Merger Failure Hits Wwp’s Earnings

Washington Water Power Co. said Monday that it took a $14 million hit on its second-quarter earnings to cover the costs of a failed merger with a Nevada utility.

The Spokane-based gas and electric utility wrote off the costs of terminating the merger last month with Sierra Pacific Resources of Reno, turning an otherwise robust quarter into its worst in four years.

“Our company is financially strong and we are well-positioned for the future in a changing utility marketplace,” WWP chairman Paul Redmond reassured the company’s 70,000 shareholders.

Redmond said the write-off will not affect what WWP charges its 300,000 Inland Northwest electrical customers and 230,000 natural gas customers in Washington, Idaho, Oregon and California.

WWP canceled the merger on June 28, two days before the close of the second quarter, after long delays in obtaining federal approval and increasing deregulation in the utilities industry eroded the financial benefits of the deal.

About 1,400 employees had accepted severance or early-retirement packages contingent on completion of the merger, and WWP had spent millions in legal, travel and administrative costs to prepare for the merger with Sierra.

Those expenses dropped WWP’s bottom line in what would have been the company’s best second quarter since 1991, spokesman Patrick Lynch said.

Net income for the quarter was $6.8 million, or 12 cents per share, on revenue of $195.9 million. That was down from $12.9 million, or 23 cents per share, on sales of $159 million for the same quarter last year.

Without the merger expense, second quarter earnings would have been $16 million, or 28 cents a share.

WWP boosted second quarter results by more than doubling wholesale electric revenues from $20 million last year to $46 million. But retail and wholesale gas revenues dropped $6.8 million for the period.

WWP non-utility net income for the quarter was $1.1 million, down from $2.5 million a year ago.

, DataTimes