GPU Plans to Cut, Sell and Improve
GPU Inc., parent of New Jersey's largest electric utility, GPU Energy,
unveiled a multi-point program designed to enhance shareholder returns
at the Edison Electric Institute Finance Conference in Orlando, FL, last
week. The plan includes a $100 million cost reduction over the next two
years, a $40-$50 million investment to improve the company's reliability
and a non-core asset sale designed to generate over $500 million.
GPU said the goal of all these moves is to deliver annual earnings which
meet or exceed expectations in 2000 and set the company on a 5% earnings
growth track for years to come. The company's stock price has suffered
in recent months, falling from above $43/share in June to under $33/share
"We are revitalizing this company, and these are the kinds of steps
you can expect from us," said Fred Hafer, CEO of GPU Inc.
The plan calls for cost reductions of $55 million in 2000 and an additional
$45 million in 2001. The area where most of the cuts will come from are
GPU Energy operations. The subsidiary, which serves over two million customers
in New Jersey and Pennsylvania, is targeting $30 million of cuts for next
year followed by $40 million of additional reductions in 2001. GPU said
the cuts would be achieved by eliminating significant amounts of operational
overhead expense and by improving the productivity of all its operations.
Jeff Dennard, a GPU spokesman, said layoffs are not out of the question.
"Every time a company analyzes its operations in this way, layoffs
are a strong possibility. Nothing has been written in stone as of yet,
but the need to cut costs could very well cause some job reductions."
The company also indicated that it would not be interested in a major
acquisition as a way to boost its stock value. It had been rumored that
GPU was in the market for a major acquisition (see NGI, June
14). Future acquisitions, if made, would likely be small in size and
would help build GPU's non-regulated businesses, which will be an area
of focus, or significantly add value to its existing portfolio, the company
The investment to improve reliability was first mentioned last month
when the company testified before the New Jersey Board of Public Utilities
that it needed to expand its operations in order to better serve its customer
base. Last summer the Pennsylvania-New Jersey-Maryland electric grid exceeded
its base peak load estimate by almost 4,000 MW, which put a serious strain
on GPU's performance.
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