Exhibit No. 99.1
News Release
Contacts: Nancy Caplan (media)
410-783-3058
Brian Stanton (investors)
410-783-3670
FOR IMMEDIATE RELEASE
Constellation Energy Group Elects Mayo A. Shattuck III
New President and CEO
Christian H. Poindexter Continues as Chairman
and
Constellation Chooses to Maintain Current Holding Company Structure
Cancels Plans to Separate Merchant Energy and Retail Energy Businesses
Ends Power Advisory Relationship with Goldman Sachs
Meets Expectations for Third Quarter Earnings
Baltimore, MD - October 26, 2001 -- Constellation Energy Group (NYSE: CEG) today
announced the election of Mayo A. Shattuck III to the position of President and
Chief Executive Officer effective November 1, 2001. Christian H. Poindexter will
continue as Chairman of the Board.
Constellation Energy Group also announced that it has chosen to remain a single
company with two major lines of business, thereby canceling its previously
announced plans to separate its merchant energy business from its retail energy
business, which includes Baltimore Gas and Electric Company (BGE).
In addition to these key decisions, Constellation Energy Group announced today
that it has terminated its power advisory relationship with Goldman Sachs.
Details of that announcement are presented later in this press release.
The Company also reported net income from operations of $163.6 million for the
three months ending September 30, 2001, equivalent to $1.00 per share. These
results are consistent with the Company forecasts made in July of this year.
Further details on earnings also appear later in this press release.
"Today we are making important moves that will cement Constellation Energy
Group's foundation for growth and stability," said Christian H. Poindexter,
Chairman and Chief Executive Officer of Constellation Energy Group.
Mayo A. Shattuck III, New President and CEO
-------------------------------------------
"First, we have selected the absolute best person for the job of leading our
company to success in the energy marketplace. When Mayo Shattuck decided a few
weeks ago to leave his position as Chairman and CEO of Deutsche Banc Alex.
Brown, I knew immediately that we had to seize this unique opportunity to
recruit a person of his quality and stature. Here is an executive with a proven
record of success in the
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world of capital markets, trading, investment banking and corporate finance -
all fields that are vital to the success of our company. Plus, of course, Mayo
has been a valued member of the Constellation Energy Group Board of Directors,
where he has participated in all of our deliberations and strategic decision
making for the past seven years. He knows our company and is one of us. Most
important, Mayo Shattuck brings the indispensable quality of being a born
leader. He is exactly the person we need," Mr. Poindexter said.
Current Holding Company Structure Maintained
--------------------------------------------
Constellation Energy Group also announced that the Board of Directors today
approved the decision to remain one company rather than separate into two
independent corporations as previously contemplated.
"We have chosen to remain one company. We are canceling our plans to separate
into two independent corporations, as previously contemplated," Mr. Poindexter
said. "We believe that dramatic changes in our industry make this the right
decision for our shareholders, our employees and our customers. Being an energy
company with sufficient size and scope to compete in the tumultuous energy
market for the long haul is our goal. We will continue to pursue growth options
in the power generation and merchant arena from the platform of one
progressively-oriented energy company; and we will continue to be the premier
provider of retail energy delivery services in Central Maryland. We have also
begun a process that will streamline our organization for maximum operating
efficiency," Mr. Poindexter added.
"The decision by management and the board of directors to maintain the current
corporate structure followed careful consideration. The utility industry and
energy markets, and indeed the entire U.S. economy, have changed considerably in
the past year. As a combined company we will be better positioned to seize
opportunities to grow and deliver the performance that produces increased
shareholder value. We remain committed to the safe and reliable delivery of
energy and the provision of quality customer service as we have done for the
past 185 years," Mr. Poindexter said.
"In the past year we have organized and staffed to function as two separate
companies. We have created plans, methods and cultures appropriate to the
different challenges that face the merchant energy business on the one hand and
the retail energy business on the other. Staying consolidated means rethinking
certain organizational issues in order to contract from two holding companies
back into one. This must be done while preserving the intense focus and
discipline on the specific missions of the two business lines. Mayo Shattuck
will be helping me execute these steps. We have purposely held off on making all
of the necessary decisions that will bring clarity to our future organization in
order to ensure that we have Mayo's input and involvement in shaping our team,"
Mr. Poindexter said.
"I am excited by the opportunity to help lead this great company, and I'm
honored by the trust being placed in me by Chris Poindexter and the
Constellation Energy Group Board of Directors," said Mayo A. Shattuck III. "When
Chris first approached me about the possibility of joining Constellation Energy
Group, I made it clear that I would be interested only if he would be willing to
work with me as a fully engaged Chairman for the next two years. Thankfully, he
has agreed to do so. Chris has steered this company through a major
transformation in the past nine years and has become one of the most respected
leaders in the industry. His experience and advice will be invaluable to me. As
a member of the Board of Directors, I have been fully supportive of the decision
to remain a single company. This is a sound strategy that will ensure strength
and stability in these times of economic uncertainty," Mr. Shattuck said.
