constellation energy q1 2007 earnings presentation 2007 first quarter

Constellation EnergyQ1 2007 Earnings Presentation

April 25, 2007

2

Forward-looking Statements DisclaimerCertain statements made in this presentation are forward-looking statements and may contain words such as “believes,” “anticipates,” “expects,”“intends,” “plans,” and other similar words. We also disclose non-historical information that represents management’s expectations, which are based on numerous assumptions. These statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to be materially different from projected results. These risks include, but are not limited to: the timing and extent of changes in commodity prices for energy including coal, natural gas, oil, electricity, nuclear fuel, and emissions allowances; the timing and extent of deregulation of, and competition in, the energy markets, and the rules and regulations adopted on a transitional basis in those markets; the conditions of the capital markets, interest rates, availability of credit, liquidity and general economic conditions, as well as Constellation Energy’s and BGE’s ability to maintain their current credit ratings; the ability to attract and retain customers in our competitive supply activities and to adequately forecast their energy usage; the effectiveness of Constellation Energy’s and BGE’s risk management policies and procedures and the ability and willingness of our counterparties to satisfy their financial and other commitments; the liquidity and competitiveness of wholesale markets for energy commodities; uncertainties associated with estimating natural gas reserves, developing properties and extracting gas; operational factors affecting the operations of our generating facilities (including nuclear facilities) and BGE’s transmission and distribution facilities, including catastrophic weather-related damages, unscheduled outages or repairs, unanticipated changes in fuel costs or availability, unavailability of coal or gas transportation or electric transmission services, workforce issues, terrorism, liabilities associated with catastrophic events, and other events beyond our control; the inability of BGE to recover all its costs associated with providing customers service; the effect of weather and general economic and business conditions on energy supply, demand, and prices; regulatory or legislative developments that affect deregulation, transmission or distribution rates, demand for energy, or that would increase costs, including costs related to nuclear power plants, safety, or environmental compliance; the actual outcome of uncertainties associated with assumptions and estimates using judgment when applying critical accounting policies and preparing financial statements, including factors that are estimated in applying mark-to-market accounting, such as the ability to obtain market prices and in the absence of verifiable market prices, the appropriateness of models and model impacts (including, but not limited to, extreme contractual load obligations, unit availability, forward commodity prices, interest rates, correlation and volatility factors); changes in accounting principles or practices; losses on the sale or write-down of assets due to impairment events or changes in management intent with regard to either holding or selling certain assets; our ability to successfully identify and complete acquisitions and sales of businesses and assets; and cost and other effects of legal and administrative proceedings that may not be covered by insurance, including environmental liabilities. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Please see our periodic reports filed with the SEC for more information on these factors. These forward-looking statements represent estimates and assumptions only as of the date of this presentation, and no duty is undertaken to update them to reflect new information, events or circumstances.

3

Use of Non-GAAP Financial MeasuresConstellation Energy presents adjusted earnings per share (adjusted EPS) in addition to its reported earnings per share in accordance with generally accepted accounting principles (reported GAAP EPS). Adjusted EPS is a non-GAAP financial measure that differs from reported GAAP EPS because it excludes the cumulative effects of changes in accounting principles, discontinued operations, special items (which we define as significant items that are not related to our ongoing, underlying business or which distort comparability of results) included in operations, the impact of certain economic, non-qualifying hedges, and synfuel earnings. The mark-to-market impact of economic non-qualifying hedges is significant to reported results, but economically neutral to the company in that offsetting gains or losses on underlying accrual positions will be recognized in the future. Synfuel earnings are excluded due to the potential for oil price volatility to result in a difficult-to-forecast phase-out of tax credits. We present adjusted EPS because we believe that it is appropriate for investors to consider results excluding these items in addition to our results in accordance with GAAP. We believe this measure provides a picture of our results that is comparable among periods since it excludes the impact of items such as workforce reduction costs or gains and losses on the sale of assets, which may recur occasionally, but tend to be irregular as to timing, thereby distorting comparisons between periods. However, investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is classified as a special item or an economic, non-qualifying hedge to be excluded from adjusted earnings). This non-GAAP measure is also used to evaluate management's performance and for compensation purposes. Constellation Energy also provides its earnings guidance in terms of adjusted EPS. Constellation Energy is unable to reconcile its guidance to GAAP earnings per share because we do not predict the future impact of special items, economic, non-qualifying hedges or synfuel earnings due to the difficulty of doing so. The impact of special items, economic, non-qualifying hedges, or synfuel earnings could be material to our operating results computed in accordance with GAAP. We note that such information is not in accordance with GAAP and should not be viewed as an alternative to GAAP information. A reconciliation of Non-GAAP information to GAAP information is included either on the slide where the information appears or on one of the slides in the Non-GAAP Measures section provided at the end of the presentation. Please see the Summary of Non-GAAP Measures included to find the appropriate GAAP reconciliation and its related slide(s). These slides are only intended to be reviewed in conjunction with the oral presentation to which they relate.

