Allegheny Energy, Inc – ‘8-K’ for 11/15/00

On:  Thursday, 11/16/00, at 9:32am ET   ·   For:  11/15/00   ·   Accession #:  3673-0-146   ·   File #:  1-00267

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         7     18K 

Document Table of Contents

8-K
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FORM 8-K                    

CURRENT REPORT                    

Pursuant to Section 13 or 15(d) of                    
the Securities Exchange Act of 1934                   

Date of Report (Date of earliest event reported):  November 15, 2000            

Allegheny Energy, Inc.                    

(Exact name of registrant as specified in its charter)                    

Maryland                 1-267                13-5531602                        
(State or other          (Commission File     (IRS Employer                     
jurisdiction of          Number)              Identification                    
incorporation)                                Number)                           

10435 Downsville Pike                   
Hagerstown, Maryland  21740-1766                    

(Address of principal executive offices)                    

Registrant's telephone number,                                                  
Including area code:                     (301) 790-3400               

8-K
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Item 1 - 8.    Not Applicable                                                   

Item 9.        Regulation FD Disclosure                                         

As part of the Company's analyst conference       

call  on November 15, 2000, Mr. Morrell, Senior             

Vice President and Chief Financial Officer of               

Allegheny Energy, Inc. read the following                   

statement:                                                  

Good afternoon.  I'm Mike Morrell, Senior         

Vice President and Chief Financial Officer of               

Allegheny Energy.  Also with me are Rege Binder,            

Vice President and Treasurer, David Bevilacqua,             

Allegheny Energy Supply Company Director of                 

Development, Terry Walker, Director of Financial            

Management and Greg Fries, Manager of Investor              

Relations.  Thank you for joining us to discuss             

our successful bid for 1,710 megawatts of gas-              

fired generating assets from Enron Corporation.             

If you have not already received a copy of        

our news release, please call Cindy Thomas at 301-          

665-2717 or you can access this information at our          

web site.  If you need to leave the teleconference          

before it has ended, you may listen to a recording          

of the entire call by calling 800-938-1593 or 402-          

220-0895 for international callers.  The replay             

pass code number is 14677.  This rebroadcast will           

be available from 6:00 p.m. this afternoon until            

11:00 p.m. Friday, November 17, 2000, Eastern               

Time. This call is also being broadcast live on             

our web site, www.alleghenyenergy.com , and also            

at the web site address, www.streetevents.com.              

Beginning this afternoon, a rebroadcast will also           

be available at these web sites through November            

17, 2000.                                                   

8-K
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Yesterday, we announced that Allegheny Energy     

Supply Company, LLC, our unregulated generation             

subsidiary, signed a definitive agreement with              

Enron Corporation under which Allegheny Energy              

Supply will purchase three Enron natural gas-fired          

generating facilities with a total generating               

capacity of 1,710 megawatts.  The acquisition will          

be accretive to Allegheny Energy's earnings in              

2001, excluding transaction costs and other costs           

related to the transition.                                  

The purchase includes the 546 megawatt            

Gleason plant in Gleason, Tennessee; the 508                

megawatt Wheatland plant in Wheatland, Indiana;             

and the 656 megawatt Lincoln Energy Center in               

Manhattan, Illinois.  One of these plants, the              

Lincoln plant in Illinois, is currently under a             

short-term contract to sell a portion of its                

output to a third party.  These assets will                 

provide Allegheny Energy with 1,710 megawatts of            

new natural gas-fired generating capacity within            

the Eastern Central Area Reliability region                 

(ECAR), Mid-America Interconnected Network (MAIN)           

and the Southeastern Electric Reliability Council           

(SERC) reliability areas.  After the close of the           

transaction, Allegheny Energy will have total               

generating capacity of more than 12,000 megawatts,          

including previously announced development                  

projects.                                                   

These plants we are purchasing from Enron are     

quite new and provide substantial geographic and            

fuel diversity to our generating portfolio which            

currently consists primarily of baseload coal-              

fired plants in Pennsylvania and West Virginia.             

These plants offer substantial optionality, which           

8-K
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we expect will immediately add earnings and value           

to our company.                                             

Completion of this transaction requires           

approval from the Federal Energy Regulatory                 

Commission, the Securities and Exchange Commission          

and the Department of Justice/Federal Trade                 

Commission.  We anticipate completing the                   

regulatory process by the second quarter of 2001.           

