Constellation Energy Reports Solid First Quarter 2008 Results

BALTIMORE, April 30 /PRNewswire-FirstCall/ -- Constellation Energy NYSE: CEG today reported adjusted earnings of $0.95 per share for the first quarter of 2008, 8 percent lower than the $1.03 adjusted earnings per share earned in the same period last year. Adjusted earnings exclude the impact of special items, discontinued operations, certain economic, non-qualifying hedges and synfuel earnings. On a Generally Accepted Accounting Principles (GAAP) basis, the company earned $0.81 per share in the first quarter of 2008, compared to $1.07 per share in the same period last year.

Constellation Energy reaffirmed earnings guidance for 2008 at $5.25 to $5.75 per share, and for 2009, the company expects to grow earnings 15 to 20 percent over projected 2008 earnings.

"We are pleased with our first quarter results, which were in line with our expectations and reflect solid operating performance," said Mayo A. Shattuck III, chairman, president and chief executive officer of Constellation Energy. "We achieved several operational successes during the first quarter of 2008, including strong results from our generation fleet, driven by the roll- off of below-market hedges. Our Nuclear Group delivered particularly strong operating results, as we successfully completed planned outages and limited nuclear fleet forced outages to less than 3 days.

"During the first quarter, we continued to transact opportunistically. We purchased the Hillabee Energy Center for approximately $155 million, which should be completed in 2010 at about 45 percent of the cost to build a new plant. This acquisition complements our roughly 3,100 megawatts of peak load in the Southeast, a growing area of our business. The addition of this generation asset continues to expand our growth strategy beyond competitive markets into regulated markets, while capitalizing on our expertise and extensive background in building and operating generating facilities. Consistent with our 'Invest-Develop-Harvest' strategy in upstream gas, we executed the sale of a non-operating interest in producing wells to Constellation Energy Partners, recognizing a gain of approximately $14 million.

"Lastly, during the first quarter, we announced a comprehensive settlement with political and regulatory leaders in Maryland," said Shattuck. "We believe the agreement provides far-reaching benefits for our customers, our investors and Maryland. All parties gain meaningfully in this carefully crafted settlement, and the overarching value is a return to regulatory stability and normalcy. There is commitment to putting the past behind us and focusing on discussions around the many energy-related challenges and opportunities that lie in Maryland's future. We fully recognize that the expression of many different views and concerns about Maryland's future energy policy will continue and is likely to spark rather intensive debates. However, we are confident that we can go about these discussions in a constructive manner now that the past has been laid to rest."

The following table summarizes adjusted earnings per share and earnings per share reported in accordance with GAAP for the company's business segments and provides a reconciliation to total company reported earnings.

                                           Three Months Ended March 31,
                                             2008               2007
                                      Reported           Reported
                                        GAAP   Adjusted    GAAP   Adjusted
    EARNINGS PER COMMON SHARE           EPS*     EPS       EPS*     EPS
    Baltimore Gas and Electric          $0.41   $0.37 (1)  $0.36   $0.36
    Merchant Energy                      0.40    0.58 (2)   0.67    0.62 (3)
    Other Nonregulated                    -       -         0.05    0.05
    Diluted Earnings Per Share from
     Continuing Operations               0.81    0.95       1.08    1.03
    Loss from Discontinued Operations
     Assuming Dilution                    -       -        (0.01)    -
    Diluted Earnings Per Share          $0.81   $0.95      $1.07   $1.03

    * Unaudited.

    GAAP EPS was adjusted by the following amounts to calculate Adjusted EPS
    (1) Subtraction of effective tax rate impact related to Maryland
        settlement agreement of $0.04 per share.
    (2) Addition of mark-to-market losses on certain non-qualifying hedges
        of $0.19 per share.  Subtraction of earnings from our synthetic
        fuel processing facilities of $0.01 per share.
    (3) Subtraction of earnings from our synthetic fuel processing
        facilities of $0.10 per share.  Addition of mark-to-market losses on
        certain non-qualifying hedges of $0.05 per share.

