Constellation to Invest in Further Mass Marketing Efforts

Constellation expects to invest additional marketing dollars over the next few years to expand its NewEnergy retail supplier into new regions and increase the number of mass market customers its serves, Constellation CEO Mayo Shattuck said during an earnings call Friday.

Constellation has raised its projected operating expenses for the NewEnergy segment by $30-40 million to reflect additional investment dollars to fund the added upfront marketing expenses needed to grow its mass marketing activities to scale.

Constellation did not provide any target mass markets, however, as only noted by Matters, ComEd and Pennsylvania are confirmed near-term new markets (see 1/18).

As noted by Matters on Friday, residential offerings from NewEnergy in Maryland and New Jersey resulted in more than 80,000 customers by year end (2/4).

Constellation also reported that it has restructured its sales force to create one unified team that sells all lines of business, including both commodities and various energy management services.

Shattuck said that Constellation will continue to pursue generation asset acquisitions in "core" NewEnergy markets to further align load obligations and supply. Such purchases may be funded by the sale of assets in less strategic regions.

ERCOT, in particular, was cited as a region where Constellation expects to pursue generation acquisitions.

For the fourth quarter of 2010, NewEnergy reported an adjusted loss of $31 million, versus an adjusted loss of $39 million a year ago. GAAP earnings were $3 million for the fourth quarter of 2010, versus a loss of $49 million a year ago.

Quarterly adjusted gross margin was $209 million, versus $200 million a year ago. Quarterly revenues were $2.4 billion, versus $2.6 billion a year ago.

Full-year 2010 adjusted earnings at NewEnergy were $108 million, versus $92 million a year ago, mainly lifted by improved results in its power business and greater upstream gas production.

Annual adjusted gross margin was $966 million in 2010, reflecting $755 million from customer commodity sales, $101 million from energy management services and solutions, and $110 million from upstream gas.

NewEnergy load served in 2010 was 119 TWh and 334 Bcf.