UtiliCorp Shopping for Generator Partner for Aquila Energy
Kansas City, MO's Utilicorp United Inc. is shopping around, and
has already begun to narrow its options on which "high quality,
low-cost fleet of generators" to pair with its wholesale merchant
moneymaker Aquila Energy, management announced last week. A
partnership deal is expected to be unveiled within a few months.
In its second-quarter earnings conference call with investors,
UtiliCorp's CEO Richard C. Green Jr. said that subsidiary Aquila
Energy, one of North America's largest electricity and natural gas
wholesalers, helped the company to another record quarter, with
most of its growth in the commodity business. Commodities alone
helped to offset lower earnings from UtiliCorp's networks segment,
and also allowed the company to surpass its results for the same
period in 1999.
Based on Aquila's strong performance, the CEO said Utilicorp,
which has international interests in electricity and natural gas
services, is considering all proposals as it looks for a quality
power generator to partner with its high achiever. Aquila earnings
before taxes and interest were up 113%, standing at $49.5 million
for the quarter.
"In terms of growth, on the merchant side of the business,
Aquila continues to see strong interest in partnership
opportunities and that continues to be a number one priority --- to
partner Aquila with a attractive fleet of generators," said Robert
Green, COO. "We expect to be announcing results in that regard over
the next few months."
Overall, the growth was good across the board at Utilicorp in
the second quarter, which saw its profit rise 18% in the period,
beating analysts' estimates. Profit was keyed by a
better-than-expected demand for its power, weather and generation
services. Net income rose to $29.3 million, or 31 cents a share,
compared with $24.8 million, or 27 cents in 1999's second quarter.
Wall Street's First Call/Thomson Financial had predicted UtiliCorp
to earn 30 cents.
UtiliCorp's expanding services segment contributed $7.7 million
to second-quarter earnings, "This segment includes our broadband
telecommunications business as well as our 36% ownership interest
in Quanta Services Inc.," COO Robert Green said. "We are expanding
our local broadband services in selected markets and expect this
business to grow significantly over the next few years." Utilicorp
entered into the strategic partnership with Houston's Quanta
Services, an electric line company, last year.
CEO Richard Green said the company was "especially pleased" with
the overall health of UtiliCorp, which he said is on a pace to grow
at least 8% through the year. "Most of the company's improved
performance came from Aquila's gas and power trading, with a
"particularly pleasing performance out of our power trading
business," said Peter Lowe, CFO. UtiliCorp's earnings before
interest and taxes (EBIT) for the second quarter were $103.9
million, up 21% from $85.6 million a year ago.
Commodity services earned $34.2 million, up from $9 million for
the same period a year ago, "reflecting a continuation of a record
performance in 2000 across all major North American commodity
markets," said Richard Green.
Aquila's natural gas liquids business also contributed this
quarter, reflecting strong NGL pricing.
Not all of the news was good. UtiliCorp's U.S. energy networks'
earnings plunged 38% to $17.1 million in the second quarter, down
from $27.6 million a year ago. The spiral resulted from increased
costs in purchased power, and Lowe said the company had
miscalculated how high natural gas prices would go in the time
period, a miscalculation that CEO Green said would not happen
again. Increased operating costs and depreciation that relate to
the company's continued investment in upgrading its technology
infrastructure also brought earnings down in this segment, but Lowe
said that the IT costs are part of upgrading the business, and
won't be repeated.
Besides Aquila's continuing ascent, Utilicorp expects to see its
broadband telecommunications business grow in the next few years,
with local service expanded in "selected markets."
Robert Green said that the $450 million purchase of TransAlta
Corp.'s electricity distribution and retail assets in Alberta has
been approved by the Alberta Utility Commission, and that deal is
expected to close this month. When complete, it will add 350,000
customers to UtiliCorp's Canadian networks operation, and will add
to 2001 earnings.
Completed mergers in the United States also will help the bottom
line next year, said the COO. On Thursday, one of its mergers, that
with St. Joseph Light & Power Co., is nearing completion, and
the utility announced that it has passed federal anti-trust
reviews. The merger has already received approval from the Federal
Energy Regulatory Commission, and the state regulatory agencies in
Iowa, Minnesota, West Virginia and Colorado, and is expected to be
completed before the end of the year.
Carolyn Davis, Houston