Recently in M&A Category

With the news that Kentucky's electric utilities appear to be for sale and suitors include Duke Energy, we were reminded of 1998-99, when Duke's now-chief executive was at Cinergy and wanted to merge with the Kentucky utilities.

Cinergy never would confirm officially that it had been talking with LG&E Energy, parent of Louisville Gas & Electric and Kentucky Utilities. But good sources discussed it, and it became fairly well known that the companies performed "due diligence" to see if a marriage made sense. In the end, it was known, though never officially said, that Cinergy chief Jim Rogers could not come to terms with LG&E chief Roger Hale on several issues, including which of them would run the merged company.

It's hard to know how these thing actually work, but not difficult to imagine.

JP Morgan Chase appeared on the verge of paying $4 billion to $4.5 billion for the commodity trading firm, RBS Sempra Commodities, up until about two weeks ago.

Then three things happened.

It's not quite "Tear down this wall," but the Russian bear can only play hardball with natural gas and its neighbors before the free market brings a response.

While ExxonMobil's announcement that it's buying Fort Worth's XTO Energy for $31 billion and $10 billion in debt is a rousing cheer for US shale producers, the real stimulus has been Russia's annual bully-thy-neighbor approach to winter gas supplies.

That didn't take long.

Only two and one-half hours after Devon Energy announced Monday morning that it would put its billions of dollars of Gulf of Mexico deepwater assets and some foreign fields up for sale to focus on US shale gas, the New York Times brought back the ghost of the China National Offshore Oil Corporation to haunt the story.

Under the headline "Devon Energy's Asset Sale May Draw China's Interest," the newspaper reports that CNOOC might be a logical bidder for Devon's Gulf properties.

Government-controlled CNOOC got a short, sharp lesson in US energy nationalism in 2005 when it bid $18.5 billion for California-based Unocal and its GOM fields, topping Chevron's bid by a few billion (back when billions with a "b" meant something).

Ten years ago, everything began to change in the power sector. Now there are signs that some things are changing back. In Texas, at least. Witness the once pure merchant company, NRG Energy, reconstituting in large part the former utility in Houston.

Against a backdrop of industry deregulation, in 1999 three local utilities in the upper Midwest -- one was Northern States Power in Minnesota -- were grouped together under a holding company that was given, as was customary at the time, the rather vague name of Xcel Energy. Some of Xcel's generation assets were then hived off, and a new merchant firm was created, called NRG Energy.

Whether Dynegy's Bruce Williamson did it just for sheer relief, or not, his separation from the plant-building joint venture with LS Power can't help but lift from him what must have been a big headache.

In today's announcement that the companies were callilng off the JV, Dynegy said it was ceding to LS the ownership and development rights to several coal-fired projects. But it was not necessarily giving up participation in two coal projects that are under construction -- Plum Point in Arkansas and Sandy Creek in Texas. It might get out of those projects, but for now it is "continuing to reevaluate" them.

The coal projects have caused nothing but grief for Dynegy and Williamson, who in December won the distinguished "corporate Scrooge" award from Co-Op America for exhibiting among "the worst kinds of unbridled greed and a lack of compassion or concern for others over the last year."

Call it the Gorat's Factor, since it may be considered pocket money that Warren Buffett spends at his favorite steakhouse in Omaha.

In 2002, a number of once fairly high-flying merchant power firms had their wings clipped by ratings agencies and investors who had lost confidence in their energy trading prowess. A number of firms, including Mirant, Dynegy, Reliant Resources and Williams saw their credit ratings decline, and their stock prices plummet. Mirant did eventually go into bankruptcy. Dynegy held on, barely. Reliant and Williams? Well, they turned to Warren Buffett and borrowed money that bought them some time.

France's EDF did say in October that it was no longer interested in trying to buy Constellation Energy. Actually, it said that given the state of financial markets then, the time was not right. It seems one had to take the French company literally, because ... it's back.

The markets don't seem to have changed a great deal, but clearly something did. The new offer from EDF stirs the pot in Maryland, where MidAmerican Energy's $26.50/share offer has generated lots of mixed feelings.

Jay Hancock at the Baltimore Sun noted today that Constellation's share price was up a few dollars this morning, to $28-plus, meaning that at first blush the market likes EDF's idea, which would further the EDF-Constellation nuclear venture while leaving Baltimore Gas & Electric pretty unaffected. The offer is complex, and all its implications weren't immediately clear