Title
of Each Class of Securities to be Registered
|
Maximum
Aggregate
Offering
Price
|
Amount
of Registration
Fee
(1)(2)
|
Constellation
Energy Group, Inc.
Series A Junior
Subordinated Debentures
|
$450,000,000
|
$17,685
|
(1)
|
Calculated
in accordance with Rule 457(r) under the Securities Act of 1933, as
amended.
|
(2)
|
This
filing fee will be offset against the $112,451 aggregate registration fee
previously paid with respect to $2,000,000,000 aggregate initial offering
price of securities that were previously registered pursuant to
Constellation Energy Group, Inc.’s Registration Statement No. 333-102723
filed on January 24, 2003, and were not sold thereunder. No
additional registration fee has been paid with respect to this
offering. In accordance with Rules 456(b) and 457(r), $94,766
of the $112,451 previously paid with respect to Registration Statement No.
333-102723 as described above will remain available for future
registration fees. This “Calculation of Registration Fee”
table shall be deemed to update the “Calculation of Registration Fee”
table in Registration Statement Nos. 333-135991 and
333-135991-01.
|
Per
Junior
Subordinated
Debenture
|
Total
(3)
|
|||||||
Price
to Public (1)
|
$25.00
|
$450,000,000
|
||||||
Underwriting
Discount (2)
|
$.7875
|
$14,175,000
|
||||||
Proceeds
to Constellation Energy (before expenses)
|
$24.2125
|
$435,825,000
|
Citi
|
Merrill
Lynch & Co.
Sole
Structuring Coordinator
|
Morgan
Stanley
|
UBS
Investment Bank
|
Wachovia
Securities
|
S-3
|
|
S-10
|
|
S-21
|
|
S-22
|
|
S-22
|
|
S-23
|
|
S-24
|
|
S-34
|
|
S-36
|
|
S-40
|
|
S-42
|
|
S-42
|
1
|
|
3
|
|
4
|
|
4
|
|
5
|
|
6
|
|
17
|
|
20
|
|
21
|
|
22
|
|
23
|
|
25
|
|
25
|
|
25
|
|
·
|
a
power generation and development operation that owns, operates, and
maintains fossil and renewable generating facilities, and holds interests
in qualifying facilities, fuel processing facilities and power projects in
the United States,
|
|
·
|
a
nuclear generation operation that owns, operates and maintains nuclear
generating facilities,
|
|
·
|
a
customer supply operation that primarily provides energy products and
services relating to load-serving obligations to wholesale and retail
customers, including distribution utilities, cooperatives, aggregators,
and commercial, industrial and governmental customers,
and
|
|
·
|
a
global commodities operation that manages contractually controlled
physical assets, including generation facilities, natural gas properties
and international coal and freight assets, provides risk management
services and trades energy and energy-related
commodities.
|
|
·
|
design,
construct and operate renewable energy, heating, cooling and cogeneration
facilities and provide various energy-related services, including energy
consulting, for commercial, industrial and governmental customers
throughout North America,
|
|
·
|
provide
home improvements, service heating, air conditioning, plumbing, electrical
and indoor air quality systems, and provide natural gas to residential
customers in central Maryland, and
|
|
·
|
develop
and deploy new nuclear plants in North
America.
|
Issuer
|
Constellation
Energy Group, Inc.
|
Securities
Offered
|
Constellation
Energy is offering $450,000,000 aggregate principal amount of its Series A
Junior Subordinated Debentures ($517,500,000 principal amount if the
underwriters exercise their overallotment option in full), which will be
referred to as the “Junior Subordinated Debentures” in this prospectus
supplement.
|
Denominations
|
The
Junior Subordinated Debentures will be issued in denominations of $25 and
integral multiples thereof.
|
Maturity
Date
|
Any
unpaid principal amount of the Junior Subordinated Debentures, together
with accrued and unpaid interest, will be due and payable on the maturity
date, or upon acceleration following an event of default. The maturity
date for the Junior Subordinated Debentures is initially June 15, 2063,
but will be automatically extended, without the consent of the holders of
Junior Subordinated Debentures, for an additional quarterly period on each
of March 15, June 15, September 15 and December 15 beginning June 15,
2013 and through and including March 15, 2018 (each, an “extension date”),
unless (i) earlier redeemed or (ii) prior to any such extension date,
Constellation Energy elects to discontinue the automatic extension of the
maturity date as described in this prospectus supplement. As a
result, if the maturity date is automatically extended on all extension
dates, the Junior Subordinated Debentures will mature on June 15,
2068. See “Specific Terms of the Junior Subordinated
Debentures—Interest and Maturity—Maturity” in this prospectus
supplement.
|
Interest
|
The
Junior Subordinated Debentures will bear interest at an annual rate equal
to 8.625% per year. Subject to Constellation Energy’s right to
defer interest payments as described below, interest is payable quarterly
in arrears on March 15, June 15, September 15 and December 15 of each
year, beginning September 15, 2008.
For
a more complete description of interest payable on the Junior Subordinated
Debentures, see “Specific Terms of the Junior Subordinated
Debentures—Interest and Maturity—Interest” in this prospectus
supplement.
|
Record
Dates for Payment of Interest
|
So
long as all of the Junior Subordinated Debentures remain in book-entry
only form, the record date for each interest payment date will be the
close of business on the business day (as defined below under “Specific
Terms of the Junior Subordinated Debentures—Interest and
Maturity—Interest”) immediately preceding the applicable interest payment
date. If any of the
|
Junior
Subordinated Debentures do not remain in book-entry only form, the record
date for each interest payment date will be the close of business on the
fifteenth calendar day immediately preceding the applicable interest
payment date.
|
|
Optional
Deferral of Interest
|
So
long as no event of default has occurred and is continuing with respect to
the Junior Subordinated Debentures, Constellation Energy may defer
interest payments on the Junior Subordinated Debentures, from time to
time, for one or more periods (each, an “Optional Deferral Period”) of up
to 10 consecutive years per Optional Deferral Period. In
other words, Constellation Energy may declare at its discretion up to a
10-year interest payment moratorium on the Junior Subordinated Debentures,
and may choose to do that on more than one
occasion. Constellation Energy may not defer payments beyond
the maturity date of the Junior Subordinated Debentures. During
an Optional Deferral Period, interest will continue to accrue on the
Junior Subordinated Debentures, compounded quarterly, and deferred
interest payments will accrue additional interest at a rate equal to the
interest rate on the Junior Subordinated Debentures, to the extent
permitted by applicable law. Once all accrued and unpaid
interest on the Junior Subordinated Debentures has been paid,
Constellation Energy can begin a new Optional Deferral
Period. However, Constellation Energy has no current intention
of deferring interest payments on the Junior Subordinated
Debentures.
