Constellation sets price of new stock at $39.90

Energy firm expects to raise $471 million in sale of 12 million shares

March 23, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Constellation Energy Group Inc., the parent company of Baltimore Gas and Electric Co., priced a public offering of 12 million newly issued common stock at $39.90 a share yesterday - a net value of about $471.4 million for the company.

Constellation plans to use the proceeds from the public offering for general corporate purposes, investments in its merchant energy and retail energy services businesses, and repayment of certain debts, according to a statement filed yesterday with the Securities and Exchange Commission.

Goldman Sachs Group Inc. is acting as sole lead manager in the transaction. The transaction will settle Monday.

Constellation's shares have traded at a 52-week high of $51.39, but the lower valuation drove shares of the Baltimore energy company down $2.81 to close at $39.20.

Kevin J. Miller, Constellation's financial planning manager, said that the pricing of the transaction was done in a block trade, typically priced at a discount.

Later this year, the holding company plans to separate BGE, its retail energy services business, from its merchant energy business. The result will be two publicly traded companies: Constellation Energy Group, which will produce and sell electricity on the wholesale power market, and BGE Corp., which will provide retail energy services.

"Each of the two separate companies have significant construction programs to fund this year, so this equity financing will be used to fund the construction programs that will fuel the future growth of each business," said Miller.

Constellation will change its common stock dividend policy in April, according to the SEC filing. The company expects to pay an annual dividend of 48 cents per share, down from the $1.68 it paid in 2000.

After the separation, Constellation Energy Group shareholders will receive an equal amount of shares in BGE. While BGE expects to pay an initial dividend of 48 cents per share, Constellation will not pay a dividend.

"An aggressive growth company, such as this merchant segment, generally will not pay a dividend because they will be on a rapid growth curve," said Joan Goodman, an analyst with the Pershing division of Credit Suisse First Boston. "They want to conserve cash, where the regulated utility part will pay."

The separation still awaits approval from the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission.

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