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Q1 2007 Adjusted EPS Summary

$0.80 - $1.00Q1 Earnings Guidance (3)

(0.02)(0.10)Synfuel Earnings (1)

$0.61$1.03Adjusted Earnings (2)

(1) Represents synfuel earnings of $0.15 per share and expected synfuel phase-out risk of $0.05 per share in Q1’07(2) Excludes special items, certain economic, non-qualifying hedges and synfuel earnings(3) Excludes estimated synfuel earnings of $0.11 per share and estimated synfuel phase-out risk of $0.06 per share See Appendix

(0.06)0.01Special Items

0.060.05Loss on Economic Non-Qualifying Hedges

$0.63$1.07GAAP Earnings

Q1 2006Q1 2007($ per share)

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Q1 2007 Operating Highlights

• Solid earnings growth driven by strong Merchant performance• Completed first quarter nuclear refueling outages• Announced agreement to acquire of select contracts from Progress Ventures

– Commodities Group to assume full requirement contracts with 16 electric membership cooperatives in Georgia with a peak load of 3,100 MWs

– Expect to receive approximately $350 million cash from Progress Ventures upon closing

• Investing $310 million in retail and wholesale natural gas businesses– Acquired working interests in two gas and oil producing properties in Oklahoma

– Announced agreement to acquire Cornerstone EnergySimilar C&I business model with a complementary geographic footprintExpected increase in NewEnergy gas volume to over 500 bcf (~7% market share)Neutral to 2007 earnings; accretive in 2008 and beyondExpected to close in May 2007

6

Constellation’s Natural Gas Strategy• Focused upstream natural gas strategy

– Selectively invest in gas producing assets with established partners

– Develop properties and hedge production to lock in returns

– Monetize mature investments through drop-down sales to Constellation Energy Partners (CEP) or third parties

• Scale of natural gas business– Net invested capital of approximately

$550 million

– Working interest in 10 properties

– Proved reserves of about 260 bcfe (1)

– Projected 2007 production volume of 18.1 bcfe (1)

Portfolio Development

Harvest

Strategic Investment

Upstream Investment Strategy

(1) Pro forma for Q1 2007 acquisitions; Constellation Energy estimates; excludes Constellation Energy Partners reserves and production volumes

7

Maryland Update

• Maryland Public Service Commission

– New chairman and commissioners appointed and seated in first quarter

– Opt-in Rate Transition Plan filing progressing through PSC process

– Maryland PSC approved pilot programs for Demand Response (DRI) and Advanced Metering (AMI)

• 2007 Maryland Legislative Session resulted in extension of time for Maryland PSC to complete industry studies ordered in last year’s special legislative session

– PSC to submit an interim report by December 1, 2007

– PSC to submit a final report by December 1, 2008

8

Strategic Outlook

• Capacity market reform– Recent auction results suggest capacity market reform is working as intended

• Potential expansion of Mid-Atlantic Fleet– Filed a Feasibility Study with PJM for a potential new gas-fired peaking plant at one of

Constellation’s existing facilities– Continuing to develop option for potential new nuclear plant at Calvert Cliffs

• Maryland officially joined the Regional Greenhouse Gas Initiative (RGGI)• Constellation is well-positioned for carbon constrained environment

– Low-emitting fleet with approximately 60% of megawatt hours coming from zero-emitting sources--nuclear and hydro

– Our commodities trading experience, position, extensive market knowledge and solid risk management capabilities will be highly leveragable in an emissions trading marketplace

– Constellation NewEnergy is currently one of the largest suppliers of “green” products to retail customers

– New nuclear initiative could provide future growth opportunities

9

Earnings Outlook

(1) Adjusted for the effect of special items, certain economic, non-qualifying hedges, and synfuel earningsSee Appendix

• Reaffirming earnings guidance for 2007 and 2008• 2009 adjusted EPS growth of approximately 10% over 2008

3.61

+10%

5.25 - 5.75

4.30 - 4.65

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

2006 2007E 2008E 2009E

Adju

sted

EPS

(1)

10

Poised to Succeed in 2007 and Beyond

• Clear and substantial earnings growth that is highly hedged– Projecting 21% to 26% compound annual earnings growth from 2006 through 2008– Forecasting 2009 earnings growth of 10% over 2008 earnings

• Constellation has delivered superior results over the past five years– Predictably and consistently delivered on earnings guidance through a variety of market

conditions– Improved ROIC to 9% in 2006 from below 7% in 2001; forecasted to be 11% in 2008– Realized annual total shareholder return of 33% per annum since management team

came together in late 2001• Constellation is well-positioned to take advantage of opportunities presented by the

market– High-quality assets in high-value markets– Market-leading position in power and strong presence in gas and coal markets– Industry-leading risk management capabilities and disciplined investment approach– Strong balance sheet

Financial Overview

E. Follin SmithExecutive Vice President, Chief Financial Officer and Chief Administrative Officer

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Financial Highlights

• Solid Merchant earnings performance– Mid-Atlantic Fleet returning to profitability as below-market hedges roll off– NewEnergy experienced lower costs to serve load and higher as-priced margins– Wholesale Competitive Supply executed in line with plan

• Progress on capital plan– Announced $310 million of investment in upstream gas properties and

acquisition of Cornerstone Energy– Upon closing, expect to receive cash payment of about $350 million from

Progress Ventures– Repaid maturing debt of $120 million in Q1 2007 and $600 million in April 2007

• Continued productivity improvements– Delivered $8 million of productivity savings in Q1 2007– On track to achieve 2007 productivity target of $60 to $65 million

13

Q1 2007 Earnings Summary

69%$0.42$0.61$1.03Adjusted Earnings (2)

N.M.0.040.010.05Other Non-regulated

(5%)(0.02)0.380.36Utility

182%$0.40$0.22$0.62Merchant

%EPSQ1 2006Q1 2007($ per share)

ChangeAdjusted Earnings

0.060.05Loss on Economic Non-Qualifying Hedges

$0.61$1.03Adjusted Earnings (2)

$0.80 - $1.00Q1 Earnings Guidance (3)

(0.06)0.01Special Items

(0.02)(0.10)Synfuel Earnings (1)

$0.63$1.07GAAP Earnings

Q1 2006Q1 2007($ per share)

