Williams delays earnings due to pending debt restructuring

Ann de Rouffignac
OGJ Online

HOUSTON, Jan. 29, 2002 — Williams Cos. Inc. Tuesday delayed the release of its 2001 year-end and fourth quarter results because it is trying to assess the impact of restructuring of $1.4 billion of debt of its former subsidiary Williams Communications Group Inc.

The communications company, spun off from Williams in 2001, has contingent debt with credit rating and equity price triggers that could affect Williams Cos. Inc.’s earnings. Williams said in December it was attempting to restructure the debt and eliminate the triggers.

Williams share prices were down 23.5% to $18.45 Tuesday morning in heavy trading on the New York Stock Exchange.

Investors and analysts quizzed the executives during a conference call about the progress on restructuring the balance sheet, especially the debt with equity and ratings triggers and the impact on earnings. But CEO Steve Malcolm said the restructuring will not be accomplished by the end of the first quarter.

“We are in the early stages of discussions. We have had no substantive discussion on that yet,” said Malcolm.

The company estimated 2001 earnings per share of $2.01, compared to $2.15/share for 2000. These figures include a 12-/share one-time charge for exposure to Enron Corp. but does not include the potential impact of Williams Communications debt.

Recent developments in the telecommunications industry, including Global Crossing’s filing for Chapter 11 protection from creditors and the pending “internal assessment of the contingent debt” will require a few more weeks to estimate the ultimate impact on earnings, Malcolm said.

Analysts also asked him to clarify the amount of the earnings that came from noncash “marked to market” trading and marketing transactions. This type of accounting values on a given day medium and long-term contracts whose proceeds are not immediately realizable.

“The cash component of earnings is about 40%,” said Malcolm. “We focus on long-term deals not on the physical side of the business. We are a risk management company and that is how we do business.”

The cash portion of earnings is expected to increase over time and the company doesn’t expect it to fall below the 40% range, he said. Malcolm said Williams didn’t close any large structured transactions during the fourth quarter because of the impact of the collapse of Enron.

“Counterparties were worried about the impact of Enron. We had to show people how we are different from Enron. We have assets behind our marketing and trading company,” he said. “We have crossed the threshold on answering Enron questions. It won’t be an impediment now to closing deals.”

He said the company has 140 deals in the pipeline that are expected to be completed during the current quarter. For 2002, Williams is estimating a 12-15% growth rate without acquisitions.

The power portfolio is expected to reach 25,000 Mw by end of 2003. Currently, Williams either owns or has under contract 15,000 Mw. Malcolm would not be more specific about the power portfolio other than to say by year end it will be between 15,000 Mw and 25,000 Mw under contract.

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