Baltimore Gas and Electric

Baltimore Gas and Electric (BGE) reported adjusted earnings of 37 cents per share in the first quarter of 2008. Compared to the first quarter of 2007, BGE's first quarter 2008 adjusted EPS was up 1 cent per share, due to higher transmission revenue, favorable gas supply revenue, favorable storm expenses and share accretion. These positive items were partially offset by higher interest expense and other costs.

Merchant

On an adjusted basis, the Merchant segment earned 58 cents per share during the first quarter of 2008, down 4 cents per share from the first quarter last year. On the positive side, Generation was up 12 cents, which benefited from higher energy and capacity prices as below-market hedges continue to roll off and a shorter planned refueling outage at Calvert Cliffs. Customer Supply was unfavorable 2 cents per share, primarily driven by lower wholesale backlog and reduced retail power margins, offset by an increase in retail gas margins. Global Commodities was down 7 cents, compared with the first quarter of 2007, due to the negative impact of hedge ineffectiveness, isolated coal supplier defaults and lower portfolio management and trading results, partially offset by strong gains in structured products and energy investments. Higher net interest expense and other items reduced earnings by 7 cents per share, compared to the first quarter of last year.

Financial Statements

The March 31, 2008, financial statements and supplemental information are attached.

Adjusted Earnings

Constellation Energy presents adjusted earnings per share (adjusted EPS) in addition to its reported earnings per share in accordance with generally accepted accounting principles (reported GAAP EPS). Adjusted EPS is a non-GAAP financial measure that differs from reported GAAP EPS because it excludes the cumulative effects of changes in accounting principles, discontinued operations, special items (which we define as significant items that are not related to our ongoing, underlying business or which distort comparability of results) included in operations, the impact of certain economic, non- qualifying hedges and synfuel earnings. The mark-to-market impact of these hedges is significant to reported results, but economically neutral to the company in that offsetting gains or losses on underlying accrual positions will be recognized in the future. Synfuel earnings have been excluded due to the potential for oil-price volatility to result in a difficult-to-forecast phase-out of tax credits.

We present adjusted EPS because we believe that it is appropriate for investors to consider results excluding these items in addition to our results in accordance with GAAP. We believe such a measure provides a picture of our results that is more comparable among periods since it excludes the impact of items such as workforce reduction costs or gains and losses on the sale of assets, which may recur occasionally, but tend to be irregular as to timing, thereby distorting comparisons between periods. However, investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is classified as a special item or an economic, non- qualifying hedge to be excluded from adjusted earnings). This non-GAAP measure is also used to evaluate management's performance and for compensation purposes.

Constellation Energy also provides its earnings guidance in terms of adjusted EPS. Constellation Energy is unable to reconcile its guidance to GAAP earnings per share because we do not predict the future impact of special items, economic, non-qualifying hedges and synfuel results due to the difficulty of doing so. The impact of special items, economic, non-qualifying hedges and synfuel results could be material to our operating results computed in accordance with GAAP. We note that such information is not in accordance with GAAP and should not be viewed as a substitute to GAAP information.

SEC Filings

The company plans to file its Form 10-Q for the three months ended March 31, 2008, on or about May 9, 2008.

Forward-Looking Statements

We make statements in this news release that are considered forward- looking statements within the meaning of the Securities Exchange Act of 1934. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to be materially different from those we project. For a full discussion of these risks, uncertainties and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Conference Call April 30, 2008

Constellation Energy will host a conference call at 8:30 a.m. (EDT) on April 30, 2008, to review the results. To participate, analysts, investors, media and the public in the U.S. may dial (888) 455-2894 shortly before 8:30 a.m. The international phone number is (773) 681-5899. The conference password is ENERGY. A replay will be available approximately one hour after the end of the call by dialing (866) 514-3171 or (203) 369-2004 (international).

A live audio webcast of the conference call, presentation slides and the earnings press release will be available on the Investor Relations page of Constellation Energy's Web site (www.constellation.com). A webcast replay, as well as a replay in downloadable MP3 format, will also be available on the site shortly after the completion of the call. The call will also be recorded and archived on the site.