(1) Represents synfuel earnings of $0.15 per share and expected synfuel phase-out risk of $0.05 per share in Q1’07(2) Excludes special items, certain economic., non-qualifying hedges and synfuel earnings(3) Excludes estimated synfuel earnings of $0.11 per share and estimated synfuel phase-out risk of $0.06 per share See Appendix

14

$0.30 - $0.35$0.36Adjusted Earnings

GuidanceActual

Q1 2007Adjusted Earnings vs. Guidance($ per share)

BGE

($0.02)

Change

$0.38$0.36Adjusted Earnings

Q1 2006Q1 2007

Adjusted Earnings vs. Prior Year ($ per share)

See Appendix

15

$0.42 - $0.62$0.62Adjusted Earnings

GuidanceActual (1)

Q1 2007Adjusted Earnings vs. Guidance($ per share)

Merchant

-6¢ Wholesale Competitive Supply Backlog+9¢ NewEnergy

-7¢ Loss of CTC Revenue+8¢ Lower Net Interest Expense

See Appendix

(1) Excludes special items, certain economic, non-qualifying hedges and synfuel earnings

-26¢ Wholesale Competitive Supply New Business+63¢ Mid-Atlantic Fleet Price

Variance Primarily Due to:

$0.40$0.22$0.62Adjusted Earnings (1)

ChangeQ1 2006Q1 2007Adjusted Earnings vs. Prior Year($ per share)

16

Wholesale Competitive Supply (1)

New Business

(54%)(62)11553Total New Business Realized (2)

(1) Excludes special items, certain economic, non-qualifying hedges and synfuel results(2) Includes power, gas (non-project), and coal gross margin and gas project margin (project revenue less operating, depreciation, depletion and interest expenses incurred at

the project level). Including gas project-level expenses of $17 million in Q1 2007 and $12 million in Q1 2006, total wholesale competitive supply gross margin in Q1 2007 and Q1 2006 was $139 million and $215 million, respectively.

See Appendix

(69)9829Portfolio Management & Trading

(40%)($81)$203$122Total Contribution Margin (2)

71724Originated & Realized (2)

(21%)($19)$88$69Total Already Originated Business (2)

%$Q1 2006Q1 2007

Change($ in millions)

17

Wholesale Competitive Supply: Origination

(1) Includes power, gas (non-project), and coal gross margin and gas project margin (project revenue less operating, depreciation, depletion and interest expenses incurred at the project level)

(2) Revised target

44%48%% of Total Origination Target Achieved

42%23%% of Current Year Target Achieved

Total Wholesale Competitive Supply Origination Value to be Realized (1)

$908 (2)$1,026Total Origination Target (including future years)

$536 (2)$469Current Year Target

171381Future Years$398$490Total Originated

$227$109Current YearTo Be Realized In:

Q1 2006Q1 2007($ in millions)

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Wholesale Competitive Supply: Backlog

(1) Includes power, gas (non-project), and coal gross margin and gas project margin (project revenue less operating, depreciation, depletion and interest expenses incurred at the project level)

(2) Includes portfolio value changes for downstream gas and coal(3) Reflects portfolio pricing on 12/31/06

Backlog (1)

(as of 3/31/07)

369

189 170

109

80 90

$0

$200

$400

$600

2007 2008 2009

$ in

mil

lion

s

New Business Since 12/31/06

Value as of 12/31/06(3)

(2)

19

NewEnergyElectric

• Delivered 17.3 million MWhs in Q1 2007

• Realized gross margin/MWh of $4.66

– Lower costs to serve load

– Higher as-priced margins

• Retention Rates were lower in Q1 2007 following an acceleration of renewals in Q4 2006

Gas

• Delivered about 100 billion cubic feet in Q1 2007

• Cornerstone acquisition expected to add 100 billion cubic feet (annually)

20

NewEnergy: Retail MWh Backlog

Contracted Retail MWh (as of 3/31/07)

17

46

31

68

8396

0

20

40

60

80

100

120

2006 2007 2008

MW

hs

in m

illio

ns

Delivered Backlog Plan

• More than 75% of 2007 plan MWhs are delivered or contracted

21

Q1 2007 Cash Flow

$196$8$67$121Net Income

178264112Depreciation & Amortization

(55)Equity (Repurchase)/Issuance - Benefit Plans

(113)$26$(52)$18Free Cash Flow

(196)-(196)-SB1 Rate Deferrals

(9)--(9)Asset Dispositions/Contract Restructuring

(492)(1)(87)(404)Capital Expenditures & Investments

(68)Dividends

31517100198Working Capital & Other

(105)Pension Adjustment (pre-tax)

$(236)Net Cash Flow before Debt Issuances/(Payments)

922614427“Operating” Cash Flow

(314)1(23)(292)Net CapEx

TotalOther

Non-RegUtilityMerchant($ in millions)

See Appendix

22

Impact of Capacity Market Reform• PJM capacity auction results for 2007/2008 planning year

– Eastern MAAC - $197.67

– Southwestern MAAC - $188.54

– Rest of Pool - $40.80

• Limited impact on Constellation earnings due to highly hedged capacity position

• Auctions for 2008/2009 plan year and 2009/2010 plan year are scheduled for July 2007 and October 2007, respectively

Note: Capacity position includes owned and purchased capacity less sold capacity

52%88%Percentage of capacity hedged (PJM & NY)

20092008(Position as of 3/31/07)

23

Q2 2007 Guidance

$0.45

0.02

0.11

$0.32

Actual Q2 2006

0.00 - 0.02Other Non-Regulated

$0.55 - $0.75Adjusted Earnings Per Share (1)

