Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Constellation Energy Group (CEG)Stock (Electric Utilities Industry, Energy Industry, Services Industry)
 Constellation Energy Group (NYSE: CEG) sells electricity to electric utilities, cities and companies. CEG also has an electric and natural gas utility subsidiary which serves 1.7 million customers in central Maryland through Baltimore Gas and Electric Company (BGE). CEG has a maximum capacity of 8,800 megawatts(MW) of electricity, enough to power around 6.8 million homes[1]. Electric utility companies are under increasing pressure, in the form of government legislation, to adopt cleaner electricity generation methods while maintaining competitive prices. CEG, however, is in an advantageous position versus many of its peers due to its substantial nuclear generation portfolio. In 2007, over 60% of the electricity generated by the company came from nuclear reactors and only 35% from coal.[2]
[edit] Business Financials[edit] Business SegmentsConstellation Energy Group has three primary business segments: Merchant Energy Business, Regulated Electric Business and Regulated Gas Business.
[edit] Key Trends/Forces[edit] Ahead of the Curve: CEG's "Green" ProfileGrowing political awareness of the risks of global warming is resulting in increasing governmental pressure for utility companies to reduce emissions. In 2008, three major investment banks predicted that the U.S. government would cap CO2 emissions in the next three years. Caps would effectively penalize big CO2 producers such as electric utility companies that own coal-fired power plants to encourage the use of cleaner electricity generating technologies. However, unlike peer Allegheny Energy (AYE), more than half of CEG's comes from nuclear and renewable energy better positioning the company to withstand the possible upcoming legislation aimed at reducing CO2 emissions. [edit] CEG is Nuclear Powering It UpThe key difference between nuclear and fossil plants is the cost structure. Nuclear plants require very large capital investments (to construct the plant) but little expenditure for fuel because it takes relatively little uranium to power a plant. On the other hand, fossil fuel plants require relatively little capital investment but have high fuel costs because they require large amounts of coal, oil or gas. In the past, low fossil fuel prices gave given fossil fuel plants a cost advantage over nuclear plants. The cost advantage, compounded by the stigmas of nuclear energy (the not in my backyard phenomenon) has prevented new nuclear construction for almost 30 years.[6] Rising fossil fuel prices along with growing awareness of the carbon dioxide emissions are making nuclear energy a more viable choice. Already, nuclear utilities such as Exelon, Entergy and Duke Energy Corporation (DUK) have begun filing for permits for construction of new nuclear plants. CEG is ahead of the pack. The company owns owned three nuclear power plants at the end of 2007 and has increased its nuclear generation capacity by 32% over the past 5 years[7] The company has also submitted an application to the U.S. Nuclear Regulatory Commission to build a new 1,600MW reactor in their existing Maryland nuclear power plant [8] and another application to the U.S. Nuclear Regulatory Commission to seek approval for a new 1,600MW nuclear generator in its existing New York plant to address the New York's growing energy needs.[9] [edit] Increasing demand for wholesale electricityA growing shortage of available electrical power plants has stemmed from strict environmental regulations and a "not in my back yard" mentality which has limited regional utilities from building new power plants to sustain and meet their customer's growing energy needs. To remedy the supply shortfall, utilities must purchase additional electricity on the open market from companies such as CEG. In recent times, CEG has benefited greatly from their low-cost nuclear generation fleet as utilities around the country try to find cheaper supply alternatives to their costly coal, oil and natural gas electricity facilities. A high commodity price environment coupled with power plant shortages due to legislation bode well for CEG's future. In addition, competing on the open markets allows them to sell electricity to the highest bidder, setting them apart from electric utilities, as their rates are regulated and capped by the government. [edit] CEG's Advantage: Protection from rising coal pricesIn 2007, coal prices rose steeply. Although CEG's power generation portfolio draws upon numerous energy sources including coal, oil, gas, it generates a majority of its energy from renewablesand nuclear power, insulating it from rising coal prices. [edit] Competition
 Constellation Energy Group2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] Electrical Generation Fleet MixThe above table encapsulates the utilities' current electrical generation fleet broken down by power source (e.g. coal, natural gas, oil etc.). It is worth noting that these percentages do not necessarily reflect the actual source percentages for electricity generated as power-plants are used at various capacities depending on the market demand and price of electricity. To further clarify, if each one of CEG's power plants were operating at 100% capacity, nuclear would power 45% of the generated electricity. However, since nuclear plants were cheaper to operate than their fossil fuel power plants during 2007, CEG tended to utilize its nuclear power-plants to a greater degree. This explains why 61% of electricity generated from CEG in 2007 was from nuclear. [edit] References
|
The Shelf
|
Edit
History
Bookmark
