Constellation has 3Q loss of $1.4 billion

Loss primarily due to lower value of nuclear power business

October 29, 2010|By Hanah Cho, The Baltimore Sun

Baltimore's Constellation Energy Group, which is no longer pursuing the development of a new nuclear reactor at Calvert Cliffs, reported Friday a net loss of $1.4 billion after taking large write-downs to reflect the reduced value of its nuclear power business and the cancellation of its nuclear development venture with a French partner.

The loss was $6.99 per share in the three months that ended Sept. 30, compared with a profit of $137.6 million, or 69 cents per share, in the same period a year ago.

Declining power prices and a lack of carbon legislation contributed to the lower value of Constellation's five nuclear plants in New York and at Calvert Cliffs in Southern Maryland, reflecting a pre-tax charge against profit of $2.3 billion.

Constellation owns the nuclear plants with its French partner EDF Group, which bought nearly half of that business two years ago amid a financial crisis. At the time of the deal's closing, the plants were valued at $5.2 billion, but they now carry a value of $2.9 billion, the company said.

This week, Constellation and EDF agreed to a deal that gives EDF full ownership of their joint nuclear development venture called Unistar, which is seeking to build a third reactor at Calvert Cliffs. Citing unreasonable costs, Constellation had withdrawn from negotiations with the Department of Energy over a federal loan guarantee deemed crucial to the $9.6 billion project.

Constellation wrote down $143 million for its Unistar investment to reflect the transfer of its 50 percent stake to EDF.

EDF will pay $140 million for Constellation's interest under an agreement reached Tuesday.

As part of the deal, EDF agreed to return 3.5 million Constellation shares, valued at about $110 million, while Constellation dropped plans to force EDF to buy several of its non-nuclear power plants it did not want for up to $2 billion.

The two companies were at odds over that so-called put option, which was to expire Dec. 31 and was part of EDF's deal to acquire nearly half of Constellation's nuclear power business.

Earnings at Constellation subsidiary Baltimore Gas & Electric Co. of 14 cents per share were flat in the third quarter.

The company's NewEnergy unit, which supplies power to commercial, industrial and some residential customers, narrowed its loss to 7 cents per share, from 22 cents a year ago.

Excluding charges related to its nuclear power business, Unistar and other costs, Constellation said it would have earned 48 cents per share in the third quarter.

The company reaffirmed its 2010 earnings guidance range of $3.05 per share to $3.45 per share.

Shares lost 60 cents to close Friday at $30.24.

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