UPDATE: Constellation Energy Swings To Loss On $271 Million Charges
May 05 2009 - 11:06AM
Dow Jones News
Constellation Energy Group Inc. (CEG) reported Tuesday that it
swung to a first-quarter loss on $271.2 million on charges related
to divestitures and a failed merger as the company said its
realignment was on track.
Like other electricity providers, the company has been slammed
by volatile commodities prices. Constellation has been selling
assets and looking for buyers for others as it continues to cut
back its commodities business, which nearly ran aground last
year.
The woes led to a planned acquisition by MidAmerican Energy
Holdings Co., owned by Berkshire Hathaway Inc. (BRKA). But that
deal was scrapped in December as Constellation instead agreed to
sell half its nuclear-power business to Electricite de France SA
(EDF.FR) for $4.5 billion.
Constellation Chairman and Chief Executive Mayo Shattuck said
Tuesday that Constellation's de-risking activities and
restructuring plan it began in August caused the quarter's loss.
The red ink totaled $123.5 million, or 62 cents a share, compared
with year-earlier earnings of $145.7 million, or 81 cents a
share.
Excluding the effects from the divestitures, merger termination
and write-downs, earnings fell to 74 cents from 95 cents. Revenue
decreased 11% to $4.3 billion.
Analysts polled by Thomson Reuters expected earnings of 70 cents
on revenue of $4.38 billion.
Shares recently traded down 5.2% to $23.91.
First-quarter results showed progress by Constellation's
management in restructuring the company after a near-collapse last
year, but plenty of risk remains in the process, said Travis
Miller, an equity analyst with Morningstar & Co.
"Certainly the turnaround is not complete. There are many steps
left to go," he said.
Constellation's Baltimore Gas & Electric utility posted an
earnings increase of 11% on the timing of expenses, partially
offsetting increased bad-debt costs.
The merchant-energy division, which operates power plants,
reported an earnings fall of 43% on woes in the commodity
business.
Constellation management, during a conference call with analysts
Tuesday, said the sale of its international operations, U.S.
natural gas trading business and other divestitures will result in
a total of $271 million in losses in the first half of the year.
The company expects to report $65.4 million in losses in the second
quarter from the divestitures.
Executives said Constellation sold the riskier businesses at
below their book value to improve the energy company's collateral
more rapidly. Constellation estimated its net available liquidity
as of last week at $4 billion, up from $2.4 billion at the end of
last year.
Over the winter, Constellation agreed to sell most of its
European energy-trading units and coal and freight operations to a
Goldman Sachs Group Inc. (GS) affiliate, while Australian bank
Macquarie Group Ltd. (MQBKY) agreed to buy the company's downstream
natural gas business.
Constellation continues to expect the deal with EDF to close in
the third quarter. Shattuck said Constellation will look
increasingly to match its generation business with its customer
power supply business, possibly adding generation where it has
customer load.
The company also on Tuesday reaffirmed its earnings guidance of
$2.90 to $3.20 a share this year and $3.05 to $3.45 a share for
2010.
-By Mark Peters and Kerry E. Grace, Dow Jones Newswires;
201-938-4604; mark.peters@dowjones.com