Entergy decides on moves to generate $4 billion Utility will cut payout and sell several units


August 04, 1998|By BLOOMBERG NEWS

NEW ORLEANS -- Entergy Corp. said yesterday that it will sell its British and Australian electricity distribution units and cut its dividend to raise $4 billion to reduce debt and invest in more profitable businesses.

The New Orleans-based utility, the fourth-largest U.S. power generator, will cut its annual dividend from $1.80 to $1.20. It also plans to sell its home security company, some telecommunications interests and its energy management company.

Entergy's former chairman and chief executive, Ed Lupberger, resigned in late May after executive changes failed to revive the company's stock, the price of which has changed little in the past year and is lagging far behind its peers. The sale of the British and Australian units, bought over the past 2 1/2 years, is a retreat from Lupberger's plans for international expansion.

"Entergy is trying to get back to its roots. They were too far afield," said Edward Tirello, an analyst with BT Alex. Brown Inc.

Robert Luft, chairman and acting chief executive of Entergy, said he expects to make money from the sale of London Electricity, which Entergy bought for $2.1 billion in February 1997. He said other companies have expressed interest in the assets Entergy wants to sell. The company also plans to sell CitiPower in Australia, which it bought for about $1 billion in January 1996.

As part of the restructuring, the company named J. Wayne Leonard president and chief operating officer. He will handle Entergy's international and domestic operations. Leonard previously was president and chief executive of the company's domestic business.

Entergy brought in Leonard in March from Ohio utility Cinergy Corp., where he was chief financial officer and highly regarded by Wall Street. Leonard is the leading candidate to replace Lupberger as Entergy's chief executive, Luft said.

The dividend cut will save the company $148 million a year, and is meant to lower dividend payouts to 50 percent to 60 percent of earnings, typical for the utility industry. Entergy's dividend now is 90 percent of earnings.

Entergy's restructuring plans also include selling its Entergy Security Inc. unit, the largest security monitoring service in the U.S. Southeast with 200,000 customers, and Entergy Integrated Solutions, an energy management company that helps companies use less energy and buy it more cheaply.

It will shed its local exchange operations, a year-old business that provides dial-tone service to commercial phone users in Louisiana, Mississippi and Arkansas, and a stake in a digital wireless service it provides with AT&T Corp. Entergy will keep its 2,000-mile system of fiber-optic cable for data transmission.

Also yesterday, Entergy said its second-quarter profit rose 40 percent to $204.3 million, or 83 cents a share, from $146.3 million, or 61 cents a share, in the 1997 quarter.

Pub Date: 8/04/98

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