EXHIBIT No. 99
| | News Release | |
| | Media Line: 410 234-7433 | | |
| | www.constellation.com | | |
| | | | |
| | Constellation Generation Group | | Constellation NewEnergy |
| | Constellation Power Source | | Constellation Energy Source |
| | Baltimore Gas and Electric Company | | BGE Home Products and Services |
| | | | | | | |
Contacts: Robert L. Gould (Media)
410-234-7433
or
Jack Thayer (Investors)
410-783-3647
CONSTELLATION ENERGY GROUP REPORTS
SECOND QUARTER 2003 RESULTS
Strong Quarterly Performance Fueled by
Physical Assets and Competitive Supply Operations
BALTIMORE — July 31, 2003 /PRNewswire-FirstCall/ — Constellation Energy Group (NYSE: CEG) today reported earnings of $0.58 per share for the three months ending June 30, 2003. These results exceeded the company’s earnings guidance (which excludes special items), provided on April 30, 2003, of $0.33 to $0.43 per share.
“I’m extremely pleased with our second quarter 2003 results, the seventh consecutive quarter in which we’ve either met or exceeded earnings guidance,” said Mayo A. Shattuck III, Constellation Energy’s chairman, president and chief executive officer. “Our strong performance is attributable to Constellation’s unique customer focused business model, which at its core, leverages our physical assets, our knowledge of the competitive marketplace, creditworthiness and risk-management expertise to create products for our growing customer base. We are at the forefront of a complex and rapidly changing energy market, marketing value-added products to a wide range of customers who have an ongoing need for our services. We are very confident that we are on track to meet our 2003 earnings forecast as presented in January.”
The following table summarizes both earnings per share excluding special items and earnings per share reported in accordance with generally accepted accounting principles (GAAP) for the second quarter of 2003 and 2002:
| | Three Months Ended
June 30, 2003 | | Three Months Ended
June 30, 2002 | |
| | Reported
GAAP
EPS | | EPS
Excluding
Special Items | | Reported
GAAP
EPS | | EPS
Excluding
Special Items | |
EARNINGS PER COMMON SHARE | | | | | | | | | |
Merchant energy | | $ | 0.45 | | $ | 0.45 | | $ | 0.35 | | $ | 0.39 | (1) |
Baltimore Gas and Electric | | 0.13 | | 0.13 | | 0.12 | | 0.15 | (2) |
Other nonregulated | | — | | — | | 0.03 | | 0.02 | (3) |
Earnings Per Common Share and Earnings
Per Common Share — Assuming Dilution | | $ | 0.58 | | $ | 0.58 | | $ | 0.50 | | $ | 0.56 | |
Details of Adjustments to GAAP EPS:
(1) Workforce reduction costs - $0.02 per share and loss on sale of investments and other assets - $0.02 per share.
(2) Workforce reduction costs - $0.03 per share.
(3) Gain on sale of investments and other assets - ($0.01) per share.
Merchant Energy
For the second quarter of 2003, our merchant energy business earned $0.45 per share. These results exceeded the high end of our April 2003 earnings guidance by $0.15 (which was calculated excluding special items) and represent an increase of 15.4 percent compared to earnings excluding special items of $0.39 per share in the second quarter of 2002. Factors contributing to the year over year increase in the second quarter 2003 results include:
• New wholesale transactions and a favorable market environment in NEPOOL, PJM, New York and ERCOT for managing existing contracts
• Favorable plant operations impact, including a shorter Calvert Cliffs outage and the start-up of the High Desert Plant, partially offset by the impact of an outage at Nine Mile Point Nuclear Station
• Strong performance by Constellation NewEnergy
• Benefits from productivity programs
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Factors which partially mitigate the quarter-over-quarter improvement include:
• The one-time impact of a favorable settlement with the California Department of Water Resources in the second quarter of 2002
• Higher interest expense, reflecting a reduction in capitalized interest expense related to completion of several large power plant construction projects, which were underway during last year’s second quarter
• Inflationary and other cost increases
“Competitive supply activities exceeded our expectations,” said Shattuck. “Constellation Power Source generated highly profitable new transactions and added value to our portfolio of existing transactions through smart risk management. Additionally, our recent acquisition, NewEnergy, is hitting stride adding to the earnings potential of our competitive supply platform.”