Even
though you will not receive any interest payments on your Junior
Subordinated Debentures during an Optional Deferral Period, you will be
required to accrue interest income and include original issue discount in
your gross income for United States federal income tax purposes on an
economic accrual basis, even if you are a cash basis
taxpayer. You should consult with your own tax advisor
regarding the tax consequences of an investment in the Junior Subordinated
Debentures. See “Material United States Federal Income Tax
Consequences—U.S. Holders—Interest” in this prospectus
supplement.
For
a more complete description of Constellation Energy’s ability to defer the
payment of interest, see “Specific Terms of the Junior Subordinated
Debentures—Option to Defer Interest Payments” in this prospectus
supplement.
|
Certain
Restrictions during an Optional Deferral Period
|
During
any period in which Constellation Energy defers interest payments on the
Junior Subordinated Debentures, Constellation Energy will not, and will
cause its majority-owned subsidiaries not to, do any of the following
(with limited exceptions):
· declare
or pay any dividend or distribution on Constellation Energy’s capital
stock;
· redeem,
purchase, acquire or make a liquidation payment with respect to any of
Constellation Energy’s capital stock;
· pay
any principal, interest or premium on, or repay, repurchase or redeem any
of Constellation Energy’s debt securities that are equal or junior in
right of payment with the Junior Subordinated Debentures; or
· make
any payments with respect to any Constellation Energy guarantee of debt
securities if such guarantee is equal or junior in right of payment to the
Junior Subordinated Debentures.
|
See
“Specific Terms of the Junior Subordinated Debentures—Option to Defer
Interest Payments” in this prospectus supplement.
If
Constellation Energy defers interest for a period of 10 consecutive years
from the commencement of an Optional Deferral Period, Constellation Energy
will be required to pay all accrued and unpaid interest at the conclusion
of the 10-year period. If Constellation Energy fails to pay in
full all accrued and unpaid interest at the conclusion of the 10-year
period and such failure continues for 30 days, an event of default that
gives rise to acceleration of principal and interest on the Junior
Subordinated Debentures will occur under the subordinated indenture
pursuant to which the Junior Subordinated Debentures will be
issued. See “Specific Terms of the Junior Subordinated
Debentures—Limitation on Remedies” in this prospectus supplement and
“Description of the Debt Securities—Events of Default” in the accompanying
prospectus.
|
|
Optional
Redemption
|
Constellation
Energy may redeem the Junior Subordinated Debentures at its
option:
· in
whole or in part on one or more occasions before June 15, 2013 at a
redemption price as set forth below under “Specific Terms of the Junior
Subordinated Debentures—Redemption” in this prospectus
supplement;
· in
whole or in part on one or more occasions on or after June 15, 2013 at
100% of their principal amount plus accrued and unpaid
interest;
· in
whole, but not in part, before June 15, 2013 at 100% of their principal
amount plus accrued and unpaid interest in the event of a Tax Event (as
defined below under “Specific Terms of the Junior Subordinated
Debentures—Right to Redeem Upon a Tax Event” in this prospectus
supplement); or
· in
whole or in part on one or more occasions before June 15, 2013 at a
redemption price as set forth below under “Specific Terms of the Junior
Subordinated Debentures—Right to Redeem Upon a Rating Agency Event” in
this prospectus supplement in the event of a Rating Agency Event (as
defined below under “Specific Terms of the Junior Subordinated
Debentures—Right to Redeem Upon a Rating Agency Event” in this prospectus
supplement).
|
Replacement
Capital Covenant
|
Around
the time of the initial issuance of the Junior Subordinated Debentures,
Constellation Energy will enter into a Replacement Capital Covenant, as
described below under “Certain Terms of the Replacement Capital Covenant,”
in which Constellation Energy will covenant for the benefit of holders of
a designated series of Constellation Energy’s unsecured long-term
indebtedness, other than the Junior Subordinated Debentures, that
it:
· will
not redeem or purchase, or satisfy, discharge or defease (collectively,
“defease”) the Junior Subordinated Debentures, and
· will
cause its majority-owned subsidiaries not to purchase the Junior
Subordinated Debentures,
|
in
each case on or before June 15, 2033 (which date will be automatically
extended for additional quarterly periods to no later than June 15, 2038
if and to the extent that the maturity date of the Junior Subordinated
Debentures is extended as provided in “Specific Terms of the Junior
Subordinated Debentures—Interest and Maturity—Maturity”), unless, subject
to certain limitations, a specified amount shall have been raised from the
issuance, during the 180 days prior to the date of that redemption,
purchase or defeasance, of qualifying securities that have equity-like
characteristics that are the same as, or more equity-like than, the
applicable characteristics of the Junior Subordinated Debentures at the
time of redemption, purchase or defeasance. See “Certain Terms
of the Replacement Capital Covenant” in this prospectus
supplement.
The
Replacement Capital Covenant is not intended for the benefit of holders of
the Junior Subordinated Debentures and may not be enforced by them, and
the Replacement Capital Covenant is not a term of the subordinated
indenture pursuant to which the Junior Subordinated Debentures will be
issued or the Junior Subordinated Debentures.
|
|
Ranking
|
Constellation
Energy’s payment obligation under the Junior Subordinated Debentures will
be unsecured and will rank junior and be subordinated in right of payment
and upon liquidation to all of Constellation Energy’s Senior
Indebtedness. Senior Indebtedness of Constellation Energy is
defined below under “Specific Terms of the Junior Subordinated
Debentures—Subordination; Ranking of the Junior Subordinated
Debentures.” However, the Junior Subordinated Debentures will
rank equally in right of payment with any Pari Passu Securities, as
defined below under “Specific Terms of the Junior Subordinated
Debentures—Subordination; Ranking of the Junior Subordinated
Debentures.”