0.04 - 0.08BGE

$0.50 - $0.70Merchant

Guidance Q2 2007($ per share)

See Appendix(1) Excludes special items, certain economic, non-qualifying hedges, and synfuel earnings

• Improved generation performance due to Mid-Atlantic Fleet’s return to profitability as below-market hedges roll off and better Calvert Cliffs outage performance

• Competitive supply approximately flat as lower wholesale portfolio management and trading is offset by higher wholesale backlog and higher NewEnergy volumes and margins

• Lower interest expense• Lower BGE results due to the loss of decommissioning income and higher costs

Additional Modeling Information

25

Merchant – Income Statement (1)

8%11718Qualifying Facilities / Other

1%1131132Plants with PPAs

155%173112284Mid-Atlantic Fleet

62%4775122NewEnergy

(35%)($76)$215$139Wholesale Competitive Supply

(2%)1(62)(61)D & A

176%$72$40$112Net Income

162%(43)(27)(70)Income Tax

170%$115$67$182Pre-Tax Income

(64%)24(38)(14)Net Interest Expense

86%$91$105$196EBIT

12%(55)(444)(500)Total Costs below Gross Margin

1

(57)

$146

$

Change

(2%)

16%

27%

%

(37)(36)Other Revenue and Expenses

(346)(403)O & M

$550$696Gross Margin

Q1 2006Q1 2007($ in millions)

See Appendix(1) Earnings excluding special items, certain economic, non-qualifying hedges, and synfuel earnings

26

Significant Excess Liquidity

Historical Excess Liquidity

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Dec-0

1Mar

-02

Jun-

02Se

p-02

Dec-0

2Mar

-03

Jun-

03Se

p-03

Dec-0

3Mar

-04

Jun-

04Se

p-04

Dec-0

4Mar

-05

Jun-

05Se

p-05

Dec-0

5Mar

-06

Jun-

06Se

p-06

Dec-0

6Mar

-07

($ i

n b

illio

ns)

Cash & Bank Lines Bank Line Usage

• Significant liquidity to support business growth• Sufficient liquidity to meet all stressed price and credit scenarios

(1) Excludes $2.5 billion bridge facility

Excess Liquidity

(1)

27

Driving Additional Profits from Productivity

• Year-to-date, realized $8 million, or 12% of our 2007 productivity target• Since announcing our long-term productivity initiatives, we have added $105 million pre-tax

to ongoing annual profits

(100)

(50)

0

50

100

150

200

2004 2005 2006 2007E 2008EPre

-Tax

Ear

nin

gs (

$ in

mill

ion

s)

Realized Target

(40)

50

97

157 - 162 170 - 180

28

Balance Sheet / Credit Metrics

(1) Includes preferred stock and minority interest(2) Excludes AOCI balance related to cash flow hedges of commodity transactions and 3rd Party Cash CollateralSee Appendix

0.30.30.4-3rd Party Cash Collateral

0.71.40.3-AOCI Balance

34%35%43%55%Net Debt to Total Capital

22%

33%

$8.7

5.7

0.1

$2.9

(1.9)

$4.8

Q1 2007

32%44%55%Adjusted Net Debt to Adjusted Total Capital(2)

0.10.10.150% Trust Preferred

Capital

$2.7$3.9$5.1Net Debt

4.95.14.1Equity (1)

(2.3)(0.8)(0.1)Less: Cash

$7.7$9.1$9.4Total Capital

$5.0$4.7$5.2Total Debt

16%29%19%FFO / Debt

Debt

YE 2006YE 2005YE 2001($ in billions)

29

$23($273)($250)($401)Cash Collateral Held

701 303398285Exchanges

5171176863rd Parties

308569877371Subtotal Posted

Collateral Posted

331296627(30)Net Cash Posted Subtotal

$435Change in Total Collateral Posted

104$1,549$1,653$2,486Letters of Credit Posted

Change vs. Year-End B / (W)3/31/0712/31/0612/31/05($ in millions)

Collateral Positions

• The change in net collateral posted was favorable by $435 million at quarter-end versus year-end as there was over a $300 million decrease in funds posted with exchanges

30

Limiting Variability – Portfolio Management

Percent Hedged as of 3/31/07

0.04.0.05Fuel down $0.10/MMBtu, Power unchanged

($0.04)($0.02)Power down $1/MWh, Fuel unchanged

65%87%Fuel

$0.00

Sensitivity to Price Changes as of 3/31/07 ($ per share)

$0.03Power down $1/MWh, Fuel down $0.10/MMBtu

92%Power 81%

20092008

• Accrual portfolio managed to reduce exposure of future earnings to commodity price changes• MTM portfolio VaR levels remain low at average of $9.8 million in Q1 07

(1) Numbers may not sum due to roundingNote: Percent hedged includes Mid-Atlantic Fleet, Plants with PPA’s, Power Wholesale Competitive Supply and NewEnergy; excludes gas, coal and freight businesses

31

Synfuel Update (1)

(48)(12)(44)Current period credit phase-out

$0.10

$19

$18

$529%

$174013

($35)

Q1 2007 Actual

$0.30

$53

($26)8

$1029%

$7915345

($119)

2007 Estimate

38%Tax credit phase-out percentage

$0.16Net synfuel EPS

$30Net synfuels income

$10Production expenses, net of tax

Impact of phase-out

Pre-phase-out:

($34)-

$6412034

($90)

2006 Actual

Net income impact of phase-out2006 Tax credit true-up

Net income pre-phase-outTax credits before phase-outTax benefit of pre-tax lossPre-tax loss on production

($ in millions, except per share amounts)