Baltimore Gas and Electric
Baltimore Gas and Electric earnings were within April guidance, but at the low end of the range due to milder than normal weather during the second quarter 2003. BGE reported GAAP earnings and earnings excluding special items of $0.13 per share for the second quarter of 2003, compared to $0.15 per share excluding special items in the second quarter of 2002. Compared to last year, the utility’s earnings were down due to milder second quarter weather partially offset by the benefit of lower interest expense.
Other Nonregulated Businesses
As expected, Constellation’s other nonregulated businesses broke even during the second quarter of 2003. This compares to earnings of $0.02 per share excluding special items in the second quarter of 2002. This decline was driven largely by earnings in 2002 from non-core real estate and financial investment portfolios, which have since been liquidated.
The June 2003 Financial Statements and selected supplemental information are attached.
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Earnings Excluding Special Items
Constellation Energy presents earnings excluding special items in addition to its reported earnings per share in accordance with generally accepted accounting principles (reported GAAP EPS). Earnings excluding special items is a non-GAAP financial measure that differs from reported GAAP EPS because it excludes the cumulative effects of changes in accounting principles and other special items (which we define as items that are not related to our ongoing, underlying business or which distort comparability of results) included in operations. We present earnings excluding special items 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 comparable among periods since it excludes the impact of items such as gains or losses on sales of non-core investments and workforce reduction costs, 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 judgments by management (in particular, judgments as to what is or is not classified as a special item). 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 earnings excluding special items. Constellation Energy is unable to reconcile its 2003 earnings guidance excluding special items to GAAP earnings per share because we do not predict the future impact of special items due to the difficulty of doing so. The impact of special items could be material to our operating results computed in accordance with GAAP.
SEC Filings
The Company plans to file its Form 10-Q for the three months ended June 30, 2003, on or about August 13, 2003. The Company filed a Form 10-Q/A for the quarter ended March 31, 2003, reflecting a reduction of $282.9 million in “Nonregulated revenues” and “Operating expenses” for the first quarter. This reduction did not affect previously reported income from operations, earnings, cash flows or common shareholders’ equity.
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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 Form 10-K under the forward-looking statements section.
Conference Call July 31, 2003
Constellation Energy Group will host a conference call at 8 a.m. Eastern Time on July 31, 2003, to review its results. To participate, investors, analysts, and members of the media in the United States may dial 1-800-905-0392 shortly before 8 a.m. The international dial-in number is 1-785-832-2041. The conference call host is Constellation Energy Group, and the password is CEG. A replay of the call will be available for one week. The replay number is 1-888-276-5302; the number for international callers is 1-402-220-2331. A live audio Web cast of the conference call, as well as presentation slides and the second quarter 2003 earnings press release, will be available on the Investor Relations page of the company Web site, www.constellation.com. The reference to our Web site is an active textual reference and the contents of our Web site are not part of this press release.
About Constellation Energy Group
Constellation Energy Group, a Fortune 500 company based in Baltimore, is the nation’s leading competitive supplier of electricity to large commercial and industrial customers. It owns and operates a diversified fleet of power plants throughout the United States. Additionally, Constellation markets energy nationally and manages the associated risks, providing value-added services for its customers. The company also delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland. In 2002, the combined revenues of the integrated energy company totaled $4.7 billion.