Constellation
Energy is a holding company that derives substantially all of its income
from its operating subsidiaries. Constellation Energy’s
subsidiaries are separate and distinct legal entities and have no
obligation to pay any amounts on the Junior Subordinated Debentures or to
make any funds available for such payment. Therefore, the
Junior Subordinated Debentures will be effectively subordinated to all
indebtedness and other liabilities, including trade payables and debt, as
well as to preferred stock incurred or issued by Constellation Energy’s
subsidiaries. In addition to trade liabilities, some of
Constellation Energy’s operating subsidiaries incur debt in order to
finance their business activities. All of this indebtedness and
right to payments under preferred stock will be effectively senior to the
Junior Subordinated Debentures. The subordinated indenture
pursuant to which the Junior Subordinated Debentures will be issued does
not place any limit on the amount of Senior Indebtedness that
Constellation Energy may issue, guarantee or otherwise incur or the amount
of liabilities, including debt, or preferred stock, that Constellation
Energy’s subsidiaries may issue, guarantee or otherwise
incur. Constellation Energy expects from time to time to incur
additional indebtedness and other liabilities that will be senior to the
Junior Subordinated Debentures. At April 30, 2008,
Constellation Energy’s Senior Indebtedness, on an unconsolidated basis,
totaled approximately $2.662 billion.
|
Listing
|
Constellation
Energy intends to apply to list the Junior Subordinated Debentures on the
New York Stock Exchange. If approved for listing, trading of the Junior
Subordinated Debentures is expected to begin within 30 days after they are
first issued.
|
Form
|
The
Junior Subordinated Debentures will be represented by one or more global
certificates and registered in the name of The Depository Trust Company
(“DTC”) or its nominee, and deposited with the indenture trustee on behalf
of DTC. This means that you will not receive a certificate for
your Junior Subordinated Debentures and that your broker will maintain
your position in the Junior Subordinated
Debentures. Constellation Energy expects that the Junior
Subordinated Debentures will be ready for delivery through DTC on or about
the date indicated on the cover of this prospectus
supplement. You may elect to hold interests in the Junior
Subordinated Debentures through DTC (in the United States), or through
either Clearstream, Luxembourg, or Euroclear (outside of the United
States), if you are a participant in any of these systems, or indirectly
through an organization which is a participant in these
systems. See “Specific Terms of the Junior Subordinated
Debentures—Book-Entry Only Issuance” in this prospectus supplement for
additional information.
|
Expected
Credit Ratings
|
Constellation
Energy expects that the Junior Subordinated Debentures will be rated
“Baa2”, “BBB-” and “BBB” by Moody’s Investors Service, Inc. (“Moody’s”) ,
Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. (“S&P”), and Fitch Ratings,
respectively. Constellation Energy expects that Moody’s and
S&P will each assign a negative outlook, and Fitch Ratings will assign
a stable outlook, with respect to their respective ratings of the Junior
Subordinated Debentures. Credit ratings are not a recommendation to buy,
sell or hold these Junior Subordinated Debentures. Each rating
may be subject to revision or withdrawal at any time by the assigning
rating organization, and should be evaluated independently of any other
rating.
|
Principal
United States Federal
Income
Tax Consequences
|
In
connection with the issuance of the Junior Subordinated Debentures,
Constellation Energy will receive an opinion from Thelen Reid Brown
Raysman & Steiner LLP that, for United States federal income tax
purposes, the Junior Subordinated Debentures will be classified as
indebtedness (although there is no clear authority on
point). This opinion is subject to certain customary
conditions. See “Material United States Federal Income Tax
Consequences” in this prospectus supplement.
Each
holder of Junior Subordinated Debentures will, by accepting the Junior
Subordinated Debentures or a beneficial interest therein, be deemed to
have agreed to treat the Junior Subordinated Debentures as indebtedness
for all United States federal, state and local tax
purposes. Constellation Energy intends to treat the Junior
Subordinated Debentures in the same manner.
If
Constellation Energy defers interest payments on the Junior Subordinated
Debentures for one or more Optional Deferral Periods, the holders of the
Junior Subordinated Debentures will be required to accrue income for
United States federal income tax purposes in the amount of the accrued and
unpaid interest payments on the Junior Subordinated Debentures, in the
form of original issue discount, even though cash interest payments are
deferred and even though they may be cash basis taxpayers.
|
Reopening
of the Series
|
Constellation
Energy may, without the consent of the holders of the Junior Subordinated
Debentures, increase the principal amount of the series and issue
additional junior subordinated debentures of such series having the same
ranking, interest rate, maturity and other terms as the Junior
Subordinated Debentures. Any such additional junior
subordinated debentures may, together with the Junior Subordinated
Debentures, constitute a single series of securities under the
subordinated indenture pursuant to which the Junior Subordinated
Debentures will be issued. See “Specific Terms of the Junior
Subordinated Debentures—Reopening of the Series” in this prospectus
supplement.
|
Use
of Proceeds
|
The
net proceeds from the sale of the Junior Subordinated Debentures will be
used for general corporate purposes. See “Use of Proceeds” in
this prospectus supplement.
|
Indenture
Trustee
|
Deutsche
Bank Trust Company Americas.
|
Governing
Law
|
The
subordinated indenture and the supplemental indenture pursuant to which
the Junior Subordinated Debentures will be issued and the Junior
Subordinated Debentures will be governed by and construed in accordance
with the laws of the State of New
York.
|
|
·
|
mechanical
or structural problems;
|
|
·
|
inadequacy
or lapses in maintenance protocols;
|
|
·
|
impairment
of reactor operation and safety systems due to human or mechanical
error;
|
|
·
|
costs
of storage, handling and disposal of nuclear materials, including the
availability or unavailability of a permanent repository for spent nuclear
fuel;
|
|
·
|
regulatory
actions, including shut down of units because of public safety concerns,
whether at Constellation Energy’s plants or other nuclear
operators;
|
|
·
|
limitations
on the amounts and types of insurance coverage commercially
available;
|
|
·
|
uncertainties
regarding both technological and financial aspects of decommissioning
nuclear generating facilities; and
|
|
·
|
environmental
risks, including risks associated with changes in environmental legal
requirements.
