Constellation NewEnergy Results Weighed by Lower Margins, Texas Weather Event

May 6, 2011
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Constellation's NewEnergy segment reported an adjusted loss of $16 million for the first quarter of 2011, versus adjusted earnings of $109 million a year ago, due to a combination of the February weather event in Texas, lower margins, as well as charges related to its international divestiture.

The GAAP net loss was $17 million, versus earnings of $108 million a year ago.

Lower realized margins at NewEnergy accounted for $22 million of the decline. Margins are about $1 to $1.20 per megawatt-hour lower versus the year-ago quarter, executives said.

NewEnergy adjusted gross margin was $175 million for the quarter, versus $331 million a year ago.

Executives reported that while NewEnergy is having success in its renewal rates, its win rate for new retail customers is lower than forecast. However, this has been offset by increased success in wholesale load auctions.

The Texas weather event accounted for $16 million of the reduction in NewEnergy earnings. Constellation reported that a combination of its own offline generation plus actual load which was more than twice its forecasted demand required it to purchase power in the real-time market at peak prices. Constellation said that it serves approximately 7% of the total load in ERCOT.

Across all Constellation business segments, the ERCOT weather event reduced earnings by approximately $40 million on a pretax basis.

The largest driver for the year-over-year decline in earnings at NewEnergy was a $48 million negative impact from the timing of certain contract assignments related to its divested international commodities operation.

NewEnergy revenue for the quarter was higher at $2.412 billion, versus $2.351 billion a year ago.

Constellation had not yet filed a 10-Q as of press time.

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