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Archive for Tuesday, June 18, 2002

Aquila to cut jobs

Energy firm also to reduce dividend

June 18, 2002

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— Energy company Aquila Inc. will reduce its trading activity in the unregulated wholesale market, cut more jobs and take other steps aimed at strengthening its creditworthiness.

The measures announced Monday had been foreshadowed last week when Robert Green, president and chief executive officer, said the annual dividend might have to be sacrificed to retain earnings.

Aquila's board plans to cut the dividend by 50 cents per share from $1.20, where it had been maintained for several years, spokesman Ethan Hirsh said.

In addition, Aquila will issue $900 million in new equity and debt securities to generate cash and help balance the books and will cut more jobs in its merchant energy unit, Hirsh said.

Details of the job cuts, which are in addition to the 700 announced in recent months for the entire company, had not been firmed up as of Monday, Hirsh said.

Partly because more debt will be issued, Aquila on Monday lowered its prediction of operating earnings for 2002 to the $1.30-$1.40 range. In mid-April, Aquila reduced its forecast for operating earnings to $2.20 from $2.83.

Aquila's debt rating is under review by Moody's Investors Service and Standard & Poor's Corp. Moody's currently rates Aquila debt one step above junk status. A credit rating downgrade would increase financing costs and trigger covenants that would require repayment of debt if a rating sank to junk.

Hirsh said Aquila officials consulted with the credit-rating firms last week and "had confirmation we were going in the right direction" with the moves announced Monday.

The reduced activity in wholesale energy trading will return the company closer to its core focus on regulated sales of electricity and natural gas and on fixed assets such as pipelines and storage.

Those businesses had been the principal activities of UtiliCorp United Inc., which adopted the name Aquila earlier this year after buying back the 20 percent of the energy trading and risk management unit it had spun off in early 2001.

But like many energy companies, Aquila soured on the deregulated wholesale market in recent months as the cost of capital soared and earnings proved elusive.

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