The current higher commodity price environment “will drive higher earnings over the planning horizon” at Constellation Energy Group, the company’s chief financial officer (CFO) said on Thursday during a Lehman Brothers conference in New York City.

Having already grown adjusted earnings per share (EPS) at a compounded rate of as much as 11% from 2002 to 2006, Constellation Energy Group’s adjusted EPS is projected to grow between 22% and 28% per annum from 2006 to 2008.

The “primary driver” for this impressive growth is “aggregation of market share in deregulated wholesale and commercial and industrial power load serving,” E. Follin Smith, Constellation’s CFO, said. “Capitalizing on our success in the power markets, we’ve expanded our presence as an intermediary [in] under-served gas and coal markets,” the CFO noted.

“We’ve grown adjusted EPS at a compounded rate of 8 to 11% from 2002 to 2006, depending on where you assume we’ll end up for 2006,” Smith said. “Our projections call for growth of about 25% per year for the next two years,” she said.

Another “key component to our ongoing success has been and will continue to be our ability to drive productivity by lowering the cost and increasing the output of our fleet.”

Constellation is “generating strong cash flow and we’ll continue to pursue opportunities to prudently invest in projects that provide above-hurdle rate returns. Absent above-hurdle rate projects…we will return cash flow to shareholders,” Smith told the conference.

Meanwhile, investors are no doubt keeping a close eye on the pending merger between Constellation and Florida-based FPL Group.

Smith said that regulatory approval in Maryland “continues to be the critical uncertainty on the merger path.” In July, the two companies filed a new merger application with the Maryland Public Service Commission (PSC) that addresses the statutory requirements of the recently-passed Senate Bill 1 (see Power Market Today, June 26).

Last month, the commission issued a merger review schedule that calls for a decision on the deal by February 2007. “Late last week, the PSC denied our request to accelerate this schedule to enable a year-end close this year,” Smith said. “So, accordingly, absent a settlement, the earliest possible merger close date would be February of 2007.”

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