|
|
·
|
the
timing and extent of changes in commodity prices and volatilities for
energy and energy-related products including coal, natural gas, oil,
electricity, nuclear fuel, freight, and emission
allowances;
|
|
·
|
the
liquidity and competitiveness of wholesale markets for energy
commodities;
|
|
·
|
the
effect of weather and general economic and business conditions on energy
supply, demand and prices;
|
|
·
|
the
ability to attract and retain customers in customer supply activities and
to adequately forecast their energy
usage;
|
|
·
|
the
timing and extent of deregulation of, and competition in, the energy
markets, and the rules and regulations adopted in those
markets;
|
|
·
|
uncertainties
associated with estimating natural gas reserves, developing properties,
and extracting natural gas;
|
|
·
|
regulatory
or legislative developments federally, in Maryland, or in other states
that affect deregulation, the price of energy, transmission or
distribution rates and revenues, demand for energy, or increases in costs,
including costs related to nuclear power plants, safety, or environmental
compliance;
|
|
·
|
the
ability of Constellation Energy’s regulated and nonregulated businesses to
comply with complex and/or changing market rules and
regulations;
|
|
·
|
the
ability of BGE to recover all its costs associated with providing
customers service;
|
|
·
|
the
conditions of the capital markets, interest rates, foreign exchange rates,
availability of credit facilities to support business requirements,
liquidity, and general economic conditions, as well as Constellation
Energy’s and BGE’s ability to maintain their current credit
ratings;
|
|
·
|
the
effectiveness of Constellation Energy’s and BGE’s risk management policies
and procedures and the ability and willingness of counterparties to
satisfy their financial and performance
commitments;
|
|
·
|
operational
factors affecting commercial operations of Constellation Energy’s
generating facilities (including nuclear facilities) and BGE’s
transmission and distribution facilities, including catastrophic
weather-related damages, unscheduled outages or repairs, unanticipated
changes in fuel costs or availability, unavailability of coal or gas
transportation or electric transmission services, workforce issues,
terrorism, liabilities associated with catastrophic events, and other
events beyond Constellation Energy’s
control;
|
|
·
|
the
actual outcome of uncertainties associated with assumptions and estimates
using judgment when applying critical accounting policies and preparing
financial statements, including factors that are estimated in determining
the fair value of energy contracts, such as the ability to obtain market
prices and, in the absence of verifiable market prices, the
appropriateness of models and model inputs (including, but not limited to,
estimated contractual load obligations, unit availability, forward
commodity prices, interest rates, correlation and volatility
factors);
|
|
·
|
changes
in accounting principles or
practices;
|
|
·
|
losses
on the sale or write down of assets due to impairment events or changes in
management intent with regard to either holding or selling certain
assets;
|
|
·
|
the
ability to successfully identify and complete acquisitions and sales of
businesses and assets; and
|
|
·
|
cost
and other effects of legal and administrative proceedings that may not be
covered by insurance, including environmental
liabilities.
|
Three
Months
Ended
|
Year
Ended
December
31,
|
|||||||||||||||||||||
March
31, 2008
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||||||||
3.06x
|
3.84x
|
4.05x
|
3.04x
|
2.71x
|
2.69x
|
As
of March 31, 2008
|
|||||||||||||
Actual
|
As
Adjusted(a)
|
||||||||||||
(In
millions)
|
%
of
Capitalization
|
(In
millions)
|
%
of
Capitalization
|
||||||||||
Capitalization
|
|||||||||||||
Long-term
Debt
|
$ | 4,686.7 | 43.4 | % | $ | 4,686.7 |
41.6%
|
||||||
Junior
Subordinated Debentures Hereby
Offered
|
— | — | 450.0 |
4.0%
|
|||||||||
Minority
Interests
|
19.9 | 0.2 | % | 19.9 |
0.2%
|
||||||||
Preference
Stock Not Subject to Mandatory Redemption
|
190.0 | 1.8 | % | 190.0 |
1.7%
|
||||||||
Common
Shareholders’ Equity
|
5,906.0 | 54.7 | % | 5,906.0 |
52.5%
|
||||||||
Total
Capitalization
|
$ | 10,802.6 | 100.0 | % | $ | 11,252.6 |
100.0%
|
(a)
|
To
give effect to the issuance of the Junior Subordinated Debentures offered
by this prospectus supplement (assuming no exercise of the overallotment
option). Adjusted amounts do not reflect the deduction of any
discounts or commissions in connection with the issuance of the Junior
Subordinated Debentures. Adjusted amounts also do not reflect
(1) the issuance by Constellation Energy of its Zero Coupon Senior Notes
due 2023 for a purchase price of approximately $250 million, which were
issued on June 19, 2008 and (2) any other possible issuance and
sale of additional securities by Constellation Energy and its subsidiaries
from time to time after the date of this prospectus
supplement.
|
|
·
|
certain
events of bankruptcy, insolvency or reorganization of Constellation
Energy;
|
|
·
|
any
Senior Indebtedness of Constellation Energy is not paid when due (after
the expiration of any applicable grace period) and that default continues
without waiver; or
|
|
·
|
any
other default has occurred and continues without waiver (after the
expiration of any applicable grace period) pursuant to which the holders
of Senior Indebtedness of Constellation Energy are permitted to accelerate
the maturity of such Senior
Indebtedness.
|
|
·
|
obligations
for borrowed money, including without limitation, such obligations as are
evidenced by credit agreements, notes, debentures, bonds or other
securities or instruments;
|
|
·
|
capitalized
lease obligations;
|
|
·
|
all
obligations of the types referred to in the two preceding bullet points of
others which Constellation Energy, has assumed, endorsed, guaranteed,
contingently agreed to purchase or provide funds for the payment of, or
otherwise becomes liable for, under any agreement;
or
|
|
·
|
all
renewals, extensions or refundings of obligations of the kinds described
in any of the preceding categories.
|
|
·
|
indebtedness
and other securities that, among other things, by its terms ranks equally
with the Junior Subordinated Debentures in right of payment and upon
liquidation; and
|
|
·
|
guarantees
of indebtedness or other securities described in the preceding bullet
point.
