Constellation Energy is focusing on “getting the simple things right,” Chairman Mayo A. Shattuck said, reporting that the parent of Baltimore Gas & Electric would be building customer-oriented services, including risk management, onto its expanding customer base. “We’re managing our way through the turbulent energy markets as well as any company in industry.”

“We have confidence in our growth outlook for 2003 and beyond,” Shattuck said, and CFO Follin Smith, added that the times being what they are, Constellation was keeping “a large cash balance.” The company “has no capitalization problems,” and Smith does not foresee any equity offering.

Constellation reported earnings excluding special items of $175.3 million, equivalent to $1.07 per share, for the third quarter. Excluding special items, third quarter earnings grew 7% compared to the same period in 2001.

Seeing the trend early, the company said it began moving away from mark-to-market to accrual accounting in the second quarter and expects that completing the non-cash exercise will have “little impact” on its reported earnings. It affirmed its earnings guidance for the full year at $2.45 to $2.55 per share, saying that included the expected 20-40 cent hit it expected to take from the transition to accrual accounting for its load-serving transactions. The company said it could not pinpoint the number at this time because many transactions included both physical and financial elements and those will have to be separated one by one.

Shattuck said the Baltimore-based company was integrating its New Energy retail acquisition, which he called “an attractive margin business” that has operations in every competitive market across the country, and building a book of supply contracts to serve customers. Business has been improving since it began offering credit support.

There is a “strong growth opportunity” in providing risk management for customers, Shattuck said, noting they are seeing increased interest in the service. The company has the sophisticated expertise to offer the services, he added, noting that his competitors have lost expertise in risk management with their downsizing. He sees an “acceleration in activity for services in unregulated markets… It’s quite an exciting future.”

As for the wholesale market, Constellation is less susceptible to the margin squeeze affecting gas-fired generators since the bulk of its power production is baseload coal or nuclear.

The company is more heavily hedged — 92% in 2003. Also monetizing for Constellation has meant closing its extraneous BGE home merchandise stores and selling off its senior living facilities and other real estate.

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