Merger and Acquisitions

12 Months Ended

Dec. 31, 2011

Merger and Acquisitions

Merger and Acquisitions

15  Merger and Acquisitions

Pending Merger with Exelon Corporation

        On April 28, 2011, Constellation Energy entered into an Agreement and Plan of Merger with Exelon Corporation (Exelon). At closing, each issued and outstanding share of common stock of Constellation Energy will be cancelled and converted into the right to receive 0.93 shares of common stock of Exelon, and Constellation Energy will become a wholly owned subsidiary of Exelon.

        The merger agreement contains certain termination rights for both Constellation Energy and Exelon. Under narrow specified circumstances in which the merger agreement is terminated and another acquisition proposal is accepted, Constellation Energy may be required to pay Exelon a termination fee of $200 million and Exelon may be required to pay Constellation Energy a termination fee of $800 million.

        In connection with the proposed merger, Exelon and Constellation Energy offered numerous commitments, each of which is contingent upon completion of the merger, in support of their request for approval of the merger with the Maryland Public Service Commission (Maryland PSC). In addition, in December 2011, Exelon, Exelon Energy Delivery Company, LLC, Constellation Energy, and BGE entered into a settlement agreement with the State of Maryland, the Maryland Energy Administration, the City of Baltimore, and the Baltimore Building and Construction Trades Council, in which they agreed to several additional commitments contingent upon completion of the merger.

        In January 2012, Exelon, Exelon Energy Delivery Company, LLC, Constellation Energy, and BGE entered into a settlement agreement with EDF Group and affiliates (EDF) in which, subject to the consummation of the merger with Exelon, the parties agreed to amendments to the operating agreement of CENG, an existing Administrative Services Agreement (ASA) and an existing Power Services Agency Agreement (PSA). We discuss the ASA and PSA in more detail in Note 16.

        The merger agreement has been approved by the boards of directors of both Constellation Energy and Exelon and stockholders and by several other state and federal regulatory bodies. The parties are working to complete the merger in the first quarter of 2012 absent any Federal Energy Regulatory Commission approval delays.

Haynesville Shale Gas Property

        In the fourth quarter of 2011, we acquired natural gas working interests and net revenue interests in certain producing wells and certain proved developed wells and proved undeveloped locations in Louisiana for a total of approximately $58.2 million, all of which was allocated to property, plant and equipment. This acquisition expanded our physical gas presence and will reduce our collateral costs. We accounted for this acquisition as a business combination within our NewEnergy business segment. The proforma impact of this acquisition would not have been material to our results of operations for the years ended December 31, 2011, 2010, and 2009.

ONEOK Energy Marketing Company

        In February 2012, we acquired all of the outstanding stock of ONEOK Energy Marketing Company (OEMC), a retail natural gas marketing company, for approximately $22.5 million, subject to a working capital adjustment. OEMC serves approximately 26,100 customers. This acquisition will expand our retail residential customer base in seven states. We will account for this acquisition as a business combination within our NewEnergy business segment.

MXenergy Holdings Inc.

        In July 2011, we acquired all of the outstanding stock of MXenergy Holdings Inc. (MXenergy), a retail energy marketer of natural gas and electricity to residential and commercial customers, for approximately $218.7 million in cash. MXenergy serves approximately 540,000 customers in numerous markets across the United States and Canada.

        We recorded the acquisition as follows:

At July 1, 2011
	(In millions)
Cash and cash equivalents	$	0.9
Accounts receivable		53.8
Restricted cash (1)		63.8
Other current assets		38.4
Goodwill (2)		108.8
Acquired contracts and intangibles (2)(3)		84.5
Other assets		13.0
Total assets acquired		363.2
Bond payable (1)		(82.9	)
Other current liabilities		(60.4	)
Noncurrent liabilities		(1.2	)
Total liabilities		(144.5	)
Net assets acquired	$	218.7

(1)

The bond payable was fully repaid during August 2011 primarily with the restricted cash.

(2)

None is deductible for tax purposes.

(3)

The weighted average amortization for these assets is approximately 4 years.

        We have included MXenergy's results of operations in our consolidated financial statements as part of our NewEnergy business segment since the date of acquisition.

        The proforma impact of this acquisition would not have been material to our results of operations for the years ended December 31, 2011, 2010, and 2009.

