CORRECT: Constellation Energy Swings To 3Q Loss On Nuclear Charges

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 $2.3 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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