|
|
·
|
any
amendment to, clarification of, or change, including any announced
prospective change, in the laws or treaties of the United States or any of
its political subdivisions or taxing authorities, or any regulations under
those laws or treaties;
|
|
·
|
an
administrative action, which means any judicial decision or any official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement including any notice or announcement of intent to issue or
adopt any administrative pronouncement, ruling, regulatory procedure or
regulation;
|
|
·
|
any
amendment to, clarification of, or change in the official position or the
interpretation of any administrative action or judicial decision or any
interpretation or pronouncement that provides for a position with respect
to an administrative action or judicial decision that differs from the
previously generally accepted position, in each case by any legislative
body, court, governmental authority or regulatory body, regardless of the
time or manner in which that amendment, clarification or change is
introduced or made known; or
|
|
·
|
a
threatened challenge asserted in writing in connection with an audit of
Constellation Energy or its subsidiaries, or a publicly-known threatened
challenge asserted in writing against any other taxpayer that has raised
capital through the issuance of securities that are substantially similar
to the Junior Subordinated
Debentures,
|
|
·
|
declare
or pay any dividend or distribution on Constellation Energy’s capital
stock;
|
|
·
|
redeem,
purchase, acquire or make a liquidation payment with respect to any of
Constellation Energy’s capital
stock;
|
|
·
|
pay
any principal, interest or premium on, or repay, purchase or redeem any of
Constellation Energy’s debt securities that are equal or junior in right
of payment with the Junior Subordinated Debentures;
or
|
|
·
|
make
any payments with respect to any Constellation Energy guarantee of debt
securities if such guarantee is equal or junior in right of payment to the
Junior Subordinated Debentures,
|
|
·
|
purchases,
redemptions or other acquisitions of Constellation Energy’s capital stock
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors,
agents, consultants or a stock purchase, dividend reinvestment or similar
plan, or the satisfaction of its obligations pursuant to any contract or
security outstanding on the date that the payment of interest is deferred
requiring it to purchase, redeem or acquire its capital
stock;
|
|
·
|
any
payment, repayment, redemption, purchase, acquisition or declaration of a
dividend as a result of any reclassification of Constellation Energy’s
capital stock or the exchange or conversion of all or a portion of one
class or series of its capital stock or debt securities for a class or
series of its capital stock;
|
|
·
|
the
purchase of fractional interests in shares of Constellation Energy’s
capital stock pursuant to the conversion or exchange provisions of its
capital stock or the security being converted or exchanged, or in
connection with the settlement of stock purchase
contracts;
|
|
·
|
dividends
or distributions paid or made in Constellation Energy’s capital stock (or
rights to acquire its capital stock), or repurchases, redemptions or
acquisitions of capital stock in connection with the issuance or exchange
of capital stock (or of securities convertible into or exchangeable for
shares of its capital stock) and distributions in connection with the
settlement of stock purchase
contracts;
|
|
·
|
redemptions,
exchanges or repurchases of, or with respect to, any rights outstanding
under a shareholder rights plan or the declaration or payment thereunder
of a dividend or distribution of or with respect to rights in the future;
or
|
|
·
|
payments
under any trust preferred securities, subordinated debentures or junior
subordinated debentures, or any guarantee of any of the foregoing, in each
case that rank equal in right of payment to the Junior Subordinated
Debentures, so long as the amount of payments made on account of such
securities or guarantees is paid on all such securities and guarantees
then outstanding on a pro rata basis in proportion to the full payment to
which each series of such securities and guarantees is then entitled if
paid in full.
|
|
(1)
|
failure
to pay interest on the Junior Subordinated Debentures within 30 days after
it is due (provided, however, that a failure to pay interest during a
valid Optional Deferral Period will not constitute an event of
default),
|
|
(2)
|
failure
to pay principal or premium, if any, on the Junior Subordinated Debentures
when it is due,
|
|
(3)
|
failure
to comply with any other covenant set forth in the Junior Subordinated
Debentures or in the Subordinated Indenture, other than a covenant that
does not apply to the Junior Subordinated Debentures, that continues for
60 days after Constellation Energy receive written notice of such failure
to comply from the indenture trustee, or Constellation Energy and the
indenture trustee receive written notice of such failure to comply from
the registered owners of at least 33% in principal amount of the Junior
Subordinated Debentures, and
|
|
(4)
|
certain
events of bankruptcy, insolvency or reorganization of Constellation
Energy.
|
|
·
|
the
Junior Subordinated Debentures will be issued in fully registered form
without coupons;
|
|
·
|
a
holder of certificated Junior Subordinated Debentures would be able to
exchange those Junior Subordinated Debentures, without charge, for an
equal aggregate principal amount of Junior Subordinated Debentures of the
same series, having the same issue date and with identical terms and
provisions; and
|
|
·
|
a
holder of certificated Junior Subordinated Debentures would be able to
transfer those Junior Subordinated Debentures without cost to another
holder, other than for applicable stamp taxes or other governmental
charges.
|
|
·
|
Constellation
Energy will not redeem, purchase or defease the Junior Subordinated
Debentures, and
|
|
·
|
Constellation
Energy will cause its majority-owned subsidiaries not to purchase the
Junior Subordinated Debentures
|
|
·
|
an
individual citizen or resident of the United
States;
|
|
·
|
a
corporation (or other entity taxable as a corporation for U.S. federal
income tax purposes) created or organized in or under the laws of the
United States or of any state thereof or the District of
Columbia;
|
|
·
|
an
estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
|
|
·
|
a
trust if (i) a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have the
authority to control all substantial decisions of the trust, or (ii) that
trust was in existence on August 1, 1996 and has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a
domestic trust.
|
|
·
|
the
interest is not effectively connected with the non-U.S. holder’s conduct
of a trade or business in the United
States;
|
|
·
|
the
non-U.S. holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of Constellation Energy’s stock
entitled to vote;
|
|
·
|
the
non-U.S. holder is not a controlled foreign corporation that is related
directly or constructively to Constellation Energy through stock
ownership; and
|
|
·
|
the
non-U.S. holder provides to the withholding agent, in accordance with
specified procedures, a statement to the effect that such non-U.S. holder
is not a United States person (generally by providing a properly executed
IRS Form W-8BEN).
