AGL Income Hit by Sales Customer Exodus
While AGL Resources reported markedly improved results for its
third fiscal quarter ended June 30, the company said returns were
hurt by costs due to the rapid pace at which Atlanta Gas Light
Customers have chosen alternate suppliers.
The company posted 3Q net income of $7.2 million compared with a
net loss of $1.2 million for the year-ago quarter. The boost came
mainly from an expected increase in operating margin for utility
operations due to the July 1, 1998 change in rate design for
delivery service for Georgia utility operations. Instead of
collecting revenues predominantly in the winter months, the new
rate design spreads utility delivery service revenues and margins
more evenly throughout the year.
Earnings also were affected by a $6.3 million increase in
utility operating expenses for the quarter compared with last
year's third quarter. Customer service activity associated with the
rapid pace at which customers are switching from the utility to
marketers for their gas sales service and increased depreciation
expense were the main factors for the increase.
A final factor affecting earnings was the start-up costs of
about $5 million from the company's retail energy marketing joint
venture associated with establishing market share in Georgia's
deregulated gas market.
Operating revenues for the third quarter were $185.9 million
compared with $246.4 million for the same period last year, a
decrease of $60.5 million. The decrease is mainly from customers
switching from the utility to marketers for gas sales service. As
utility sales service revenues decline there is a comparable
decline in utility purchased gas costs, so the revenue decline does
not affect earnings.
The company also announced an agreement with Sonat Inc. for the
sale of AGL Resources' interests in two joint ventures-Sonat
Marketing Co. LP, a gas marketer, and Sonat Power Marketing LP, a
power marketer. Both deals are subject to various government
approvals. The Sonat Marketing interest sale is expected to close
some time during the company's fourth quarter. The sale of the
Sonat Power Marketing interest is expected to close by the end of
AGL Resources acquired a 35% interest in Sonat Marketing in
August 1995 for about $32 million and acquired a 35% interest in
Sonat Power Marketing in June 1996 for about $1 million. The
agreement would give AGL Resources $40 million for its interest in
Sonat Marketing and $25 million for its interest in Sonat Power
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