While Constellation Energy remains interested in scooping up generation assets in deregulated markets, the company’s cautious outlook on how quickly spark spreads and power prices will rebound in the U.S. is tempering enthusiasm for power plant acquisitions, E. Follin Smith, Constellation’s chief financial officer, said last Wednesday.

“In general, we are very interested in adding to our generation fleet” in deregulated markets, Smith said at the Lehman Brothers CEO Energy/Power Conference in New York City.

“One area of focus, of course, for us is New England, where we serve a third of the load and we have no assets,” Smith said. “Ultimately, yes, we would like to own assets in New England, but the key is — we only want to acquire them at an attractive price,” she said.

In explaining why Constellation has a lower view on asset valuations than other companies, Smith said that “fundamentally it has to do with our future outlook on power prices and spark spreads. I think we are less optimistic about how fast spark spreads and power prices come back… how quickly excess capacity is absorbed by the system.” This explains Constellation’s cautious stance related to plant acquisitions.

But, other companies refuse to sit on the sidelines. Dominion Resources on Tuesday said that it has reached an agreement to acquire three electric power generation facilities from USGen New England Inc., a subsidiary of National Energy & Gas Transmission Inc. (NEGT), for $536 million in cash, plus an adjustment for inventory and reimbursement of certain capital expenditures incurred prior to closing (see related story).

Meanwhile, Smith told the conference that Constellation is not banking on additional power markets becoming deregulated in the near term as part of its overall business strategy. “Over the planning horizon, which most of you have used for valuing our business, we’re not counting on further deregulation,” she said. “What we are counting on is further market share growth, so taking share in the existing deregulated markets.”

Constellation is counting on in the existing deregulated states “more commercial and industrial customers to take advantage of their opportunities for managing their costs. We think that is going to continue to drive the markets and I think most observers expect that.”

Ultimately, Constellation thinks that deregulation “will inexorably march forward,” but that long-term view isn’t a factor as analysts try to value the company in the intermediate term, Smith added.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.