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Presentation for. 2004 Oil & Gas Investment Symposium April 19 – 21, 2004 New York City, NY. Who is Constellation Energy?. CE formed in 1997 as a joint venture between Goldman Sachs and Baltimore Gas & Electric (Non-regulated Assets)

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  1. Presentation for 2004 Oil & Gas Investment SymposiumApril 19 – 21, 2004 New York City, NY

  2. Who is Constellation Energy? • CE formed in 1997 as a joint venture between Goldman Sachs and Baltimore Gas & Electric (Non-regulated Assets) • Unique combination of physical market experience from Baltimore Gas & Electric utility and systems and risk management expertise of Goldman Sachs • CE is a leading provider of energy risk management products with a national (US) trading and generation portfolio • Wholesale energy marketing, trading, development and risk management • 12,510 MW total controlled capacity • Gas business currently moving approximately to 2BCF/Day

  3. Constellation Family of Companies CONSTELLATION ENERGY GROUP, INC. (NYSE: CEG) Constellation Generation Group (CGG) Constellation Energy (CE) Baltimore Gas & Electric (BGE) Retail • BGE Home • Full service physical and financial energy services • C&I focus • Mid-Atlantic concentration • New Energy • Full service physical, financial services • C&I focus • Ohio Valley/Northeast and Canada • Alliance • Full service physical and financial energy services and consulting • C&I focus • Ohio Valley • Transmission and distribution services in Central Maryland • 1.1 million electric customers • 6,000 MW of load • 0.6 million gas customers • Peak daily gas delivery at 795,700 dth • 105 Bcf in annual throughtput • Wholesale power generation • 9,200 MW in operation • 40 plants in 11 states • 2,900 MW under construction • 4 plants in 4 states • July 1, 2000: BGE generation assets were transferred to the non-regulated entity • Wholesale energy marketing, trading, development and risk management • 12,510 MW total controlled capacity • Manage a growing gas business currently, moving 490Bcf/year • National fleet fuel • Retail supply • Wholesale supply 490 Bcf Annually 25 Bcf Annually 130 Bcf Annually 100 Bcf Annually

  4. CE Gas Group Objectives • Manage physical fuel supply for CEG • Make a return on capital/credit deployed • Diversify risk profile (credit risk vs. reserve risk) • Leverage existing gas capabilities • Trading, contracts, systems • Pipeline and storage contracts • Access to capital markets • Develop upstream capital businesses • Senior debt (VPP) • Mezzanine financing • Equity investments

  5. Energy Capital"One Stop Shop" • Senior Debt/ VPP • Mezzanine/ Sub Debt • Equity (Project/Corporate) • Advantages: • Saves Time - • Prevents dealing with multiple counterparties when accessing various capital products • Increases Flexibility - • Eliminates inter-creditor issues • Allows for easier structuring/customization of financings for specific transactions

  6. Volumetric Production Payment (VPP) Transaction Description Cash advanced in exchange for hydrocarbon volumes to be delivered over time • Buyer purchases a limited term overriding royalty interest • Size and term of transaction depend on production profile • Production is delivered free of all costs (operator pays LOE, royalties, G&A, etc.) • No preference given to gas or oil • Proved Developed Non-Producing (60%) and Proved Undeveloped Reserves (20%) credited on a risk-adjusted basis • Some property qualifications apply

  7. VPP - Valuation Example Portfolio of Properties 6,000 5,000 4,000 3,000 2,000 1,000 0 Unadjusted Net Production Risk-Adjusted Net Production 10% Cushion Annual Production (Bbtue) “Cost Gas/Oil” Risk-Adjusted Reserve Coverage (Tail) Constellation Production Payment 0 1 2 3 4 5 6 7 8 9 10 11 12 Year

  8. VPP - Structure Benefits • Producer • Receives cash up-front to implement various strategies (monetize, refinance existing capital structure, acquire) • Retains operational control of properties • Hedge out interest rate and commodity price risk (with no margin call) • Transfer reserve risk (no borrowing base re-determinations) • Satisfies obligation to CE in hydrocarbons instead of cash • Retains reserve upside • ORRI terminates and properties revert to producer after all production payment volumes have been delivered • Constellation Energy • Gains access to long-term supply of hydrocarbons

  9. VPP - Advantages Over Traditional Financing • Higher cash advance rate than traditional senior financing • Non-recourse • Fixed funding cost • Lower blended cost of capital than traditional choice of debt plus equity or mezzanine financing • No downside price risk • Defined volume obligation

  10. VPP - Important Notes • Deficiencies and make-ups are adjusted for: • Time value of money • Location differentials • Price seasonality • Up to 90% takes • Structure based on net revenue interest; royalty owners are assumed to be non-participating • Producer is responsible for all severance and ad valorem taxes • Operating and other costs are the responsibility of the producer • Structuring fee is payable by the producer at closing • Legal and third-party engineering fees are paid by the producer

  11. Mezzanine Financing • Provided as bridge financing and for low risk developmental projects • Provided along-side VPP structure to add additional capital for continuing project development (with VPP take-out upon successful results) • Lower blended cost of capital than traditional choice of debt plus mezzanine financing • Avoids inter-creditor issues • Risk adjustment factors of mezzanine funding more aggressive than those of VPP (~80-100% of PDNP and 50-60% of PUD’s) • Engineering case typically greater than p10 (probabilistic case) • “Equity Participation” – in the form of override or corporate equity; Equity Principles apply including: • Quality management team • Good track record • Quality PUD’s, probables, and possibles

  12. Equity Capital Principles

  13. Capital Products and Funding Matrix

  14. Contact Information Houston Office: 500 Dallas St. St. 3010 Houston, TX 77002 Gas Group: Houston: Craig Fox (713) 344-2888 craig.fox@constellation.com Ken Davis (713) 344-2884 ken.davis@constellation.com Claire Harvey (713) 344-2878 claire.harvey@constellation.com Brett Mudford (713) 344-2890 brett.mudford@constellation.com Terry McBride (713) 344-2892 theresa.mcbride@constellation.com John Thompson (713) 344-2889 john.thompson@constellation.com Baltimore: Matt Arnold (410) 468-3707 matt.arnold@constellation.com Mo Bawa (410) 468-3574 mo.bawa@constellation.com Jennifer McNiece (410) 468-3564 jennifer.mcniece@constellation.com Ozzie Pagan (410) 468-3641 ozzie.pagan@constellation.com Dan Reck (410) 468-3571 daniel.reck@constellation.com Baltimore Office: 111 Market Place St. 500 Baltimore, MD 21202

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