- The Washington Times - Monday, November 1, 2004

Baltimore’s Constellation Energy asserts that its 9 percent rise in third-quarter profits and increasing market share show that its gamble with the nation’s deregulated energy industry is paying off.

Constellation Energy is a major supplier of electricity in the District and 22 states.

It owns the nuclear power plant at Calvert Cliffs, Md., as well as two coal-fired generating plants in the Baltimore area. Its subsidiaries include Baltimore Gas and Electric Co.

“We have jumped up to about 200 on the Fortune 500 list,” said Mayo Shattuck, Constellation Energy’s chief executive officer. “We have become nationally scaled and nationally recognized.”

The company reported third-quarter earnings of $210.4 million, or $1.19 a share, up from $192.9 million, or $1.15 a share in the comparable period a year ago.

The stock price is up 65 percent since a new management team took over three years ago.

Revenue rose 32 percent to $3.43 billion.

The Wall Street financial firm of Credit Suisse First Boston gave the stock of Constellation Energy an outperform rating, meaning industry analysts consider it a good value that will exceed the stock market’s average earnings in the next year.

“If only the Orioles hit this well,” Credit Suisse First Boston said in a research note.

The stock closed yesterday at $41.13 a share on the New York Stock Exchange, up 1.26 percent from its previous close of $40.62.

The third-quarter results were helped by strong earnings in its sales to large industrial and commercial customers and from acquisition of the Ginna nuclear plant in New York.

Only three years ago, investors were dumping Constellation Energy stock as it struggled through an industrywide downturn.

Charges that Enron Corp.had caused California’s energy crisis in the winter of 2000 prompted congressional investigations, bad publicity and a regulatory backlash. While other energy companies fled the industry, Mr. Shattuck decided Constellation Energy should try to take over their markets. He also refinanced $5.5 billion of the company’s debt and shed $1 billion in noncore assets, which included a Boeing 747, a tanker ship and assisted-living facilities in Maryland.

In deregulated states, where large consumers could buy electricity from anyone they choose, Constellation Energy offered customers a way to hedge their purchases. Instead of getting stuck with sometimes wildly fluctuating prices, Constellation offered commercial customers electricity for a single long-term price.

“Constellation elected to pursue a strategy that sort of seized upon what was good about the deregulated market,” Mr. Shattuck said.

Standard & Poor’s credit-rating service responded to the marketing gamble by downgrading Constellation Energy’s credit rating in March from A-minus to BBB-plus.

Constellation Energy says its sales, expected to exceed $10 billion this year, show it has proven the naysayers wrong.

Sales in the deregulated energy market now make up about two-thirds of Constellation Energy’s profits.

Mr. Shattuck said annual earnings are expected to be 14 percent to 18 percent higher than last year.

For its next ventures, the company is eyeing purchases of nuclear power plants in the Midwest as high oil prices make nuclear energy a more attractive option for consumers.

Constellation Energy also is trying to enter markets in California and Ohio as the states deregulate more of their energy industry.

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