The 2007 phase-out estimate is based on oil forwards and volatilities as of March 31, 2007(1) Numbers may not sum due to rounding

32

South Carolina Synfuel (1)

3.40.82.7Production (tons in millions)


$0.07

$13

$ -6

$229%

$13279

($23)

Q1 2007 Actual

$0.18

$33

($21)6

$429%

$5310432

($83)

2007 Estimate





Impact of phase-out

Pre-phase-out:

($24)-

$407623

($59)

2006 Actual




(1) Numbers may not sum due to rounding

33

Pace Synfuel (1)

1.70.41.4Production (tons in millions)


$0.03

$6

$12

$329%

$5134

($12)

Q1 2007 Actual

$0.11

$20

($6)2

$629%

$264913

($36)

2007 Estimate





Impact of phase-out

Pre-phase-out:

($10)-

$244411

($32)

2006 Actual




(1) Numbers may not sum due to rounding

34

NewEnergy Performance

Realized Electric Gross Margin (GM / MWh)

$1.00

$3.00

$5.00

$7.00

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07

Electric Retention Rates

0%

25%

50%

75%

100%

1Q06 2Q06 3Q06 4Q06 1Q07

Including Return to Utility Excluding Return to Utility

Gas Retention Rates

80%

90%

100%

1Q06 2Q06 3Q06 4Q06 1Q07

Electric

Gas

Realized Gas Gross Margin (GM / Dth)

$0.00

$0.10

$0.20

$0.30

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07

35

NewEnergy Gross Margin Reconciliation

$0.27101.3

$27(1)

(4)$22

$4.6617.3

9%$81

69

$96

108122

$118

Q1 2007

$0.2191.2

$191

(2)$18

$3.3915.3

18%$52(7)10

$55

7175

$73

Q1 2006

Other Margin

% of Gross Receipts Tax / Gross Margin

Adjusted Gross Margin

Gas Gross Margin / DthVolume (Dth)

Adjusted Gas Gross MarginOther Margin

Non-Qualifying HedgesGross Margin Gas

Electric Margin / MWhVolume

Adjusted Electric Gross Margin

Gross Receipts TaxGross Margin Electric

Gross Margin (Excluding Non-Qualifying Hedges)Gross MarginTotal

Non-GAAP Reconciliations

37

Summary of Non-GAAP Measures

Slide(s) Where Used Slide Containing Non-GAAP Measure in Presentation Most Comparable GAAP Measure Reconciliation

Adjusted EPS Reported GAAP EPSQ107 Actual 4, 13, 14, 15 38Q106 Actual 4, 13, 14, 15 38EPS Guidance 4, 9, 13, 14, 15, 23 382006 Actual 9 39Q206 Actual 23 39

Q107 Merchant Gross Margin 16, 25 Income from Operations / Net Income 40Q106 Merchant Gross Margin 16, 25 41Q107 Merchant Below Gross Margin 25 40Q106 Merchant Below Gross Margin 25 41

Net Cash Flow before Debt Issuances/(Payments) 21 Operating, Investing and Financing Cash Flow 42Free Cash Flow 21 42

Debt to Total Capital 28 Debt Divided by Total Capitalization 43Projected Debt to Total Capital 28 43

38

Adjusted EPS Q1 2007 and 2006We exclude special items and certain economic, non-qualifying fuel adjustment clause and gas transportation and storage hedges because we believe that it is appropriate for investors to consider results excluding these items, in addition to our results in accordance with GAAP. We have also adjusted earnings to exclude synfuel results due to the potential volatility and phase-out of the tax credits. We believe such a measure provides a picture of our results that is comparable among periods since it excludes the impact of items, which may recur occasionally, but tend to be irregular as to timing and magnitude, thereby distorting comparisons between periods. However, investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is or is not classified as a special item). We also use this measure to evaluate performance and for compensation purposes.

RECONCILIATION:Merchant Regulated Regulated OtherEnergy Electric Gas BGE Nonreg. Total

A B C D = (B+C) E F =(A+D+E)

1Q07 ACTUAL RESULTS:

Reported GAAP EPS 0.66$ 0.18$ 0.18$ 0.36$ 0.05$ 1.07$

Loss from Discontinued Operations (0.01) - - - - (0.01) GAAP MEASURES

0.67 0.18 0.18 0.36 0.05 1.08

Special Items, Non-qualifying Hedges, and Synfuel Results Included in Operations:

Non-qualifying hedges (0.05) - - - - (0.05)

Synthetic fuel facility results 0.10 - - - - 0.10

Total Special Items, Non-qualifying Hedges, and Synfuel Results 0.05 - - - - 0.05

Adjusted EPS 0.62$ 0.18$ 0.18$ 0.36$ 0.05$ 1.03$ NON-GAAP MEASURE

1Q06 ACTUAL RESULTS:

Reported GAAP EPS 0.24$ 0.19$ 0.19$ 0.38$ 0.01$ 0.63$

Income from Discontinued Operations 0.07 - - - - 0.07 GAAP MEASURES

0.17 0.19 0.19 0.38 0.01 0.56

Special Items and Non-qualifying Hedges Included in Operations:

Non-qualifying Hedges (0.06) - - - - (0.06)

Merger-related Costs (0.01) - - - - (0.01)

Synthetic fuel facility results 0.02 - - - - 0.02

Total Special Items, Non-qualifying Hedges, and Synfuel Results (0.05) - - - - (0.05)


EARNINGS GUIDANCE Constellation Energy is unable to reconcile its earnings guidance excluding special items, non-qualifying hedges, and synfuel results to GAAP earnings per share because we do not predict the future impact of special items such as the cumulative effect of changes in accounting principles, the disposition of assets, economic, nonqualifying hedges or synfuel results.