|
|
·
|
that
gain is effectively connected with the non-U.S. holder’s conduct of a
trade or business in the United States (and, if an applicable U.S. income
tax treaty applies, is attributable to a permanent establishment
maintained by the non-U.S. holder within the United States);
or
|
|
·
|
the
non-U.S. holder is an individual who is present in the United States for
183 days or more in the taxable year of the disposition and certain other
conditions are met.
|
Underwriter
|
Principal Amount
|
|||
Citigroup
Global Markets Inc.
|
$ | 77,625,000 | ||
Merrill
Lynch, Pierce, Fenner & Smith
Incorporated |
77,625,000 | |||
Morgan
Stanley & Co. Incorporated
|
77,625,000 | |||
UBS
Securities LLC
|
77,625,000 | |||
Wachovia
Capital Markets, LLC
|
77,625,000 | |||
Banc
of America Securities LLC
|
27,000,000 | |||
Robert
W. Baird & Co. Incorporated
|
2,250,000 | |||
H&R
Block Financial Advisors, Inc.
|
2,250,000 | |||
Fidelity
Capital Markets, a division of
National
Financial Services LLC
|
2,250,000 | |||
J.J.B.
Hilliard, W.L. Lyons, LLC
|
2,250,000 | |||
Janney
Montgomery Scott LLC
|
2,250,000 | |||
Keefe,
Bruyette & Woods, Inc.
|
2,250,000 | |||
Oppenheimer
& Co. Inc.
|
2,250,000 | |||
RBC
Capital Markets Corporation
|
2,250,000 | |||
Raymond
James & Associates, Inc.
|
2,250,000 | |||
Charles
Schwab & Co., Inc.
|
2,250,000 | |||
Wedbush
Morgan Securities Inc.
|
2,250,000 | |||
Wells
Fargo Securities, LLC
|
2,250,000 | |||
BB&T
Capital Markets, a division of
Scott
& Stringfellow, Inc.
|
1,125,000 | |||
William
Blair & Company, LLC
|
1,125,000 | |||
Davenport
& Company LLC
|
1,125,000 | |||
D.A.
Davidson & Co.
|
1,125,000 | |||
Ferris,
Baker Watts, Incorporated
|
1,125,000 | |||
J.B.
Hanauer & Co.
|
1,125,000 | |||
Pershing
LLC
|
1,125,000 | |||
Total
|
$ | 450,000,000 | ||
Constellation
Energy Group, Inc.
Baltimore
Gas and Electric Company
750
E. Pratt Street
Baltimore,
Maryland 21202
(410)
783-2800
|
FORWARD
LOOKING STATEMENTS
|
1
|
THE
REGISTRANTS
|
3
|
RISK
FACTORS
|
4
|
USE
OF PROCEEDS
|
4
|
RATIOS
OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS |
5
|
DESCRIPTION
OF THE DEBT SECURITIES
|
6
|
DESCRIPTION
OF CAPITAL STOCK
|
17
|
DESCRIPTION
OF WARRANTS
|
20
|
DESCRIPTION
OF STOCK PURCHASE CONTRACTS
|
21
|
DESCRIPTION
OF UNITS
|
22
|
PLAN
OF DISTRIBUTION
|
23
|
VALIDITY
OF THE SECURITIES
|
25
|
EXPERTS
|
25
|
WHERE
YOU CAN FIND MORE INFORMATION
|
25
|
|
·
|
the
timing and extent of changes in commodity prices and volatilities for
energy and energy-related products including coal, natural gas, oil,
electricity, nuclear fuel and emission
allowances;
|
|
·
|
the
liquidity and competitiveness of wholesale markets for energy
commodities;
|
|
·
|
the
effect of weather and general economic and business conditions on energy
supply, demand and prices;
|
|
·
|
the
ability to attract and retain customers in our competitive supply
activities and to adequately forecast their energy
usage;
|
|
·
|
the
timing and extent of deregulation of, and competition in, the energy
markets, and the rules and regulations adopted in those
markets;
|
|
·
|
uncertainties
associated with estimating natural gas reserves, developing properties and
extracting natural gas;
|
|
·
|
regulatory
or legislative developments that affect deregulation, the price of energy,
transmission or distribution rates and revenues, demand for energy or
increases in costs, including costs related to nuclear power plants,
safety or environmental compliance;
|
|
·
|
the
inability of BGE to recover all its costs associated with providing
electric residential customers
service;
|
|
·
|
the
conditions of the capital markets, interest rates, foreign exchange rates,
availability of credit facilities to support business requirements and
general economic conditions, as well as Constellation Energy’s and BGE’s
ability to maintain their current credit
ratings;
|
|
·
|
the
effectiveness of Constellation Energy’s and BGE’s risk management policies
and procedures and the ability and willingness of our counterparties to
satisfy their financial and performance
commitments;
|
|
·
|
operational
factors affecting commercial operations of our generating facilities
(including nuclear facilities) and BGE’s transmission and distribution
facilities, including catastrophic weather-related damages, unscheduled
outages or repairs, unanticipated changes in fuel costs or availability,
unavailability of coal or gas transportation or electric transmission
services, workforce issues, terrorism, liabilities associated with
catastrophic events and other events beyond our
control;
|
|
·
|
the
actual outcome of uncertainties associated with assumptions and estimates
using judgment when applying critical accounting policies and preparing
financial statements, including factors that are estimated in determining
the fair value of energy contracts, such as the ability to obtain market
prices and, in the absence of verifiable market prices, the
appropriateness of models and model inputs (including, but not limited to,
estimated contractual load obligations, unit availability, forward
commodity prices, interest rates, correlation and volatility
factors);
|
|
·
|
changes
in accounting principles or
practices;
|
|
·
|
losses
on the sale or write down of assets due to impairment events or changes in
management intent with regard to either holding or selling certain
assets;
|
|
·
|
cost
and other effects of legal and administrative proceedings that may not be
covered by insurance, including environmental liabilities;
and
|
|
·
|
the
likelihood and timing of the completion of the pending merger with FPL
Group, Inc. (FPL Group), the terms and conditions of any required
regulatory approvals of the pending merger, and potential diversion of
management’s time and attention from our ongoing business during this time
period.