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Constellation Energy Group and Subsidiaries
Consolidated Statements of Income (Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | (In Millions, Except Per Share Amounts) | |
Revenues | | | | | | | | | |
Nonregulated revenues | | $ | 1,696.7 | | $ | 460.4 | | $ | 3,242.2 | | $ | 831.6 | |
Regulated electric revenues | | 436.9 | | 480.4 | | 923.2 | | 940.7 | |
Regulated gas revenues | | 137.5 | | 90.6 | | 435.7 | | 311.4 | |
Total revenues | | 2,271.1 | | 1,031.4 | | 4,601.1 | | 2,083.7 | |
| | | | | | | | | |
Expenses | | | | | | | | | |
Operating expenses | | 1,844.0 | | 649.6 | | 3,817.7 | | 1,331.8 | |
Workforce reduction costs | | 0.7 | | 13.3 | | 1.4 | | 39.2 | |
Depreciation and amortization | | 116.9 | | 117.2 | | 227.9 | | 234.3 | |
Accretion of asset retirement obligations | | 10.7 | | — | | 21.3 | | — | |
Taxes other than income taxes | | 70.2 | | 63.6 | | 142.3 | | 129.2 | |
Total expenses | | 2,042.5 | | 843.7 | | 4,210.6 | | 1,734.5 | |
Net Gain (Loss) on Sales of Investments and Other Assets | | 0.5 | | (2.8 | ) | 14.2 | | 254.3 | |
Income from Operations | | 229.1 | | 184.9 | | 404.7 | | 603.5 | |
Other Income | | 6.0 | | 8.3 | | 14.9 | | 12.8 | |
Fixed Charges | | | | | | | | | |
Interest expense | | 83.5 | | 82.7 | | 165.8 | | 150.5 | |
Interest capitalized and allowance for borrowed funds used during construction | | (2.8 | ) | (20.1 | ) | (7.2 | ) | (31.9 | ) |
BGE preference stock dividends | | 3.3 | | 3.3 | | 6.6 | | 6.6 | |
Total fixed charges | | 84.0 | | 65.9 | | 165.2 | | 125.2 | |
Income Before Income Taxes | | 151.1 | | 127.3 | | 254.4 | | 491.1 | |
Income Taxes | | 54.3 | | 46.0 | | 90.6 | | 181.1 | |
Income Before Cumulative Effects of Changes in Accounting Principles | | 96.8 | | 81.3 | | 163.8 | | 310.0 | |
Cumulative Effects of Changes in Accounting Principles, Net of Income Taxes of $119.5 | | — | | — | | (198.4 | ) | — | |
Net Income (Loss) | | $ | 96.8 | | $ | 81.3 | | $ | (34.6 | ) | $ | 310.0 | |
| | | | | | | | | |
Earnings (Loss) Applicable to Common Stock | | $ | 96.8 | | $ | 81.3 | | $ | (34.6 | ) | $ | 310.0 | |
| | | | | | | | | |
Average Shares of Common Stock Outstanding | | 165.8 | | 164.0 | | 165.4 | | 163.9 | |
Earnings Per Common Share and Earnings Per Common Share - Assuming Dilution Before Cumulative Effects of Changes in Accounting Principles | | | | | | | | | |
$ | 0.58 | | $ | 0.50 | | $ | 0.99 | | $ | 1.89 | |
Cumulative Effects of Changes in Accounting Principles | | — | | — | | (1.20 | ) | — | |
Earnings (Loss) Per Common Share - Assuming Dilution | | $ | 0.58 | | $ | 0.50 | | $ | (0.21 | ) | $ | 1.89 | |
Certain prior-period amounts have been reclassified to conform with the current period’s presentation.
