GPU Inc., parent of New Jersey’s largest electric utility, GPUEnergy, unveiled a multi-point program designed to enhanceshareholder returns at the Edison Electric Institute FinanceConference in Orlando, FL, yesterday. The plan includes a $100million cost reduction over the next two years, a $40-$50 millioninvestment to improve the company’s reliability and a non-coreasset sale designed to generate over $500 million.

GPU said the goal of all these moves is to deliver annualearnings which meet or exceed expectations in 2000 and set thecompany on a 5% earnings growth track for years to come. Thecompany’s stock price has suffered in recent months, falling fromabove $43/share in June to under $33/share in September.

“We are revitalizing this company, and these are the kinds ofsteps you can expect from us,” said Fred Hafer, CEO of GPU Inc.

The plan calls for cost reductions of $55 million in 2000 and anadditional $45 million in 2001. The area where most of the cutswill come from are GPU Energy operations. The subsidiary, whichserves over two million customers in New Jersey and Pennsylvania,is targeting $30 million of cuts for next year followed by $40million of additional reductions in 2001. GPU said the cuts wouldbe achieved by eliminating significant amounts of operationaloverhead expense and by improving the productivity of all itsoperations.

Jeff Dennard, a GPU spokesman, said layoffs are not out of thequestion. “Every time a company analyzes its operations in thisway, layoffs are a strong possibility. Nothing has been written instone as of yet, but the need to cut costs could very well causesome job reductions. To what extent and when? Those questions havenot been answered yet.”

The company also indicated that it would not be interested in amajor acquisition as a way to boost its stock value. It had beenrumored that GPU was in the market for a major acquisition (seeDaily GPI, June 8). Future acquisitions, if made, would likely besmall in size and would help build GPU’s non-regulated businesses,which will be an area of focus, or significantly add value to itsexisting portfolio, the company said.

The investment to improve reliability was first mentioned lastmonth when the company testified before the New Jersey Board ofPublic Utilities that it needed to expand its operations in orderto better serve its customer base. Last summer the Pennsylvania-NewJersey-Maryland electric grid exceeded its base peak load estimateby almost 4,000 MW, which put a serious strain on GPU’sperformance.

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