Power company expects staff reductions through retirements, attrition
Allegheny Energy hopes to cut its staff by 10 percent through early retirements and normal attrition and not through layoffs, a company spokesperson said. On Monday, the utility announced it will cut 600 of its 6,000 jobs to help trim its costs after an unexpectedly weak first half of the year.
The company, which has customers in parts of Maryland, Ohio, Pennsylvania, Virginia and West Virginia, also lowered its 2002 earnings estimate by more than 25 percent, citing lower wholesale energy prices, a mild winter and spring weather and substantially decreased energy trading since the collapse of Enron Corp. Allegheny invested heavily last year in energy-trading operations.
“But they are not really layoffs. We hope to reach that figure through an early-retirement option we are offering as well as normal attrition,” said Debbie Beck, a spokesperson for the Hagerstown, Md.-based company.
“At that point, as we get down the road to September, we will then see how many people have taken the early retirement option and if other staff reductions will be needed at that point.”
The work force reductions will result in about $5 million of expense reductions this year and an ongoing annual savings of $40 million to $50 million, the company said.
When asked if the company might be contemplating requesting a rate hike to bolster revenue, Beck said, “Not that I am aware of.’
In addition to the staff cuts, Allegheny Energy, which has been in an expansion phase for the past several years, dropped some construction plans for new generating stations, Beck said.
Allegheny has canceled construction of a 1,080-megawatt generating plant in La Paz County, Ariz., and an 88-megawatt plant in St. Joseph County, Ind., reducing capital expenses by about $700 million over the next several years.
Those actions and others are aimed at lowering pretax operating expenses by $45 million for the rest of 2002, the company said. “We have been involved in some expansion projects in the past several years, and part of our plan has been to expand on a national basis,’ Beck said of the proposed projects.
While some of the company’s generating facilities in this region are coal fired, Beck said the new plants were to be fueled by natural gas.
In a statement from the company, Allegheny chairman Alan J. Noia said, “These are challenging times for our company, but we are taking immediate action to bolster our financial performance.
“The Allegheny Energy management team and I recognize that these challenging times call for prudent and decisive actions that will allow us to continue to provide shareholder value, while offering customer service that is unmatched in our industry.”
Noia added that Allegheny Energy remains committed to maintaining strong investment grade ratings. In this regard, the registration statement the company filed earlier this year has been declared effective, and “we continue to evaluate an offering of $400 million to $600 million of common stock and/or convertible securities later this year,’ he said.
Proceeds from the offering of such securities will be used to reduce outstanding debt and for other corporate purposes, Noia added.
Allegheny Energy Inc., which trades on the New York Stock Exchange under the symbol AYE, also announced that it expects 2002 earnings per share to be in the range of $2.50 to $2.70, excluding the 10-cent after-tax gain on the sale of property at Canaan Valley, W.Va., which was recorded in the first quarter. This amount is lower than its prior guidance of $3.60 to $3.70 per share.
“Although the energy industry as a whole is facing unprecedented challenges, we are taking steps now to realign our cost structure relative to our projections,” added Noia. “Despite the challenges ahead, Allegheny Energy remains steadfast in its commitment to employees, shareholders, and customers and will ensure that safety, reliability, and top-notch customer service will not be compromised.”