachs' put right if, during the period that Goldman Sachs'
put right is exerciseable, Constellation Energy proposes to enter into a change
of control transaction.
Between the signing of the Agreement and the closing of the transaction,
Constellation Energy is precluded from soliciting offers for its merchant energy
businesses. However, should an unsolicited offer for these businesses be
received by Constellation Energy, Constellation Energy may terminate the
Agreement upon payment of a fee intended to compensate Goldman Sachs for amounts
to which Goldman Sachs is or would become entitled under the existing services
agreement it has with Constellation Energy's power marketing and trading
company. Also, if Constellation Energy enters into a change of control
transaction, Constellation Energy may terminate the Agreement, in which case the
existing power marketing and trading agreement termination provisions would
apply.
The closing of the transaction is subject to customary closing conditions,
including regulatory approvals and the receipt of a Private Letter Ruling from
the Internal Revenue Service regarding certain tax matters. It is a condition to
the closing that, between the date of signing and the date of closing, there
shall not have been any material adverse effect on the merchant energy business.
In addition, the Agreement may be terminated by Constellation Energy or Goldman
Sachs if the closing of the transaction has not occurred by December 31, 2001.
Additional information about the proposed transaction is included in the press
release attached hereto as an exhibit.
We make statements in this Form 8-K that are considered forward-looking
statements within the meaning of the Securities Exchange Act of 1934. Sometimes
these statements will contain words such as "believes," "expects," "intends,"
"plans," and other similar words. These statements are not guarantees of our
future performance and are subject to risks, uncertainties and other important
factors that could cause our actual performance or achievements to be materially
different from those we project. These risks, uncertainties and factors include,
but are not limited to: ability to obtain all regulatory approvals necessary to
allow Goldman Sachs to invest in our merchant energy business and complete the
separation of our merchant energy business from our retail services business;
satisfaction of all conditions precedent to the transaction with Goldman Sachs;
general economic, business and regulatory conditions; energy supply and demand;
competition; federal and state regulations; availability, terms and use of
capital; nuclear and environmental issues; weather; implications of the Order
issued by the Maryland PSC regarding
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implementation of customer choice including any appeals of the order; commodity
price risk; operating our generation assets in a deregulated market without the
benefit of a fuel rate adjustment clause; loss of revenues due to customers
choosing alternative suppliers; higher volatility of earnings and cash flows;
increased financial requirements of our nonregulated subsidiaries; inability to
recover all costs associated with providing electric retail customers service
during the electric rate freeze period; and implications from the transfer of
BGE's generation assets and related liabilities to nonregulated subsidiaries of
Constellation Energy, including the outcome of any appeal of the PSC order
regarding the transfer. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Please see our periodic reports
filed with the Securities and Exchange Commission for more information on these
factors. These forward-looking statements represent our estimates and
assumptions only as of the date of this Form 8-K, and we undertake no duty to
update any forward-looking statements to reflect new information, events or
circumstances after the date of this Form 8-K or to reflect the occurrence of
unanticipated events.
ITEM 7. Financial Statements and Exhibits
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(c) Exhibit No. 99.1 Press Release of Constellation Energy Group,
Inc. issued on October 23, 2000.
Exhibit No. 99.2 Analyst information.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONSTELLATION ENERGY GROUP, INC.
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(Registrant)
BALTIMORE GAS AND ELECTRIC COMPANY
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(Registrant)
Date: October 23, 2000 /s/ Christian H. Poindexter
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Christian H. Poindexter,
President and Chief Executive Officer
on behalf of
Constellation Energy Group, Inc.
Date: October 23, 2000 /s/ Frank O. Heintz
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Frank O. Heintz,
President and Chief Executive Officer
on behalf of
Baltimore Gas and Electric Company
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