- Earnings driven by solid execution across all business units
- Reaffirms guidance for 2008 at $5.25 to $5.75 per share and 2009
projected growth of 15 to 20 percent over 2008
BALTIMORE, July 31 /PRNewswire-FirstCall/ -- Constellation Energy
(NYSE: CEG) today reported adjusted earnings of $1.82 per share for the
second quarter of 2008, compared to $0.64 adjusted earnings per share (EPS)
earned in the same period last year. Adjusted earnings exclude the impact
of special items, including approximately $188 million pre-tax for the $170
per residential electric customer credit associated with the Maryland
settlement, certain economic, non-qualifying hedges and synfuel earnings.
On a Generally Accepted Accounting Principles (GAAP) basis, the company
earned $0.95 per share in the second quarter of 2008, compared to $0.64 per
share in the same period last year.
Constellation Energy reaffirmed earnings guidance for 2008 at $5.25 to
$5.75 per share, and for 2009, the company expects to grow earnings 15 to
20 percent over projected 2008 earnings.
"Second quarter results significantly exceeded expectations and reflect
solid execution throughout the enterprise," said Mayo A. Shattuck III,
chairman, president and chief executive officer of Constellation Energy.
"Our Global Commodities Group delivered strong new business results as
rising commodity prices benefited our strategies in power, natural gas and
coal markets. Constellation Energy's nuclear fleet continued its excellent
operating performance in the second quarter. We successfully completed
nuclear refueling outages at our R.E. Ginna Nuclear Power Plant and Nine
Mile Point Nuclear Station Unit 2, while maintaining an extremely low
forced outage rate at our three other nuclear facilities. We are proud of
our three refueling outages that resulted in the first, third and 11th
shortest durations out of 42 units that refueled during the first half of
the year.
"During the second quarter, we expanded our existing fleet by 300
megawatts through the refurbishment of our Gould Street Power Plant in
Baltimore and the acquisition of the West Valley Power Plant near Salt Lake
City, strategically broadening our footprint in western markets," said
Shattuck. "In addition, we continued to execute our
'Invest-Develop-Harvest' strategy with the sale of gas assets in Arkansas.
With the purchase of Nufcor International Limited, we acquired specialized
uranium capabilities and expanded our risk management services.
"Lastly, we continued to make significant strides in our conservation
and energy-efficiency initiatives at Baltimore Gas and Electric Company
(BGE)," said Shattuck. "The combined potential of our Smart Energy
Savers(SM) pilots and PeakRewards(SM) programs, including smart
thermostats, advanced meters, dynamic pricing and energy efficiency, is
between 1,500 and 1,700 megawatts. The potential for BGE's PeakRewards(SM)
program, which has been highly successful in trials, is extraordinary and
represents one of the most encouraging developments for BGE customers."
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 June 30,
2008 2007
Reported Reported
GAAP Adjusted GAAP Adjusted
EARNINGS PER COMMON SHARE EPS* EPS EPS* EPS
Baltimore Gas and Electric $(0.60) $0.09 (1) $0.08 $0.08
Merchant Energy 1.56 1.74 (2) 0.56 0.56 (3)
Other Nonregulated (0.01) (0.01) - -
Diluted Earnings Per Share from
Continuing Operations 0.95 1.82 0.64 0.64
Income from Discontinued Operations
Assuming Dilution - - - -
Diluted Earnings Per Share $0.95 $1.82 $0.64 $0.64
* Unaudited.
GAAP EPS was adjusted by the following amounts to calculate Adjusted EPS
(1) Addition of earnings impact related to the Maryland settlement
agreement of $0.70 per share and subtraction of effective tax rate
impact related to Maryland settlement agreement of $0.01 per share.
(2) Addition of mark-to-market losses on certain non-qualifying hedges of
$0.19 per share and subtraction of earnings from our synthetic fuel
processing facilities of $0.01 per share.
