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Allegheny Energy still has debt woes

March 12, 2004|by JULIE E. GREENE

julieg@herald-mail.com

Allegheny Energy Inc.'s financial losses in the fourth quarter of 2003 were much smaller than a year earlier, but a company filing warned that its debt still could adversely affect its ability to operate successfully.

Allegheny's consolidated net loss for the fourth quarter of 2003 was $13.7 million, or 11 cents per share, compared with a fourth quarter loss in 2002 of $281.8 million, or $2.23 per share, according to a company press release.

For all of 2003, the utility had a consolidated net loss of $355 million, or $2.80 per share, compared with a loss in 2002 of $632.7 million, or $5.04 per share, company officials said.

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In a prepared statement, Allegheny Energy Chairman and Chief Executive Officer Paul J. Evanson said the company received a clean audit opinion on its 2003 financial statements from its independent public accountants.

The utility's exit from energy trading in the western United States last year helped improve its financial position. Compared with the same period in 2002, the company's net losses on energy trading decreased by $277.4 million to $900,000 in the fourth quarter of 2003, according to a company press release.

Exiting the western energy trading markets was one of the many steps Allegheny officials took last year to avert a bankruptcy filing and try to right the company's financial ship.

Other steps included overhauling its management team, consolidating and transferring its finance and accounting offices to Greensburg, Pa., and securing a $2.4 billion refinancing deal in February 2003.

That refinancing was a big step for the company at the time, but resulted in large debt payments that required another refinancing the company secured earlier this week.

On Monday, Allegheny officials announced a $1.55 billion debt refinancing that reduced the company's interest payments by more than $60 million a year and improved its financial flexibility.

However, the company's troubles are not over.

The annual report states the company's "substantial indebtedness could adversely affect our and our subsidiaries' ability to operate successfully and meet contractual obligations."

"There's still a substantial amount of debt with the refinancing," Allegheny Energy spokeswoman Janice Lantz said Thursday.

Allegheny officials are looking for other ways to reduce the company's overall debt, which includes long-term debt of $5.1 billion, Lantz said.

The company's consolidated debt was approximately $5.7 billion as of Dec. 31, 2003, according to the annual report. Allegheny Energy's energy trading subsidiary, Allegheny Energy Supply, and Allegheny Generating Co. were responsible for approximately $3.2 billion of that debt.

Company officials still are considering selling non-core assets, but Lantz said they were not anticipating work force reductions at this time.

Lantz said it will be a while before Allegheny Energy reinstates dividend payments. For the first time in at least 54 years, Allegheny officials announced in December 2002 that they would not issue a quarterly dividend to shareholders of common stock.

When asked if Allegheny officials were in formal discussions to sell or merge the company, Lantz said even if she knew about discussions of a buyout - which she said she didn't - she wouldn't be able to talk about it.

Company officials are concentrating on creating value for the company and getting the financial situation in order, she said.

Allegheny, which had filed several financial reports late with the U.S. Securities and Exchange Commission in recent years, is now considered a timely filer with the SEC after issuing its annual report for 2003, Lantz said.

Allegheny Energy, which has its headquarters southwest of Hagerstown, delivers electric and natural gas service to about 4 million people in Maryland, Pennsylvania, West Virginia, Virginia and Ohio.

The company employs 117 people at its Williamsport Service Center and 40 people at its corporate center, Lantz has said. The number of employees at the R. Paul Smith Power Station was not available.

Staff writer Brian Shappell contributed to this story.

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