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Constellation Energy Reports Solid Third Quarter 2007 Results
Announces $1 Billion Share Repurchase Program
BALTIMORE, Oct 31, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Constellation Energy (NYSE: CEG) today reported third quarter 2007 adjusted earnings of $1.45 per share, compared to $1.46 of adjusted earnings per share (EPS) in the same period last year. These results were in line with management's guidance range of $1.35 to $1.55 per share. Adjusted earnings exclude the impact of special items, certain economic, non-qualifying hedges and synfuel earnings. On a GAAP basis, the company earned $1.38 per share in the third quarter of 2007, compared to $1.79 per share in the same period last year.
In addition, Constellation Energy today announced that its board of directors authorized a $1 billion share repurchase program, which is expected to be executed over the next 24 months. Further, Constellation Energy is executing on $250 million of the program through an accelerated share repurchase agreement. The remainder of the share repurchase program is expected to be implemented in a manner that preserves the flexibility to pursue additional investment opportunities.
"We are pleased with another solid performance in the third quarter of 2007, driven by continued growth of our merchant businesses," said Mayo A. Shattuck III, chairman, president and chief executive officer, Constellation Energy. "In addition, the announcement of a share repurchase program illustrates continued confidence in our bright future. Given our strong financial profile, we believe this is the right time to implement a share repurchase program. We also believe this program represents the most efficient return of excess capital to our shareholders, while maintaining flexibility to opportunistically pursue higher value-added strategic investments.
"In addition, we are making steady progress on our new nuclear initiative through our joint venture with EDF, UniStar Nuclear Energy. The revised federal loan guarantee program that was recently announced was a watershed event that provides more clarity on the financing necessary for new nuclear development. Looking ahead, AREVA, a partner with UniStar Nuclear Energy, is preparing to file the design certification for the U.S. EPR by year-end 2007. Through UniStar Nuclear Energy, we expect to complete our Combined License Application (COLA) for a potential Calvert Cliffs Unit 3 in early 2008," said Shattuck.
"We are also investing in reliability programs across the company. Baltimore Gas and Electric Company (BGE) recently filed aggressive demand response and conservation programs with the Maryland Public Service Commission. These programs are important to encourage customers to better manage their electricity use and to help Maryland meet its reliability and conservation objectives," said Shattuck. "Lastly, we are mobilizing to respond to high capacity prices through near-term investments, whereby we plan to rejuvenate, uprate and extend the life of existing generation assets. Longer term, we see significant opportunity in creating the option to build new nuclear plants in PJM and New York."
Based on its solid performance and earnings visibility, Constellation Energy raised the bottom end of the range for its full-year 2007 earnings guidance to $4.45 to $4.65 per share from $4.30 to $4.65 per share. For 2008, the company reaffirmed earnings guidance of $5.25 to $5.75 per share and expects to be in the middle to upper half of the guidance range. For 2009, the company expects earnings growth of more than 10 percent over 2008.Baltimore Gas and Electric
BGE reported earnings of 14 cents per share in the third quarter of 2007, down 6 cents per share versus the third quarter of 2006, driven by credits to residential customers required by Maryland's Senate Bill 1 and higher operations and maintenance costs, partially offset by higher electric transmission and demand response revenues.
Merchant
On an adjusted basis, the Merchant segment earned $1.31 per share during the third quarter of 2007, up 7 cents per share from the third quarter last year.
Compared to the third quarter of 2006, Wholesale Competitive Supply increased 13 cents per share due to higher backlog realization and new business, partially offset by higher operating expenses. Retail Competitive Supply was down 5 cents per share, with NewEnergy Electric delivering higher year-over-year results and with NewEnergy Gas providing an unfavorable comparison to last year's third quarter.
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 are 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.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.
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