Shares of Constellation Energy Group fell 16 percent yesterday - the largest one-day drop in seven years - after one analyst questioned the company's accounting and another raised concerns about the effects of a potential credit downgrade.
The stock closed down $11.79 to $61.25 on the New York Stock Exchange.
It was the biggest percentage decrease for the Baltimore company since July 20, 2001, when shares fell 21 percent after Constellation lowered its earnings forecast for that year.
Yesterday's decline was the third-biggest drop on the New York Stock Exchange.
"The drop of the stock is breathtaking," said Paul Patterson, an analyst with Glenrock Associates in New York. "It's hard to pinpoint exactly what has gotten everybody so concerned."
Energy companies are typically volatile investments, analysts said, but Constellation, which owns Baltimore Gas & Electric, has been doing well amid rising prices. Last month, the company reported a 47 percent increase in its second-quarter profit, buoyed by its gas and electricity trading business.
But a few lines in the quarterly report it filed Monday with the U.S. Securities and Exchange Commission drew analysts' attention: Constellation said it made a mistake in a filing earlier this year.
The company said it significantly underestimated the amount of collateral it would have to put up if its credit rating were lowered below investment grade, a development that analysts said was unlikely.
The company, which is considering building a nearly $10 billion nuclear reactor at Calvert Cliffs in Lusby, relies heavily on its borrowing power.
Constellation did not respond to requests for comment yesterday.
The company's SEC filing said a three-level credit downgrade would trigger collateral obligations of $3.4 billion, more than double the $1.6 billion figure the company provided in May.
Constellation attributed the $1.8 billion difference to price increases and the failure to take into account certain contracts with credit downgrade provisions.
That explanation made Deutsche Bank "somewhat concerned," analyst John Kiani said in a research note Monday.
Constellation has been under a "negative" credit watch from rating agency Standard & Poor's since February.
But Kiani said a credit downgrade to junk status is unlikely, given the company's efforts to strengthen its balance sheet and recent profitability forecasts.
