Delivers Solid Results Amid a Significant Increase in Commodity
Prices and Extreme Weather BALTIMORE, Oct. 28
/PRNewswire-FirstCall/ -- Constellation Energy (NYSE:CEG) today
reported third quarter 2005 adjusted earnings of $1.16 per share,
at the top of management's guidance range of $1.02 to $1.17 per
share. Adjusted earnings exclude the impact of special items and
certain economic hedges that do not qualify for hedge accounting.
Compared to the third quarter of last year, adjusted earnings per
share were four cents lower. On a GAAP basis, the company's
reported earnings were $1.03 per share in the third quarter of
2005, compared to $1.19 per share during the same quarter last
year. Constellation Energy also reaffirmed 2005 guidance for
adjusted earnings of $3.35 to $3.60 per share. "Constellation
Energy delivered strong financial results despite a third quarter
in which hot weather in many regions drove strong load demand and
Gulf Coast hurricanes fueled a significant rise in commodity
prices," said Mayo A. Shattuck III, chairman, president and chief
executive officer of Constellation Energy. "We once again
demonstrated that our strong risk management capabilities enable us
to succeed in this type of environment. "The past quarter also was
marked by the formation of UniStar Nuclear, a joint enterprise with
AREVA Inc. that provides the business framework through which the
first fleet of advanced nuclear power plants in America in nearly
three decades could be developed and deployed," added Shattuck.
Also in the third quarter, Constellation Energy reached an
agreement to sell its Panama operations. The transaction closed on
Oct. 3, 2005, which will result in an eight cent gain in the fourth
quarter. The following table summarizes both adjusted earnings per
share (which excludes the impact of special items and certain
economic hedges that do not qualify for hedge accounting) and
earnings per share reported in accordance with generally accepted
accounting principles (GAAP) for the three and nine months ended
Sept. 30, 2005: Three Months Ended September 30, 2005 2004 Reported
Reported GAAP Adjusted GAAP Adjusted EARNINGS PER COMMON SHARE EPS*
EPS EPS* EPS Baltimore Gas and Electric $0.24 $0.24 $0.16 $0.16
Merchant Energy 0.78 0.92 (1) 1.05 1.06 (2) Other Nonregulated - -
(0.05) (0.02)(3) Diluted Earnings Per Share from Continuing
Operations 1.02 1.16 1.16 1.20 Income from Discontinued Operations
Assuming Dilution 0.01 - 0.03 - Diluted Earnings Per Share $1.03
$1.16 $1.19 $1.20 * Unaudited. Prior period amounts reclassified to
conform with current period presentation. GAAP EPS was adjusted by
the following amounts to calculate Adjusted EPS (1) Workforce
reduction costs of $0.01 per share and non-qualifying hedges on
fuel adjustment clauses and gas transportation contracts of $0.13
per share (2) Non-qualifying hedges on fuel adjustment clauses of
$0.01 per share. (3) Net loss on sales of investments and other
assets of $0.03 per share. Nine Months Ended September 30, 2005
2004 Reported Reported GAAP Adjusted GAAP Adjusted EARNINGS PER
COMMON SHARE EPS* EPS EPS* EPS Baltimore Gas and Electric $0.76
$0.76 $0.72 $0.72 Merchant Energy 1.57 1.77 (1) 1.90 1.72 (2) Other
Nonregulated 0.01 0.01 (0.06) (0.04)(3) Diluted Earnings Per Share
from Continuing Operations 2.34 2.54 2.56 2.40 Income (Loss) from
Discontinued Operations Assuming Dilution 0.04 - (0.20) - Diluted
Earnings Per Share $2.38 $2.54 $2.36 $2.40 * Unaudited. Prior
period amounts reclassified to conform with current period
presentation. GAAP EPS was adjusted by the following amounts to
calculate Adjusted EPS (1) Workforce reduction costs of $0.01 per
share and non-qualifying hedges on fuel adjustment clauses and gas
transportation contracts of $0.19 per share. (2) Synfuel tax
credits associated with 2003 production at SC facility of ($0.21)
per share and non-qualifying hedges on fuel adjustment clauses of
$0.03 per share. (3) Net loss on sales of investments and other
assets of $0.01 per share and impairment of a financial investment
of $0.01 per share. Baltimore Gas & Electric BGE delivered a
strong performance in the third quarter, earning 24 cents per
share. These results were seven cents above the top end of
management's guidance range and eight cents higher than the same
period last year. The positive variance was due primarily to hot
weather in Central Maryland in the third quarter, which was the
third warmest since 1950, when BGE began tracking weather. Merchant
Energy Constellation Energy's merchant energy business recorded
adjusted earnings of 92 cents per share. This result was in line
with management's guidance and 14 cents lower than the adjusted EPS
of $1.06 per share earned in the third quarter last year. As
expected in the third quarter, the company received lower
competitive transition charge (CTC) revenue as some commercial
customers completed their CTC obligation. Weather-driven demand
increased costs for the load serving businesses as customers
consumed more fixed-price power. This phenomenon combined with the
sharp rise in power prices increased NewEnergy's costs to serve
customers in their expanding retail business. "We delivered
incremental productivity in the third quarter, driven primarily by
our generation group. Year to date, we have realized about $72
million, or 90 percent of our 2005 productivity target of $80
million. As you can see, we are delivering on our promise that 2008
pretax earnings would be $150 to $180 million higher than 2003's
via productivity," said E. Follin Smith, executive vice president,
chief financial officer and chief administrative officer of
Constellation Energy. "These gains will create a lower cost
structure, which is an annuity for our shareholders in our
deregulated environment and which increases the return on
investment in Constellation Energy." Adjusted Earnings
Constellation Energy presents adjusted earnings per share (adjusted
EPS) in addition to its reported earnings per share in accordance
with generally accepted accounting principles (reported GAAP EPS).
