Constellation Sees Expanding Retail Margins

Constellation saw expanding retail power margins during the second quarter of 2014, Exelon reported in announcing earnings yesterday.

Joseph Nigro, CEO of Constellation, told investors that providers have become more disciplined in their pricing assumptions, as a result of volatility and high spot prices earlier this year

"We continue to see an improving retail market developing through longer-term contracts and competitor consolidation," Nigro said.

"We have been saying for some time that we expected to see this happen, because we couldn’t get our hands around where the market was trading at, effectively," Nigro added.

Specifically, Nigro said that new business C&I margins are back above $2/MWh

"We have and will remain disciplined in our risk premiums and will not chase volumes for the sake of volume," Nigro said.

Regarding Integrys Energy Services, for which Constellation is paying $60 million and assuming about $180 million in working capital, executives said that, on an EBITDA multiple basis, the valuation is, "close to or less than 2 times on an EBITDA multiple basis."

Exelon CEO Christopher Crane also addresses competitive concerns about the Integrys Energy Services acquisition.

"[T]here's dozens and dozens of participants that are still in markets like northern Illinois. We expect upon closure that our combined footprint would be about 29%. I think it’s been over reported in a few outlets. And so 28% to 29%, but there again, as the contracts come up, they will be processed in a very competitive way," Crane said.

Crane did not explicitly define the market for which he pegged the combined Constellation-Integrys Services at 28% (e.g. whether this was all load or just residential, whether it was only switched load, or included default service load).