BGE stays course on merger plan Chairman says deal with Pepco is in best interest of many

Earnings increase

Despite assurances, price-freeze rulings spur look at options


October 31, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Despite the many obstacles blocking its merger with a Washington utility, the head of Baltimore Gas and Electric Co. told stockholders yesterday that the company remains convinced that the $3 billion alliance is in the best interest of customers, shareholders, employees and the community.

"I feel strongly that this merger continues to be in the long-term best interests of our company," said BGE Chairman and Chief Executive Christian H. Poindexter.

At the same time, BGE announced its third-quarter common stock earnings rose 19 percent to $164.4 million, or $1.11 a share, the result of slightly higher electricity sales, earnings from its unregulated subsidiary, moderate customer growth and cost control. Revenue in the quarter ended Sept. 30 totaled $860.8 million, a 4.2 percent gain from the same period in 1996.

For the first three quarters of the year, BGE's earnings were off 16 percent, to $235.7 million, or $1.60 per share, largely because of mild weather. Revenue for the nine-month period rose just 3.1 percent, to $2.5 billion. BGE's common stock fell 44 cents yesterday to close at $27 per share on news of the quarterly results.

But even with the increased quarterly earnings, the talk at yesterday's meeting centered on the merger, which is troubled by court challenges and continued regulatory hurdles.

Poindexter's comments came even as some impatient shareholders questioned whether the Potomac Electric Power Co. deal still represents the best path for the company.

"What do we have to show for the $57 million we've spent [on the merger] thus far?" asked one shareholder.

Even with the commitment, though, BGE said publicly for one of the first times yesterday that it is also focusing on "strategies that enhance BGE's capabilities as a stand-alone company," including lowering generation costs and entering new businesses.

Still, the company plans to stay the course, and yesterday said it would ask the District of Columbia Public Service Commission to alter a ruling that would force the utilities, if merged, to freeze electric rates in Washington for four years and rebate more than $100 million to consumers, according to a filing with the U.S. Securities & Exchange Commission.

The company took another step somewhat related to the merger yesterday as well, when its real estate subsidiary committed to developing a 10-story office building outside Annapolis.

The projected $50 million One Annapolis Exchange tower, slated to contain 200,000 square feet and 864 parking spaces, will be the city's tallest office structure and the centerpiece of a 28-acre project containing four buildings and a 300-room hotel.

Constellation Energy Corp., the company BGE and Pepco are working to form, is expected to take the top three floors of the building for its headquarters.

"We've studied the market, determined that rental rates are up and the market is tight," said Randall M. Griffin, president of Constellation Real Estate Group. "Now is the time. We've decided we can't wait for the merger decisions, because we might miss the market opportunity."

Griffin said no tenants have been found yet. He said construction would begin next spring and take 18 months to complete.

Pub Date: 10/31/97

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