Constellation shares lose 18%

September 16, 2008|By Hanah Cho | Hanah Cho,

Constellation Energy Group worked to reassure Wall Street yesterday that its wholesale energy and credit relationships with Lehman Brothers will not have a "material adverse effect" on the Baltimore company, which saw its shares lose 18 percent amid a broader market sell-off.

Constellation's stock closed down $10.38 to $47.99 on the New York Stock Exchange.

Even though Constellation conducts energy deals with Lehman, the New York investment banking company that entered bankruptcy proceedings yesterday does not owe it a substantial amount of money, according to a document filed with the Securities and Exchange Commission after financial markets closed yesterday.

"Constellation Commodities did not have any direct net credit exposure" to Lehman's commodities businesses based on existing contracts and current market prices as of yesterday, the filing said.

Constellation's Baltimore Gas & Electric Co. - which has existing contracts with Lehman for the purchase of natural gas for the upcoming winter - also does not have credit exposure and will not face difficulties meeting its customers' energy needs, according to the filing.

Moreover, Constellation has a credit line of $150 million with Lehman Brothers Bank, but the company said it has excess liquidity of about $2 billion, which does not include Lehman's credit commitment.

Energy company Exelon also said yesterday that its dealings with Lehman would not have an adverse effect on the Chicago-based firm. Its shares declined $1.79 or 3 percent to close at $66.60.

Constellation's stock loss comes nearly a month after its shares experienced a similar drop. Shares fell 16 percent on Aug. 12 after one analyst questioned the company's accounting and another raised concerns about the effects of a potential credit downgrade. Constellation shares are down 53 percent this year.

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