The purchase price for these plants, which        

have been in service since June 2000, was $1.028            

billion, or about $600 per kilowatt.   This price           

is comparable to the all-in cost of new gas-fired           

construction.  While the locations of these plants          

span three NERC regions, they are contiguous to             

our existing operations and within easy reach of            

major mid-west cities. Each plant is a simple               

cycle, gas-fired facility that is capable of being          

expanded to combined cycle operation as market              

conditions warrant.  And, each plant has an                 

established gas transportation and balancing                

contract in place for 2 to 10 years.  The gas               

commodity will be competitively priced and will be          

obtained through the Chicago hub, a very liquid             

marketplace.                                                

This transaction, along with our existing         

generating facilities and previously announced              

development projects, will give Allegheny Energy            

more than 12,000 megawatts of generating capacity.          

This generation portfolio will include 62% of low-          

cost, coal-fired base load capacity, 31% of gas             

and oil-fired capacity, and 7% hydro capacity.              

The gas and oil-fired portion consists of 53% gas-          

fired peaking capacity, 43% gas-fired combined              

cycle capacity, and 4% oil-fired peaking capacity.          

8-K
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We will finance this acquisition through a        

combination of debt and equity.  While we have not          

determined the exact allocation between debt and            

equity, the acquisition is accretive when modeled           

based on a 50 percent debt/50 percent equity                

financing scenario.                                         

To be more specific on the earnings               

available, our projections show that, in an                 

average year over the next five years, Allegheny            

Energy Supply should receive at least $225 million          

of revenue from these plants.  Using a 35-year              

depreciation and our expectations on other costs,           

the net income available should be at least $60             

million per year.  If you further assume that               

Allegheny Energy issues $500 million of equity, an          

amount well in excess of the equity actually                

needed to finance this transaction, the                     

transaction will be accretive to earnings per               

share.  At lower levels of equity issuance, the             

transaction is even more accretive.                         

This means that Allegheny Energy's net income     

and earnings per share should be higher than they           

otherwise would have been in 2001, assuming a               

closing early in the second quarter.  While the             

Company has not yet given any specific earnings             

guidance for 2001, we expect to do so by year-end.          

Such guidance will include the effects of our               

announced development and acquisition projects and          

will clearly support our guidance of earnings               

growth from operations by more than 10% per year            

over the 2000 - 2004 time period.  If one looks at          

Allegheny Energy Supply by itself, expected                 

earnings growth is substantially in excess of 10%           

per year.  With the addition of these generating            

assets and the generation development plans                 

8-K
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already in place which provide us the assets,               

location and scale to be a national player in the           

competitive generation market, we believe we are            

even better positioned to meet our growth goals             

and Wall Streets expectations.                              

At this time, we will be happy to answer any      

questions you may have.  Our operator, Frank, will          

queue your questions.                                       

Forward-Looking Statements                                  

Mr. Morrell's remarks were preceded by the        

following statement:                                        

Certain statements made during this conference              

call constitute forward-looking statements with             

respect to Allegheny Energy, Inc.  Such forward-looking     

statements involve known and unknown risks,                 

uncertainties, and other factors that may cause             

the actual results, performance, or achievements            

of Allegheny Energy to be materially different              

from any future results, performance, or                    

achievements expressed or implied by such forward-          

looking statements.  Such factors may affect                

Allegheny Energy's operations, markets, products,           

services, and prices.  Such factors include, among          

others, the following:   general and economic and           

business conditions; industry capacity; changes in          

technology; changes in political, social, and               

economic conditions; regulatory matters;                    

litigation involving Allegheny Energy; regulatory           

conditions applicable to Allegheny Energy; the              

loss of any significant customers; and changes in           

business strategy or development plans.                     

8-K
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SIGNATURES                    

Pursuant to the requirements of the Securities Exchange               
Act of 1934, the Registrant has duly caused this Report to                      
be signed on its behalf by the undersigned thereunto duly                       
authorized.                                                                     

  Allegheny Energy, Inc.

      By: /s/ MICHAEL P. MORRELL

     Name:  Michael P. Morrell
        Title: Senior Vice President

Dated:  November 16, 2000                                                       

Dates Referenced Herein

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