Williams CEO Steve Malcolm said his company is cutting $50 million in annual expenses in an effort to strengthen its balance sheet and prepare for the possibility that it will have to assume $2.2 billion in debt from its former communications subsidiary.

At the UBS Warburg Energy and Utilities Conference in New York, Malcolm said the company was expecting to release its fourth quarter and full year earnings later this month following an assessment of Williams’ contingent obligations related to Williams Communications Group (WCG), which was spun off to shareholders in April 2001.

“WCG has announced that it will provide a balance-sheet restructuring plan to its banks by Feb. 25 and yesterday provided public guidance on its earnings expectations for the current year,” said Malcolm. “Both are important elements in our assessment. We are digesting the information provided yesterday and we’ll need to understand the impact of their restructuring plan before we can release our final 2001 earnings.

Williams, which has faced increasing scrutiny and credit tightening as a result of the Enron Corp. bankruptcy, has had the additional problem of dealing with its struggling former communications unit. The company already issued securities and plans to sell non-core assets and cut more than $1 billion in capital spending to survive stringent scrutiny by ratings agencies and investors.

However, Malcolm said the difficult situation has slowed the number of transactions the company is able to close with customers. “The rate at which we are closing deals has been slowed and has been hampered by the fact that we’ve been contending with these issues over the past two weeks. But let me tell you, we will be successful. We will have good things to talk about at the end of this quarter.”

Malcolm said the company is continuously reviewing its balance sheet strengthening plan. “In addition, we are also moving to further reduce expenses and would expect annual reductions of $50 million from that effort. We are fully committed to make additional adjustments in any of these areas to ensure that we continue to operate as a solid investment-grade company.”

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