First profit in 2 years at Allegheny Energy

25 cents a share posted for first quarter by debt-ridden company

May 11, 2004|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Debt-ridden Allegheny Energy Inc., struggling to recover from past trading losses and accounting irregularities, said yesterday that it posted its first quarterly profit in two years as it focuses on slashing debt.

Allegheny, which is moving its headquarters from Hagerstown to Greensburg, Pa., to consolidate corporate offices, reported net income of $33.3 million, or 25 cents a share, for the first three months of 2004. That compared with a net loss of $58.8 million, or 46 cents a share, for last year's first quarter. Revenue rose 24 percent to $889.7 million.

The company reported a $39.4 million after-tax net gain as proceeds from the 2003 sale of a California energy supply contract were released from escrow. Power-generation and trading losses narrowed to $2.6 million from $94.9 million a year earlier.

After two years of struggling to cut $5.75 billion in debt, Allegheny has made a number of moves to reverse its fortunes, selling assets, refinancing debt and replacing about two-thirds of its accounting staff because of accounting errors discovered in November 2002.

Paul J. Evanson, a veteran utility executive who took over as chairman and chief executive officer in June, said the first-quarter results show the energy company's turnaround is on track. "With the liquidity crises, trading losses and accounting challenges of the past two years substantially behind us, we are now focused on reducing debt, building a high performance organization and growing the fundamental earnings of our company," Evanson said in a statement yesterday.

Allegheny stock rose 70 cents to $14 per share yesterday.

In March, Fitch Ratings became the third ratings agency to boost the outlook on Allegheny's debt, replacing a negative debt outlook with a stable outlook, after the company managed both to refinance debt and to meet reporting deadlines.

Last month, Allegheny said it will relocate its headquarters to save money, a move to be completed by Sept. 1 and affect about 50 employees at the Hagerstown campus. More than 300 employees, such as linemen and other power delivery service workers, will remain in Western Maryland. Allegheny has about 230,000 customers in Maryland and a total of 1.7 million utility customers in Maryland, Pennsylvania, Ohio, Virginia and West Virginia.

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