Constellation's profit rose 83% in 1st quarter

Earnings beat estimates as energy sales increased in unregulated markets

April 28, 2005|By Paul Adams | Paul Adams,SUN STAFF

Constellation Energy Group reported an 83 percent increase in first-quarter net income and a 20 percent increase in sales yesterday as a growing list of Fortune 100 companies and municipal utilities chose the Baltimore company as their power supplier.

With profit flat at its regulated utility, Baltimore Gas and Electric Co., the energy provider's strategy of going after big power buyers in competitive energy markets nationwide fueled much of the jump in earnings.

Net income in the three months that ended March 31 was $120.7 million, or 68 cents per share, compared with $66.2 million, or 39 cents per share, in the corresponding period a year ago. Sales grew to $3.63 billion from $3.03 billion in the year-earlier period.

The comparisons were skewed by a $70.1 million loss on the sale of a power plant in Hawaii last year, which lowered first-quarter 2004 earnings by 27 cents per share. The pending sale of Constellation's Oleander Power Plant in Cocoa, Fla., resulted in a 1-cent adjustment to earnings in both quarters.

Excluding those items, earnings per share were 67 cents in the recent quarter and 65 cents per share in first-quarter 2004. That beat analyst estimates of 60 cents per share and the company's estimates of 47 cents to 62 cents per share back in January.

Constellation shares fell 48 cents to close at $52.80 yesterday.

"We'll see that more and more as you are able to pick your power provider, there will be more opportunities for companies that are lower-cost providers to compete for business," said Ivan Feinseth, an analyst with Matrix USA LLC in New York, which rates the stock a "strong buy" but doesn't own its shares or have a financial relationship with the company. "Low-cost producers like Constellation will continue to pick up customers."

Mayo A. Shattuck III, Constellation's chairman and chief executive, said the company's push into competitive, deregulated markets outside Maryland has gone better than anticipated. Its share of the national competitive market grew from 21 percent in the fourth quarter of 2004 to 23 percent in the most recent quarter.

Company officials point out that several other states are considering bills to open their electric markets to competition, a movement that had stalled in recent years.

"The momentum behind that business continues to be very strong and our ... market share relative to other companies keeps widening," Shattuck said.

Constellation's reliance on nuclear energy gives it an edge over utilities more reliant on power plants fueled by natural gas, which have been buffeted by volatile prices. Nearly 53 percent of the company's power generation comes from its three nuclear plants. In June, the company bought the Ginna nuclear plant in Rochester, N.Y.

Shattuck said the company continues to look for power plants to buy and is part of a consortium pressing the government for regulations that would make it more favorable for companies to build nuclear plants. Constellation owns plants that can produce a combined 12,500 megawatts, enough to power 10 million homes.

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