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Southwest Gas Consolidation Options Stymied

Southwest Gas Consolidation Options Stymied

After being an attractive takeover or merger target, the phone lines to Las Vegas-based Southwest Gas Corp. from prospective suitors are idle.

In response to a local reporter's question, Southwest president/CEO Michael Maffie said no one has talked to the $1 billion (revenues) local gas distribution company since the bottom fell out of its merger plans with ONEOK, the Oklahoma-based gas utility holding company. Several major lawsuits were filed over last year's failed merger attempts --- first with ONEOK, a desired partner, and second with an unwanted partner, Southern Union.

Southwest's operations in Nevada, Arizona and some of the more sparsely populated desert and mountain areas of California have remained unchanged and the merger failure has generally not been noticed by the company's 1.3 million customers, a Las Vegas-based spokesperson, Roger Buehrer, said Wednesday. "Even when the merger was active, it was virtually invisible to the customers and to our operating divisions," he said. "It was really focused only on the key officers involved."

Since the first of the year, Southwest Gas has filed lawsuits against ONEOK of Tulsa, alleging "breach of contract, breach of the implied covenant of good faith and fair dealing and fraud" in several areas including the cancellation of the proposed merger contract, and against Southern Union Co., of Austin, TX, seeking unspecified damages related to its attempts to block the proposed ONEOK combination.

While the court process is expected to take at least two years if not longer, Southwest Gas, the fastest growing LDC in the nation, adding customers at an average of 5% increase annually for the past five years, has told its shareholders that the company is "well positioned" to go it alone in the future or to strike up a strategic alliance. The latter is not likely to happen before the court actions are settled or concluded.

With residential and commercial customer growth continuing at a strong pace and the construction of several new merchant power plants fueled by natural gas planned in both Nevada and Arizona, Southwest has said it can "succeed through internal growth or join with another company if that makes more sense for shareholders," Maffie said in this year's annual report.

He also has not tried to hide the bitterness left by the failed merger, calling it a "huge disappointment," following Arizona regulators' delaying a decision on the merger, prompting ONEOK to cancel the deal. Nevada regulators earlier in 1999 had approved the marriage. Then Southern Union came in with its unsolicited offer, and Southwest rejected that in favor of ONEOK.

Richard Nemec, Los Angeles

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