Wwp Changes Name, Reduces Dividends Spokane-Based Utility Will Be Known As Avista After January

Washington Water Power is changing its name to Avista and slashing shareholder dividends by 61 percent, both to help the Spokane-based utility survive in the increasingly turbulent marketplace for power.

Monday’s announcements are bold moves from Tom Matthews, newly hired WWP chief executive officer and board chairman who said he had discussed similar changes with the board of directors before it hired him in June.

Dividends will be cut in December and the name change will take effect in January.

”(Matthews) is growth-focused and that’s why the board brought him on,” said company spokesman Patrick Lynch. “What we’re doing is a shift away from what we’ve done in the past. We’ve been a growth company, but now we’re taking a more aggressive path.”

With regulatory protection, WWP electricity customers shouldn’t notice any immediate rate changes. However, the reduction in dividend payments will be a jolt to many of the company’s shareholders, 80 percent of whom are small investors, according to the company.

“It is a bit of a disappointment,” said Casey Getty, a Spokane stockbroker with Edward Jones. “A lot of people have come to depend on Washington Water Power for good, predictable income, and to wake up finding it cut in two is quite a shock.”

To cushion the shock for small investors, the company has devised a stock swap that will protect investors from the dividend reduction for three years, pending regulatory approval.

Investors didn’t embrace the changes on Monday, however, and WWP’s stock - which will trade under the AVA ticker symbol beginning Jan. 4 - fell nearly 9 percent, slumping from 20-7/8 to 19-1/16.

More than 1.2 million shares were traded Monday, 16 times the company’s average daily activity.

The company’s dividend payment will be cut Dec. 15 from $1.24 a share to 48 cents a share. The move was necessary to free up cash for future growth, said Matthews, who joined the company just 45 days ago.

“In its current state, WWP will not survive as a small Northwest utility,” said Matthews, who initiated similar changes as president of Houston-based Dynergy Co. “It’s not earning enough money to pay its dividends and not earning enough to reinvest in areas outside of its business.”

Matthews said he recommended that WWP consider a similar move when he was interviewed for the top job.

“They knew what they were getting,” he said.

The increase in revenue, estimated by WWP to be $27 million a year for the first three years, will be used to purchase generating assets like dams and coal plants whose power will be sold though WWP’s deregulated electricity marketing arm, Avista Energy.

WWP is actively pursuing power-generating properties, Matthews said, and also is talking to other regional utilities about mergers.

Ultimately, he said, it may mean that Spokane’s power will no longer come from a Spokane company.

“You will always have the major operating presence here, but a corporate office can be anywhere,” Matthews said.

The company’s name change is also an effort to expand the company, by distancing the name from WWP’s origins as a Northwest-based utility, Matthews said.

While the company changes its name to Avista, electricity customers in Washington, Idaho, Oregon and California will still be billed by the WWP division.

WWP, which has more than 3,000 employees through its subsidiaries, posted revenues of $2 billion in 1997, up from $1.3 billion the year before. Much of that growth is attributed to Avista Energy, which has grown to be the nation’s 14th-largest power marketing company in its first year of existence.

Although Jon Eliassen, WWP’s chief financial officer, predicted earnings growth from five percent a year in 1998 and 1999 to 8-10 percent in 2000 and beyond, some equity analysts are skeptical.

“The strategy looks neat on paper, but it won’t be easy to carry out,” said James Bellessa of D.A. Davidson in Great Falls, Mont. “Everyone (in utilities) is saying that they have to be different in the future and they all have different strategies. They aren’t all going to be right. Some are going to fail.”

WWP’s announcement didn’t surprise many who follow the utility industry.

As state and federal governments have deregulated the generation and sales of electricity, a growing number of utilities, including WWP, have entered the marketplace, said Ralph Cavanaugh, a California attorney who teaches a University of Idaho summer program for utility executives.

“Water Power has been positioning itself to be one of the winners on the national market, so I’m not surprised to hear this announcement,” Cavanaugh said.