Constellation Energy's earnings increase 9%, revenue 32% in 3Q

Firm earns $1.22 a share

analysts had forecast $1.15

October 30, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Constellation Energy Group's profit rose 9 percent in the third quarter, as the Baltimore company continued to aggressively build its business of selling power to businesses and utilities in competitive markets.

The parent of the Baltimore Gas and Electric Co. reported net profit of $210.4 million, or $1.19 per share, in the three months that ended Sept. 30, compared with $192.9 million, or $1.15 per share, for the third quarter a year ago.

BGE contributed 16 cents per share to earnings, up from the 12 cents per share in the third quarter of 2003 when the utility had steep repair costs from Tropical Storm Isabel and other severe summer storms.

Excluding special items, such as losses on asset sales, the company earned $1.22 per share, beating analysts' estimates on that basis of $1.15 per share.

Revenue for the third quarter increased 32 percent, to $3.4 billion from $2.6 billion for the quarter last year. Constellation has grown into Maryland's second-largest company in terms of revenue, after Lockheed Martin Corp.

"We felt Constellation's performance was very strong, and its value is still very cheap," said Ivan Feinseth, managing director for Matrix USA LLC in New York. "We still rate the stock a `strong buy.' "

Shares of Constellation closed at $40.62 yesterday, up 28 cents.

Third-quarter revenue growth was driven by the company's nonregulated energy supply and power production businesses, which had a 43 percent increase in sales.

While others in the industry have returned to their roots in regulated utilities, Constellation has moved aggressively to stake out a leading position as the nation's biggest wholesale energy provider.

The company sells power to utilities that no longer produce their own power as well as to commercial and industrial customers that, in deregulated markets, can buy electricity from the lowest bidder.

The company has been steadily gaining market share from rivals and now does business in 22 states, with customers such as Ford Motor Co., Starwood Hotels and Staples Inc.

"New originations are strong; the performance of the portfolio is strong," said Mayo A. Shattuck III, Constellation's chairman, president and chief executive, noting that the firm's New Energy subsidiary sells power to 60 of the Fortune 100 companies. "Our commitment to these competitive markets ... has really been a good bet."

He said the company is poised to move into additional states as they restructure and open their electric markets to competition.

"The more success that states experience in this wholesale competitive procurement, the more it plays into our strategy. To us, it's a real affirmation."

The third quarter was the first that reflected the addition of the Ginna nuclear power plant near Rochester, N.Y., which the company purchased during the second quarter and which added 5 cents a share to earnings in the third quarter.

The utility owns several power plants, including coal-fired, gas-fired, nuclear and geothermal. The firm has expanded its nuclear plants because of its success with the Calvert Cliffs plant in Southern Maryland.

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