Adjusted EPS is a non- GAAP financial measure that differs from
reported GAAP EPS because it excludes the cumulative effects of
changes in accounting principles, discontinued operations, special
items (which we define as significant items that are not related to
our ongoing, underlying business or which distort comparability of
results) included in operations, and impacts of certain economic,
non- qualifying hedges. For the third quarter, Constellation Energy
has for the first time determined to exclude from adjusted earnings
two categories of non-qualifying hedges: hedges against the
Commodities Group New England fuel adjustment clauses and hedges on
gas transport contracts. The mark-to-market impact of these hedges
was significant on reported results, but economically neutral to
the company in that offsetting gains on underlying accrual
positions will be recognized in the future. We present adjusted EPS
because we believe that it is appropriate for investors to consider
results excluding these items in addition to our results in
accordance with GAAP. We believe such a measure provides a picture
of our results that is comparable among periods since it excludes
the impact of items such as workforce reduction costs or gains and
losses on the sale of a business, which may recur occasionally, but
tend to be irregular as to timing, thereby distorting comparisons
between periods. However, investors should note that these non-GAAP
measures involve judgments by management (in particular, judgments
as to what is classified as a special item or an economic,
non-qualifying hedge to be excluded from adjusted earnings). These
non-GAAP measures are also used to evaluate management's
performance and for compensation purposes. Constellation Energy
also provides its earnings guidance in terms of adjusted EPS.
Constellation Energy is unable to reconcile its 2005 adjusted EPS
to GAAP earnings per share because we do not predict the future
impact of special items and economic, non-qualifying hedges due to
the difficulty of doing so. The impact of special items and
economic, non-qualifying hedges could be material to our operating
results computed in accordance with GAAP. SEC Filings The company
plans to file its Form 10-Q for the three months ended Sept. 30,
2005 on or about Nov. 8, 2005. Forward-Looking Statements We make
statements in this news release that are considered forward-
looking statements within the meaning of the Securities Exchange
Act of 1934. These statements are not guarantees of our future
performance and are subject to risks, uncertainties, and other
important factors that could cause our actual performance or
achievements to be materially different from those we project. For
a full discussion of these risks, uncertainties, and factors, we
encourage you to read our documents on file with the Securities and
Exchange Commission, including those set forth in our Form 10-K
under the forward- looking statements section. Conference Call Oct.
28, 2005 Constellation Energy will host a conference call at 8:30
a.m. EDT on Oct. 28, 2005, to review its third quarter 2005
financial results. To participate, analysts, investors, media and
the public in the U.S. may dial 888-455-2894 shortly before 8:30
a.m. The international phone number is 773-681-5899. The conference
password is ENERGY. A replay will be available approximately one
hour after the end of the call. The replay number is 800-925-4871
(U.S.) or 402-220-4325 (international). A live audio webcast of the
conference call, as well as presentation slides, will be available
on the Investor Relations page of the company Web site,
http://www.constellation.com/. The reference to our Web site is an
active textual reference and the contents of our Web site are not
part of this press release. Constellation Energy
(http://www.constellation.com/), a FORTUNE 200 company based in
Baltimore, is the nation's largest competitive supplier of
electricity to large commercial and industrial customers and the
nation's largest wholesale power seller. Constellation Energy also
manages fuels and energy services on behalf of energy intensive
industries and utilities. It owns a diversified fleet of more than
100 generating units located throughout the United States, totaling
approximately 12,000 megawatts of generating capacity. The company
delivers electricity and natural gas through the Baltimore Gas and
Electric Company (BGE), its regulated utility in Central Maryland.
