Wwp Seeks To Escape Merger Costs Asks Court Protection From Liability For Sierra’s Expenses
Washington Water Power Co. wants a Washington court to hold the company harmless for $15 million in merger-related expenses of its jilted partner - Sierra Pacific Resources.
The Spokane utility asked for the declaratory judgment in a lawsuit filed Friday in Spokane County Superior Court.
A letter asking Sierra to release WWP from any liability was also sent Friday.
WWP directors voted Friday afternoon to terminate its pact with Sierra, which would have created a new company - Altus Corp. - delivering electricity, natural gas and water to about 500,000 consumers in six states.
Thursday had marked the two-year anniversary of the merger agreement. The terms, noted WWP Chairman Paul Redmond, provided for termination of the deal after two years if all regulatory approvals had not been obtained.
“We were properly executing our right within the contract,” he said at a Monday news conference.
Sierra Chairman Walter Higgins said Redmond had asked for a release of liability for Sierra merger costs when he called Friday to inform him of the directors’ decision.
“I told him that it was unlikely the board would be willing to do that,” Higgins said.
But he added that the limited amount of time, not a potential effort for recovery, dictated his response.
“There is no implication positive or negative,” he said. “I think that Paul Redmond worked very hard for this (merger) to come to pass.”
The merger has been before the Federal Energy Regulatory Commission for almost two years. Last week, hearings on the proposal before one of the commission’s administrative law judges concluded in Washington, D.C.
But months of additional waiting were likely before the agency released a definitive ruling.
Redmond disclosed that as late as Thursday informal attempts were made to see if a settlement over the remaining points of contention between the utilities and commission’s staff could be reached.
Positions taken by the staff that might have compromised low electricity rates in Washington and Idaho were not acceptable to WWP, he said.
Meanwhile, Redmond said, company directors met in Spokane Wednesday to reassess the merger in light of the hearings, the eroding financial benefits of the deal, and a regulatory environment that had overtaken the would-be partners.
“It just didn’t make sense for us to continue,” he said.
Redmond said he advised Higgins Thursday that WWP’s board would meet Friday to vote.
“I knew our board was going to be decisive,” he said. “Doing nothing was not an option.”
Redmond said confidence the companies could pull off their merger was rocked last November, when FERC first turned aside the proposal and scheduled the hearings.
The commissioners then raised some of the issues that dogged the transaction for the next seven months. Their reservations were so severe they questioned whether the merger was in the public interest.
Redmond said favorable rulings from all the state regulatory commissions involved had left the companies unprepared for FERC’s action.
He said officials had planned a management retreat, and expected to begin doing business as Altus Jan. 1.
Despite the merger’s demise, Redmond said WWP will be able to hold the line on rates until 2001 as a result of measures taken during the last two years.
Otherwise, he said, the company might have sought increases as early as next year.
Redmond acknowledged that many of WWP’s 1,400 employees who had accepted severance or early-retirement packages contingent on completion of the merger would be disappointed by its collapse.
“They’ve probably made a lot of plans,” he said. “I’m sorry we put them through that.
“We could not have put forward a better effort than we did.”
As for shareholders, he said a write-off of its $16 million in merger-related expenses will probably cut earnings about 15 cents per share.
But he said good performance by both the utility and its subsidiaries should help compensate for those deductions. And he noted that Standard & Poor’s reacted to the cancellation of the merger by upgrading WWP’s bond rating from A- to A.
Also, both WWP and Sierra shares climbed on the New York Stock Exchange Monday. WWP closed at $19.12, up 50 cents; Sierra at $25.75, up 37 cents, on extremely heavy volume of 956,100 shares.
, DataTimes ILLUSTRATION: Photo