The Columbia Gas System, a supplier of natural gas to 15 states, including Maryland, reported yesterday that it lost nearly $805 million in the quarter before it declared bankruptcy.
The Wilmington, Del.-based company attributed the loss to high- priced gas purchase contracts.
Columbia's gas pipeline subsidiary, which filed for bankruptcy along with the parent company, took a $765 million charge as a reserve against the costs of canceling the expensive contracts.
Though industry experts say the bankruptcy filings and proposed contract cancellation should benefit customers by lowering the price of the company's gas, a utility executive said that Columbia might not be able to supply much gas this winter.
Steven Jones, Baltimore Gas and Electric Co.'s principal engineer for gas supply planning, said that Columbia's financial problems won't cause shortages of natural gas for consumers because other pipelines serve the area. But BG&E, which buys about 2 percent of its gas from Columbia, is considering making other arrangements to replace that part of its supply, he said.
Though Columbia has received $155 million in interim loans and has said it will have no problem meeting its supply obligations, Mr. Jones said that a company in bankruptcy may not get the credit it will need to buy gas for this winter.
In June, Columbia announced that because spot gas prices had dropped, its fixed-price gas contracts would mean company would lose theequivalent of $1 billion over the next 10 years. The company offered to pay its suppliers $600 million in cash and notes to cancel the contracts, but suppliers failed to agree to the settlement before Columbia's self-imposed July 31 deadline.
Though Columbia's stock closed down 62 1/2 cents at $17 yesterday, stock analysts said the loss may not be end up being so bad.
Joe Culp, who follows Columbia for First Manhattan Co. in New York, said that Columbia played it safe by making its reserve as large as possible and probably won't have to pay out all the money it set aside.
For the quarter that ended June 30, Columbia's revenues fell 6.9 percent, to $427 million from $458 million for the same period last year.