Constellation Energy reports 63% drop in its first-quarter profit

Baltimore company agreed to merger with Chicago-based Exelon last week

May 06, 2011|By Hanah Cho, The Baltimore Sun

Constellation Energy Group, which agreed last week to sell itself to Chicago-based Exelon Corp., posted a 63 percent drop Friday in first-quarter profit amid higher expenses.

Separately, the Baltimore company revealed Friday that it will likely delay a request for another rate increase for customers of its utility Baltimore Gas & Electric Co. until after the merger's completion, which is expected in early 2012.

BGE had warned last year, as it was seeking its first electric delivery rate increase in 17 years, that the utility would request increases on a more regular basis. BGE received regulatory approval in December to increase electric and gas delivery rates for customers.

The 2012 earnings outlook for BGE included the assumption that the utility would file a request to raise rates in late 2011. But Constellation Chairman and CEO Mayo A. Shattuck III said the company doesn't want to "overload" the Maryland Public Service Commission.

"My guess is that we'll make the determination not to double up on that and overload, and we would postpone consideration of that until after we get the ruling on our merger case," Shattuck said in a conference call Friday with analysts.

Constellation's net income for the three months ending March 31 was $70.4 million, or 35 cents per share, down from $191.5 million, or 95 cents per share, in the same quarter the previous year.

When adjusting for one-time charges in the first quarter totaling $56.1 million after taxes, the company said, earnings were 63 cents per share, compared with $1.43 per share in the corresponding period last year. Those charges included costs related to the acquisition of five power plants in the Boston area and divesting its nuclear joint venture stake to its French partner EDF last year, the company said.

Analysts polled by Bloomberg had expected 97 cents in adjusted earnings.

In total, expenses rose to $3.3 billion, up from $3.2 billion. Revenues fell to $3.57 billion, down from $3.59 billion last year.

Constellation's earnings also were hurt by February's severe weather in Texas, where the company's two power plants were knocked out temporarily. As a result, the company took a hit of $40 million in pre-tax earnings, said Constellation's Chief Financial Officer Jonathan Thayer.

BGE posted adjusted earnings of 39 cents per share, up from 32 cents per share last year.

The $7.9 billion all-stock deal with Exelon would create the largest competitive energy provider in the United States. The new combined company would have its headquarters in Chicago, with a large presence in Baltimore.

To sell the deal to Maryland regulators, the two companies have offered a $250 million incentive package, which includes a $100 credit to 1.1 million BGE customers.

Shattuck said that the two companies will focus on the regulatory approval process.

The merger of Exelon and Constellation must be approved by the Maryland Public Service Commission, the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the New York Public Service Commission and the companies' shareholders.

Shattuck said he expects the first wave of approvals to occur in the third quarter and continue through the first quarter of 2012, when the deal is expected to close.

"We have offered upfront a strong package of commitment and mitigation that we believe should be viewed favorably," Shattuck said.

    Baltimore Sun Articles
    Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.