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Goldman Sachs Relationship Ends
-------------------------------
It was also announced today that Constellation Energy Group and Goldman Sachs
have agreed to terminate their power business services agreement. Constellation
Energy Group will pay Goldman Sachs approximately $355 million to terminate
their power business services agreement and thereby satisfy a current payable of
approximately $159 million related to the existing power business services
agreement. The conclusion of the Goldman Sachs power advisory relationship will
result in a special expense in the fourth quarter related to the termination of
the contract of approximately $200 million pre-tax, or $0.79 per share. In light
of this transaction, Goldman Sachs will no longer make the equity investment in
Constellation Energy Group's merchant energy business, which had been announced
in October 2000.
Third Quarter Earnings
----------------------
The company also reported net income from operations of $163.6 million for the
three months ending September 30, 2001, equivalent to $1.00 per share, compared
to $147.5 million or $0.98 per share in the third quarter of 2000. These results
are consistent with the Company forecasts made in July of this year.
For the nine months ending September 30, 2001, net income from operations was
$351.0 million, or $2.20 per share. Excluding the $0.06 per share impact
associated with a change in accounting principle in the first quarter of 2001,
net income from operations for the first nine months of 2001 was $2.14 per
share. This compares with earnings of $259.2 million, or $1.73 per share, for
the first nine months of 2000.
Earnings per share for the Company's business segments were as follows:
Three Months Ending Nine Months Ending
September 30 September 30
2001 2000 2001 2000
---- ---- ---- ----
Domestic Merchant Energy $0.89 $0.87 $1.50 $1.10
Regulated Electric $0.17 $0.10 $0.46 $0.65
Regulated Gas ($0.02) ($0.03) $0.18 $0.12
Other Nonregulated Businesses ($0.04) $0.04 $0.00 ($0.01)
------- ------ ------ -------
Earnings from operations $1.00 $0.98 $2.14 $1.86
Deregulation Transition Cost $0.00 $0.00 $0.00 ($0.10)
Voluntary Early Retirement Programs $0.00 $0.00 $0.00 ($0.03)
------ ------ ------ -------
Earnings per share of Common Stock
Before Cumulative Effect of
Change in Accounting Principle $1.00 $0.98 $2.14 $1.73
Cumulative Effect of Change in
Accounting Principle $0.00 $0.00 $0.06 $0.00
------ ------ ------ -----
Total Earnings Per Share $1.00 $0.98 $2.20 $1.73
The Domestic Merchant Energy business earned $0.89 per share, versus $0.87 per
share in the third quarter of 2000. This business enjoyed strong results from
the structured origination and portfolio management unit and the contribution
from new peaking facilities completed this summer. These improvements were
partially offset by power price declines in California, which affected certain
facilities.
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Baltimore Gas and Electric's regulated electric and gas businesses improved by
$0.08 per share, from $0.07 per share in the third quarter of 2000 to $0.15 per
share in the third quarter of 2001, due to increases related to warmer weather
and lower expenses.
Third quarter earnings for the Other Non-regulated businesses declined by $0.08
per share year over year. The weakness is due to declining equity values in the
investment portfolio, the absence of gains on the sale of equity securities that
occurred in the third quarter of 2000, and the change in the method of
accounting for our investment in Orion, disclosed in July.
Conference Call Information
---------------------------
Constellation Energy Group will host a live conference call at 8:00 AM Eastern
Time on October 26, 2001. To participate, investors, analysts and members of the
media in the United States may dial 1-888-566-5771 shortly before 8:00 AM. The
international dial-in number is 1-712-257-2760. The conference call host is
Constellation Energy Group, and the password is Constellation. A replay of the
call will be available starting approximately two hours after the call ends, and
will be available for one week. The replay number is 1-888-566-0471,
1-402-998-0639 for international callers. A live audio web cast of the
conference call will be available at the Investor Relations page of the Company
web site, www.constellationenergy.com.