Constellation Energy (http://www.constellation.com), a FORTUNE 125 company with 2007 revenues of $21 billion, is the nation's largest competitive supplier of electricity to large commercial and industrial customers and the nation's largest wholesale power seller. Constellation Energy also manages fuels and energy services on behalf of energy intensive industries and utilities. It owns a diversified fleet of 78 generating units located throughout the United States, totaling approximately 8,700 megawatts of generating capacity. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland.

Addendum - Amounts Excluded from Adjusted EPS

Non-qualifying Hedges - after-tax loss of $(34.6) million, or $(0.19) per share

During the first quarter of 2008, we recognized a $(34.6) million after- tax loss related to certain non-qualifying hedges of gas transportation rights and gas storage contracts, which are economic hedges that do not meet the criteria or are not designated for cash-flow hedge accounting under FAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and thus are required to be marked-to-market. This mark-to-market loss is essentially a timing difference that is expected to be offset as we realize the related accrual contracts in cash in future periods.

Effective Tax Rate Impact: Maryland Settlement - after-tax benefit of $6.6 million, or $0.04 per share

As a result of the approximately $187 million in BGE residential electric customer credits provided for in the settlement agreement with the State of Maryland and the Maryland Public Service Commission, we expect our 2008 effective tax rate to be reduced. Pursuant to Accounting Principles Board Opinion No. 28, Interim Financial Reporting, and FASB Interpretation FIN 18, Accounting for Income Taxes in Interim Periods an Interpretation of APB Opinion No. 28, we recorded our first quarter 2008 income tax expense based on an estimate of our full-year 2008 effective tax rate that reflects these credits. We have excluded this reduction to income tax expense from our adjusted first quarter 2008 earnings to be consistent with how we plan to treat the $187 million non-recurring charge we will record in the second quarter of 2008. We will similarly adjust our results for the income tax expense impact of the credits for the remaining three quarters of 2008.

Synfuel Earnings - after-tax gain of $3.6 million, or $0.01 per share

We have removed a $3.6 million gain generated during the first quarter of 2008, primarily related to the final true-up of the estimated tax-credit phase-out that we recorded in 2007 based on oil price and inflation information published by the IRS in the first quarter of 2008.

    Constellation Energy Group and Subsidiaries

    Consolidated Statements of Income (Unaudited)

                                                      Three Months Ended
                                                          March 31,
                                                    2008              2007
                                       (In Millions, Except Per Share Amounts)
    Revenues
      Nonregulated revenues                       $3,726.9          $4,193.8
      Regulated electric revenues                    709.3             514.8
      Regulated gas revenues                         391.0             402.5
      Total revenues                               4,827.2           5,111.1

    Expenses
      Fuel and purchased energy expenses           3,743.1           4,016.7
      Operating expenses                             590.1             568.7
      Depreciation, depletion, and amortization      148.3             132.4
      Accretion of asset retirement obligations       16.6              17.7
      Taxes other than income taxes                   74.8              73.2
      Total expenses                               4,572.9           4,808.7
    Income from Operations                           254.3             302.4
    Other Income                                      42.3              42.4
    Fixed Charges
      Interest expense                                78.8              80.3
      Interest capitalized and allowance for
       borrowed funds used during construction        (7.1)             (3.8)
      BGE preference stock dividends                   3.3               3.3
      Total fixed charges                             75.0              79.8
    Income from Continuing Operations Before
     Income Taxes                                    221.6             265.0
    Income Tax Expense                                75.9              67.7
    Income from Continuing Operations                145.7             197.3
      Loss from discontinued operations, net of
       income taxes of $0.8                            -                (1.6)
    Net Income                                      $145.7            $195.7

    Earnings Applicable to Common Stock             $145.7            $195.7

    Average Shares of Common Stock Outstanding -
     Basic                                           178.2             180.6
    Average Shares of Common Stock Outstanding -
     Diluted                                         180.2             182.8

    Earnings Per Common Share from Continuing
     Operations - Basic                              $0.82             $1.09
      Loss from discontinued operations - Basic        -               (0.01)
    Earnings Per Common Share - Basic                $0.82             $1.08

    Earnings Per Common Share from Continuing
     Operations - Diluted                            $0.81             $1.08
      Loss from discontinued operations - Diluted      -               (0.01)
    Earnings Per Common Share - Diluted              $0.81             $1.07


    Certain prior-period amounts have been reclassified to conform with the
    current period's presentation.



