CEG profit dips

heat, hurricanes raise costs

Higher demand for electricity required added purchases of fuel for power plants in quarter even as energy prices soared

October 29, 2005|By ANDREA K. WALKER | ANDREA K. WALKER,SUN REPORTER

Constellation Energy Group Inc., the largest U.S. power marketer and parent of Baltimore Gas and Electric Co., reported yesterday that third-quarter earnings declined as hot weather and a rise in commodity prices because of the Gulf Coast hurricanes drove up the company's cost of providing power to retail and wholesale clients.

Net income fell 12 percent to $185.5 million, or $1.03 cents per share, compared with $210.4 million, or $1.19 a share, for the comparable period last year. Sales rose 44 percent to $4.9 billion from $3.4 billion, the company's 14th consecutive quarterly increase in revenue.

"Performance for the third quarter was not bad but was not as good as usual," Robert Rubin, an analyst for Deutsche Bank Securities in New York, wrote in a note to clients. "The company has consistently been able to outpace consensus expectations." Rubin rates the shares as "buy" and owns none.

Despite the decline, the company said it met the high end of its guidance on earnings per share adjusted for special items. It recorded $1.16 per share after having predicted a range of $1.02 to $1.17. The adjusted earnings were 4 cents lower than expected.

"It was a very good quarter," said Mayo A. Shattuck III, Constellation president and chief executive officer. "We came in at the top of our guidance range and that of [Wall Street]. They seemed very pleased by the results." Constellation stock fell 20 cents, or less than 1 percent, to close at $53.20 yesterday.

The hotter-than-expected summer hurt the unregulated side of the business as the company faced increased demand for electricity from its retail and wholesale customers who pay a fixed price. Constellation was forced to buy extra fuel at higher prices. Combined costs for such purchased power and for power-plant fuel surged 71 percent from a year earlier to $3.95 billion, the company said.

Constellation is the leading provider of competitive power to business users in North America, supplying many large commercial users including Staples, Hyatt Properties, Genzym, SuperValu and Baxter Healthcare. Locally, the company serves the buying cooperative for Baltimore schools and government buildings and the Baltimore Regional Cooperative Purchasing Committee.

Hot weather, on the other hand, helped performance at BGE.

BGE, the parent company's regulated utility serving the Baltimore area, earned 24 cents a share in the third quarter, 8 cents higher than for the period last year. Power use continued strong in Central Maryland, which recorded its third warmest summer since 1950, when BGE began tracking weather.

"It does in fact help one part of the business, but can hurt another," Shattuck said.

Also during the quarter, the company formed Unistar Nuclear, a joint venture with Areva SA, a French builder of nuclear reactors. Constellation wants to help lead a resurgence of nuclear power in the United States.

The company announced plans Thursday to begin the license application process with U.S. regulators to build a reactor. Sites under consideration include the company's Calvert Cliffs nuclear plant in Maryland and its Nine Mile Point station in New York. The company said a decision on a site would be made by early next year.

The company also sold its Panama operations in the third quarter as part of a plan to divest of "non-strategic assets," Shattuck said.

andrea.walker@baltsun.com

Bloomberg News contributed to this article.

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