Monday, December 04, 2006

The Allegheny Debacle

The Pittsburgh Tribune-Review:
Allegheny Energy Inc. this week closed the door to a $700 million debacle that helped to nearly bankrupt the... energy company.

The company sold the last of three power plants acquired in 2001 for more than $1 billion from Enron Corp., once the symbol of America's high-flying power industry during the early 2000s...

In total, the three so-called peaking plants -- used only when demand for power was so high that the natural gas-fired plants were economical to run -- were sold over the last three years for less than $300 million.

That left about $700 million Allegheny Energy was forced to write-off. It was one of the reasons the company eliminated the dividend on its stock, demanded mandatory retirements from about 600 workers or 10 percent of the work force, and sold assets worth $1.1 billion to pay down $6 billion in debt built up during an expansion in 2000-2001. In the worst years, 2002 and 2003, the company lost a total of $987 million.