Shares in Baltimore, MD-based Constellation Energy plummeted Tuesday on worries over the company’s relationship with bankrupt Lehman Brothers Holdings Inc. and fears that Constellation could lose its credit lines. The New York Stock Exchange halted trading in Constellation shares just before 2 p.m. EDT.

“Constellation Energy Group Inc., Constellation Energy Commodities Group Inc. and Baltimore Gas and Electric Co. (BGE) have business relationships with subsidiaries of Lehman. Constellation, Constellation Commodities and BGE believe the Lehman bankruptcy and the possible resulting effects on subsidiaries of Lehman will not have a material adverse effect on the company or its subsidiaries,” the company said in a regulatory filing Monday.

The market was not calmed by the reassurance, however. Tuesday afternoon Constellation shares closed down almost 36% at $30.76 after rebounding from a low of $13 earlier in the day, which was down 73% from Monday’s closing price. Trading volume was more than 13 times the average. Judging by comments posted to the stock’s Yahoo! message board, some bargain hunters were grateful for the buying opportunity.

JPMorgan noted concerns with Lehman counterparties, making mention of Constellation in particular. Citigroup Global Markets said the plunge in Constellation’s shares was exacerbated by the Lehman bankruptcy (see Daily GPI, Sept. 16), and Credit Suisse cited “worries that the $2 billion credit facility from UBS/RBS (Royal Bank of Scotland) could be pulled,” Reuters reported.

According to Citigroup, the bankruptcy of Lehman and the sale of Merrill Lynch to Bank of America could lead to a sell-off in the whole energy sector.

Constellation and BGE have aggregate credit facility commitments of $6.13 billion (not including a firm, underwritten commitment for an additional $2 billion credit facility that extends through December 2009) with a consortium of banks that includes Lehman Brothers Bank. As of Sept. 15, Lehman Brothers Bank’s total commitment is $150 million, Constellation said. Constellation had excess liquidity of about $2 billion, excluding the $150 million Lehman commitment and excluding the firm, underwritten commitment for an additional $2 billion credit facility, which is expected to close in October.

“Constellation does not believe that the potential reduction in available capacity under the credit facilities would have a significant impact on its liquidity,” it said.

Constellation Commodities is a counterparty with Lehman Brothers Commodity Services Inc. and Eagle Energy Partners 1 LP, subsidiaries of Lehman, in wholesale energy marketing transactions, the company said in its Monday filing. The obligations of Lehman Commodity Services and Eagle Energy are guaranteed by Lehman, and the Lehman bankruptcy filing gives Constellation Commodities the right to terminate the transactions. As of Sept. 15 Constellation Commodities did not have any direct net credit exposure to Lehman Commodity Services or Eagle Energy, Constellation said.

BGE has existing contracts with Eagle Energy for the purchase of gas for the 2008 winter period based on a first-of-month index prices but does not have any material credit exposure under these contracts. BGE said that if Eagle were to fail to perform under the contracts it would not have a material impact on its operations.

Lehman subsidiary Shearson Lehman Brothers acts as a remarketing agent for BGE on a $48 million Anne Arundel County tax exempt bond. The next remarketing under this bond issue is not scheduled until November.

Constellation had 2007 revenues of $21 billion. It claims to be the nation’s largest competitive supplier of electricity to commercial and industrial customers and the nation’s largest wholesale power seller. It owns 83 generating units throughout the United States, totaling approximately 9,000 MW. The company delivers electricity and natural gas through BGE, its regulated utility in Central Maryland.

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.