- Solid earnings growth driven by strong Merchant performance
BALTIMORE, April 25 /PRNewswire-FirstCall/ -- Constellation Energy
(NYSE:CEG) today reported adjusted earnings of $1.03 per share, 42
cents per share higher than the 61 cents of adjusted earnings per
share (EPS) earned in the same period last year. The results
exceeded the top of management's guidance range of 80 cents to
$1.00 per share. Adjusted earnings exclude the impact of special
items, discontinued operations, certain economic, non- qualifying
hedges and synfuel earnings. On a GAAP basis, the company earned
$1.07 per share in the first quarter of 2007, compared to 63 cents
per share earned in the same period last year. "Constellation
Energy delivered another strong performance in the first quarter of
2007," said Mayo A. Shattuck III, chairman, president and chief
executive officer, Constellation Energy. "The first quarter of 2007
was marked by solid earnings growth in the Merchant businesses. Our
Mid-Atlantic Fleet is returning to profitability as below-market
hedges roll off. Constellation NewEnergy performed well as we
continue to leverage its national platform. Our wholesale
competitive supply business executed in line with its plan and
delivered solid results, which, as expected, were down from an
exceptionally strong portfolio management and trading performance
in the first quarter of last year. "We completed our first quarter
nuclear refueling outages, executing the refueling and reactor
vessel head replacement at Calvert Cliffs Nuclear Power Plant Unit
2 in less than 36 days and a refueling outage at Nine Mile Point
Nuclear Plant Unit 1 in 30 days, a new record for the unit," said
Shattuck. "Another highlight of the quarter was Constellation
Energy Commodities Group's announcement of an agreement to acquire
select contracts from Progress Ventures, which represents an
opportunity for us to grow the wholesale competitive supply
business in the Southeast, where we have had good initial success
to date and where we see additional opportunities. "We also moved
in the quarter on a number of strategic initiatives related to the
growth of our wholesale and retail natural gas platforms," said
Shattuck. "We announced that Constellation Energy Commodities Group
acquired working interests in gas and oil producing properties in
Oklahoma. Constellation NewEnergy announced an agreement to acquire
Cornerstone Energy, which has a similar commercial and industrial
business model and a complementary geographic footprint to
Constellation NewEnergy's gas business. Overall, we are planning to
invest approximately $310 million in these acquisitions, which will
strengthen and diversify our growing natural gas platform."
Constellation Energy provided second quarter 2007 guidance of 55
cents to 75 cents per share and affirmed earnings guidance of $4.30
to $4.65 per share in 2007 and $5.25 to $5.75 per share for 2008.
Looking at 2009, the company expects earnings growth of 10 percent
over 2008. "Our long-term outlook continues to strengthen, and the
earnings growth drivers are highly visible," said Shattuck.
"Constellation Energy is well- positioned to take advantage of
opportunities presented by the market. Our solid foundation is
built on a well-managed, high-quality asset base. Our
market-leading position in power and our strong position in gas and
coal markets give us an information edge and scale advantage over
competitors. Our disciplined investment approach and
industry-leading risk management capabilities help us to make good
investments and optimize their value. Our strong balance sheet
provides us the financial foundation to act quickly to capture
opportunities." The following table summarizes adjusted earnings
per share and earnings per share reported in accordance with GAAP
for the company's business segments and provides a reconciliation
to total company reported earnings: Three Months Ended March 31,
2007 2006 Reported Reported GAAP Adjusted GAAP Adjusted DILUTED
EARNINGS PER COMMON SHARE EPS* EPS EPS* EPS Baltimore Gas and
Electric $0.36 $0.36 $0.38 $0.38 Merchant 0.67 0.62(1) 0.17 0.22(2)
Other Nonregulated 0.05 0.05 0.01 0.01 Diluted Earnings Per Share
from Continuing Operations 1.08 1.03 0.56 0.61 (Loss)/Income from
Discontinued Operations Assuming Dilution (0.01) -- 0.07 -- Diluted
Earnings Per Share $1.07 $1.03 $0.63 $0.61 * Unaudited. Prior
period amounts reclassified to conform with the current period's
presentation. GAAP EPS was adjusted by the following amounts to
calculate Adjusted EPS (1) Subtraction of earnings from our
synthetic fuel processing facilities of $0.10 per share and
addition of mark-to-market losses on certain non-qualifying hedges
of $0.05 per share. (2) Addition of mark-to-market losses on
certain non-qualifying hedges of $0.06 per share and addition for
merger-related and workforce reduction costs of $0.01 per share.