(3) Addition of impairment losses and other costs of $0.07 per share and
addition for workforce reduction costs of $0.01 per share. Subtraction
of earnings from our synthetic fuel processing facilities of $0.07 per
share and subtraction of mark-to-market gains on certain
non-qualifying hedges of $0.01 per share.
Six Months Ended June 30,
2008 2007
Reported Reported
GAAP Adjusted GAAP Adjusted
EARNINGS PER COMMON SHARE EPS* EPS EPS* EPS
Baltimore Gas and Electric $(0.19) $0.46 (1) $0.44 $0.44
Merchant Energy 1.95 2.30 (2) 1.22 1.17 (3)
Other Nonregulated - - 0.06 0.06
Diluted Earnings Per Share from
Continuing Operations 1.76 2.76 1.72 1.67
Income from Discontinued Operations
Assuming Dilution - - (0.01) -
Diluted Earnings Per Share $1.76 $2.76 $1.71 $1.67
* Unaudited.
GAAP EPS was adjusted by the following amounts to calculate Adjusted EPS
(1) Addition of earnings impact related to the Maryland settlement
agreement of $0.70 per share and subtraction of effective tax rate
impact related to Maryland settlement agreement of $0.05 per share.
(2) Addition of mark-to-market losses on certain non-qualifying hedges of
$0.38 per share and subtraction of earnings from our synthetic fuel
processing facilities of $0.03 per share.
(3) Addition of impairment losses and other costs of $0.07 per share,
addition of mark-to-market losses on certain non-qualifying hedges of
$0.04 per share, and addition for workforce reduction costs of $0.01
per share. Subtraction of earnings from our synthetic fuel processing
facilities of $0.17 per share.
Baltimore Gas and Electric
BGE reported adjusted earnings of 9 cents per share in the second
quarter of 2008, up 1 cent per share over second quarter 2007 adjusted EPS.
The increase in second quarter 2008 adjusted EPS was due to higher electric
transmission revenue and the benefits from the Maryland settlement, which
was partially offset by higher storm expenses.
Merchant
On an adjusted basis, the Merchant segment earned $1.74 per share
during the second quarter of 2008, up $1.18 per share from the second
quarter last year. On the positive side, Global Commodities was favorable
$1.20 per share, primarily driven by strong new business results and an
increased backlog realization compared to a relatively weak second quarter
in 2007. In addition, Customer Supply was favorable 14 cents per share,
primarily driven by higher backlog realization versus the second quarter of
last year. Generation was unfavorable 19 cents, driven by the differences
in planned refueling outages at our nuclear plants as compared to the same
quarter last year, higher costs to improve fossil peaking unit reliability
in response to the Reliability Pricing Model (RPM) capacity market, and
unplanned outages at the company's Baltimore coal plants.
Financial Statements
The June 30, 2008, 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 have been 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 June
30, 2008, on or about August 8, 2008.
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 July 31, 2008
Constellation Energy will host a conference call at 8:30 a.m. (EDT) on
Thursday, July 31, 2008, to review the 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) 483-9032 or (203) 369-1585
(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). A
webcast replay, as well as a replay in downloadable MP3 format, will also
be available on the site shortly after the completion of the call. The call
will also be recorded and archived on the site.
Constellation Energy (http://www.constellation.com), a FORTUNE 125
company with 2007 revenues of $21 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 83 generating
units located throughout the United States, totaling approximately 9,000
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.
Addendum -- Amounts Excluded from Adjusted EPS
Non-qualifying Hedges -- after-tax loss of $(34.7) million, or $(0.19)
per share
During the second quarter of 2008, we recognized a $(34.7) million
after-tax loss related to certain non-qualifying hedges of gas
transportation rights, international freight contracts, 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.
Accrual of Maryland Settlement -- after-tax charge of $(125.3) million,
or $(0.70) per share
In April 2008, BGE accrued approximately $188 million pre-tax for the
$170 per residential electric customer credit provided for in the
settlement agreement with the State of Maryland and the Maryland Public
Service Commission. We expect these credits to be paid to customers in the
third quarter of 2008. We have excluded this nonrecurring charge from our
adjusted results.
