Constellation Energy Group to split

Constellation Energy Group will split into two separate companies by the end of 2001.

In late October, Constellation announced it would shift its merchant business under the umbrella of Constellation Energy Group, focusing it on American wholesale power marketing and generation. The second business, BGE Corp., will do regional business on the retail end of the industry and will include Baltimore Gas & Electric in central Maryland.

The plan is intended to enhance shareholder value.

“Constellation Energy Group is creating two strategically strong energy companies,” said Christian Poindexter, chairman and CEO of Constellation Energy Group. Poindexter will continue to serve as CEO and chairman of the board for the new Constellation Energy Group.

The new merchant energy business will lay claim to all of the current Constellation Energy Group’s unregulated power generation, including the Calvert Cliffs nuclear plant. They have an additional goal of controlling a portfolio of 30,000 MW by 2005.

Two co-presidents have been announced to helm the new company: Charles Shivery and Eric Grubman. Shivery is president and CEO of Constellation Power Source Holdings Inc., Constellation Energy Group’s current merchant generation business. Grubman is joining the new business from Goldman Sachs.

Goldman Sachs has agreed to an equity investment in the merchant spin-off of Constellation, with its closing estimated in mid- to late 2001. It will become an equity owner of up to 17.5 percent of the future Constellation Energy group merchant company. Constellation has high hopes that this equity investment will pay off.

“We aim to be among the handful of top players in the merchant energy sector,” Poindexter commented.

BGE, the retail side of the split, will be chaired by Edward Crooke, who returns after retiring from vice chairman of Constellation Energy Group in January of this year. It will continue to serve as a regional utility for 1.1 million electricity customers.

Besides the Calvert Cliffs plant, Brandon Shores, Herbert Wagner, Charles Crane, Keystone (Penn.), Riverside, Perryman, Conemaugh (Penn.), Notch Cliff, Westport, Gould Street, Philadelphia Road and Safe Harbor have all been deregulated and transferred from BGE to the merchant energy side of Constellation, representing 6,239 MW of power.

Constellation Energy Group plans to maintain current common stock dividend through January. In April, its annual dividend is expected to be around 48 cents a share. BGE Corp. will pay initial annual dividends equal to that price, while Constellation Energy Group anticipates reinvesting earnings and paying no dividend in order to fund growth plans.

While not subject to approval by shareholders, the split will be reviewed by the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Department of Justice, the Maryland Public Service Commission and the Pennsylvania Public Utility Commission. (The plan is also subject to a tax ruling by the IRS.)

Constellation Energy Group reported combined revenues in 1999 of nearly $3.8 billion and mid-year 2000 assets of $10 billion.

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