Allegheny Energy looking to pare debt

Utility's first-half loss widens to $290 million

December 23, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Allegheny Energy Inc., the troubled Hagerstown-based utility owner, faces a transitional year in 2004 in which it will need to cut its $5.75 billion debt by refinancing and selling assets, the company said yesterday as it released weakened earnings for the first half of 2003.

Paul J. Evanson, Allegheny's chairman and chief executive, said the company is on track to meet goals set six months ago when he joined a company teetering on the brink of bankruptcy.

"We may need to consider selling selective assets and taking other actions to reduce debt levels," Evanson said.

Using cash from power sales and other operations to reduce debt is "just not enough," Evanson said on a conference call with analysts and investors.

The company owns 10 coal-fired power plants in the United States. The largest coal plants are in Hatfield's Ferry, Pa., and Harrison, Pleasants and Fort Martin, W.Va.

Evanson didn't specify which assets might be sold. Allegheny spokeswoman Janice Lantz declined to say which the company was considering selling.

Allegheny is working toward improving its liquidity, which it has done in part by repaying $250 million in debt two weeks earlier than a Dec. 31 deadline. That saves the company $500,000 in interest payments, Evanson said yesterday in a conference call with analysts.

Allegheny owns Allegheny Power, which supplies electric and natural gas service to about 4 million people in Maryland, Pennsylvania, West Virginia and Ohio. The company has completed restructuring its senior management team, Evanson said.

"The next key objective is to divest our noncore operations and focus on core businesses in traditional territories," he said.

Evanson's comments came as the company released financial results for the first and second quarters of 2003, reporting a loss of $290.3 million, or $2.29 per share, for the first six months of 2003, compared with a loss of $87.9 million, or 70 cents per share, posted for the first six months of 2002.

Allegheny's filings have been delayed by its financial problems.

On a quarterly basis, the company reported a loss of $231.5 million, or $1.82 per share, for the second quarter, compared with a loss of $33.5 million, or 27 cents per share, in the second quarter of 2002.

During the first quarter of 2003, the company said it lost $58.8 million, or 46 cents per share, compared with a loss of $54.4 million, or 43 cents per share, in the first quarter of 2002.

The September disclosures were included in the company's annual report to the Securities and Exchange Commission, a filing that had been delayed by the discovery of accounting errors last year.

Bloomberg News contributed to this article.

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