CEG to Serve Better with New Assets - Analyst Blog

Constellation Energy Group Inc. (CEG) has agreed to buy a fleet of generation assets worth $1.1 billion in Boston, New England.

As a part of the deal, Constellation Energy will acquire the 2,950-megawatt Boston Generating fleet comprising of five power plants that meet nearly half of the electricity demand of the Boston metropolitan area. Of the five plants, four are natural gas fired plants, including Mystic 8 and 9 (1,580 megawatts), Fore River (787 megawatts), and Mystic 7 (574 megawatts) and one is a fuel oil plant, Mystic Jet (9 megawatts).

Constellation Energy expects the acquisition to be accretive to earnings beginning in 2011. The company expects to finance the acquisition through a mix of available cash on hand and debt. The transaction received approval from the Federal Energy Regulatory Commission on December 22, 2010.

Constellation Energy has been a leader in New England energy markets for more than a decade. The company continues to build on its position with the acquisition of these premier assets. Constellation Energy currently serves nearly 13.3 TWh of customer load in the NEPOOL market where Boston Generating is located. Prior to this acquisition, Constellation Energy had no generation assets in the region.

These well-managed, low-emission plants greatly expand Constellation Energy's generation portfolio and increase its capacity, enabling it to sell electricity to retail and wholesale customers in competitive energy markets in New England and nationwide. The addition of these assets improves the company's net load-to-generation ratio to roughly 55%.

 

Based in Baltimore, Maryland, Constellation Energy supplies energy products and services in North America. The company operates in three segments: Merchant Energy, Regulated Electric and Regulated Gas.

Constellation Energy is slated to release its fourth quarter 2010 numbers on February 21, 2011. The Zacks Consensus Estimate for the quarter currently stands at 57 cents, higher than the year-ago quarterly earnings of 30 cents.

We have a Zacks #3 Rank (short-term Hold recommendation) on Constellation Energy shares. This implies that the stock is expected to perform in line with the broader U.S. equity market over the next 1–3 months. Our long-term ‘Neutral' rating on Constellation Energy also supports this view, suggesting investors not to take any position on the stock for the time being.

A window of opportunity however gets reflected in its Zacks #2 Rank (short-term Buy recommendation) peers like CMS Energy Corporation (CMS) and Consolidated Edison Inc. (ED).

 
CONSTELLATN EGY (CEG): Free Stock Analysis Report
 
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