Constellation Reports Third-Quarter Loss After EDF Deal; Misses Estimates
Constellation Energy Group Inc., the Baltimore-based utility owner, reported a third-quarter loss of $1.41 billion as it wrote down the value of its stake in nuclear plants jointly owned with Electricite de France SA.
The loss was $6.99 a share, compared with net income of $137.6 million, or 69 cents, a year earlier, Constellation said today in a statement. Excluding expenses related to its nuclear joint ventures and a gain from a plant sale, Constellation would have earned 48 cents a share, 16 cents less than the average estimate of nine analysts surveyed by Bloomberg. Sales fell 1.5 percent to $3.97 billion.
“Power prices are down, hedged power prices are down, and they’d sold 50 percent of their nuclear generation,” Angie Storozynski, a New York-based analyst for Macquarie Capital USA Inc., said today in a telephone interview. She rates the stock “outperform” and doesn’t own any shares.
Profit was reduced 14 cents by quarterly adjustments to the value of contracts used to lock in the prices and cost of electricity and gas Constellation sells, Chief Financial Officer Jonathan W. Thayer said today on an investor call.
The shares fell 47 cents, or 1.5 percent, to $30.37 at 10:54 a.m. in New York Stock Exchange composite trading. Before today, the shares, which have three buy ratings from analysts, eight holds and a sell, had fallen 12 percent this year.
Annual Profit Forecast
Constellation affirmed a full-year profit forecast of $3.05 to $3.45 a share. The average estimate is $3.23 among 11 analysts. It also affirmed the 2011 forecast of $3.25 to $3.65 a share. The average estimate is $3.40 among 11 analysts.
Slumping power prices slashed the value of Constellation’s stake in three nuclear plants co-owned with Paris-based EDF by $1.35 billion, or $6.70 a share, the company said. Forecasts of low future power prices prompted the company to withdraw from talks on a government loan guarantee for a new reactor in Maryland. EDF agreed Oct. 26 to pay about $249 million for Constellation’s stake in the companies’ nuclear venture.
A writedown of that venture, UniStar Nuclear Energy, reduced results for the quarter by $86.3 million, or 43 cents, and the company also wrote down stakes in three coal-burning power plants in California by $32.5 million. It had a 12 cent per-share gain on the sale of its stake in a geothermal plant in California to partner Ormat Technologies Inc. for $72.5 million.
EDF in July recorded a first-half charge of 1.1 billion euros ($1.52 billion) on its Constellation-related holdings because of a “less favorable” outlook for power prices for existing power generators and for a planned new nuclear reactor in Maryland.
The price of electricity to be generated during times of peak demand in 2013 in the largest U.S. power market, PJM Interconnection LLC, has dropped 11 percent this year to $53.75 a megawatt-hour as the price of natural gas, a power-plant fuel, dropped 29 percent.
EDF, the largest nuclear operator, announced Oct. 26 it would pay Constellation $140 million in cash and surrender 3.5 million Constellation shares for full ownership of UniStar, the development venture. Constellation agreed to forgo its right under a previous contract, or put option, to force EDF to buy stakes in its non-nuclear plants for $2 billion.
Value of the settlement to Constellation is “roughly economically the same” as the put option, Chief Executive Officer Mayo Shattuck said today on the investor call. The settlement includes a revised agreement for sale of power that will lower costs for Constellation’s retail-energy unit, Chief Financial Officer Thayer said.
It also avoids litigation, as EDF had said it would contest an exercise of the put option, Thayer said.
The two remain partners in Constellation Energy Nuclear Group, owner of a plant in Maryland and two plants in New York.
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