Star Electricity, Inc.

        In May 2011, we acquired all of the outstanding stock of Star Electricity, Inc. (StarTex), a retail electric provider, for approximately $160.4 million in cash. StarTex serves approximately 170,000 customers in the Texas residential market.

        We recorded the acquisition as follows:

At May 27, 2011
	(In millions)
Cash and cash equivalents	$	17.9
Other current assets		42.7
Goodwill(1)		93.6
Acquired contracts and intangibles(1)(2)		78.3
Other assets		1.3
Total assets acquired		233.8
Total liabilities		(73.4	)
Net assets acquired	$	160.4

(1)

None is deductible for tax purposes.

(2)

The weighted average amortization for these assets is approximately 3 years.

        The net assets acquired amounts are preliminary pending final purchase price adjustments.

        We have included StarTex's results of operations in our consolidated financial statements as part of our NewEnergy business segment since the date of acquisition.

        The proforma impact of this acquisition would not have been material to our results of operations for the quarters and six months ended June 30, 2011 and 2010 and to our financial condition as of June 30, 2011 and December 31, 2010.

Boston Generating

        In January 2011, we acquired Boston Generating's 2,950 MW fleet of generating plants for cash of approximately $1.1 billion. The fleet acquired includes the following four natural gas power plants and one fuel oil plant located in the Boston, Massachusetts area:

• •

  Mystic 7—574 MW,

  •

  Mystic 8 and 9—1,580 MW,

  •

  Fore River—787 MW, and

  •

  Mystic Jet, a fuel oil plant—9 MW.

        We recorded the acquisition as follows:

At January 3, 2011
	(In millions)
Current assets	$	92.2
Land		29.2
Property, plant and equipment		1,061.8
Noncurrent assets		0.1
Total assets acquired		1,183.3
Current liabilities		(77.5	)
Noncurrent liabilities		(21.8	)
Total liabilities		(99.3	)
Net assets acquired	$	1,084.0

        We have included the results of operations from these plants in our consolidated financial statements as part of our Generation business segment since the date of acquisition.

        The proforma impact of this acquisition would not have been material to our results of operations for the quarters ended March 31, 2011 and 2010 and to our financial condition as of March 31, 2011 and December 31, 2010.

CPower

        In October 2010, we acquired 100% ownership of CPower, an energy management and demand response provider, for $77.1 million in cash, all of which was paid at closing. CPower designs and manages programs that allow its customers to reduce electricity demand at times of peak usage. We have included CPower's results of operations in our consolidated financial statements as part of our NewEnergy business segment since the date of acquisition.

        We recorded the acquisition as follows:

At October 11, 2010
	(In millions)
Cash and cash equivalents	$	2.9
Other current assets		12.9
Goodwill (1)		54.3
Acquired intangible assets (2)		12.6
Other assets		10.6
Total assets acquired		93.3
Total liabilities		(16.2	)
Net assets acquired	$	77.1

(1)

$3.6 million is deductible for tax purposes.

(2)

The weighted average amortization for these intangibles is approximately 2 years.

        The pro-forma impact of this acquisition would not have been material to our results of operations for the years ended December 31, 2010 and 2009.

Texas Combined Cycle Generation Facilities

        In May 2010, we acquired 100% ownership of the 550 MW Colorado Bend Energy Center and the 550 MW Quail Run Energy Center natural gas combined cycle generation facilities in Texas for $372.9 million, all of which was paid in cash at closing. We include these facilities as part of our Generation business and have included their results of operations in our consolidated financial statements since the date of acquisition.

        We recorded the acquisition as follows:

At May 17, 2010
	(In millions)
Current assets	$	7.1
Property, plant and equipment		368.6
Total assets acquired		375.7
Current liabilities		(2.8	)
Net assets acquired	$	372.9

        The pro-forma impact of this acquisition would not have been material to our results of operations for the years ended December 31, 2010 and 2009.

Criterion Wind Project

        In April 2010, we acquired 100% ownership of a 70 MW Criterion wind project to be constructed in Garrett County, Maryland. In December 2010, we placed this facility in commercial operation. This wind energy project was developed, constructed, and is owned by our Generation business.

        The pro-forma impact of all of the 2010 acquisitions, collectively, would not have been material to our results of operations for the years ended December 31, 2010 and 2009.