Subtraction of earnings from our synthetic fuel processing
facilities of $0.02 per share. Baltimore Gas and Electric Baltimore
Gas and Electric Company (BGE) reported earnings of 36 cents per
share in the first quarter of 2007. Compared to the first quarter
of 2006, BGE's first quarter 2007 EPS was down 2 cents, driven by
the loss of nuclear decommissioning income and higher costs,
partially offset by more favorable weather in the first quarter of
2007. Merchant On an adjusted basis, the Merchant segment earned 62
cents per share during the first quarter of 2007, at the top of
management's guidance range of 42 cents to 62 cents per share and
up 40 cents per share from the first quarter last year. The
Merchant segment's solid year-over-year performance in the first
quarter was in line with expectations. The Mid-Atlantic Fleet
returned to profitability as below-market hedges were replaced with
hedges established in later, higher-priced energy environments.
Constellation NewEnergy experienced lower costs to serve load and
higher as-priced margins in the electric business versus the first
quarter last year. Net interest expense was down due to higher cash
balances following the sale of gas-fired generation plants in late
2006. These positive comparisons were partially offset by lower
wholesale competitive supply new business following an
exceptionally strong portfolio management and trading performance
in the first quarter of 2006, lower competitive supply backlog in
the quarter, in line with expectations, and the loss of competitive
transition charge collections in Maryland. Other Nonregulated
Constellation Energy's Other Nonregulated businesses reported
earnings of 5 cents per share for the first quarter of 2007, in
line with management's guidance range of 4 cents to 6 cents per
share and up 4 cents per share, compared to earnings per share of
one cent for the first quarter of 2006. Financial Statements The
March 31, 2007 financial statements and supplemental information
are attached. 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, the impact of certain economic, non-
qualifying hedges and synfuel earnings. The mark-to-market impact
of these hedges is significant to reported results, but
economically neutral to the company in that offsetting gains or
losses on underlying accrual positions will be recognized in the
future. Synfuel earnings are excluded due to the potential for
oil-price volatility to result in a difficult-to-forecast phase-
out of tax credits. 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
more comparable among periods since it excludes the impact of items
such as workforce reduction costs or gains and losses on the sale
of assets, which may recur occasionally, but tend to be irregular
as to timing, thereby distorting comparisons between periods.
However, investors should note that this non-GAAP measure involves
judgment by management (in particular, judgment as to what is
classified as a special item or an economic, non- qualifying hedge
to be excluded from adjusted earnings). This non-GAAP measure is
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 guidance to GAAP earnings per share because we do not
predict the future impact of special items, economic,
non-qualifying hedges and synfuel results due to the difficulty of
doing so. The impact of special items, economic, non-qualifying
hedges and synfuel results could be material to our operating
results computed in accordance with GAAP. We note that such
information is not in accordance with GAAP and should not be viewed
as a substitute to GAAP information. SEC Filings The company plans
to file its Form 10-Q for the three months ended March 31, 2007, on
or about May 9, 2007. 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 periodic reports under the
forward-looking statements and risk factors sections. Except as
required by law, we do not intend to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Conference Call April 25, 2007
Constellation Energy will host a conference call at 8:30 a.m. (EDT)
on April 25, 2007, to review its first quarter 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 by dialing (866) 448-5657 or (203) 369-1191
(international). A live audio webcast of the conference call,
presentation slides and the earnings press release will be
available on the Investor Relations page of Constellation Energy's
Web site (http://www.constellation.com/). The call will also be
recorded and archived on the site. Constellation Energy
(http://www.constellation.com/), a FORTUNE 200 company with 2006
revenues of $19.3 billion, 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 78 generating units located throughout the
United States, totaling approximately 8,700 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. Addendum - Amounts Excluded from Adjusted EPS
Loss from Discontinued Operations - after-tax loss of $(1.6)
million, or $(0.01) per share In December 2006, we completed the
sale of six gas-fired plants, including the High Desert facility.
During the first quarter of 2007, we recorded a $(1.6) million
after-tax charge related to the High Desert facility, which is
reflected in "Loss from discontinued operations." Non-qualifying
Hedges - after-tax loss of $(9.2) million, or $(0.05) per share
During the first quarter of 2007, we recognized a $(9.2) million
after-tax loss related to certain non-qualifying hedges of gas
transportation rights and gas storage contracts, which are economic
hedges that do not meet the criteria or are not designated for
cash-flow hedge accounting under FAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, and thus
are required to be marked-to-market. This mark-to-market loss is
essentially a timing difference that is expected to be offset as we
realize the related accrual contracts in cash in future periods.