|
|
·
|
a
generation operation that owns, operates and maintains fossil, nuclear and
hydroelectric generating facilities and holds interests in qualifying
facilities, fuel processing facilities and power projects in the United
States,
|
|
·
|
a
wholesale marketing and risk management operation that primarily provides
energy products and services to distribution utilities, power generators
and other wholesale customers,
|
|
·
|
an
electric and natural gas retail operation that provides energy products
and services to commercial, industrial and governmental customers,
and
|
|
·
|
a
generation operations and maintenance services
operation.
|
|
·
|
design,
construct and operate heating, cooling and cogeneration facilities for
commercial, industrial and governmental customers throughout North
America, and
|
|
·
|
provide
home improvements, service heating, air conditioning, plumbing, electrical
and indoor air quality systems, and provide natural gas to residential
customers in central Maryland.
|
THREE
MONTHS
ENDED
MARCH
31, 2006
|
TWELVE
MONTHS
ENDED
DECEMBER
31, 2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||||||
2.86
|
3.38
|
3.02
|
2.90
|
3.31
|
1.39
|
THREE
MONTHS
ENDED
MARCH
31, 2006
|
TWELVE
MONTHS
ENDED
DECEMBER
31, 2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||||||
5.83
|
4.22
|
3.75
|
3.36
|
2.66
|
1.99
|
THREE
MONTHS
ENDED
MARCH
31, 2006
|
TWELVE
MONTHS
ENDED
DECEMBER
31, 2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||||||
4.77
|
3.45
|
3.08
|
2.82
|
2.31
|
1.75
|
|
·
|
title
of the securities,
|
|
·
|
any
limit on the aggregate principal amount of the debt securities of that
series,
|
|
·
|
maturity
date,
|
|
·
|
interest
rate or rates (or the method to calculate such
rate)
|
|
·
|
remarketing
provisions,
|
|
·
|
redemption
or repurchase provisions,
|
|
·
|
if
other than the principal amount, the portion of the principal amount
payable upon maturity (known as discounted debt
securities),
|
|
·
|
whether,
and on what terms and at what prices, the debt securities may be converted
into or exercised or exchanged for our common stock, preferred stock or
any other type of security, and
|
|
·
|
any
other provisions.
|
|
·
|
how
it handles securities payments and
notices,
|
|
·
|
whether
it imposes fees or charges,
|
|
·
|
how
it would handle voting if ever
required,
|
|
·
|
whether
and how you can instruct it to send you debt securities registered in your
own name so you can be a direct securityholder as described below to the
extent permitted, and
|
|
·
|
how
it would pursue rights under the debt securities if there were a default
or other event triggering the need for securityholders to act to protect
their interests.
|
|
·
|
the
investor cannot get debt securities registered in his or her own name,
and
|
|
·
|
the
investor cannot receive physical certificates for his or her interest in
the debt securities. This means these securities may not be
pledged as security under the laws of some
jurisdictions.
|
|
·
|
the
depositary notifies us that it is unwilling or unable to continue as
depositary or if it ceases to be a clearing agency registered under
applicable law and a successor depositary is not appointed by us within 90
days;
|
|
·
|
an
event of default with respect to the debt securities of that series has
occurred and has not been cured (see “Events of Default”);
or
|
|
·
|
we
determine not to have the debt securities of a series to be represented by
a global debt security and notify the trustee of our decision. (Section
3.04)
|
|
·
|
in
registered form;
|
|
·
|
without
interest coupons; and
|
|
·
|
in
denominations that are multiples of $1,000. (Section
3.02)
|
|
·
|
the
certificated debt security, with the section entitled “Option to Elect
Repayment” on the reverse of the debt security completed;
or
|
|
·
|
a
fax or letter (first class, postage prepaid) from a member of a national
securities exchange, the National Association of Securities Dealers, or a
bank or trust company in the United States which states the
following:
|
|
·
|
the
name of the holder;
|
|
·
|
the
principal amount of the debt security and the amount to be
repurchased;
|
|
·
|
the
certificate number or the maturity and a description of the terms of the
security;
|
|
·
|
a
statement that you wish to sell all or a portion of your note;
and
|
|
·
|
a
guaranty that the debt security with the section entitled “Option to Elect
Repayment” on the reverse of the debt security completed will be received
by the paying agent within 5 business
days.
|
|
·
|
we
fail to pay the principal of (or premium, if any, on) any debt security of
that series when due and payable;
|
|
·
|
we
fail to pay any interest on any debt security of that series for 30 days
after such is due;
|
|
·
|
we
fail to observe or perform any other covenants or agreements set forth in
the debt securities of that series, or in the indentures in regard to such
debt securities, continuously for 60 days after notice (which must be sent
either by the Trustee or holders of at least 33% of the principal amount
of the affected series);
|
|
·
|
we
file for bankruptcy or certain other events of bankruptcy, insolvency or
reorganization occur; or
|
|
·
|
any
other event of default described in the prospectus
supplement.
|
|
·
|
you
must give the trustee written notice that an Event of Default has occurred
and remains uncured;
|
|
·
|
the
holders of 25% of the principal amount of all outstanding debt securities
of the relevant series must make a written request that the trustee take
action because of the default, and must offer reasonable indemnity to the
trustee against the cost and other liabilities of taking that action;
and
|
|
·
|
the
trustee must have not taken action for 60 days after receipt of the above
notice and offer of indemnity.
