Shattuck believes utility is mending


After abandoning its plan to split into two separate companies in October, Constellation Energy Group Inc. is striving to rebuild its reputation on Wall Street as it refocuses on increasing its regulated utility and wholesale energy generation businesses, the company's president and chief executive officer said yesterday.

In his first annual meeting since taking charge of Constellation on Nov. 1, Mayo A. Shattuck III said the company has taken steps to strengthen its balance sheet through asset sales and issuance of long-term bonds, cost-control measures and reduction of the work force by 10 percent, or 900 employees, mainly through a voluntary retirement program.

"We will stand out in this industry if we continue to improve our balance sheet," Shattuck told shareholders.

Rapid energy market changes, the Enron scandal, a weak economy and falling stock prices last year led the board to rescind plans to split the company into a fast-growing unregulated merchant energy business and a regional electric company, Shattuck said.

Christian H. Poindexter, Constellation's board chairman, told shareholders yesterday that he believed at the time that the company's decision to split, announced in October 2000, was the right one. But by last October, he said, "all the signs said to us we should change our plans, and we did."

Said Shattuck: "We have been and will continue to be in a rapidly transforming market - that means there's more drama ahead. ... We're in a place of earning our credibility back, as many others in the industry are."

After trading as high as $49.95 last May, Constellation's stock price plunged to a 52-week low of $22 on Oct. 30. Since then, the stock has climbed 42.3 percent, closing yesterday at $31.31.

Constellation - the parent of Baltimore Gas and Electric Co. - brought in some new executive leadership last year after the plan to split was jettisoned. The company also revised its corporate executive structure, sold $575 million in assets, focused on the business of power generation and transmission, and worked to reorient Wall Street to expect modest growth, Shattuck said.

After reworking the business plans of each of the company's units through 2004, Shattuck said, he was confident that the company could deliver an earnings growth rate of 10 percent a year.

After slashing its annual dividend last year to 48 cents in preparation for the split, Constellation now projects a 96-cent dividend this year. The increase has heartened investors, many of whom are retirees who depend on the stock for income.

"I think Mr. Shattuck is going to do a very good job," retiree Sam Capriolo, 75, of Eldersburg said after the meeting. "I have fixed income, so dividends are important to me."

Analysts said the company appears to have steadied itself after a turbulent 2001. Despite a warm winter, Constellation beat analysts' earning estimates in the first quarter this year, reporting 49 cents a share.

William Maze, an energy analyst with Banc of America Securities in New York, said that the company has "made a lot of tough decisions" and that bringing in new management was a positive. "They need to build a track record," Maze said. "But so far so good."

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