Synfuel Earnings - after-tax income of $18.5 million, or $0.10 per
share Due to the potential for oil price volatility to result in a
difficult-to- forecast phase-out of tax credits at our facilities
that produce synfuel, we have removed the $18.5 million of income
generated during the first quarter of 2007 from our results as
follows: March 31, Three Months Ended 2007 (In millions) After-tax
loss from operations $(17.6) Tax credits before phase-out 39.7
Current period tax credit phase-out (11.5) True-up of 2006 tax
credits and phase-out for final 2006 IRS inflation adjustment
factor 7.9 Net income from synfuel facilities $18.5 Constellation
Energy Group and Subsidiaries Consolidated Statements of Income
(Unaudited) Three Months Ended March 31, 2007 2006 (In Millions,
Except Per Share Amounts) Revenues Nonregulated revenues $4,138.2
$3,936.9 Regulated electric revenues 514.8 504.0 Regulated gas
revenues 402.5 418.3 Total revenues 5,055.5 4,859.2 Expenses Fuel
and purchased energy expenses 3,961.1 3,923.1 Operating expenses
568.7 507.7 Workforce reduction costs -- 2.2 Merger-related costs
-- 1.9 Depreciation, depletion, and amortization 132.4 130.2
Accretion of asset retirement obligations 17.7 16.5 Taxes other
than income taxes 73.2 73.6 Total expenses 4,753.1 4,655.2 Income
from Operations 302.4 204.0 Other Income 42.4 14.8 Fixed Charges
Interest expense 80.3 77.0 Interest capitalized and allowance for
borrowed funds used during construction (3.8) (2.7) BGE preference
stock dividends 3.3 3.3 Total fixed charges 79.8 77.6 Income from
Continuing Operations Before Income Taxes 265.0 141.2 Income Tax
Expense 67.7 39.6 Income from Continuing Operations 197.3 101.6
(Loss) income from discontinued operations, net of income taxes of
$0.8 and $7.1, respectively (1.6) 12.3 Net Income $195.7 $113.9
Earnings Applicable to Common Stock $195.7 $113.9 Average Shares of
Common Stock Outstanding - Basic 180.6 178.6 Average Shares of
Common Stock Outstanding - Diluted 182.8 180.4 Earnings Per Common
Share from Continuing Operations -Basic $1.09 $0.57 (Loss) income
from discontinued operations - Basic (0.01) 0.07 Earnings Per
Common Share - Basic $1.08 $0.64 Earnings Per Common Share from
Continuing Operations - Diluted $1.08 $0.56 (Loss) income from
discontinued operations - Diluted (0.01) 0.07 Earnings Per Common
Share - Diluted $1.07 $0.63 Certain prior-period amounts have been
reclassified to conform with the current period's presentation.
Constellation Energy Group and Subsidiaries Consolidated Balance
Sheets (Unaudited) March 31, December 31, 2007 2006 ASSETS (In
Millions) Current Assets Cash and cash equivalents $1,936.6
$2,289.1 Accounts receivable (net of allowance for uncollectibles
of $51.7 and $48.9, respectively) 3,187.4 3,248.3 Fuel stocks 369.7
599.5 Materials and supplies 204.4 200.2 Mark-to-market energy
assets 1,189.3 1,294.8 Risk management assets 233.6 261.7
Unamortized energy contract assets 34.1 35.2 Deferred income taxes
172.0 674.3 Other 485.4 497.0 Total current assets 7,812.5 9,100.1
Investments And Other Assets Nuclear decommissioning trust funds
1,257.7 1,240.1 Investments in qualifying facilities and power
projects 297.3 308.6 Regulatory assets (net) 560.3 389.0 Goodwill
157.6 157.6 Mark-to-market energy assets 702.3 623.4 Risk
management assets 323.8 325.7 Unamortized energy contract assets
118.2 123.6 Other 291.3 311.4 Total investments and other assets
3,708.5 3,479.4 Property, Plant And Equipment Nonregulated
property, plant and equipment 7,945.7 7,587.6 Regulated property,
plant and equipment 5,816.9 5,752.9 Nuclear fuel (net of
amortization) 337.6 339.9 Accumulated depreciation (4,545.1)
(4,458.3) Net property, plant and equipment 9,555.1 9,222.1 Total
Assets $21,076.1 $21,801.6 LIABILITIES AND EQUITY Current
Liabilities Current portion of long-term debt $878.8 $878.8
Accounts payable and accrued liabilities 2,089.5 2,137.2 Customer
deposits and collateral 365.3 347.2 Mark-to-market energy
liabilities 1,082.9 1,071.7 Risk management liabilities 484.4
1,340.0 Unamortized energy contract liabilities 336.2 378.3 Accrued
expenses and other 703.8 969.5 Total current liabilities 5,940.9
