Constellation Energy Gets Grant – Analyst Blog

Baltimore Gas and Electric Company, a subsidiary of Constellation Energy (CEG), has finalized an agreement with the U.S. Department of Energy (DOE) for the award of a $200 million federal stimulus grant in support of a comprehensive Smart Grid initiative. Constellation Energy’s implementation of the Smart Grid initiative is however contingent upon the pending approval of the Maryland Public Service Commission.

 

The new Smart Grid technology, once fully implemented, is expected to transform the way BGE customers consume and conserve electricity, and in the process, allow them greater control of their monthly energy bills. Constellation Energy estimates when fully implemented, Smart Grid will result in an estimated $2.6 billion in savings over the life of the project.

 

Constellation Energy is focusing on the implementation of the Smart Grid to comply with Maryland’s EmPOWER law passed in 2008. The law stipulates that the State of Maryland will reduce energy consumption by 15% by the year 2015.

 

Constellation Energy is a leading supplier of energy products and services to wholesale and retail electric and natural gas customers. It owns a diverse fleet of generating units in the United States and Canada, totaling approximately 7,100 megawatts of generating capacity, and is among the leaders in pursuing the development of new nuclear plants in the United States. The company delivers electricity and natural gas through Baltimore Gas and Electric Company, its regulated utility in Central Maryland.

 

Constellation Energy remains diversified among owned generation, contractual generation, regulated distribution and competitive supply. Its diverse fleet of power generating units located across four U.S. states and Canada is a mix of coal, oil, natural gas and renewable sources (including geothermal, solar, hydro-electric and biomass).

 

Diversified generation assets help Constellation Energy to minimize the impact of volatile commodity prices on its costs.

 

However, we believe that the above positives are already reflected in the current valuation of Constellation Energy leaving little room for above-market gain.

 

Also in the near-term, the fortunes of the company appear a little bleak due to the tepid economy, lower demand for electricity, over-exposure in the merchant power space and low-dividend yield compared to its peers. Thus we maintain our near-term Neutral recommendation on the Zacks #3 Rank stock.