EPS Before Discontinued Operations


39

Adjusted EPS – 2Q06 and 2006We exclude special items and certain economic, non-qualifying fuel adjustment clause and gas transportation and storage hedges because we believe that it is appropriate for investors to consider results excluding these items, in addition to our results in accordance with GAAP. We have also adjusted earnings to exclude synfuel results due to the potential volatility and phase-out of the tax credits. We believe such a measure provides a picture of our results that is comparable among periods since it excludes the impact of items, which may recur occasionally, but tend to be irregular as to timing and magnitude, thereby distorting comparisons between periods. However, investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is or is not classified as a special item). We also use this measure to evaluate performance and for compensation purposes.

RECONCILIATION:Merchant Regulated Regulated OtherEnergy Electric Gas BGE Nonreg. Total

A B C D = (B+C) E F =(A+D+E) 2Q06 ACTUAL RESULTS:Reported GAAP EPS 0.40$ 0.11$ (0.01)$ 0.10$ 0.02$ 0.52$ Income from Discontinued Operations 0.11 - - - - 0.11 GAAP MEASURES

0.29 0.11 (0.01) 0.10 0.02 0.41 Special Items, Non-qualifying Hedges, and Synfuel Results Included in Operations:

Synthetic fuel facility results (0.01) - - - - (0.01)

Merger related transaction costs (0.02) (0.01) - (0.01) - (0.03) Non-qualifying hedges - - - - - - Total Special Items, Non-qualifying Hedges, and Synfuel Results (0.03) (0.01) - (0.01) - (0.04)

Adjusted EPS 0.32$ 0.12$ (0.01)$ 0.11$ 0.02$ 0.45$ NON-GAAP MEASURE

2006 ACTUAL RESULTS:Reported GAAP EPS 4.23$ 0.66$ 0.20$ 0.86$ 0.07$ 5.16$ Income from Discontinued Operations 1.03 - - - 0.01 1.04 GAAP MEASURESEPS Before Discontinued Operations 3.20 0.66 0.20 0.86 0.06 4.12 Special Items, Non-qualifying Hedges, and Synfuel Results Included in Operations:

Gain on sale of gas-fired plants (excluding High Desert) 0.26 - - - - 0.26 Non-qualifying hedges 0.21 - - - - 0.21 Synthetic fuel facility results 0.16 - - - - 0.16 Workforce reduction costs (0.09) - - - - (0.09) Merger-related costs (0.02) (0.01) - (0.01) - (0.03) Total Special Items, Non-qualifying Hedges, and Synfuel Results 0.52 (0.01) - (0.01) - 0.51



40

1Q07 Merchant Gross Margin and Below Gross MarginWe utilize the non-GAAP financial measure of Gross Margin to highlight the relationship between the costs of and prices for energy in our Merchant Energy business categories (i.e., Mid-Atlantic Fleet, Plants with PPAs, Wholesale Competitive Supply, NewEnergy, and QFs/Other). We believe this non-GAAP measure helps investors to better understand the changes in the level of our Merchant Energy operating results for these categories from period to period.

RECONCILIATION:GAAP Adjustments Merchant

GAAP Fuel & Purchased In Arriving Gross MarginMerchant Revenue & Expense Categories Revenues Energy Expenses Difference At Gross Margin Notes (Non-GAAP)

($ millions)Mid-Atlantic Fleet 547.9$ 295.3$ 252.6$ 31$ a, b, c 284$ Plants with PPAs 151.2 18.0 133.2 (1) a 132 Wholesale Competitive Supply 1,445.2 1,292.0 153.2 (14) a , d, e 139 **NewEnergy 2,221.5 2,103.5 118.0 4 d 122 QFs / Other 20.6 - 20.6 (2) e, f 18

Total Merchant 4,386.4$ 3,708.8$ 677.6$ 18$ 695$

Adjustments Merchant Below Arriving At Merchant Gross Margin

Total Merchant: GAAP Below Gross Margin (Non-GAAP)Revenues less fuel and purchased energy expenses 677.6$ 695$ Operations and maintenance expenses (420.2) 17 g, h, i (403) Depreciation, depletion, and amortization (62.9) 1 h, i (61) Taxes other than income taxes (26.8) 26 k - Accretion of asset retirement obligations (17.7) 18 k -

Income From Operations 150.0 231 Other income / (expense) 11.1 (46) b, k, l (36)

EBIT N/A 195 Fixed charges (20.5) 8 i, l (14)

Income Before Income Taxes 140.6 181 Income tax expense (19.0) (51) i, m (69)

Income from Continuing Operations 121.6 112 Loss from discontinued operations (1.6) 2 j -

Net Income 120.0$ 112$

Details of Adjustments Made in Arriving at Merchant Gross Margin:a Adjustment to remove $34 million loss from Mid-Atlantic Fleet and ($1 million) gain from Plants with PPA's of estimated gross margin created through active portfolio

management more appropriately categorized as a competitive supply activity.b Adjustment to remove ($5 million) of decommissioning revenues from non-GAAP gross margin measure and included in Other Income. The offsetting decommissioning

expense was recorded in accretion of asset retirement obligations.c Adjustment to remove $2 million of other indirect costs from non-GAAP gross margin as they are more appropriately categorized as operating expenses.d Adjustment to remove $11 million loss in Wholesale Competitive Supply and $4 million loss in NewEnergy related to economic, non-qualifying hedges of gas transport and storage contracts.e Adjustment to remove synfuel losses from Wholesale Competitive Supply gross margin of $8 million and Other gross margin of $8 million.f Adjustment to reflect ($10 million) of direct costs in Other for purposes of non-GAAP gross margin measure.

