BGE will sell electricity in New England

Constellation Power subsidiary to supply Mass., R.I. customers

Deal valued at $500 million

Md. utility also agrees to assume some of Boston firm's contracts

Deregulation

January 06, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

Moving to capitalize on New England's aggressive deregulation of its electricity market, Baltimore Gas and Electric Co. said yesterday that it has landed a $500 million contract to supply power to a Boston-based energy firm's customers in two states.

Through its Constellation Power Source Inc. subsidiary, BGE also agreed to assume the nonnuclear power purchase contracts of Montaup Electric Co., a subsidiary of Boston's Eastern Utilities Associates.

"These long-term contracts with EUA are consistent with our strategy to target customers in developing, competitive energy markets," said Charles W. Shivery, president of Constellation Power Source.

The transaction, which follows EUA's pledge to sell power plants in Massachusetts and Rhode Island for deregulation in those states, will likely be completed early this year. The deal allows BGE to sell electricity to some of the 300,000 EUA customers who choose to stay with that provider in a newly competitive market.

"We are extremely pleased that Constellation Power Source has been able to craft a solution that best meets the needs of EUA and their customers in Massachusetts and Rhode Island, while strengthening our presence in the New England energy market," Shivery said.

"I think it indicates a trend," said Ronald Tanner, an analyst who follows BGE for Legg Mason Wood Walker Inc. "It's really the start of a business they are trying to get into, and we expect them to do more of this. Over time, they will grow this business so they'll have some economies of scale.

"The Northeast is one of the first real active markets in the industry, so this is not that surprising. In terms of earnings, it's not likely to change our outlook over the next year or two. This is not a growth business. The margins are thin. Until you get scale, it doesn't contribute a lot to the bottom line."

BGE shares closed down 50 cents yesterday at $30.1875. EUA's shares slipped 18.75 cents, to $20.375.

BGE has said it wants to buy or build plants in the Northeast to make up for revenue it may lose as Maryland deregulates its electric supply industry -- a process expected to be completed by July 2002.

Constellation Power Source, a subsidiary formed almost a year ago by BGE, will acquire 177 megawatts from four plants -- two in Massachusetts, one in Vermont and one in Rhode Island -- by assuming Montaup Electric Co.'s long-term purchase contracts. The expiration dates of the contracts range from 2001 to 2021.

Terms of the transfer, which were not disclosed, call for Constellation to eventually supply about 56 percent of the energy distributed by EUA subsidiaries to customers who stay with the Boston company. Constellation will supply power to EAU subscribers through 2004 in Massachusetts and through 2009 in Rhode Island.

Constellation spokesman Michael Delaney estimated the value of those contracts at $500 million in revenue over 10 years but declined to provide more details. BGE had sales of $3.3 billion last year.

Pub Date: 1/06/99

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