Taking its name and direction from its unregulated subsidiary,Washington Water Power announced Monday it will be cutting itsdividend by 61% and putting the money saved into growing allaspects of its business. The aim is to grow “a bigger and strongercompany” and the second priority is speed, the company’s newchairman and CEO Tom Matthews said.

“We cannot survive as a small northwestern utility, but we canbe THE Northwest Utility,” Matthews said in a conference call,describing it as a case of “eat or be eaten.” He said WashingtonWater Power which will take the name Avista Corp. after its energytrading subsidiary next Jan. 1 would be spending between $300 and$400 million a year acquiring generation, pipeline and both gas andelectric distribution assets.

The dividend will drop from $1.24 to $0.48, a rate that willyield 2.3% based on last Friday’s closing price of $20.875 “placingit more in line with growth-oriented utility companies and stillabove the dividend yield of the average Standard & Poor’s 500company,” the announcement said.. (The yield is close to Enron’s2.03, and considerably under the 5% plus registered by utilitiessuch as Baltimore Gas & Electric and Houston Po`wer &Light). WWP’s stock closed Monday after the announcement at $18 and7/8. The new dividend will be effective for the payout expectedDec. 15, 1998. For now the company will pay its regular quarterlydividend of 31 cents per common share.

WWP has offered to provide a safety net for shareholders whodepend on dividend income by offering an exchange of 35% ofoutstanding common shares for an equal number of mandatorilyconvertible preferred shares, each of which will pay an annualdividend of $1.24 per share for a period of about three years. Atthat point the new-issue shares will automatically convert back tocommon stock on a one-for-one basis. The plan must receiveregulatory approval to be put in place. WWP said if more than 20million shares are tendered for exchange, they will be subject toproration.

The announcement was made by Matthews, who left Dynegy (then NGCCorp.) to join the Spokane, WA-based utility 45 days ago. Thechange “immediately improves our cash flows, enhances our abilityto acquire needed capital in a cost-effective manner, andestablishes a solid foundation for our continued growth andsuperior financial performance.” The aim is “to act quickly andpurposefully to capture emerging opportunities….I amgrowth-oriented by nature and, with our industry in a state orrapid change, we need to make significant moves within the nextyear to position our company to succeed.”

At the end of July the utility reported increased earnings forthe first half over 1997, but said because of lower streamflowlevels for the hydroelectric generating system corporate earningsfor the year were not projected to match expectations. WashingtonWater Power has had to buy power to supply customers and it hasbeen expensive.

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