Details of Adjustments Made in Arriving at Merchant Below Gross Margin:g Adjustment detailed in "c" and "f" above are offset by adjustments made to O&M costs. h Adjustment to reclassify certain allocated costs totaling $5 million from O&M to Depreciation and Amortization.i Adjustment to remove Synfuel results, which are not included in determining Merchant Below Gross Margin - $4 million in O&M, $6 million in D&A, $1 million in Fixed Charges, and ($46 million) from income tax expense.j Adjustment to remove Special Items, which are not included in determining Merchant Below Gross Margin.k Adjustment to reflect management's view of these items as Other Income / Expense.l Adjustment to move Interest Income of $7 million recorded in Other Income / Expense to Fixed Charges (to show a fixed charge amount net of interest income).m Adjustment to remove tax benefit of $5 million related to gains on economic, non-qualifying hedges of gas transportation and storage contracts.

** Excludes $18 million of operating expenses, depreciation, depletion and amortization, and interest expense associated with our Upstream Gas properties

PROJECTED GROSS MARGIN AND RESULTS BELOW GROSS MARGIN:Constellation Energy is unable to reconcile its projected gross margin or results below gross margin to GAAP because we do not predict the future impact of reconciling items or special items such as the cumulative effect of changes in accounting principles and the disposition of assets.

Quarter Ended March 31, 2007

41

1Q06 Merchant Gross Margin and Below Gross MarginWe utilize the non-GAAP financial measure of Gross Margin to highlight the relationship between the costs of and prices for energy in our Merchant Energy business categories (i.e., Mid-Atlantic Fleet, Plants with PPAs, Wholesale Competitive Supply, NewEnergy, and QFs/Other). We believe this non-GAAP measure helps investors to better understand the changes in the level of our Merchant Energy operating results for these categories from period to period.

RECONCILIATION:GAAP Adjustments Merchant

GAAP Fuel & Purchased In Arriving Gross MarginMerchant Revenue & Expense Categories Revenues Energy Expenses Difference At Gross Margin Notes (Non-GAAP)

($ millions)Mid-Atlantic Fleet 465.4$ 366.1$ 99.3$ 13$ a, b, c 112$ Plants with PPAs 152.4 15.7 136.7 (5) a 131 Wholesale Competitive Supply 1,420.5 1,215.3 205.2 10 a , d, e 215 **NewEnergy 2,024.2 1,950.9 73.3 2 d 75 QFs / Other 20.8 - 20.8 (4) e, f 17

Total Merchant 4,083.3$ 3,548.0$ 535.3$ 16$ 550$

Adjustments Merchant Below Arriving At Merchant Gross Margin

Total Merchant: GAAP Below Gross Margin (Non-GAAP)Revenues less fuel and purchased energy expenses 535.3$ 550$ Operations and maintenance expenses (362.3) 15 g, h, i (346) Merger related transaction costs (1.3) 1 j - Workforce reduction costs (2.2) 2 j - Depreciation, depletion, and amortization (64.1) 3 h, i (62) Taxes other than income taxes (29.5) 30 k - Accretion of asset retirement obligations (16.5) 17 k -

Income From Operations 59.4 142 Other income / (expense) 13.3 (50) b, i, k, l (37)

EBIT N/A 105 Fixed charges (47.4) 9 l (38)

Income Before Income Taxes 25.3 67 Income tax expense 6.9 (32) i, m (26)

Income from Continuing Operations 32.2 41 Income from discontinued operations 11.4 (11) j -

Net Income 43.6$ 41$

Details of Adjustments Made in Arriving at Merchant Gross Margin:a Adjustment to remove ($14 million) loss from Mid-Atlantic Fleet and $5 million gain from Plants with PPA's of estimated gross margin created through active portfolio

management more appropriately categorized as a competitive supply activity.b Adjustment to remove $5 million of decommissioning revenues from non-GAAP gross margin measure and included in Other Income. The offsetting decommissioning expense

was recorded in accretion of asset retirement obligations.c Adjustment to remove ($4 million) of other indirect costs have been removed from non-GAAP gross margin as they are more appropriately categorized as operating expenses.d Adjustment to remove ($14 million) loss in Wholesale Competitive Supply and ($2 million) loss in NewEnergy related to economic, non-qualifying hedges of fuel adjustment clauses and gas transport contractse Adjustment to remove synfuel losses from Wholesale Competitive Supply gross margin of ($6 million) and Other gross margin of ($7 million)f Adjustment to reflect $11 million of direct costs in Other for purposes of non-GAAP gross margin measure.

Details of Adjustments Made in Arriving at Merchant Below Gross Margin:g Adjustment detailed in "c" and "f" above are offset by adjustments made to O&M costs. h Adjustment to reclassify certain allocated costs totaling $3 million from O&M to Depreciation and Amortizationi Adjustment to remove Synfuel results, which are not included in determining Merchant Below Gross Margin - $4 million in O&M, $6 million in D&A, $1 million in other expense, and ($25 million) from income tax expensej Adjustment to remove Special Items, which are not included in determining Merchant Below Gross Margin.k Adjustment to reflect management's view of these items as Other Income / Expense.l Adjustment to move Interest Income of $9 million recorded in Other Income / Expense to Fixed Charges (to show a fixed charge amount net of interest income).m Adjustment to remove tax benefit ($7 million) related to losses on economic, non-qualifying hedges of fuel adjustment clauses and gas transport contracts and special items

** Excludes $12 million of operating expenses, depreciation, depletion and amortization, and interest expense associated with our Upstream Gas properties

PROJECTED GROSS MARGIN AND RESULTS BELOW GROSS MARGIN:Constellation Energy is unable to reconcile its projected gross margin or results below gross margin to GAAP because we do not predict the future impact of reconciling items or special items such as the cumulative effect of changes in accounting principles and the disposition of assets.