In 2004, the combined revenues of the integrated energy company
totaled $12.5 billion. Addendum -- Economic, Non-qualifying Hedges
and Special Items Recognized in Third Quarter 2005 Economic,
Non-qualifying Hedges -- after-tax loss of $(22.8) million, or
$(0.13) per share In the third quarter of 2005, we recognized a
$(22.8) million after-tax loss related to certain non-qualifying
hedges, which are economic hedges that do not meet the criteria for
hedge accounting under Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, and thus are required to be
marked-to-market. These non-qualifying hedges relate to New England
load contracts fuel adjustment clauses (FACs) and gas transport
contracts. This mark-to-market loss is expected to be offset as we
realize the related accrual load-serving and gas transport
contracts in future periods. Workforce Reduction Costs -- after-tax
charge of $(2.3) million, or $(0.01) per share In the fourth
quarter of 2004, we announced our plans to restructure the work
forces of the Nine Mile Point and Calvert Cliffs nuclear generating
stations effective in 2005. As a result of the restructuring, in
the third quarter of 2005 we were required to record a settlement
charge for one of our qualified pension plans under SFAS No. 88,
Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits. This charge
reflects recognition of the portion of deferred actuarial gains and
losses associated with employees who were terminated as part of the
restructuring or retired in 2005 and who elected to receive their
pension benefit in the form of a lump-sum payment. In accordance
with SFAS No. 88, a settlement charge must be recognized at the
point in time when lump-sum payments exceed annual pension plan
service and interest cost, which occurred in the third quarter. We
expect to incur a small incremental SFAS No. 88 settlement charge
in the fourth quarter of 2005 as additional lump-sum payments are
made. Income from Discontinued Operations -- after-tax gain of $1.4
million, or $0.01 per share In September 2005, we reached an
agreement to sell Constellation Power International Investments,
Ltd., which includes a controlling financial interest in a
Panamanian electric distribution facility. As of Sept. 30, 2005, we
classified these investments, reflected in other non-regulated, as
held for sale and reclassified their financial results to
discontinued operations. The transaction was closed on Oct. 3,
2005. During the fourth quarter of 2005, we will recognize a
pre-tax gain of approximately $15 million, or eight cents per
share, in discontinued operations from the sale of these non-core
international investments. The gain will be classified as a special
item. Constellation Energy Group and Subsidiaries Consolidated
Statements of Income (Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, 2005 2004 2005 2004 (In Millions,
Except Per Share Amounts) Revenues Nonregulated revenues $4,183.4
$2,702.2 $9,771.0 $7,018.0 Regulated electric revenues 626.8 582.0
1,583.4 1,543.6 Regulated gas revenues 112.2 74.6 618.5 504.0 Total
revenues 4,922.4 3,358.8 11,972.9 9,065.6 Expenses Fuel and
purchased energy expenses 3,953.2 2,317.3 9,218.0 6,372.7 Operating
expenses 415.4 445.3 1,339.3 1,296.6 Workforce reduction costs 3.9
- 3.9 - Depreciation and amortization 143.3 132.5 407.4 376.1
Accretion of asset retirement obligations 15.8 14.5 46.2 38.1 Taxes
other than income taxes 73.8 67.0 209.4 192.5 Total expenses
4,605.4 2,976.6 11,224.2 8,276.0 Income from Operations 317.0 382.2
748.7 789.6 Other Income (Expense) 16.1 (0.6) 43.0 15.1 Fixed
Charges Interest expense 75.7 79.9 230.2 246.4 Interest capitalized
and allowance for borrowed funds used during construction (2.1)
(2.2) (7.6) (8.0) BGE preference stock dividends 3.3 3.3 9.9 9.9
Total fixed charges 76.9 81.0 232.5 248.3 Income from Continuing
