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The Finance Forum: Growth in a Back-to-Basics World

Thomas Fanning, executive vice president and CFO, Southern Co.
Fortnightly Magazine - October 15 2003

credit ratings fell below investment grade, charges and impairment wiped out years of earnings, we suspended our quarterly dividend, and our share price fell by more than 90 percent," said Green, in the letter to shareholders section of the 2002 annual report.

In August 2003, Aquila reported a net loss for the second quarter was $80.6 million or $.41 per fully diluted share, including $14.5 million of net income from discontinued operations, compared to the 2002 second quarter net loss of $810.0 million or $5.69 per fully diluted share, which included $15.5 million in net income from discontinued operations.

Meanwhile, Green has been selling, selling, and selling billions in assets to restore his company to financial health in the last year. Green, who was interviewed in late July, said that the company had a debt level of $3 billion and planned to reduce it to the range of $1.2 billion to $1.5 billion. Of course, given the furious pace of asset sales in the last six months those numbers are constantly changing, he says.

Moreover, his plan is what he calls a, "clean and disciplined strategy the objectives are financial stability, business stability, built on credibility."

In an August 2003 shareholder update, Green said the company was working diligently to return to profitability after 2004 and that the company's short-term liquidity was sufficient to execute its restructuring plan and support continuing operations.

"We're going back to the Aquila group of 1995, 1996. … So when you think about some of your metrics there, [Aquila is] going back to being a regulated utility, so that means that whatever earnings you make will have a 10 to 12 multiple on them because it's a utility. We don't pay a dividend now but a regulated utility, I believe by definition, should pay one so that's something we'll begin to do when we [return to] profitability."


Shootout in Texas:
TXU Bites Bullet, Dices Dividend

Dan Farell, executive vice president and CFO, TXU

Will investors once again put their trust in TXU after last year? At 3:45 A.M., on Oct. 14, 2002, the utility's chairman in a surprise announcement revealed plans to slash its dividend by 80 percent and abandon its cash-strapped U.K. subsidiary, TXU Europe. According to press reports, the news also shocked investors, who were reassured only a week before that TXU had "ample funding for the strong dividend" and a strong commitment to its flailing European subsidiary. In other press reports, one financial analyst at the time, said, "they never even said they had a liquidity problem..."

Furthermore, much like the Watergate fiasco, to this day many still wonder what TXU executives knew and when they knew it. William J. Murray of Austin, who was a senior vice president in TXU's energy-trading unit, recently claimed he was fired last year for complaining about the company's financial disclosure practices, and alleges that TXU executives knew about potential multibillion-dollar losses in TXU's European operations three months before disclosing the problem to investors, which caused the company's shares to plunge. TXU heatedly denies this. Erle Nye, the