Effective Tax Rate Impact: Maryland Settlement -- after-tax benefit of
$2.1 million, or $0.01 per share
As a result of the $188 million charge for the BGE residential electric
customer credits discussed above, BGE's 2008 effective tax rate will be
reduced. Pursuant to Accounting Principles Board (APB) Opinion No. 28,
Interim Financial Reporting, and FASB Interpretation FIN 18, Accounting for
Income Taxes in Interim Periods an Interpretation of APB Opinion No. 28, we
record quarterly income tax expense based on an estimate of the full-year
2008 effective tax rate, which will be reduced by these credits. We have
excluded this reduction to income tax expense from BGE's adjusted quarterly
earnings to be consistent with how we are treating the $188 million
non-recurring charge.
Synfuel Earnings -- after-tax gain of $1.4 million, or $0.01 per share
We have removed a $1.4 million gain realized in the second quarter of
2008 related to our synfuel production activities, which ceased at the end
of 2007 upon expiration of the tax credit.
Constellation Energy Group and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(In Millions, Except Per Share Amounts)
Revenues
Nonregulated revenues $4,445.3 $4,172.9 $8,157.2 $8,366.7
Regulated electric revenues 448.7 544.3 1,158.0 1,059.1
Regulated gas revenues 183.1 159.1 574.1 561.6
Total revenues 5,077.1 4,876.3 9,889.3 9,987.4
Expenses
Fuel and purchased energy
expenses 3,880.4 3,885.2 7,623.5 7,901.9
Operating expenses 711.5 580.4 1,301.6 1,149.1
Impairment losses and other
costs - 20.2 - 20.2
Workforce reduction costs - 2.3 - 2.3
Depreciation, depletion, and
amortization 141.9 142.8 290.2 275.2
Accretion of asset retirement
obligations 17.0 18.2 33.6 35.9
Taxes other than income taxes 71.1 72.8 145.9 146.0
Total expenses 4,821.9 4,721.9 9,394.8 9,530.6
Gains on Sales of Upstream Gas
Assets 76.5 - 91.5 -
Income from Operations 331.7 154.4 586.0 456.8
Gain on Sale of Subsidiary Equity
- CEP - 12.9 - 12.9
Other Income, Primarily Interest
Income 15.1 45.2 57.4 87.6
Fixed Charges
Interest expense 73.5 71.1 152.3 151.4
Interest capitalized and
allowance for borrowed funds
used during construction (8.6) (4.5) (15.7) (8.4)
BGE preference stock dividends 3.3 3.3 6.6 6.6
Total fixed charges 68.2 69.9 143.2 149.6
Income from Continuing Operations
Before Income Taxes 278.6 142.6 500.2 407.7
Income Tax Expense 107.1 26.3 183.0 94.1
Income from Continuing Operations 171.5 116.3 317.2 313.6
Loss from discontinued operations,
net of income taxes of $0.8 - - - (1.6)
Net Income $171.5 $116.3 $317.2 $312.0
Earnings Applicable to Common
Stock $171.5 $116.3 $317.2 $312.0
Average Shares of Common Stock
Outstanding - Basic 178.4 180.3 178.3 180.5
Average Shares of Common Stock
Outstanding - Diluted 180.2 182.7 180.2 182.8
Earnings Per Common Share from
Continuing Operations - Basic $0.96 $0.65 $1.78 $1.74
Loss from discontinued operations
- Basic - - - (0.01)
Earnings Per Common Share - Basic $0.96 $0.65 $1.78 $1.73
Earnings Per Common Share from
Continuing Operations - Diluted $0.95 $0.64 $1.76 $1.72
Loss from discontinued operations
- Diluted - - - (0.01)
Earnings Per Common Share -
Diluted $0.95 $0.64 $1.76 $1.71
Certain prior-period amounts have been reclassified to conform with the
current period's presentation.