Operations Before Income Taxes 256.2 300.6 559.2 556.4 Income Tax
Expense 72.1 95.8 138.7 115.8 Income from Continuing Operations
184.1 204.8 420.5 440.6 Income (Loss) from discontinued operations,
net of income taxes of $4.1, $5.7, $12.0, and ($11.4), respectively
1.4 5.6 7.4 (35.8) Net Income $185.5 $210.4 $427.9 $404.8 Earnings
Applicable to Common Stock $185.5 $210.4 $427.9 $404.8 Average
Shares of Common Stock Outstanding - Basic 178.1 175.5 177.5 170.7
Average Shares of Common Stock Outstanding - Diluted 180.5 176.4
179.6 171.8 Earnings Per Common Share from Continuing Operations
-Basic $1.03 $1.17 $2.37 $2.58 Income (Loss) from discontinued
operations - Basic 0.01 0.03 0.04 (0.21) Earnings Per Common Share
- Basic $1.04 $1.20 $2.41 $2.37 Earnings Per Common Share from
Continuing Operations - Diluted $1.02 $1.16 $2.34 $2.56 Income
(Loss) from discontinued operations - Diluted 0.01 0.03 0.04 (0.20)
Earnings Per Common Share - Diluted $1.03 $1.19 $2.38 $2.36 Certain
prior-period amounts have been reclassified to conform with the
current period's presentation. Constellation Energy Group and
Subsidiaries Consolidated Balance Sheets (Unaudited) September 30,
December 31, 2005 2004 ASSETS (In Millions) Current Assets Cash and
cash equivalents $1,135.0 $706.3 Accounts receivable (net of
allowance for uncollectibles of $38.1 and $43.1, respectively)
2,819.1 1,979.3 Mark-to-market energy assets 1,845.8 567.3 Risk
management assets 1,963.2 471.5 Fuel stocks 361.3 298.3 Materials
and supplies 200.8 203.8 Assets held for sale 326.8 - Other 487.5
262.9 Total current assets 9,139.5 4,489.4 Investments And Other
Assets Nuclear decommissioning trust funds 1,091.4 1,033.7
Mark-to-market energy assets 1,003.0 359.8 Risk management assets
661.5 306.2 Investments in qualifying facilities and power projects
308.1 318.4 Regulatory assets (net) 148.8 195.4 Goodwill 147.1
144.8 Other 511.1 412.8 Total investments and other assets 3,871.0
2,771.1 Property, Plant And Equipment Nonregulated property, plant
and equipment 8,453.9 8,638.4 Regulated property, plant and
equipment 5,502.4 5,412.7 Nuclear fuel (net of amortization) 250.2
264.3 Accumulated depreciation (4,288.8) (4,228.8) Net property,
plant and equipment 9,917.7 10,086.6 Total Assets $22,928.2
$17,347.1 LIABILITIES AND EQUITY Current Liabilities Current
portion of long-term debt $200.8 $480.4 Accounts payable and
accrued liabilities 2,033.0 1,424.9 Customer deposits and
collateral 791.0 223.8 Mark-to-market energy liabilities 1,801.5
559.7 Risk management liabilities 643.7 304.3 Liabilities held for
sale 274.6 - Deferred income taxes 602.4 95.0 Accrued expenses and
other 642.2 574.3 Total current liabilities 6,989.2 3,662.4
Deferred Credits And Other Liabilities Deferred income taxes
1,093.3 1,303.3 Asset retirement obligations 876.4 825.0
Mark-to-market energy liabilities 932.5 315.0 Risk management
liabilities 1,563.7 472.2 Postretirement and postemployment
benefits 381.0 375.3 Net pension liability 265.5 269.7 Deferred
investment tax credits 65.8 71.2 Other 292.9 232.0 Total deferred
credits and other liabilities 5,471.1 3,863.7 Long-Term Debt
Long-term debt of nonregulated businesses 3,406.1 3,800.5 Long-term
debt of BGE 1,222.4 1,245.9 6.20% deferrable interest subordinated
debentures due October 15, 2043 to BGE wholly owned BGE Capital
Trust II relating to trust preferred securities 257.7 257.7
Unamortized discount and premium (8.5) (10.5) Current portion of
long-term debt (200.8) (480.4) Total long-term debt 4,676.9 4,813.2
Minority Interests 22.7 90.9 BGE Preference Stock Not Subject To
Mandatory Redemption 190.0 190.0 Common Shareholders' Equity Common
stock 2,597.0 2,502.5 Retained earnings 2,674.9 2,425.9 Accumulated
other comprehensive income (loss) 306.4 (201.5) Total common
shareholders' equity 5,578.3 4,726.9 Total Liabilities And Equity
