UPDATE: Constellation Energy Swings To 3Q Loss On Nuclear Charges
October 29 2010 - 11:29AM
Dow Jones News
Constellation Energy Group Inc. (CEG) swung to a third-quarter
loss, with adjusted results missing analysts' estimates, after it
booked major charges at its nuclear generation business due to weak
power prices.
The Baltimore power and utility company's core earnings and
revenue have been declining, while performance has lagged at the
company's NewEnergy unit, which supplies energy to industrial,
commercial and more recently residential customers. Earnings at its
Baltimore Gas & Electric utility have fluctuated in recent
quarters.
In the third quarter, Baltimore Gas & Electric's earnings
per share were flat, while NewEnergy narrowed its loss to 7 cents
from 22 cents. Overall, Constellation reported a loss, including
preferred dividends, of $1.41 billion, or $6.99 a share, compared
with a year-earlier profit of $137.6 million, or 69 cents a share.
Excluding charges related to the nuclear business and other items,
earnings from continuing operations slumped to 48 cents from $1.23
while revenue fell 1.5% to $3.97 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 64 cents on $4.03 billion in revenue.
Shares of Constellation, which reiterated its earnings target
for this year and next, fell 52 cents, or 1.7%, to $30.32 in recent
trading.
The Constellation's nuclear business has faced a messy fight
with Electricite de France SA (EDF.FR) this autumn over their
partnerships to develop new reactors and operator existing plants.
Earlier this week, the companies reach an agreement in which the
French power giant will take full ownership of the nuclear
development joint venture and sites for new reactors in Maryland
and New York. In exchange, Constellation Energy will receive $250
million in cash and stock. EDF's nearly 50% stake in
Constellation's existing nuclear power plants won't change,
however.
As part of the agreement, Constellation said it wouldn't
exercise an option to sell 12, non-nuclear power plants to EDF for
up to $2 billion--an issue that could have resulted in costly
litigation. This week's deal was reached "in terms to provide
future and current benefits that were roughly economically the same
as under the put option," said Jack Thayer, the company's chief
financial officer, during a conference call Friday.
Meanwhile, Constellation said it has taken a $2.9 billion write
down connected to the joint venture with EDF for its existing U.S.
nuclear plants because of lower power prices and the absence of
federal energy policy. The write down likely pressures nuclear and
unregulated assets owned by other generation companies, J.P. Morgan
analyst Andrew Smith wrote in a note to clients.
Constellation executives said they expect the company to face
challenges tied to lower power prices over the next few years.
Based on forward-commodity prices, they said the overall generation
business will likely post a loss in 2012, which is expected to be a
trough year for power generators.
Amid these pressures, the company continues to expand its
generation capacity. Constellation has acquired 2,950 megawatts of
gas-fired generation this year, and that number could rise to 4,000
megawatts by the end of the year. Constellation is in the middle of
trying to acquire power plants in the Boston area. The company
expects to close that acquisition in December.
-By Naureen S. Malik, Dow Jones Newswires; 212-416-4210;
naureen.malik@dowjones.com;
(Nathan Becker contributed to this report.)
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