Constellation Energy became a stand-alone public energy company Wednesday — and the largest public company headquartered in Baltimore — after separating from Exelon Corp., the owner of Baltimore Gas and Electric Co.
Energy giant Exelon announced plans nearly a year ago to split its utilities and power-generation businesses to better unlock the value in each enterprise. Exelon, based in Chicago, owns BGE and five other regulated utilities.
Constellation Energy, which will rank high among the Fortune 500 companies, operates power plants and supplies power and natural gas in the competitive retail and wholesale markets to millions of homes and businesses.
As a power supplier, Constellation says it is the nation’s largest provider of carbon-free energy, ahead of Juno Beach, Florida-based NextEra Energy and Charlotte, North Carolina-based Duke Energy.
Constellation’s focus will be on helping customers and communities eliminate carbon pollution, which is linked to the nation’s health and prosperity, said Joseph Dominguez, Constellation CEO and former CEO of Exelon utility ComEd, the Chicago-based utility also known as Commonwealth Edison.
“In terms of the separation, what it does for both us and for Exelon is to allow us to laser focus on the objectives of our individual businesses,” Dominguez said in an interview. “For us, it’s really about the climate crisis, plain and simple, and being the leading company in that space” by making investments in clean energy.
Constellation operates in 48 states, Canada and the United Kingdom, employing about 13,000 people. In Baltimore, about 1,134 people, most of them Constellation workers, will be employed at the Exelon building in Harbor Point that opened in 2016.
Constellation said it expects to rank among the Fortune 200 based on 2020 operating revenues of $17.6 billion, far larger than other Baltimore-area public companies, including T. Rowe Price Group and Under Armour.
Exelon acquired Baltimore’s Constellation Energy Group, the former parent of BGE, for $7.9 billion in 2012. In recent years, energy companies that own both regulated utilities, with more predictable returns, and market-based power generating businesses that can be riskier have looked to spin off the market-based side.
BGE, which serves more than 1.3 million electricity customers and 680,000 natural gas customers in Central Maryland, remains a subsidiary of Exelon. The Baltimore utility said Wednesday that it is updating its brand and logo now that its parent company’s separation from Constellation is complete. BGE said it is retaining its name, local leadership and Baltimore headquarters.
For a decade, “we have been a part of Exelon, greatly improving our service performance over that time in every category that counts for our customers,” said Carim Khouzami, BGE’s president and CEO, in an announcement. “Across the Exelon network of utilities, we share best practices, [and] help each other during storms and emergencies.”
The newly formed Constellation Energy Corp. will begin trading Wednesday on the Nasdaq Global Select Market under the CEG symbol. Its shares climbed in Wednesday trading, rising 6.5% to $53.01 each.
As part of the split, Exelon shareholders received one share of Constellation common stock for every three shares of Exelon common stock held at the close of business Jan. 20, the record date for the distribution. Exelon shareholders will retain their current shares of Exelon stock. Exelon shares, adjusted for the split, rose 7% to close at $42.86 each.
Constellation’s power generation fleet supplies energy to more than 20 million homes and businesses. It is in the top 10 U.S. natural gas providers.
The company said its growth will be based on a commitment to a carbon-free future. Its fleet of nuclear, hydro, wind and solar plants generate 10% of all renewable energy on the U.S. power grid.
Some of the biggest challenges facing energy companies include a significant increase in the cost of natural gas and uncertainty over the outcome of President Joe Biden’s Build Back Better proposal with regard to climate provisions, Dominguez said in an interview.
“We’re anxiously awaiting some direction as to how they intend to deal with this,” including provisions on production tax credits for renewable and nuclear energy as well as provisions to produce clean hydrogen energy, which can be done at nuclear plants, Dominguez said.
“We think clean hydrogen is a really important new fuel that has emerged on the scene,” he said.
It could help to reduce consumption of natural gas or be produced as a liquid fuel to replace gasoline or diesel in applications such as long-haul trucking and shipping.
“There’s support in Build Back Better for that new growing economy,” Dominguez said.
Nuclear power also will play a critical role in meeting the nation’s climate goals, the company said. The nuclear fleet has the potential for second license renewals that will extend the life of its nuclear plants to 80 years, Constellation said. The company is the nation’s largest owner of nuclear power plants.
But it could be costly to maintain aging nuclear plants that have struggled to compete with low-cost natural gas. The Illinois legislature recently approved giving Exelon $694 million over five years to subsidize nuclear plants in that state.
And nuclear energy opponents question its viability as a source of sustainable energy and have long argued it poses threats to people and the environment because of the creation of radioactive waste.
Constellation said its nuclear energy fleet has run more than 94% of the time since 2013, which is 4% better than the industry average, and had a 2020 refueling outage duration of 22 days, which is 11 days below the industry average. The increase in carbon-free electricity from the plants equals taking more than 1.1 million passenger cars off the road each year, according to emissions data from the Environmental Protection Agency, the company said.
Constellation on Wednesday also announced climate goals, including achieving 95% carbon-free electricity by 2030 and 100% by 2040. It plans to customize data for business customers to help them reduce their carbon footprints.
The goals are in line with plans to move the federal government toward carbon-neutral status. In December, Biden signed an executive order to make the government carbon-neutral by 2050, aiming for a 65% reduction in planet-warming greenhouse gas emissions by 2030 and an all-electric fleet of cars and trucks five years later.
The energy company said Wednesday that it is exploring several avenues for growth in line with the demand for carbon-free energy and reduced emissions. It will consider options such as acquiring clean energy assets, acquiring nuclear plants as other energy firms look to shed those assets, creating clean hydrogen using its nuclear fleet, and introducing new products or services for business customers.