Constellation Energy Group and Subsidiaries
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
2008 2007
ASSETS (In Millions)
Current Assets
Cash and cash equivalents $1,230.7 $1,095.9
Accounts receivable (net of
allowance for uncollectibles of
$154.8 and $44.9, respectively) 5,356.1 4,289.5
Fuel stocks 931.3 591.3
Materials and supplies 213.4 207.5
Derivative assets 3,766.4 760.6
Unamortized energy contract assets 86.1 32.0
Deferred income taxes - 300.7
Other 704.3 408.1
Total current assets 12,288.3 7,685.6
Investments And Other Assets
Nuclear decommissioning trust funds 1,315.0 1,330.8
Other investments 507.5 542.2
Regulatory assets (net) 532.4 576.2
Goodwill 266.4 261.3
Derivative assets 2,948.5 1,030.2
Unamortized energy contract assets 170.8 178.3
Other 386.0 370.6
Total investments and other assets 6,126.6 4,289.6
Property, Plant And Equipment
Nonregulated property, plant and equipment 8,751.8 8,087.0
Regulated property, plant and equipment 6,241.6 6,051.2
Nuclear fuel (net of amortization) 367.2 374.3
Accumulated depreciation (4,923.6) (4,745.4)
Net property, plant and equipment 10,437.0 9,767.1
Total Assets $28,851.9 $21,742.3
LIABILITIES AND EQUITY
Current Liabilities
Short-term borrowings $145.7 $14.0
Current portion of long-term debt 144.4 380.6
Accounts payable and accrued liabilities 3,638.4 2,630.1
Customer deposits and collateral 492.1 146.6
Derivative liabilities 3,355.6 1,134.3
Unamortized energy contract liabilities 389.7 392.2
Deferred income taxes 546.9 -
Accrued expenses and other 805.2 956.0
Total current liabilities 9,518.0 5,653.8
Deferred Credits And Other Liabilities
Deferred income taxes 1,349.5 1,588.5
Asset retirement obligations 951.5 917.6
Derivative liabilities 2,560.2 1,118.9
Unamortized energy contract
liabilities 1,090.2 1,218.6
Defined benefit obligations 774.6 828.6
Deferred investment tax credits 47.2 50.5
Other 164.6 155.9
Total deferred credits and other
liabilities 6,937.8 5,878.6
Long-Term Debt
Long-term debt of nonregulated businesses 3,528.3 2,830.8
Long-term debt of BGE 1,508.0 1,334.2
Rate stabilization securitization
bonds of BGE 590.0 623.2
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 (4.7) (4.8)
Current portion of long-term debt (144.4) (380.6)
Total long-term debt 5,734.9 4,660.5
Minority Interests 20.1 19.2
BGE Preference Stock Not Subject To
Mandatory Redemption 190.0 190.0
Common Shareholders' Equity
Common stock 2,571.2 2,513.3
Retained earnings 4,038.1 3,919.5
Accumulated other comprehensive loss (158.2) (1,092.6)
Total common shareholders' equity 6,451.1 5,340.2
Total Liabilities And Equity $28,851.9 $21,742.3
Certain prior-period amounts have been reclassified to conform with the
current period's presentation.
