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Energy company changes strategy

September 27, 2002|by JULIE E. GREENE

julieg@herald-mail.com

With the current climate in the energy industry, Allegheny Energy has changed its strategy in recent months in an attempt to improve its financial performance, a company spokeswoman said Thursday.

Allegheny is eliminating an unknown number of positions, accepting more than 600 early retirements and deciding whether to sell assets such as power plants and long-term power sales agreements, corporate spokeswoman Cynthia Shoop said.

The company told shareholders at the end of the second quarter that it was embarking on a different strategy that includes scaling back energy trading operations, Shoop said.

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On Wednesday, Allegheny filed a lawsuit in New York State Supreme Court against Merrill Lynch over Allegheny's purchase in March 2001 of Merrill's energy trading unit.

The lawsuit accuses Merrill Lynch of misrepresenting the unit's trading volume, revenues and growth so it could inflate the energy trading unit's worth and unload it.

Merrill Lynch filed suit against Allegheny on Tuesday in U.S. District Court in New York, stating Allegheny was trying to avoid paying $115 million it owes Merrill for the unit, Global Energy Markets.

When Allegheny announced a net loss of $32.3 million in July, the company's statement said the utility would reduce its reliance on energy trading and take other steps to bolster the utility's financial performance during changing times in the energy industry, Shoop said.

More than 600 people companywide have accepted early retirement, an option the company offered in July, Shoop said. Those retirements will be spread out, Shoop said.

"We're working with the different parts of the business and employees to make a smooth transition," Shoop said.

Before the July 8 announcement, Allegheny had 6,000 total employees in 15 states. Of those, 577 employees worked in the Tri-State area.

Shoop said she could not say how many of the people taking early retirement work in the Tri-State area.

Those people still have the option of opting out of early retirement, she said.

The company also will eliminate occupied positions, but Shoop said she couldn't say how many.

People in those positions will be given the opportunity to apply for other Allegheny Energy jobs while they are still employed by Allegheny, Shoop said.

Allegheny officials also are considering selling a portfolio of certain long-term power sales agreements, Shoop said.

Those agreements give Allegheny the ability to trade or sell power from power plants the utility doesn't own, to areas in the western United States, she said.

They do not include agreements Allegheny has to provide power to local municipalities such as Hagerstown, Shoop said.

Shoop said these moves should not affect customers.

Shoop wouldn't comment on Allegheny's stock price, which has fallen from a peak of $43.86 in April to $13.07 at the close of trading Thursday.

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