Constellation Energy posts $4.4 billion 4Q profit

Shattuck points out gain on nuclear deal with EDF

February 23, 2010|By Liz F. Kay |

Constellation Energy Group, parent of Baltimore Gas and Electric Co., reported Monday a $4.4 billion fourth-quarter profit as the company accounted for a sizable gain on its deal with Electricite de France, a French utility that bought half of the company's nuclear power business.

The $4.5 billion gain on the transaction led to net income of $21.96 a share in the quarter compared with a loss of $1.4 billion, or $7.75 a share, in the corresponding period a year ago. Constellation CEO Mayo A. Shattuck III said during a Monday conference call with investors and analysts that the company took several steps last year to strengthen its business, including closing the deal with EDF, shedding its trading and marketing businesses and retiring outstanding debt.

"We completed these initiatives in less time and at a lower cost than originally anticipated," Shattuck said.

Constellation performed well in 2009 despite decreased demand because of reduced industrial and commercial activity in the early part of the year, Shattuck said. Commodity prices and demand "appear to have stabilized," he said.

For all of 2009, Constellation reported a $4.5 billion profit, turning around the $1.3 billion loss in 2008. The company also reaffirmed 2010 earnings guidance of $3.05 per share to $3.45 per share.

"The outlook for 2010 and beyond remains uncertain and will be influenced by the timing and magnitude of the economic recovery," Shattuck said. "We believe Constellation's merchant businesses are well-positioned to weather these market uncertainties."

Shattuck also reviewed decisions expected from state and federal regulators this year.

As previously announced, BGE expects to file a case with the Maryland Public Service Commission to increase the distribution rates charged to consumers to pay for new initiatives and system upgrades. The increases to the distribution rates - what BGE charges to deliver electricity to its customers and a small portion of energy bills - have been capped at 5 percent under a previous PSC agreement. Electric distribution rates were last adjusted in 1993.

The company also is awaiting approval from commissioners of its "smart grid" proposal to deploy advanced metering technology to every customer. A $200 million grant from the U.S. Department of Energy would partially offset the estimated $500 million cost of the program.

And the company hopes to hear soon about a possible federal loan guarantee from the Energy Department to move forward with construction of a new nuclear reactor at Calvert Cliffs, as part of its EDF venture.

Constellation expects to use about $1 billion of its cash balances in the next few years to purchase additional generation in regions where the company is providing more load than it has the capacity to produce, Shattuck said.

Analysts questioned how Constellation intended to use its cash balance and the kinds of acquisitions that the company was exploring. Shattuck expressed interest in purchasing natural gas plants and said the company is considering development of renewable sources, particularly in Maryland.

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