Forward-Looking Statements
--------------------------
Certain statements made in this press release are forward-looking statements,
and may contain words such as "believes," "expects," "intends," "plans," and
other similar words. These statements are not guarantees of future performance,
and are subject to risks and uncertainties that could cause actual results to be
materially different from projected results. These risks include, but are not
limited to: satisfaction of all the conditions precedent to the closing on the
purchase of the Nine-Mile Point nuclear power plants, including obtaining
regulatory approval; general economic, business, and regulatory conditions; the
pace and nature of deregulation nationwide (including the status of the
California markets); competition; energy supply and demand; weather;
implications of the Restructuring Order issued by the Maryland Public Service
Commission (PSC) regarding implementation of customer choice in Maryland
including the outcome of the appeal of the order; commodity price risk;
operating generation assets in a deregulated market without the benefit of a
fuel rate adjustment clause; loss of revenues due to customers choosing
alternative suppliers; higher volatility of earnings and cash flows; increased
financial requirements of non-regulated subsidiaries; inability to recover all
costs associated with providing electric retail customers service during BGE's
electric rate freeze period; implications from the transfer of BGE's generation
assets and related liabilities to nonregulated subsidiaries of Constellation
Energy, including the outcome of an appeal to the Maryland PSC's order regarding
the transfer; and force majeure events (events beyond our control), such as:
acts of nature, change of laws, labor strikes, and work stoppages, especially as
they impact plant construction or operation. Given these uncertainties, you
should not place undue reliance on these forward-looking statements. Please see
periodic reports filed with the Securities and Exchange Commission for more
information on these factors. These forward-looking statements represent
estimates and assumptions only as of the date of this press release, and no duty
is undertaken to update any forward-looking statements to reflect new
information, events or circumstances after the date of this press release or to
reflect the occurrence of unanticipated events.
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About Constellation Energy Group
--------------------------------
Constellation Energy Group owns energy-related businesses, including a North
American wholesale power marketing and merchant generation company and the
Baltimore Gas and Electric Company (BGE), a regulated energy delivery company in
Central Maryland. BGE provides service to more than 1.1 million electric
customers and approximately 600,000 natural gas customers in Central Maryland.
Constellation Energy Group had $3.9 billion in revenues in 2000 and assets of
$12.4 billion at December 31, 2000.
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CONSTELLATION ENERGY GROUP, INC. AND SUBSIDIARIES
Consolidated Financial Information (unaudited)
September 30, 2001
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
(in millions, Except Per Share Data)
Revenues
Nonregulated revenues $ 335.1 $283.7 $ 873.9 $ 768.4
Regulated electric revenues 634.4 598.2 1,624.0 1,688.0
Regulated gas revenues 66.6 86.7 528.5 372.8
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Total revenues 1,036.1 968.6 3,026.4 2,829.2
Expenses
Operating expenses 560.5 497.9 1,824.8 1,666.4
Depreciation and amortization 102.9 107.6 308.5 370.7
Taxes other than income taxes 55.2 49.7 169.6 162.2
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Total expenses 718.6 655.2 2,302.9 2,199.3
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Income from Operations 317.5 313.4 723.5 629.9
Other Income / (Expense) 2.3 (0.3) 5.3 5.8
----------------------------------------------------------------------------------------------
Income Before Fixed Charges and Income Taxes 319.8 313.1 728.8 635.7
Fixed Charges
Interest expense (net) 54.3 66.6 170.7 192.0
BGE preference stock dividends 3.3 3.3 9.9 9.9
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Total fixed charges 57.6 69.9 180.6 201.9
----------------------------------------------------------------------------------------------
Income Before Income Taxes 262.2 243.2 548.2 433.8
Income Taxes
Current 86.5 105.1 198.9 211.9
Deferred 14.2 (7.3) 12.9 (31.0)
Investment tax credit adjustments (2.1) (2.1) (6.1) (6.3)
----------------------------------------------------------------------------------------------
Total income taxes 98.6 95.7 205.7 174.6
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Income Before Cumulative Effect of
Change in Accounting Principle 163.6 147.5 342.5 259.2
Cumulative Effect of Change in Accounting
Principle Net of Taxes $5.6 - - 8.5 -
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Net Income $ 163.6 $ 147.5 $ 351.0 $ 259.2
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Earnings Applicable to Common Stock $ 163.6 $ 147.5 $ 351.0 $ 259.2
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Average Shares of Common Stock Outstanding 163.7 150.1 159.8 149.8
EARNINGS PER COMMON SHARE
-------------------------
Domestic merchant energy $ 0.89 $ 0.87 $1.50 $ 1.10
Regulated electric 0.17 0.10 0.46 0.65
Regulated gas (0.02) (0.03) 0.18 0.12
Other nonregulated (0.04) 0.04 - (0.01)
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Total earnings per share before nonrecurring
items 1.00 0.98 2.14 1.86
Deregulation transition cost * - - - (0.10)
Voluntary early retirement program * - - - (0.03)
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Earnings per share of common stock before
cumulative effect of change in accounting
principle 1.00 0.98 2.14 1.73
Cumulative effect of change in accounting
principle net of income taxes - - 0.06 -
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Earnings per share of common stock $ 1.00 $ 0.98 $ 2.20 $ 1.73
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Equity investment in nonregulated businesses
at end of period $ 3,052.3 $ 2,349.7 $ 3,052.3 $ 2,349.7
==============================================================================================
Equity investment in utility business at end
of period $ 893.8 $ 756.3 $ 893.8 $ 756.3
==============================================================================================
Certain prior-period amounts have been reclassified to conform with the current
period's presentation.
* Nonrecurring items included in earnings from operations.