6
Constellation Energy Group and Subsidiaries
Consolidated Balance Sheets (Unaudited)
| | June 30,
2003 | | December 31,
2002 | |
| | (In Millions) | |
ASSETS | | | |
Current Assets | | | | | |
Cash and cash equivalents | | $ | 751.0 | | $ | 615.0 | |
Accounts receivable (net of allowance for uncollectibles of $53.9 and $41.9, respectively) | | 1,578.8 | | 1,244.1 | |
Trading securities | | 3.4 | | 77.1 | |
Mark-to-market energy assets | | 742.4 | | 759.4 | |
Risk management assets | | 278.5 | | 72.3 | |
Fuel stocks | | 135.3 | | 126.5 | |
Materials and supplies | | 202.2 | | 208.6 | |
Prepaid taxes other than income taxes | | 7.4 | | 57.1 | |
Other | | 271.1 | | 157.1 | |
Total current assets | | 3,970.1 | | 3,317.2 | |
Investments And Other Assets | | | | | |
Real estate projects and investments | | 70.8 | | 86.1 | |
Investments in qualifying facilities and power projects | | 433.3 | | 439.2 | |
Nuclear decommissioning trust funds | | 686.6 | | 645.4 | |
Mark-to-market energy assets | | 397.4 | | 926.8 | |
Risk management assets | | 95.7 | | 88.8 | |
Goodwill | | 120.1 | | 115.9 | |
Other | | 245.8 | | 204.7 | |
Total investments and other assets | | 2,049.7 | | 2,506.9 | |
Property, Plant and Equipment | | | | | |
Regulated property, plant and equipment | | 5,145.2 | | 5,075.2 | |
Nonregulated generation property, plant and equipment | | 7,542.6 | | 6,811.9 | |
Other nonregulated property, plant and equipment | | 288.9 | | 242.0 | |
Nuclear fuel (net of amortization) | | 230.5 | | 224.8 | |
Accumulated depreciation | | (3,814.3 | ) | (4,396.8 | ) |
Net property, plant and equipment | | 9,392.9 | | 7,957.1 | |
Deferred Charges | | | | | |
Regulatory assets (net) | | 256.7 | | 405.7 | |
Other | | 149.9 | | 136.0 | |
Total deferred charges | | 406.6 | | 541.7 | |
Total Assets | | $ | 15,819.3 | | $ | 14,322.9 | |
| | | | | |
LIABILITIES AND EQUITY | | | | | |
Current Liabilities | | | | | |
Short-term borrowings | | $ | 11.4 | | $ | 10.5 | |
Current portion of long-term debt | | 570.2 | | 426.2 | |
Accounts payable | | 1,152.8 | | 943.4 | |
Customer deposits and collateral | | 272.4 | | 102.8 | |
Mark-to-market energy liabilities | | 801.4 | | 709.6 | |
Risk management liabilities | | 278.3 | | 20.1 | |
Accrued interest | | 92.3 | | 95.5 | |
Dividends declared | | 46.3 | | 42.8 | |
Other | | 351.0 | | 337.1 | |
Total current liabilities | | 3,576.1 | | 2,688.0 | |
Deferred Credits And Other Liabilities | | | | | |
Deferred income taxes | | 1,244.4 | | 1,330.7 | |
Mark-to-market energy liabilities | | 342.4 | | 460.0 | |
Risk management liabilities | | 89.2 | | 149.5 | |
Asset retirement obligations | | 572.6 | | — | |
Net pension liability | | 238.4 | | 334.6 | |
Postretirement and postemployment benefits | | 360.8 | | 352.8 | |
Deferred investment tax credits | | 82.1 | | 85.7 | |
Other | | 136.8 | | 150.1 | |
Total deferred credits and other liabilities | | 3,066.7 | | 2,863.4 | |
Long-Term Debt | | | | | |
Long-term debt of nonregulated businesses | | 3,696.8 | | 3,149.8 | |
Long-term debt of BGE | | 1,699.7 | | 1,650.0 | |
Company obligated mandatorily redeemable trust preferred securities of subsidiary trust holding solely 7.16% debentures of BGE due June 30, 2038 | | 250.0 | | 250.0 | |
Unamortized discount and premium | | (12.5 | ) | (9.7 | ) |
Current portion of long-term debt | | (570.2 | ) | (426.2 | ) |
Total long-term debt | | 5,063.8 | | 4,613.9 | |
Minority Interests | | 108.9 | | 105.3 | |
BGE Preference Stock Not Subject To Mandatory Redemption | | 190.0 | | 190.0 | |
Common Shareholders’ Equity | | | | | |
Common stock | | 2,138.9 | | 2,078.9 | |
Retained earnings | | 1,856.8 | | 1,977.6 | |
Accumulated other comprehensive loss | | (181.9 | ) | (194.2 | ) |
Total common shareholders’ equity | | 3,813.8 | | 3,862.3 | |
Total Liabilities And Equity | | $ | 15,819.3 | | $ | 14,322.9 | |
Certain prior-period amounts have been reclassified to conform with the current period’s presentation.
