The energy merchant sector took another hit Friday, after Boise-based IDACORP Inc. announced plans to wind down its power marketing business and cut in half its 120-member trading staff in the next year and a half. The decision was made to reaffirm “its commitment to maintain a strong investment credit rating.” IDACORP’s news mirrored announcements by Aquila Inc. to close its Merchant Services unit on Tuesday, and Dynegy Corp.’s decision to stop online trading on Wednesday (see Daily GPI, June 19; June 21).

In a statement, the company said its energy marketing subsidiary, IDACORP Energy, “will not seek new customers and will limit its maximum value at risk limits to less than $3 million. In addition to minimizing its risk tolerance, IDACORP Energy anticipates staff reductions of approximately 50% over the next 18 months.” In the next 18 months, IDACORP has targeted a reduction of working capital requirements for its trading business to less than $100 million.

“IDACORP Energy is committed to fulfilling its obligations under existing agreements,” said CEO Jan B. Packwood. “In keeping with our decision to wind down this portion of our business, IDACORP Energy will limit transactions to those necessary to meet obligations with existing customers and ensure the orderly settlement of the existing book of business.”

Like the statements of other energy merchants, the company said the “changes in the business strategy are being driven by a number of factors that include changing liquidity requirements brought on by rating agencies, continued uncertainty in the regulatory and political environment, and the reduction of credit worthy counterparties.” Standard & Poor’s cut its rating on IDACORP in March to “A-” from “A+” because of “increasing business risk” and gave it a negative outlook.

IDACORP said the reduction in energy marketing would not impact its 2002 annual earnings estimates of between $1.35 and $1.70 per share. “IDACORP is committed to maintaining its credit quality and consequently, we need to take steps to reduce the company’s overall risk profile,” stated Packwood. Additional details of the company’s “strategic direction” will be given during a second quarter analyst conference call scheduled for late July.

IDACORP, formed in 1998, is a holding company comprised of Idaho Power, a regulated electric utility; Ida-West Energy, an independent power project management and development arm; IDACORP Energy; IDACORP Financial, an investment vehicle which makes investments primarily in affordable housing projects; IdaTech, a developer and producer of fully integrated fuel cell systems; and IDACOMM, a telecommunications subsidiary providing high-speed Internet access technologies.

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