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Allegheny says no dividend this quarter

December 06, 2002|by JULIE E. GREENE

julieg@herald-mail.com

HAGERSTOWN - For the first time in at least 54 years, Allegheny Energy will not issue a quarterly dividend to shareholders of common stock.

The board of directors decided Thursday not to issue a quarterly dividend this month as company officials continue working to improve the publicly traded company's financial position.

Allegheny Energy spokesman Scott Shields said the board has not decided whether to issue a dividend in March. The next regularly scheduled meeting to discuss a dividend is in March.

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"While our board of directors recognizes the importance of rewarding our shareholders with a consistent cash dividend, we believe this action is prudent and necessary," Allegheny Energy Chairman, President and Chief Executive Officer Alan J. Noia said in a prepared statement.

"Our core businesses remain fundamentally sound, and we expect to work through our short-term liquidity needs in a timely manner," Noia said.

Allegheny has had a rocky year following the collapse of Enron, troubles in the energy trading market and a disappointing first quarter due to mild weather, a poor economy and lackluster trading.

The utility's debt rating was reduced to "junk" status in October and it has not released its third quarter earnings after company officials found flaws in past financial statements.

Allegheny's steps to improve its financial position include scaling back its energy trading operation and offering early retirement to many white collar workers.

Allegheny has 650 employees accepting early retirement, with 520 to 585 of those expected to leave by the end of the year.

Allegheny Energy's stock rose 6 cents Thursday to close at $6.25. The utility's stock was $43.86 in April.

Company officials announced in October that they would either suspend or reduce the dividend through the fourth quarter of 2003. At the time, they said the dividend could be 0 to 50 percent of the previous dividend, which was 43 cents per share.

Allegheny has about 126 million shares outstanding and traditionally paid out an annual dividend of $1.72 a share, the company said.

Suspending the dividend would therefore save about $54 million a quarter, or $216 million a year.

This is the first time Allegheny or its predecessor, Allegheny Power, has suspended a quarterly dividend in at least 543/4 years, according to Shields. That's as far back as information was available.

This is the second step taken this week to improve the utility's financial flexibility.

On Wednesday, the Federal Energy Regulatory Commission gave Allegheny's energy trading subsidiary, Allegheny Energy Supply, permission to transfer two contracts with California to a new subsidiary.

Transferring the contracts to Allegheny Trading Finance Co. will give Allegheny the flexibility to sell the contracts or use them as collateral to bolster the company's financial position, Allegheny Energy Supply spokeswoman Janice Lantz said.

An administrative law judge is hearing a dispute between Allegheny and California over the two contracts, the largest of which is a $1.3 billion asset for Allegheny's parent company, Allegheny Energy. When the contract was signed in March 2001, the company stated it would be worth $4.5 billion during its 11-year term, Lantz said.

California officials have said moving those contracts to a separate company with no other assets could allow Allegheny to default on the contracts and leave California with no recourse.

The FERC order can be found on the Web by going to ferris.ferc.gov/idmws/search/fercgensearch.asp and submitting a text search for "Allegheny Energy."

The Associated Press contributed to this story.

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