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Constellation Energy Group and Subsidiaries
Merchant Energy Operating Statistics
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Revenues (In Millions) | | | | | | | | | |
PJM Platform | | $ | 465.3 | | $ | 323.6 | | $ | 841.0 | | $ | 610.0 | |
Plants with Power Purchase Agreements | | 156.8 | | 107.4 | | 266.0 | | 199.9 | |
Competitive Supply | • Accrual Revenues | | 1,192.2 | | 78.3 | | 2,354.7 | | 101.5 | |
| • MTM Energy Revenues | | 6.0 | | 90.3 | | 2.8 | | 154.1 | |
Other | | 6.8 | | 7.1 | | 39.7 | | 31.2 | |
Total Revenues | | $ | 1,827.1 | | $ | 606.7 | | $ | 3,504.2 | | $ | 1,096.7 | |
| | Six Months Ended June 30, | |
| | Nuclear | | Coal | | Oil | | Hydro &
Gas | | Other | | Total | |
Generation by Fuel Type (%) | | | | | | | | | | | | | |
2003 | | 50.1 | | 37.4 | | 2.0 | | 8.0 | | 2.5 | | 100.0 | |
2002 | | 54.4 | | 37.1 | | 1.9 | | 3.4 | | 3.2 | | 100.0 | |
| | | | | | | | | | | | | |
Utility Operating Statistics
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
ELECTRIC | | | | | | | | | |
Revenues (In Millions) | | | | | | | | | |
Residential | •with househeating | | $ | 80.7 | | $ | 77.0 | | $ | 210.9 | | $ | 181.5 | |
| •other | | 129.4 | | 137.7 | | 257.4 | | 252.7 | |
| •total | | 210.1 | | 214.7 | | 468.3 | | 434.2 | |
Commercial | •excluding delivery service | | 166.8 | | 205.5 | | 327.3 | | 396.6 | |
| •delivery service | | 14.7 | | 5.0 | | 26.8 | | 6.3 | |
Industrial | •excluding delivery service | | 30.5 | | 45.0 | | 68.7 | | 86.5 | |
| •delivery service | | 4.5 | | 1.6 | | 8.4 | | 1.9 | |
System Sales | | | 426.6 | | 471.8 | | 899.5 | | 925.5 | |
Other | | | 10.4 | | 8.6 | | 23.8 | | 15.3 | |
Total | | | $ | 437.0 | | $ | 480.4 | | $ | 923.3 | | $ | 940.8 | |
| | | | | | | | | | |
Sales (In Thousands) - MWH | | | | | | | | | |
Residential | •with househeating | | 1,073 | | 1,028 | | 3,091 | | 2,622 | |
| •other | | 1,563 | | 1,689 | | 3,343 | | 3,292 | |
| •total | | 2,636 | | 2,717 | | 6,434 | | 5,914 | |
Commercial | •excluding delivery service | | 2,339 | | 3,132 | | 4,878 | | 6,564 | |
| •delivery service | | 1,128 | | 303 | | 2,212 | | 355 | |
Industrial | •excluding delivery service | | 608 | | 1,004 | | 1,254 | | 2,058 | |
| •delivery service | | 441 | | 102 | | 839 | | 115 | |
Total System Sales | | | 7,152 | | 7,258 | | 15,617 | | 15,006 | |
| | | | | | | | | | |
GAS | | | | | | | | | | |
Revenues (In Millions) | | | | | | | | | |
Residential | •excluding delivery service | | $ | 86.4 | | $ | 54.7 | | $ | 273.6 | | $ | 186.0 | |
| •delivery service | | 1.8 | | 1.9 | | 9.1 | | 10.1 | |
| •total | | 88.2 | | 56.6 | | 282.7 | | 196.1 | |
Commercial | •excluding delivery service | | 25.7 | | 12.5 | | 81.4 | | 47.6 | |
| •delivery service | | 4.7 | | 5.2 | | 13.6 | | 15.8 | |
Industrial | •excluding delivery service | | 2.6 | | 2.1 | | 7.0 | | 6.2 | |
