Constellation Energy's profit rises 28%

Tropical Storm Isabel lowers profit by 11 cents a share, to $1.15

October 31, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

In spite of the tens of millions in expenses for Tropical Storm Isabel, Constellation Energy Group Inc. said yesterday that it beat its third-quarter profit goal, with earnings up 28 percent.

The Baltimore parent of Baltimore Gas and Electric Co. said net income rose to $192.9 million, or $1.15 a share, from $150.7 million, or 92 cents per share, a year earlier. Revenue more than doubled, growing to $2.6 billion in the three months that ended Sept. 30 from $1.27 billion in the third quarter last year.

The $65.9 million cost for repairing damage from Isabel lowered profit by 11 cents per share, or by $31.8 million, the company said.

Excluding the cost of power restoration, the company said, it posted a profit of $1.26 per share. In July, the company projected third-quarter earnings of $1.05 to $1.20 per share.

The better-than-expected results were driven by a strong performance of Constellation's competitive wholesale energy and power generating businesses, prompting the company to boost its earnings goal for the year.

The company said it expects earnings per share of $2.75 to $2.85, excluding the expense of Tropical Storm Isabel, or $2.63 to $2.73 per share including the storm costs.

"It's the combination of BGE actually performing well, in spite of Isabel, and the merchant side of the house performing well because of plant productivity and growing this business of load serving," said Mayo A. Shattuck III, Constellation Energy's chairman, president and chief executive.

The bulk of the company's revenue growth came from its unregulated businesses as opposed to its regulated utility, BGE. Income from nonregulated subsidiaries rose to $1.9 billion in the third quarter from $605.8 million in the third quarter 2002.

The "merchant," or competitive, energy business earned $1.03 per share, Constellation said.

Growth was driven by acquisitions that have expanded Constellation's business of supplying gas and electric to commercial, industrial and wholesale customers. Also helping were the start-up of Constellation's new High Desert electric plant in California and some cost-cutting initiatives, including employee reductions earlier in the year at its Calvert Cliffs nuclear plant and in power plant management, the company said,

In particular, Constellation NewEnergy, a September 2002 acquisition from AES Corp. that supplies energy to large commercial and industrial customers in 17 states, has far surpassed projections, Shattuck said. Part of Constellation's growth strategy calls for increasing its national presence as an energy marketer hired by commercial and industrial businesses to procure their energy.

"We've taken advantage of the retrenchment of our competitors in this regard," Shattuck said.

Constellation said it is also benefiting from more efficient operations of some of its power plants, which are overseen by the Constellation Generation Group.

Several of the plants have been able to operate at higher capacity because of improvements "in management of the plants, making sure plans are down less and less, because they have done all the preventative maintenance," said E. Follin Smith, Constellation's chief financial officer.

Shares of Constellation closed yesterday at $36.02, up 77 cents.

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