The body count of lost energy traders and related support staff has climbed sharply in the past two weeks after Williams Cos. downsized its staff by another 210 employees, Reliant Resources Inc. cut close to 135, and Albuquerque-based PNM Resources Inc. eliminated 85 positions. The new cuts followed those by Houston’s UBS Warburg Energy, which fired 100 of its energy trading staff, and Duke Energy Corp. said it was considering reducing its 500-member trading force to “fit” the current conditions.

Houston-based Reliant Resources announced that it would cut up to 135 within its energy merchant services, which it said was a response to poor energy trading conditions industry wide. Most of the cuts are in Houston, and are either within the trading staff or in support jobs including information technology. Company-wide, Reliant Resources employs close to 6,300, and about half are based in Houston. The company had already eliminated about 50 positions in June, and had also cut 22 of its contract positions.

“Layoffs are always difficult, but we have an obligation to all of our employees and shareholders to make necessary business decisions and maintain our financial strength,” Reliant’s Richard Wheatley said. “Business conditions will have a bearing on our staffing needs in the future.”

Meanwhile, PNM announced it was realigning the company and plans to consolidate “several areas” to reduce operation and maintenance costs and reorganize “back into a more traditional utility structure.” PNM’s principal subsidiary is Public Service Company of New Mexico, which provides power and gas utility services to about 1.3 million in New Mexico, and sells wholesale power in the western United States.

PNM said in a written statement that “like many other energy companies, [it] has been hurt by the troubled power trading market where prices have been low and trading activity has been sluggish.” It said it also was implementing process improvement initiates to reduce costs, which overall will affect 85 employees.

“Unfortunately, difficult decisions have to be made,” PNM CEO Jeff Sterba said. “These changes, which affect departments at all levels, are part of our ongoing process to improve our efficiency while retaining our commitment to improving service quality for our customers.” PNM said it was also responding to market conditions by “redeploying resources to focus on long-term power agreements, instead of daily wholesale market activity,” and has scaled back its generation development and construction operations.”

Last Wednesday, Tulsa-based Williams reported its third trading staff reduction so far this year. On Aug. 7, about 90 Williams employees lost their jobs followed by another 100 on Aug. 22 and 110 more last week. More are certain to follow. Currently, Williams employs about 500 marketing and trading employees. Another 70 from the company’s London office are likely to suffer a similar fate early this month.

Williams is down to about 12,000 total employees from more than 12,400 at the beginning of the year, said spokeswoman Paula Hall-Collins, noting that a staff number is hard to pinpoint these days because it’s a rapidly moving target.

Williams is in the process of unloading $5 billion in assets and still has eight major operations left to sell, including a 40% portion of its energy trading book, its Memphis and Alaska refineries, Williams Gas Pipeline Central, midstream assets in Western Canada, its soda ash facilities, bio energy assets, its travel centers and its olefins plants.

“There’s no question that Williams is undergoing the most dynamic restructuring in its history,” CEO Steve Malcolm said in a conference call on Aug. 21. “Progress has been made but clearly there is much more left to be done.” Malcolm promised Williams will be a much smaller, more focused company but will retain a large presence in the energy business.

Malcolm said that despite the asset sales planned for this year the company still will retain a major presence in the energy business, including a premier exploration and production operation in the Rocky Mountain region, a large midstream presence in the Rockies and Gulf Coast regions, 20,000 miles of interstate pipelines, a 54% stake in a profitable master limited energy partnership, and 60% of its former energy marketing and trading portfolio.

In July, Williams reported a second-quarter loss of $349.1 million, or 68 cents a share, compared with net income of $339.5 million, or 69 cents, a year earlier. It had a loss of $498 million from trading and selling natural gas and electricity. Malcolm said the company expects recurring segment profit of $630 million to $660 million from its interstate natural gas pipeline business and $780 million to $850 million from its energy services segment for full-year 2002. He didn’t forecast results for energy marketing and trading.

He added that expansions on Northwest Pipeline and Transcontinental Gas Pipe Line will more than offset the loss of returns from Kern River Gas Transmission, which was sold in March to MidAmerican Energy Holdings, and from Williams Gas Pipeline Central, which currently is on the auction block.

The company’s financial situation greatly improved following a $3.4 billion financing package in July, in which Williams received a $700 million term loan, a $400 million credit facility, a $900 million credit on its E&P properties and $1.4 billion in asset sales. However, the $900 million Barrett assets loan is at 30% interest, which will propel Williams’ debt payments to a total of $2.2 billion next year from $684 million this year. Williams officials acknowledged the high cost of debt next year but said the company can cover it and would not be adding any new debt. Nevertheless, the next six months will be a challenge for Williams and most other energy companies as credit restrictions, light trading and low liquidity force multiple asset sales and a reorganization of the energy merchant sector.

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