| •delivery service | | 2.7 | | 3.1 | | 5.9 | | 7.0 | |
System Sales | | | 123.9 | | 79.5 | | 390.6 | | 272.7 | |
Off-System Sales | | | 14.0 | | 11.5 | | 48.7 | | 39.8 | |
Other | | | 2.1 | | 1.5 | | 4.3 | | 3.4 | |
Total | | | $ | 140.0 | | $ | 92.5 | | $ | 443.6 | | $ | 315.9 | |
| | | | | | | | | | |
Sales (In Thousands) - DTH | | | | | | | | | |
Residential | •excluding delivery service | | 6,186 | | 4,460 | | 26,235 | | 19,317 | |
| •delivery service | | 1,006 | | 797 | | 4,390 | | 3,764 | |
| •total | | 7,192 | | 5,257 | | 30,625 | | 23,081 | |
Commercial | •excluding delivery service | | 2,240 | | 1,238 | | 8,904 | | 5,991 | |
| •delivery service | | 6,247 | | 5,188 | | 15,913 | | 14,717 | |
Industrial | •excluding delivery service | | 201 | | 145 | | 690 | | 752 | |
| •delivery service | | 4,658 | | 5,174 | | 9,948 | | 11,442 | |
System Sales | | | 20,538 | | 17,002 | | 66,080 | | 55,983 | |
Off-System Sales | | | 2,212 | | 2,782 | | 6,737 | | 10,987 | |
Total | | | 22,750 | | 19,784 | | 72,817 | | 66,970 | |
| | | | | | | | | | |
Merchant Energy and Utility operating statistics do not reflect the elimination of intercompany transactions. | |
| | | | | | | | | | |
Heating/Cooling Degree Days (Calendar-Month Basis) | | | | | |
| | | | | |
Heating Degree Days | •Actual | | 667 | | 493 | | 3,425 | | 2,616 | |
| •Normal | | 528 | | 532 | | 2,947 | | 2,960 | |
Cooling Degree Days | •Actual | | 153 | | 295 | | 153 | | 298 | |
| •Normal | | 235 | | 230 | | 239 | | 233 | |
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Constellation Energy Group and Subsidiaries
Supplemental Financial Statistics
| | Six Months Ended
June 30, | |
| | 2003 | | 2002 | |
| | | | | |
Ratio of Earnings to Fixed Charges | | 2.37 | | 3.80 | |
| | | | | |
Effective Tax Rate | | 34.7 | % | 36.4 | % |
| | | | | |
Equity Investment In Nonregulated Businesses — End of Period | | $ | 2,317.7 | | $ | 2,568.8 | |
| | | | | |
Equity Investment In Utility Business — End of Period | | $ | 1,496.1 | | $ | 1,386.9 | |
Common Stock Data
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | | | | | | | | |
Common Stock Dividends - Per Share | | | | | | | | | |
• Declared | | $ | 0.26 | | $ | 0.24 | | $ | 0.52 | | $ | 0.48 | |
• Paid | | $ | 0.26 | | $ | 0.24 | | $ | 0.50 | | $ | 0.36 | |
| | | | | | | | | |
Market Value Per Share | | | | | | | | | |
• High | | $ | 34.92 | | $ | 32.38 | | $ | 34.92 | | $ | 32.38 | |
• Low | | $ | 27.50 | | $ | 27.65 | | $ | 25.17 | | $ | 26.16 | |
• Close | | $ | 34.30 | | $ | 29.34 | | $ | 34.30 | | $ | 29.34 | |
| | | | | | | | | |
Shares Outstanding—End of Period (In Millions) | | 166.5 | | 164.1 | | 166.5 | | 164.1 | |
| | | | | | | | | |
Book Value per Share—End of Period | | $ | 22.91 | | $ | 23.88 | | $ | 22.91 | | $ | 23.88 | |
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