- The Washington Times - Friday, July 28, 2006

Constellation Energy Group Inc., the parent company of Baltimore Gas & Electric Co., yesterday said second-quarter profit fell 24 percent, which it blamed largely on higher costs for fuel used to generate electricity.

The Baltimore company, whose $11 billion acquisition by FPL Group Inc. of Florida has been delayed by the BGE electricity rate fracas in Maryland, reported net income of $93.1 million (52 cents per diluted share) for the three months ended June 30 compared with $121.7 million (68 cents) a year ago.

Sales climbed 27 percent to $4.42 billion from $3.48 billion.

The results capped a politically tumultuous quarter for Constellation. After a lawsuit and several months of controversy, Maryland lawmakers in a special session approved a plan to phase in a 72-percent increase in electricity rates for BGE residential customers starting July 1. The Federal Energy Regulatory Commission last week extended its deadline for approval of the FPL acquisition until February.

Profits declined for both of the company’s business units. Constellation’s merchant energy business, which sells electricity and gas in deregulated markets, earned 40 cents a share compared with 52 cents a year ago. BGE earned 10 cents a share, down from 13 cents.

It was a different story for FPL, which also reported second-quarter results yesterday. The Juno Beach, Fla., company said net income grew 17 percent to $238 million (60 cents a share) from $203 million (52 cents) a year ago, which it attributed to its power-generation business.

Constellation is selling six gas-fired power plants across the country to help reduce debt, company Chairman and CEO Mayo A. Shattuck III told investors during a conference call.

“We have a 19-quarter record of meeting or exceeding earnings guidance and that is approaching five years of steady growth, demonstrating the soundness of our business model,” Mr. Shattuck said.

“Our employees continue to deliver results, whether we face extreme market volatility, regulatory distraction or merger uncertainty,” he added.

Under the plan passed by lawmakers during the special session, BGE’s electricity rate increase — which Constellation credited to the higher cost of energy as well as inflation during the six years rates were capped — is limited to 15 percent, forcing the company to borrow to make up the difference.

Lawmakers also sought to fire the five members of the utility-regulating Public Service Commission (PSC), but an appeals court judge has prevented the measure from taking effect through a restraining order.

The company said it still expects the acquisition by FPL — creating the country’s largest utility and competitive energy supplier — to clear, though it is uncertain when the companies will receive the necessary regulatory approvals, Mr. Shattuck said. The agreement, signed last year, gives the companies until June 30, 2007, to obtain approval.

Constellation reapplied with the PSC last week, after lawmakers altered the process through which it approves utility mergers. The commission plans to hold a hearing Aug. 9, Mr. Shattuck said.

Shares of Constellation closed yesterday at $57.45 on the New York Stock Exchange, up from $56.80 Thursday.

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