7,122.7 Deferred Credits And Other Liabilities Deferred income
taxes 1,377.4 1,435.8 Asset retirement obligations 992.5 974.8
Mark-to-market energy liabilities 466.9 392.4 Risk management
liabilities 667.8 707.3 Unamortized energy contract liabilities
866.1 958.0 Defined benefit obligations 813.6 928.3 Deferred
investment tax credits 55.5 57.2 Other 127.2 109.0 Total deferred
credits and other liabilities 5,367.0 5,562.8 Long-Term Debt
Long-term debt of nonregulated businesses 3,403.9 3,390.3 Long-term
debt of BGE 1,337.6 1,459.0 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 (5.6) (5.9) Current portion of
long-term debt (878.8) (878.8) Total long-term debt 4,114.8 4,222.3
Minority Interests 90.1 94.5 BGE Preference Stock Not Subject To
Mandatory Redemption 190.0 190.0 Common Shareholders' Equity Common
stock 2,707.0 2,738.6 Retained earnings 3,574.0 3,474.3 Accumulated
other comprehensive loss (907.7) (1,603.6) Total common
shareholders' equity 5,373.3 4,609.3 Total Liabilities And Equity
$21,076.1 $21,801.6 Constellation Energy Group and Subsidiaries
Merchant Operating Statistics (Unaudited) Three Months Ended March
31, Hydro & Nuclear Coal Oil Gas Other Total Generation by Fuel
Type (%) 2007 56.9 38.0 0.6 2.4 2.1 100.0 2006* 49.3 33.6 -- 15.1
2.0 100.0 Thousands of MWH 2007 7,116 4,757 72 300 269 12,514 2006*
6,972 4,755 6 2,132 274 14,139 * Includes generation output from
our gas-fired plants until their sale in December 2006 Utility
Operating Statistics (Unaudited) Three Months Ended March 31, 2007
2006 ELECTRIC Revenues (In Millions) Residential $298.9 $249.2
Commercial Excluding Delivery Service Only 134.9 200.2 Delivery
Service Only 49.9 20.2 Industrial Excluding Delivery Service Only
6.8 15.2 Delivery Service Only 6.6 5.7 System Sales 497.1 490.5
Other 17.7 13.5 Total $514.8 $504.0 Distribution Volumes (In
Thousands) - MWH Residential 3,806 3,461 Commercial Excluding
Delivery Service Only 1,054 2,082 Delivery Service Only 2,792 1,621
Industrial Excluding Delivery Service Only 65 163 Delivery Service
Only 749 708 Total 8,466 8,035 GAS Revenues (In Millions)
Residential Excluding Delivery Service Only $260.1 $243.1 Delivery
Service Only 7.5 8.1 Commercial Excluding Delivery Service Only
73.2 79.0 Delivery Service Only 15.4 11.2 Industrial Excluding
Delivery Service Only 4.0 4.4 Delivery Service Only 4.0 4.6 System
Sales 364.2 350.4 Off-System Sales 40.6 66.4 Other 2.5 3.4 Total
$407.3 $420.2 Distribution Volumes (In Thousands) - DTH Residential
Excluding Delivery Service Only 19,645 15,991 Delivery Service Only
2,190 1,999 Commercial Excluding Delivery Service Only 6,110 5,605
Delivery Service Only 10,649 8,659 Industrial Excluding Delivery
Service Only 343 317 Delivery Service Only 4,164 5,736 System Sales
43,101 38,307 Off-System Sales 4,518 5,967 Total 47,619 44,274
Utility operating statistics do not reflect the elimination of
intercompany transactions. Heating Degree Days (Calendar-Month
Basis) Heating Degree Days -Actual 2,428 2,126 -Normal 2,448 2,450
Constellation Energy Group and Subsidiaries Supplemental Financial
Statistics (Unaudited) Three Months Ended March 31, 2007 2006 Ratio
of Earnings to Fixed Charges 3.99 2.64 Effective Tax Rate 25.3%
27.4% Equity Investment In Nonregulated Businesses -- End of Period
$3,681.4 $2,720.1 Equity Investment In Regulated Business -- End of
Period $1,691.9 $1,603.9 Prior-period statistics have been adjusted
for discontinued operations. Common Stock Data Three Months Ended
March 31, 2007 2006 Common Stock Dividends - Per Share --Declared
$0.4350 $0.3775 --Paid $0.3775 $0.3350 Market Value Per Share
--High $88.20 $60.55 --Low $68.78 $54.01 --Close $86.95 $54.71
Shares Outstanding--End of Period (In Millions) 180.2 178.8 Book
Value per Share--End of Period $29.82 $24.18 DATASOURCE:
Constellation Energy CONTACT: Media, Robert L. Gould, or Debra
Beck, +1-410-470-7433, or Investors, Kevin Hadlock,
+1-410-783-3647, or Tonya Cultice, +1-410-783-3383 Web site:
http://www.constellation.com/ Company News On-Call:
http://www.prnewswire.com/comp/084087.html
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