PITTSBURGH CHALLENGES MERGER; ALLEGES COLLUSION
The city of Pittsburgh has filed an antitrust lawsuit against Allegheny Power Systems Inc., and Duquesne Light Co., to stop the merger...
utility's CEO, has reiterated the company discovered the magnitude of its European troubles only in September of 2002.
Whoever is to be believed, the damage has already been done. TXU paid dearly last year for its failure in Europe, taking $4.2 billion in charges in the fourth quarter of 2002, primarily to write off its struggling European business. Not to mention that on the day of the Oct. 14 announcement, the ratings agencies downgraded the company and Wall Street crushed the stock, pushing it down 46 percent to a decade low of $10.10, according to press reports. Plainly, investor confidence has fallen to a historical low.
That is perhaps why the task of putting the pieces back together and winning investor confidence back will be up to a new management. Dan Farell, named executive vice president and CFO of the company in February 2003, will be one of the new faces investors will see, joined soon by a new CEO who is to be announced between two board meeting scheduled for August and November. TXU's new chief is expected to take the reigns full time possibly at the 2004 annual meeting.
As for Farell, he seems to be a straight shooter. He has a clean-cut plan to restore TXU. "Our strategy for this year and next year is to deliver on our plan to reduce costs within the business substantially, to defend our leadership position, and to strengthen the balance sheet. Those are very simple financial goals for this two-year period. Any thought of getting into a growth mode will follow this two-year financial strengthening program that we are on," he says.
On that score, Farell has raised billions to pay down debt. The company has stated that it plans to reach a total debt-to-capital ratio of 53 percent by the end of the year. Not to mention, Farell plans to grow earnings in the coming year.
"We would hope to see a growth of 4 to 6 percent on earnings per share. We'll do that. I think we know where that growth will come from. It will come through organic service territory growth both in Texas and Australia. It will come through improving the financial performance of our gas business. We have a gas rate case underway right now that should payoff for us next year. We'll be making more investments in our transmission grid, and we will be reducing debt. Those will be the near term drivers of growth," he says, confidently. For 2003 fully diluted earnings from operations will be in the range of $2 to $2.10 per share, the company has stated.
Meanwhile, in the two areas of Australia and Texas, TXU seems not to be concerned about the competition or losing market share. Its financial gains in those territories appear to bolster the utility's claims that it's a savvy player in competitive markets.
"On the regulated business [in Australia], demand growth we are seeing is 2.8 percent in power and gas growth is 3.7 percent. That is physical demand growth. We combine that with the ability that