Allegheny names Pifer acting CEO, president

Noia retires tomorrow after tumultuous year

April 17, 2003|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Allegheny Energy Inc. named a longtime company insider as interim chief executive and president yesterday to replace Alan J. Noia, who is retiring after a tumultuous year in which the Hagerstown utility saw its debt level balloon to $5.1 billion and stock price plummet by more than 80 percent.

Noia is to be replaced tomorrow by Jay S. Pifer, 65, a senior vice president of Allegheny and president of Allegheny Power, the company's energy delivery subsidiary that serves 1.5 million electricity and 230,000 natural gas customers in Maryland, Ohio, Pennsylvania, Virginia and West Virginia.

In addition to the leadership change, James J. Hoecker, former chairman of the Federal Energy Regulatory Commission in the Clinton administration who joined Allegheny's nine-member board in 2001, was named lead director.

"One of the things to keep in mind is the fact that this is not an anomaly in the industry," said Craig Shere, an energy analyst at Standard & Poor's Investment Advisory Services. "We've already seen a change in top management at AES, Aquila, El Paso Corp. and others. ... Not all the ailments afflicting the energy sector have been under management control, but the advent of new management can ease investor anxiety and improve negotiations with outside parties.

"Right or wrong, financial counterparties, investors and regulators like to see a changing of the guard," Shere added.

In the past year, chief executive departures have included Dynegy Inc.'s Charles L. "Chuck" Watson, El Paso Corp.'s William A. Wise, Aquila Inc.'s Robert K. Green, and AES Corp.'s Dennis W. Bakke.

Noia announced his retirement a little more than a week after Allegheny nailed down a crucial $2.4 billion refinancing deal with its lenders in February. Noia was widely blamed for leading the company astray from its core business of generating and delivering power to customers.

Trouble surfaces

Trouble at Allegheny began to surface in September, when Allegheny fired the head of its energy-trading unit for alleged violations of the company's conflict-of-interest policies. That same month, Merrill Lynch & Co. Inc. sued Allegheny for failing to buy out the investment firm's remaining 2 percent equity stake in the trading unit that the Hagerstown utility purchased in March 2001. Allegheny counter sued Merrill Lynch.

On Oct. 1, Moody's Investor Services downgraded Allegheny's credit rating to below investment grade, and two subsidiaries defaulted on several key credit agreements a week later.

Allegheny is also enmeshed in a legal dispute with California over a $4.4 billion contract to supply the state with power over a 10-year period. California has accused several energy companies of illegally inflating power prices during its energy crisis.

More recently, Allegheny received permission from its investors to sell stock privately to raise cash and pay off debt.

"It has been a difficult time," Shere said. "Allegheny didn't start Global Energy Markets, the trading unit. Merrill Lynch did. Allegheny took huge losses on its California contract, which was supposed to turn profitable but was held up because of California's legal posturing. They're the only company whose shares fell when they got their refinancing deal. There's uncertainty about share dilution.

"Somehow, they've got to settle with Merrill Lynch, somehow they've got to settle with California and somehow they've got to find a way to sell some assets," Shere said. "There's still a lot unanswered."

A comprehensive review of financial statements, which has identified errors in prior earnings reports, has delayed the release of quarterly results and postponed Allegheny's annual shareholder meeting. Allegheny has not reported official quarterly results since the second quarter of last year.

Company officials could not say yesterday whether Pifer is a candidate for the permanent position of CEO. He started with Allegheny 39 years ago in the customer service department,

`Talented executive'

"Jay Pifer is a talented executive and a thoughtful leader," Hoecker said in a prepared statement. "Having served Allegheny Energy for four decades, Jay's understanding of our company and the energy industry is impressive. The board and I are grateful that Jay has agreed to share his knowledge and experience in an expanded leadership role as we continue to take the actions necessary to restore the company's financial health and refocus our business strategy.

The board is working with an executive search firm to identify a permanent CEO, Hoecker said, adding, "We have accelerated this process, but we believe it is also appropriate to ensure continuity in the management of the company during this transition period."

Shares of Allegheny rose 9 cents to close at $7.74 on the New York Stock Exchange.

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