Quarter Ended March 31, 2006

42

Cash FlowsThe following is a reconciliation of the non-GAAP financial measures of Net Cash Flow before Debt Issuances/Payments and Free Cash Flow. We utilize these non-GAAP measures because we believe they are helpful in understanding our ability to reduce debt by existing cash.

RECONCILIATION:

QTD MARCH ACTUAL RESULTS:Net cash used in operating activities (GAAP measure) 349 Adjustment to reflect operating use of cash in connection with contract acquisitions

as a financing useAdjustment for derivative contracts presented as financing activities under SFAS 149 (2) Adjusted Net Cash Used in Operating Activities 347$ NON-GAAP MEASURE

Net cash used in investing activities (GAAP measure) (493)

Net Cash Used in Financing Activities (Excl. Debt-Related Sources & Uses) *Common stock dividends paid (68) Proceeds from issuance of common stock 22 Reacquisition of common stock (77) Net proceeds from acquired contracts 27 Other financing activities, excluding SFAS 149 activities included in operating 6 Adjusted Net Cash Used in Financing Activities (90)

Net Cash Flow before Debt Issuances/(Payments) (236) NON-GAAP MEASURE

Less: Proceeds from issuance of common stock (22) Add: Reacquisition of common stock 77 Add: Common stock dividends paid 68

Free Cash Flow (113)$ NON-GAAP MEASURE

* Total GAAP Cash Used in Financing Activities (incl. debt-related sources & uses) was $209 million QTD March 07.

PROJECTED CASH FLOWS:Constellation Energy is unable to provide a reconciliation of these measures for Projected 2007 because it does not prepare a forecasted statement of cash flows on a GAAP basis.

2007($ millions)

43

Net Debt to Total CapitalDebt to Total Capital is a non-GAAP ratio that excludes unamortized discounts and premiums, reduces debt by our cash balance, and includes minority interests in equity. In addition, we reflect a 50 percent equity credit for our trust preferred securities and remove the non-economic impact commodity hedges and cash collateral held, similar to the evaluation performed by major credit rating agencies. Management believes this non-GAAP measures provide investors useful information on our leverage because it is consistent with the evaluation performed by rating agencies, takes into account minority equity interests in our consolidated affiliates and cash available to reduce debt, and facilitates comparability between periods.RECONCILIATION:

Total long-term debt (gross of current portion) 4,741.5$ 4,741.5$ 4,849.3$ 4,849.3$ 4,610.9$ 4,610.9$ 3,874.4$ 3,874.4$

Fair value (increase) decrease in fixed to floating rate swap included in long-term debt (1.6) 7.1 0.9 -

6.20% deferrable interest subordinated debentures due

October 15, 2043 to BGE wholly owned BGE Capital

Trust II relating to trust originated preferred securities 257.7 257.7 257.7 257.7 257.7 257.7 250.0 250.0 50% Equity credit to trust preferred securities - (125.0) - (125.0) - (125.0) - (125.0)

Adjustment to include High Desert Lease on Balance Sheet at December 31, 2001 - - - - - - - 221.0 Short-term borrowings - - - - 0.7 0.7 975.0 975.0 Unamortized discount and premium (5.6) - (5.9) - (8.0) - (5.2) - Subtotal 4,993.6 4,872.6 5,101.1 4,989.1 4,861.3 4,745.2 5,094.2 5,195.4 LESS: Cash - 1,936.6 - 2,289.1 - 813.0 - 72.4 Total Net Debt 4,993.6 2,936.0 33.7% 5,101.1 2,700.0 35.0% 4,861.3 3,932.2 42.8% 5,094.2 5,123.0 54.6%

BGE Preference Stock Not Subject To Mandatory Redemption 190.0 190.0 190.0 190.0 190.0 190.0 190.0 190.0 Minority Interests - 90.1 - 94.5 - 22.4 - 101.8 Common shareholders' equity 5,373.3 5,373.3 4,611.7 4,611.7 4,915.5 4,915.5 3,843.6 3,843.6

Subtotal 5,563.3 5,653.4 4,801.7 4,896.2 5,105.5 5,127.9 4,033.6 4,135.4 50% Equity credit to trust preferred securities - 125.0 - 125.0 - 125.0 - 125.0

Total Equity 5,563.3 5,778.4 66.3% 4,801.7 5,021.2 65.0% 5,105.5 5,252.9 57.2% 4,033.6 4,260.4 45.4%

Total Capitalization 10,556.9$ 8,714.4$ 100.0% 9,902.8$ 7,721.2$ 100.0% 9,966.8$ 9,185.1$ 100.0% 9,127.8$ 9,383.4$ 100.0%

Exclude commodity hedge AOCI Balance from common shareholders' equity 666 1,379 323 (30.0) Counterparty cash collateral held reflected as a reduction of cash balance (296) (253) (388) - Adjusted Net Debt to Total Capital 33.4% 31.6% 43.7% 54.8%

PROJECTED LEVERAGE RATIOS:Constellation Energy is unable to provide a reconciliation of this measure for Projected 2006 because it does not prepare a forecasted balance sheet on a GAAP basis.

($ millions)

March 31, 2007

GAAP Balances Non-GAAP Ratio

December 31, 2006


December 31, 2001


December 31, 2005


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