Constellation Energy leaning toward EDF: source

By Michael Erman

NEW YORK (Reuters) - U.S. power company Constellation Energy Group Inc is leaning toward an agreement to sell one-half of its nuclear power business to Electricite de France SA, but still needs to obtain waivers of its bank covenants to seal the deal, according to a source familiar with the matter.

The terms of the deal being discussed are basically in line with the $4.5 billion offer the French company made for the assets earlier this month, the source said on Tuesday.

If a deal is reached, it would scuttle a previous offer for the entire company from MidAmerican Energy Holdings, a unit of Warren Buffett's Berkshire Hathaway Inc (BRKa.N)(BRKb.N).

A deal with the French company could be announced some time this week, according to the source. Shareholders are scheduled to vote on the MidAmerican deal next week.

In September, MidAmerican agreed to pay $4.7 billion, or $26.50 a share, for Constellation (CEG.N), which was on the brink of bankruptcy.

But in early December, EDF (EDF.PA), France's main electricity provider, said it would pay $4.5 billion for 50 percent of Constellation's nuclear assets and give the U.S. company the option to sell it up to $2 billion more of its nonnuclear

assets.

MidAmerican has said it does not plan to raise its bid for Constellation. If Constellation rejects MidAmerican's offer it would have to issue about 20 million common shares to the company, or about 9.9 percent of its outstanding stock, and pay it about $593 million in cash.

Constellation could not be reached immediately for comment. EDF declined to respond to the report.

EDF sees gaining a foothold in the United States, the world's biggest nuclear energy market, as a key element in its global expansion strategy.

(Additional reporting by Eric Yep in Bangalore; Editing by Jon Loades-Carter and Jeffrey Benkoe)