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Shareholders OK merger to create Allegheny Energy

August 08, 1997

By KERRY LYNN FRALEY

Staff Writer

Allegheny Power System Inc. glided over the second hurdle in its plan to merge with DQE Inc. Thursday when an overwhelming majority of both companies' shareholders voted for the merger, officials said.

If approved by state and federal regulators, the $2.6 billion agreement with DQE - parent company of Pittsburgh-based Duquesne Light Co. - will create a $11.3 billion company known as Allegheny Energy Inc.

The name change, approved by stockholders on Thursday, reflects the company's vision to be a "total energy services supplier" and strong player in a deregulated energy market, said president and CEO Alan J. Noia.

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"We intend to make Allegheny Energy America's best energy value," Noia said.

The merger is a necessary response to Pennsylvania's Customer Choice Act, which went into effect Jan. 1, and moves toward similar legislation in Maryland and other states, he said.

The deal will increase the company's total electricity generating capacity by almost a third to over 11,000 megawatts, making it competitive with larger power companies in the region, Noia said.

Allegheny Power serves about 1.4 million homes and businesses in Maryland, West Virginia, Pennsylvania, Virginia and Ohio.

Duquesne Light serves about 580,000 customers in and around Pittsburgh.

Both companies' customers, employees and shareholders will be better off if the merger goes through, Noia told Allegheny Power shareholders who came to the special meeting Thursday afternoon in Hagerstown.

Noia said that while he couldn't promise customers that rates will go down, they'll surely be less that they would be without the merger.

He said the company will pass on an expected $1 billion in savings over 10 years to customers and shareholders equally.

The company plans to streamline its operation with the phasing out of about 500 of a combined 8,300 jobs over the next three or four years, Noia said.

Most will come from duplicated departments and will be eliminated through normal attrition and early retirements, with layoffs used only if the company doesn't meet its goal by 2001, he said.

Noia said the company will begin using the name Allegheny Energy for official purposes immediately, but will continue to use Allegheny Power for its regional operation until the merger goes through.

He said company officials are hopeful the merger will be completed by May 1, 1998.

The merger follows a national trend in the utility industry, which is seeing a lot of companies join forces to better position themselves for a deregulated market, said Michael Barr, an energy stock analyst with Standard and Poor in N.Y.

Barr said the Allegheny Power-DQE merger "seems to make sense," given the companies' geographic proximity and complementary services.

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