Deregulation helps raise profit 76% at BGE parent

Constellation Energy earns 51 cents a share

January 20, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Constellation Energy Group Inc. said yesterday that it posted a 76 percent increase in its earnings for the fourth quarter last year, mostly because of the transition to electric deregulation in Maryland.

In the three months that ended Dec. 31, earnings from operations for the parent of the Baltimore Gas and Electric Co. were $86.1 million, or 51 cents a share, compared with $49 million, or 33 cents a share in the fourth quarter of 1999. Revenue in the quarter rose 11 percent, to $1 billion.

Analysts had expected earnings of 48 to 54 cents a share. Company officials told a conference for analysts yesterday that Constellation should continue to perform well. They expect earnings per share of 60 cents to 65 cents for the first quarter of this year.

For the 12 months that ended Dec. 31, the company had earnings of $364.5 million, or $2.43 a share, down from $371.8, or $2.48 a share, in the 12 months that ended Dec. 31, 1999.

"The way their business is structured, the earnings have been lumpy because of the whole deregulation process," said Greg Gordon, a utilities analyst with Goldman Sachs Group Inc. "As the company transitions from being fully regulated to only partially regulated, the financial transition has caused earnings to look a little bit strange.

"Constellation's $2.43-per-share earnings for the year are close to what Wall Street's expectations were. If the area continues to have cold weather, company earnings should do very well in the first quarter."

Constellation officials said the power crisis in California has hurt earnings for utilities nationwide because it has raised doubts about deregulation, but that approximately 15 cents of the Baltimore company's increase in fourth quarter per-share earnings was attributable to a reduction in depreciation and amortization expenses after the start of deregulation July 1.

The company's domestic merchant energy business and regulated electric operations benefited by a few cents a share because of colder-than-average weather in the mid-Atlantic region.

November and December were the coldest such period in the region since 1989. However, full-year earnings suffered by more than 15 cents, primarily because of cooler-than-average summer weather.

"Our fourth-quarter earnings were back on track after a disappointing third quarter," said Christian H. Poindexter, Constellation's chairman and chief executive. "We experienced one of the mildest summers on record in 2000, and this depressed our results for the third quarter and the full year.

"But we believe our fourth quarter results demonstrate that we have successfully made the transition to deregulation in Maryland. And we will continue to execute our strategy to grow the earnings contribution of our merchant energy businesses."

Shares of Constellation rose $1.31 yesterday on the New York Stock Exchange to close at $38.06.

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