|
|
·
|
extend
the fixed maturity of any debt
security;
|
|
·
|
reduce
the interest rate (or change the method used to establish the interest
rate) or extend the time of payment of
interest;
|
|
·
|
reduce
any premium payable upon
redemption;
|
|
·
|
reduce
the principal amount;
|
|
·
|
reduce
the amount of principal payable upon acceleration of the maturity of a
discounted debt security following
default;
|
|
·
|
change
the currency of payment on a debt security;
or
|
|
·
|
reduce
the percentage of securityholders whose consent is required to modify or
amend the indentures. (Section
11.02)
|
|
·
|
we
are the continuing corporation or the successor corporation expressly
assumes the payment of principal, and premium, if any, and interest on the
debt securities and the performance and observance of all the covenants
and conditions of the indentures binding on us (Section 12.01);
and
|
|
·
|
we,
or the successor corporation, are not immediately after the merger,
consolidation or sale in default in the performance of a covenant or
condition in the indentures. (Section
12.02)
|
|
·
|
dividends
and other distributions payable in our common stock on shares of our
capital stock;
|
|
·
|
the
issuance to all holders of our common stock of rights, options or warrants
entitling them to subscribe for or purchase our common stock at less than
the then current market price of such common stock as of the record date
for stockholders entitled to receive such rights, options or
warrants;
|
|
·
|
subdivisions,
combinations and reclassifications of our common
stock;
|
|
·
|
distributions
to all holders of our common stock of evidences of our indebtedness,
shares of capital stock, cash or assets, including securities, but
excluding:
|
|
·
|
those
dividends, rights, options, warrants and distributions referred to
above;
|
|
·
|
dividends
and distributions paid exclusively in cash, subject to certain exceptions;
and
|
|
·
|
distributions
upon mergers or consolidations discussed
below;
|
|
·
|
distributions
consisting exclusively of cash, excluding cash distributed upon a merger
or consolidation discussed below, to all holders of our common stock in an
aggregate amount that, combined together
with:
|
|
·
|
other
all-cash distributions made within the preceding 365-day period in respect
of which no adjustment has been made;
and
|
|
·
|
any
cash and the fair market value of other consideration payable in
connection with any tender offer by us or any of our subsidiaries for our
common stock concluded within the preceding 365-day period in respect of
which no adjustment has been made,
|
|
·
|
the
completion of a tender offer made by us or any of our subsidiaries for our
common stock which involves an aggregate consideration that, together
with:
|
|
·
|
any
cash and the fair market value of other consideration payable in a tender
offer by us or any of our subsidiaries for our common stock expiring
within the 365-day period preceding the expiration of that tender offer in
respect of which no adjustments have been made;
and
|
|
·
|
the
aggregate amount of any cash distributions to all holders of our common
stock within the 365-day period preceding the expiration of that tender
offer in respect of which no adjustments have been
made,
|
|
·
|
the
number of shares;
|
|
·
|
the
designation;
|
|
·
|
the
voting powers;
|
|
·
|
votes
per share (which cannot be greater than one vote per
share);
|
|
·
|
liquidation
preferences;
|
|
·
|
relative
participating, optional or other
rights;
|
|
·
|
conversion
or exchange rights;
|
|
·
|
redemption
rights;
|
|
·
|
put
and sinking fund provisions;
|
|
·
|
dividend
rights;
|
|
·
|
the
terms or conditions of redemption;
and
|
|
·
|
any
other applicable terms.
|
|
·
|
the
title of the warrants;
|
|
·
|
the
total number of warrants;
|
|
·
|
the
price or prices at which the warrants will be
issued;
|
|
·
|
the
currency or currencies investors may use to pay for the
warrants;
|
|
·
|
the
designation and terms of the underlying securities purchasable upon
exercise of the warrants;
|
|
·
|
the
price at which and the currency or currencies, including composite
currencies, in which investors may purchase the underlying securities
purchasable upon exercise of the
warrants;
|
|
·
|
the
date on which the right to exercise the warrants will commence and the
date on which the right will
expire;
|
|
·
|
whether
the warrants will be issued in registered form or bearer
form;
|
|
·
|
information
with respect to book-entry procedures, if
any;
|
|
·
|
if
applicable, the minimum or maximum amount of warrants which may be
exercised at any one time;
|
|
·
|
if
applicable, the designation and terms of the underlying securities with
which the warrants are issued and the number of warrants issued with each
underlying security;
|
|
·
|
if
applicable, the date on and after which the warrants and the related
underlying securities will be separately
transferable;
|
|
·
|
if
applicable, a discussion of material United States federal income tax
considerations;
|
|
·
|
the
identity of the warrant agent;
|
|
·
|
the
procedures and conditions relating to the exercise of the warrants;
and
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·
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any
other terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the
warrants.
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·
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whether
the stock purchase contracts obligate the holder to purchase or sell, or
both purchase and sell, our common stock or preferred stock, as
applicable, and the nature and amount of each of those securities, or the
method of determining those
amounts;
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·
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whether
the stock purchase contracts are to be prepaid or
not;
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·
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whether
the stock purchase contracts are to be settled by delivery, or by
reference or linkage to the value, performance or level of our common
stock or preferred stock;
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·
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any
acceleration, cancellation, termination or other provisions relating to
the settlement of the stock purchase
contracts;
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·
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whether
the stock purchase contracts will be issued in fully registered or global
form; and
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·
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any
other terms of the stock purchase
contracts.
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·
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the
designation and terms of the units and of the securities comprising the
units, including whether and under what circumstances those securities may
be held or transferred separately;
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·
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any
provisions for the issuance, payment, settlement, transfer or exchange of
the units or of the securities comprising the units;
and
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·
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whether
the units will be issued in fully registered or global
form.
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·
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the
purchase by an institution of the securities covered by its delayed
delivery contract shall not, at any time of delivery, be prohibited under
the laws of any jurisdiction in the United States to which such
jurisdiction is subject; and
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·
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if
the securities are being sold to underwriters, we shall have sold to those
underwriters the total amount of the securities less the amount thereof
covered by the delayed delivery contracts. The underwriters
will not have any responsibility in respect of the validity or performance
of the delayed delivery contracts.
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·
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Annual
Report on Form 10-K for the year ended December 31, 2005, as amended by
Form 10 K/A filed on May 1, 2006.
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·
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Quarterly
Report on Form 10-Q for the quarter ended March 31,
2006.
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·
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Current
Reports on Form 8-K filed on January 27, 2006, February 9, 2006, February
28, 2006, May 31, 2006, June 6, 2006, June 16, 2006 and June 23,
2006.
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·
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Description
of the Common Stock under the caption “Proposal No. 1, Approval of the
Share Exchange and Formation of the Holding Company—Constellation Energy
Capital Stock” in the Proxy Statement and Prospectus contained in
Amendment No. 1 to Constellation Energy’s Registration Statement on Form
S-4 (Reg. No. 33-64799), including any amendments or reports filed with
the SEC for the purpose of updating this
description.
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·
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Annual
Report on Form 10-K for the year ended December 31,
2005.
|
|
·
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Quarterly
Report on Form 10-Q for the quarter ended March 31,
2006.
|
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·
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Current
Report on Form 8-K filed on January 27,
2006.
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PROSPECTUS
SUPPLEMENT
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