By the OGJ Online Staff
HOUSTON, Nov. 15, 2001 – Regulatory delay of the sale of its gas and electric utility is hurting liquidity at its telecommunications unit, Montana Power Co. executives said Thursday.
State regulators don’t plan to make a definitive decision until Jan. 31 on the proposed sale of Montana Power’s utility to NorthWestern Corp. for $602 million cash, plus debt. The company said its telecom unit is experiencing “short-term” liquidity problems that sale of the utility will cure.
Until last week, the Montana Public Service Commission had not even set a schedule to proceed on the final approval of the sale, said Montana Power CEO Robert Gannon during a Thursday conference call. Montana Power is in the midst of exiting the energy business to focus on its telecommunications unit, Touch America.
The strategy was announced in March 2000. It has already sold the power plants and oil and gas assets and has been waiting for regulatory approval of the sale of the distribution and transmission utility announced in October 2000.
Montana Power reported a third quarter loss of $27.5 million, or 26¢/share, on $283 .4 million in revenue, compared to a profit of $30.4 million, or 29-/share, on $270.3 million in the third quarter last year. The holding company’s losses resulted from a commission order requiring it to increase the distribution to natural gas utility customers of additional proceeds from an earlier sale of Montana Power’s oil and gas business and stagnation in the telecommunications industry, the company said.
Because of the telecommunications industry slow down and increasing costs, Touch America is out of compliance on covenants of a $308 million bank facility, Gannon said. A waiver was obtained so the company can arrange for additional capital and amend the facility. The company needs an additional $40 million before the end of January, he said.
Montana Power and NorthWestern Corp., Sioux City, ND, asked regulators to schedule a final hearing in December, but some of the parties participating in the process wanted the decision delayed until late in the first quarter of 2002, said Gannon. An agreement was reached with all the parties for regulators to decide Jan. 31.
Some of the issues to be resolved before the sale can be completed include whether the company is entitled to transition costs that would account for any uneconomic transactions the utility might have made resulting from the legislative requirement to sell its generation, said Roger Schrum, spokesman for NorthWestern Corp.
The portfolio of power supply contracts Montana Power filed with regulators Oct. 29 also must be approved. The final hurdle is the hearing scheduled to begin Jan. 15 on whether NorthWestern is “fit, willing, and able” to serve Montana’s default electricity and gas customers. Northwestern owns and operates a regulated utility in South Dakota and central Nebraska.