BALTIMORE, MD - Constellation Energy (NYSE: CEG) today reported adjusted earnings of $0.68 per share for the third quarter of 2011, compared with adjusted earnings of $0.48 per share in the third quarter of 2010. Adjusted earnings exclude the cumulative effects of changes in accounting principles, discontinued operations and special items (which are defined as significant items that are not related to the company's ongoing, underlying business or which distort comparability of results). On a Generally Accepted Accounting Principles (GAAP) basis, Constellation Energy reported earnings of $0.36 per share in the third quarter of 2011, compared with a loss of $6.99 per share in the third quarter of 2010.
Excluding power restoration costs associated with Hurricane Irene and mark-to-market timing, Constellation Energy reaffirmed its 2011 earnings guidance range of $3.05 to $3.35 per share.
"Our core businesses are performing well in a competitive price environment, benefitting in particular from strong results in our wholesale load serving business. We continue to make headway with our strategy to combine cost-effective conventional and renewable energy supply with an integrated mix of innovative energy management products and solutions," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy.
"During the quarter, we continued to reinforce our commitment to renewable energy with the start of construction on a 16.1 megawatt solar installation in Emmitsburg, Md., that will be the state's largest when completed," Shattuck said. "In September, we also launched our solar panel leasing program for residential customers in Maryland, New Jersey, New York, Massachusetts, Ohio and Pennsylvania. As a result of this initiative, homeowners can harness solar energy to meet a significant portion of their electricity needs with little or no upfront investment.
"Our generation segment posted solid results for the quarter, with our recently acquired New England generation assets again exceeding our expected output," Shattuck said. "In Texas, our gas plants performed particularly well during an extended stretch of record-breaking heat in August.
"At BGE, our employees demonstrated their determination and skill in the wake of Hurricane Irene, a massive storm that slammed the region with 72-mile-per-hour wind gusts and knocked out power to 750,000 customers," Shattuck said. "Despite difficult conditions, BGE restored service to 95 percent of affected customers within five days after Irene passed through our system, and restored all service at a rate that on average was 20 percent faster than in the wake of Hurricane Isabel in 2003.
"Looking ahead, we remain confident in the prospect of combining Constellation's leading customer-facing retail and wholesale customer platform with Exelon's clean merchant generation fleet," Shattuck said. "During the quarter, we reached an agreement with PJM's Independent Market Monitor to address market power concerns and have received regulatory approval from the Public Utility Commission of Texas. In Maryland, we look forward to the start of hearings before the Maryland Public Service Commission (PSC) next week and continue to anticipate closing our merger in the first quarter of 2012."
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 (see full press release below).
BGE reported adjusted third-quarter earnings of $0.00 per share, down from adjusted earnings of $0.14 per share in third quarter 2010. The year-over-year variance is primarily due to costs associated with restoring power following Hurricane Irene. Of the approximately $90 million in storm-related expenses, about $55 million, or $0.17 per share, was accounted for as operations and maintenance, with the remainder recorded as capital. Costs associated with storm restoration were partially offset by higher distribution rates, which were approved in the PSC's 2010 rate case order.
The Generation segment reported adjusted third-quarter earnings of $0.44 per share, up from adjusted earnings of $0.41 per share in the year-earlier quarter. The increase is largely attributed to the earnings contribution from our New England assets, partially offset by lower power prices and increased outage days at Constellation Energy Nuclear Group (CENG).
Our NewEnergy segment reported adjusted earnings of $0.23 per share for the third quarter of 2011, as compared to an adjusted loss of $0.07 per share for the third quarter of 2010. This year over year variance is due partially to the $0.20 per share loss experienced in the third quarter of 2010 resulting from contract novations related to our legacy UK coal and freight business. Also contributing to the variance are third quarter contributions of $0.36 per share from wholesale load serving and structured products and a $0.07 per share gain from the divestiture of the majority of our share in Constellation Energy Partners. These gains were partially offset by the $0.16 per share loss resulting from this summer's extreme weather in Texas and a $0.12 per share decline in our retail business, $0.07 per share of which is dilution from our MXenergy and StarTex acquisitions.
Download the financial statements and supplemental information.
Constellation Energy presents adjusted earnings per share (adjusted EPS) in addition to 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 and 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.
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 impairment losses, work force 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 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 due to the difficulty of doing so. In the past, the impact of special items has been 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.
Constellation Energy plans to file its Form 10-Q on or about Nov. 7, 2011.
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.
Additional Information and Where to Find it
In connection with the proposed merger between Exelon and Constellation Energy, Exelon filed with the SEC a Registration Statement on Form S-4 that included the definitive joint proxy statement/prospectus. The Registration Statement was declared effective by the SEC on October 11, 2011. Exelon and Constellation Energy mailed the definitive joint proxy statement/prospectus to their respective security holders on or about October 12, 2011. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION about Exelon, Constellation Energy and the proposed merger. Investors and security holders may obtain copies of all documents filed with the SEC free of charge at the SEC's website, www.sec.gov. In addition, a copy of the definitive joint proxy statement/prospectus may be obtained free of charge from Exelon Corporation, Investor Relations, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398, or from Constellation Energy Group, Inc., Investor Relations, 100 Constellation Way, Suite 600C, Baltimore, MD 21202.