Constellation Energy Group and Subsidiaries
Merchant Energy Operating Statistics (Unaudited)
Six Months Ended June 30,
Oil & Hydro &
Nuclear Coal Gas Renewables Other Total
Generation by Fuel Type (%)
2008 61.6 33.7 0.2 3.0 1.5 100.0
2007 59.8 35.6 0.7 2.5 1.4 100.0
Thousands of MWH
2008 15,506 8,474 47 751 376 25,154
2007 15,147 9,011 182 628 344 25,312
Utility Operating Statistics (Unaudited)
Three Months
Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
ELECTRIC
Revenues (In Millions)
Residential $217.6 $312.4 $722.3 $611.4
Commercial
Excluding Delivery Service Only 135.4 142.0 255.4 276.8
Delivery Service Only 55.3 53.1 107.4 103.1
Industrial
Excluding Delivery Service Only 7.4 7.9 13.6 14.6
Delivery Service Only 7.3 7.1 13.8 13.7
System Sales 423.0 522.5 1,112.5 1,019.6
Other 25.7 21.8 45.6 39.5
Total $448.7 $544.3 $1,158.1 $1,059.1
Distribution Volumes (In Thousands) -
MWH
Residential 2,813 2,926 6,511 6,732
Commercial
Excluding Delivery Service Only 946 1,066 1,846 2,120
Delivery Service Only 2,867 2,923 5,642 5,715
Industrial
Excluding Delivery Service Only 62 73 113 138
Delivery Service Only 793 791 1,548 1,540
Total 7,481 7,779 15,660 16,245
GAS
Revenues (In Millions)
Residential
Excluding Delivery Service Only $86.5 $82.9 $327.2 $343.0
Delivery Service Only 3.4 3.5 10.7 10.9
Commercial
Excluding Delivery Service Only 29.9 26.1 99.0 99.3
Delivery Service Only 9.7 7.5 24.7 22.8
Industrial
Excluding Delivery Service Only 1.3 1.2 5.1 5.2
Delivery Service Only 3.8 4.4 7.9 8.5
System Sales 134.6 125.6 474.6 489.7
Off-System Sales 51.1 34.9 104.4 75.5
Other 2.4 2.3 5.5 4.9
Total $188.1 $162.8 $584.5 $570.1
Distribution Volumes (In Thousands) -
DTH
Residential
Excluding Delivery Service Only 4,215 5,262 22,163 24,907
Delivery Service Only 444 571 2,395 2,761
Commercial
Excluding Delivery Service Only 1,932 2,070 7,700 8,179
Delivery Service Only 6,118 6,366 16,628 17,016
Industrial
Excluding Delivery Service Only 92 103 426 446
Delivery Service Only 4,359 4,237 9,518 8,401
System Sales 17,160 18,609 58,830 61,710
Off-System Sales 4,176 4,227 9,420 8,744
Total 21,336 22,836 68,250 70,454
Utility operating statistics do not reflect the elimination of
intercompany transactions.
Heating/Cooling Degree Days (Calendar-
Month Basis)
Heating Degree Days - Actual 510 573 2,839 3,000
- Normal 528 523 3,000 2,971
Cooling Degree Days - Actual 237 251 238 258
- Normal 234 234 238 238
Constellation Energy Group and Subsidiaries
Supplemental Financial Statistics (Unaudited)
Six Months Ended
June 30,
2008 2007
Effective Tax Rate 36.1% 22.7%
Equity Investment In
Nonregulated Businesses -- End of Period
(In Millions) $5,010.4 $3,453.4
Equity Investment In Regulated
Business -- End of Period
(In Millions) $1,440.7 $1,705.6
Common Stock Data
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Common Stock Dividends -- Per Share
-- Declared $0.4775 $0.4350 $0.9550 $0.8700
-- Paid $0.4775 $0.4350 $0.9125 $0.8125
Market Value Per Share
-- High $94.62 $95.57 $107.97 $95.57
-- Low $78.74 $82.71 $78.74 $68.78
-- Close $82.10 $87.17 $82.10 $87.17
Shares Outstanding -- End of Period
(In Millions) 178.5 180.4 178.5 180.4
Book Value per Share -- End of Period $36.14 $28.60 $36.14 $28.60
SOURCE Constellation Energy Group
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CONTACT:
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Diana L. Hayden, +1-410 470-7433; Investors, Kevin Hadlock,
+1-410 470-3647 or Janet Mosher, +1-410 470-1884 all of
Constellation Energy Group
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