Coming off of a tough week because of an announcement of lower earnings guidance, Bedminster, NJ-based NUI Corp. Thursday reaffirmed the positive performance of its energy trading and portfolio management business and declared its regular quarterly dividend on Thursday. The company said that while trading will be limited going forward because of its strict credit requirements on counterparties and declining liquidity in certain markets, the trading division is still expected to post relatively strong earnings.

“NUI’s trading and portfolio management subsidiary has been profitable every year since its inception in 1995, including fiscal 2002,” stated CEO John Kean. “NUI Energy Brokers has been the second largest contributor to earnings for NUI for the past several years and should account for more than 25% of NUI’s earnings before interest and taxes in fiscal 2002.” The company predicted last week that while the segment is expected to continue to be a significant contributor to fiscal 2003 earnings, earnings are likely to be flat, or slightly lower, when compared to fiscal 2002.

Sparked by the company’s earnings guidance reduction last week, Moody’s Investors Service placed the debt ratings of NUI Utilities Inc. and that of its parent holding company, NUI Corp., under review for possible downgrade. The review affects $260 million and $60 million of NUI Utilities’ and NUI Corp.’s debt securities, respectively.

NUI reduced its earnings outlook for the second time in the last four months. The company said it anticipates fiscal 2002 earnings from continuing operations for the year that ended Sept. 30 to be between $0.85 to $0.95 per share, excluding the effect of the change in accounting, severance and discontinued items. In July, the company lowered its guidance to $1.50 to $1.60 per share from its previous guidance of $1.80 – $1.90 per share (see NGI, July 29).

The Moody’s review was prompted by concerns over the weaker earnings outlook due to deteriorating economic condition of NUI’s gas customer base that could result in decreased gas consumption. The ratings agency added that the parent company’s non-regulated businesses of telecom and retail marketing are still undergoing management restructuring and evaluation of strategic importance, as those earnings come in below management expectations.

“In light of the changes taking place in the energy marketplace, the earnings contribution of the energy trading business to NUI Corp. is less certain,” Moody’s said in a note. “Moreover, increasing overhead expenses in areas such as health care costs and pension asset valuation adjustments could continue in the event of generally weak economic conditions.”

In addition, Moody’s cited the uncertainty of financial reporting as the company goes through re-audits by their new accountants, PricewaterhouseCoopers, over the 2000-2002 period that was previously audited by Arthur Andersen. NUI said last week that the re-audit would delay the release of September 2002 year-end fiscal numbers until December of this year.

In its review, Moody’s said it will assess the impact of:

The debt ratings under review include NUI Utilities -Baa1 senior unsecured debt, Baa1 senior unsecured medium term notes and NUI Corp. -Baa2 senior unsecured debt.

“Despite all the issues facing the energy trading markets over the past year, NUI Energy Brokers has not experienced any write-offs and has not incurred any bad debt expense associated with its trading activities,” Kean added. “NUI Energy Brokers was successful in generating close to the same amount of earnings in fiscal 2002 as it did in fiscal 2001, which was a record year.”

The company also reported that the board of directors declared a regular quarterly dividend of $0.245 per share on the NUI’s common stock. The dividend is payable on Dec. 16 to shareholders of record on Dec. 2. “For more than 100 years, our dividend has played an important part in the value received by our shareholders. As previously stated, our board of directors is committed to the current dividend based on their positive view of the company’s future,” said Kean.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.