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Constellation Energy to sell the majority of its international commodities business

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Constellation Energy has announced it has agreed to divest the majority of its London-based international commodities business, including its coal and freight operations and European en

Constellation Energy has announced it has agreed to divest the majority of its London-based international commodities business, including its coal and freight operations and European energy trading units, to an affiliate of Goldman Sachs, on undisclosed terms.

The pending disposition of the international commodities business is part of a strategic plan to increase the company’s liquidity and reduce collateral requirements by divesting select merchant businesses. The company is also pursuing the sale of its Houston-based downstream natural gas trading unit.

"We are executing against our stated plans to de-risk our merchant business and increase liquidity by sharply reducing the collateral requirements associated with our commodities subsidiaries," says Mayo A. Shattuck III, chairman, president and chief executive of Constellation Energy.

"The pending sale of our international commodities business is among several strategic initiatives we’re pursuing in the months ahead to strengthen our financial position and transform our core business.

‘Market conditions continue to be difficult, but we’re actively reducing capital consumption and cash flow risk, and right-sizing the business to address the realities of the new financial and economic environment. Completion of these near-term activities should position Constellation Energy to earn solid risk-adjusted returns while reducing earnings risk and variability."

The international commodities business is primarily based in London and includes the company’s coal and freight platforms, as well as its European-focused power, gas and carbon trading operations. The transaction is expected to close by the end of the first quarter of 2009 and is subject to certain regulatory approvals and other standard closing conditions.

Constellation Energy, which had 2007 revenues of USD21bn, is a US supplier of electricity to large commercial and industrial customers and wholesale power seller, and also manages fuels and energy services on behalf of energy-intensive industries and utilities.

It owns generating units throughout the US, totalling some 9,000 MW of generating capacity, and delivers electricity and natural gas through the Baltimore Gas and Electric Company, a regulated utility in Maryland.

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