$22,928.2 $17,347.1 Constellation Energy Group and Subsidiaries
Merchant Energy Operating Statistics (Unaudited) Nine Months Ended
September 30, Hydro & Nuclear Coal Oil Gas Other Total
Generation by Fuel Type (%) 2005 51.5 30.7 1.3 14.9 1.6 100.0 2004
49.9 33.3 2.0 12.7 2.1 100.0 Thousands of MWH 2005 23,036 13,734
593 6,686 721 44,770 2004 20,664 13,798 817 5,262 867 41,408
Utility Operating Statistics (Unaudited) Three Months Ended Nine
Months Ended September 30, September 30, 2005 2004 2005 2004
ELECTRIC Revenues (In Millions) Residential --with househeating
$108.4 $97.3 $311.8 $310.7 --other 231.5 203.0 520.6 490.6 --total
339.9 300.3 832.4 801.3 Commercial --excluding delivery service
206.5 221.8 560.1 556.9 --delivery service 35.4 19.8 83.4 52.8
Industrial --excluding delivery service 14.7 19.3 40.9 80.1
--delivery service 8.9 6.7 21.4 15.2 System Sales 605.4 567.9
1,538.2 1,506.3 Other 21.4 14.1 45.2 37.3 Total $626.8 $582.0
$1,583.4 $1,543.6 Sales (In Thousands) - MWH Residential --with
househeating 1,323 1,183 4,184 4,255 --other 2,699 2,385 6,358
6,096 --total 4,022 3,568 10,542 10,351 Commercial --excluding
delivery service 1,920 2,479 5,983 7,429 --delivery service 2,611
1,713 6,109 4,037 Industrial --excluding delivery service 145 222
465 1,269 --delivery service 867 854 2,370 1,904 Total System Sales
9,565 8,836 25,469 24,990 GAS Revenues (In Millions) Residential
--excluding delivery service $51.3 $48.6 $344.5 $332.9 --delivery
service 3.1 0.8 16.6 10.0 --total 54.4 49.4 361.1 342.9 Commercial
--excluding delivery service 17.2 14.3 108.8 98.2 --delivery
service 5.2 3.7 22.2 19.7 Industrial --excluding delivery service
1.1 1.1 6.5 7.0 --delivery service 3.2 1.6 8.7 5.6 System Sales
81.1 70.1 507.3 473.4 Off-System Sales 33.6 4.0 114.1 28.6 Other
1.2 1.2 5.5 5.4 Total $115.9 $75.3 $626.9 $507.4 Sales (In
Thousands) - DTH Residential --excluding delivery service 2,488
2,633 27,054 27,741 --delivery service 318 362 3,821 4,398 --total
2,806 2,995 30,875 32,139 Commercial --excluding delivery service
1,170 1,056 9,989 9,644 --delivery service 5,030 5,759 22,201
24,375 Industrial --excluding delivery service 80 77 632 635
--delivery service 4,899 3,090 13,927 10,903 System Sales 13,985
12,977 77,624 77,696 Off-System Sales 3,623 594 14,501 4,005 Total
17,608 13,571 92,125 81,701 Utility operating statistics do not
reflect the elimination of intercompany transactions.
Heating/Cooling Degree Days (Calendar-Month Basis) Heating Degree
Days - Actual 39 49 3,129 3,111 - Normal 87 87 3,054 3,078 Cooling
Degree Days - Actual 686 538 896 831 - Normal 581 581 822 818
Constellation Energy Group and Subsidiaries Supplemental Financial
Statistics (Unaudited) Nine Months Ended September 30, 2005 2004
Ratio of Earnings to Fixed Charges 3.12 3.05 Effective Tax Rate
24.4% 20.4% Equity Investment In Nonregulated Businesses -- End of
Period $3,902.8 $3,377.8 Equity Investment In Regulated Business --
End of Period $1,675.5 $1,442.5 Common Stock Data Three Months
Ended Nine Months Ended September 30, September 30, 2005 2004 2005
2004 Common Stock Dividends - Per Share --Declared $0.335 $0.285
$1.005 $0.855 --Paid $0.335 $0.285 $0.955 $0.830 Market Value Per
Share --High $62.09 $41.18 $62.09 $41.47 --Low $56.50 $36.76 $43.01
$35.89 --Close $61.60 $39.84 $61.60 $39.84 Shares Outstanding--End
of Period (In Millions) 178.4 175.7 178.4 175.7 Book Value per
Share--End of Period $31.27 $27.43 $31.27 $27.43 Prior-period
statistics have been adjusted for discontinued operations.
DATASOURCE: Constellation Energy CONTACT: Media: Robert L. Gould or
Angelique Rewers, +1-410-234-7433, or Investors: Kevin Hadlock,
+1-410-783-3647, all of Constellation Energy Web site:
http://www.constellation.com/ Company News On-Call:
http://www.prnewswire.com/comp/084087.html
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