Constellation Energy Group Inc. (CEG) is focused on improving its liquidity position and strengthen its balance sheet. The company was able to reduce its total debt level from $8.5 billion at year-end 2008 to below the $7 billion mark after the first half of fiscal 2009.
The debt-loaded company with a debt-to-equity ratio of 134.6% after the first half of fiscal 2009 dished out $143.9 million in interest expenses during the recent second quarter of 2009 compared to only $78.8 million in the year-ago quarter.
The pain may get even worse with the July 2009 downgrade by Fitch Ratings, bringing Constellation Energy’s senior unsecured debt rating from BBB to BBB- and BGE’s (Baltimore Gas & Electric) senior unsecured debt rating from A- to BBB+.
With more than $1.5 billion of debt lined up for maturity this fiscal year, the company may have to resort to refinancing. To tide over the debt-maturity storm, CEG is pro-active in increasing its credit facility from approximately $5.6 billion after the first half of fiscal 2009. It added another $500 million in August 2009.
However, all the resource crunch will be solved if the pending deal for selling half of the company’s nuclear business to EDF Group for $4.5 billion goes through. A final decision will be taken by the Maryland Public Service Commission in October 2009.
Based in Baltimore, MD, Constellation Energy supplies energy products and services to wholesale customers, and retail commercial, industrial, and governmental customers in North America. It is a North American energy company, which includes a merchant energy business and the Baltimore Gas and Electric Company (BGE). Its merchant energy business is a provider of energy solutions.
Constellation Energy also has other non-regulated businesses, which design, construct and operate heating, cooling and cogeneration facilities for commercial, industrial and governmental customers throughout North America. Moreover, it provides home improvements, service heating, air conditioning, plumbing, electrical and indoor air-quality systems; and also provides natural gas to the residential customers in central Maryland. We maintain our market Neutral recommendation on the shares.
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