    Constellation Energy Group and Subsidiaries

    Consolidated Balance Sheets (Unaudited)

                                                  March 31,       December 31,
                                                    2008              2007
    ASSETS                                              (In Millions)
    Current Assets
      Cash and cash equivalents                     $662.6          $1,095.9
      Accounts receivable (net of allowance
       for uncollectibles of $139.3 and $44.9,
       respectively)                               4,560.5           4,289.5
      Fuel stocks                                    609.2             591.3
      Materials and supplies                         208.9             207.5
      Derivative assets                            1,843.0             760.6
      Unamortized energy contract assets              86.5              32.0
      Deferred income taxes                            -               300.7
      Other                                          445.7             408.1
      Total current assets                         8,416.4           7,685.6
    Investments And Other Noncurrent Assets
      Nuclear decommissioning trust funds          1,274.4           1,330.8
      Other investments                              541.1             542.2
      Regulatory assets (net)                        548.6             576.2
      Goodwill                                       261.3             261.3
      Derivative assets                            1,472.4           1,030.2
      Unamortized energy contract assets             194.7             178.3
      Other                                          366.6             370.6
      Total investments and other noncurrent
       assets                                      4,659.1           4,289.6
    Property, Plant And Equipment
      Nonregulated property, plant and equipment   8,454.9           8,087.0
      Regulated property, plant and equipment      6,150.8           6,051.2
      Nuclear fuel (net of amortization)             347.2             374.3
      Accumulated depreciation                    (4,843.7)         (4,745.4)
      Net property, plant and equipment           10,109.2           9,767.1
    Total Assets                                 $23,184.7         $21,742.3

    LIABILITIES AND EQUITY
    Current Liabilities
      Short-term borrowings                           $-               $14.0
      Current portion of long-term debt              232.8             380.6
      Accounts payable and accrued liabilities     2,931.8           2,630.1
      Customer deposits and collateral               202.2             146.6
      Derivative liabilities                       1,847.4           1,134.3
      Unamortized energy contract liabilities        389.7             392.2
      Deferred income taxes                           95.3               -
      Accrued expenses and other                     742.0             956.0
      Total current liabilities                    6,441.2           5,653.8
    Deferred Credits And Other Noncurrent
     Liabilities
      Deferred income taxes                        1,415.7           1,588.5
      Asset retirement obligations                   934.5             917.6
      Derivative liabilities                       1,480.3           1,118.9
      Unamortized energy contract liabilities      1,132.2           1,218.6
      Defined benefit obligations                    762.3             828.6
      Deferred investment tax credits                 48.8              50.5
      Other                                          167.1             155.9
      Total deferred credits and other noncurrent
       liabilities                                 5,940.9           5,878.6
    Long-Term Debt
      Long-term debt of nonregulated businesses    2,853.9           2,830.8
      Long-term debt of BGE                        1,189.5           1,334.2
      Rate stabilization securitization bonds
       of BGE                                        623.2             623.2
      6.20% deferrable interest subordinated
       debentures due October 15, 2043 to BGE
       wholly owned BGE Capital Trust II relating
       to trust preferred securities                 257.7             257.7
      Unamortized discount and premium                (4.8)             (4.8)
      Current portion of long-term debt             (232.8)           (380.6)
      Total long-term debt                         4,686.7           4,660.5
    Minority Interests                                19.9              19.2
    BGE Preference Stock Not Subject To
     Mandatory Redemption                            190.0             190.0
    Common Shareholders' Equity
      Common stock                                 2,544.5           2,513.3
      Retained earnings                            3,958.3           3,919.5
      Accumulated other comprehensive loss          (596.8)         (1,092.6)
      Total common shareholders' equity            5,906.0           5,340.2
    Total Liabilities And Equity                 $23,184.7         $21,742.3


    Certain prior-period amounts have been reclassified to conform with the
    current period's presentation.



    Constellation Energy Group and Subsidiaries

    Merchant Operating Statistics (Unaudited)

                                        Three Months Ended March 31,
                                              Oil &   Hydro &
                               Nuclear  Coal   Gas  Renewables  Other   Total
    Generation by Fuel Type (%)
        2008                     59.4   35.6   -       3.5       1.5    100.0
        2007                     56.9   38.0   0.9     2.8       1.4    100.0


    Thousands of MWH
        2008                    7,804  4,686    (2)    456       192   13,136
        2007                    7,116  4,757   110     352       179   12,514


    Utility Operating Statistics (Unaudited)
                                                      Three Months Ended
                                                            March 31,
                                                     2008              2007

    ELECTRIC
    Revenues (In Millions)
       Residential                                  $504.7            $298.9
       Commercial
         Excluding Delivery Service Only             120.0             134.9
         Delivery Service Only                        52.1              49.9
       Industrial
         Excluding Delivery Service Only               6.2               6.8
         Delivery Service Only                         6.5               6.6
       System Sales                                  689.5             497.1
       Other                                          19.9              17.7
       Total                                        $709.4            $514.8

    Distribution Volumes (In Thousands) - MWH
       Residential                                   3,698             3,806
       Commercial
         Excluding Delivery Service Only               900             1,054
         Delivery Service Only                       2,775             2,792
       Industrial
         Excluding Delivery Service Only                51                65
         Delivery Service Only                         755               749
       Total                                         8,179             8,466

    GAS
    Revenues (In Millions)
       Residential
         Excluding Delivery Service Only            $240.7            $260.1
         Delivery Service Only                         7.3               7.5
       Commercial
         Excluding Delivery Service Only              69.1              73.2
         Delivery Service Only                        15.0              15.4
       Industrial
         Excluding Delivery Service Only               3.8               4.0
         Delivery Service Only                         4.1               4.0
       System Sales                                  340.0             364.2
       Off-System Sales                               53.3              40.6
       Other                                           3.1               2.5
       Total                                        $396.4            $407.3

    Distribution Volumes (In Thousands) - DTH
       Residential
         Excluding Delivery Service Only            17,948            19,645
         Delivery Service Only                       1,951             2,190
       Commercial
         Excluding Delivery Service Only             5,768             6,110
         Delivery Service Only                      10,510            10,649
       Industrial
         Excluding Delivery Service Only               334               343
         Delivery Service Only                       5,159             4,164
       System Sales                                 41,670            43,101
       Off-System Sales                              5,244             4,518
       Total                                        46,914            47,619


       Utility operating statistics do not reflect the elimination of
       intercompany transactions.


    Heating Degree Days (Calendar-Month Basis)
    Heating Degree Days - Actual                     2,329             2,428
                        - Normal                     2,472             2,448



    Constellation Energy Group and Subsidiaries

    Supplemental Financial Statistics (Unaudited)
                                                      Three Months Ended
                                                           March 31,
                                                       2008      2007

    Effective Tax Rate                                  33.7%     25.3%

    Equity Investment In Nonregulated Businesses --
     End of Period                                   $4,186.4  $3,681.4

    Equity Investment In Regulated Business --
     End of Period                                   $1,719.6  $1,691.9


    Common Stock Data
                                                     Three Months Ended
                                                          March 31,
                                                        2008      2007

    Common Stock Dividends - Per Share
      -- Declared                                     $0.4775   $0.4350
      -- Paid                                         $0.4350   $0.3775

    Market Value Per Share
      -- High                                         $107.97    $88.20
      -- Low                                           $81.94    $68.78
      -- Close                                         $88.27    $86.95

    Shares Outstanding -- End of Period (In Millions)   178.4     180.2

    Book Value per Share -- End of Period              $33.11    $29.82