BY URSULA MILLER
The Cincinnati Enquirer
Don't expect Cinergy Corp. stock to do much for the time being -- unless or until the Cincinnati-based electric and gas utility makes an acquisition or is acquired.
That's because most Wall Street analysts consider the stock fully valued based on current earnings prospects, Cinergy President and Chief Executive Jim Rogers told shareholders at Wednesday's annual meeting at the Westin Hotel.
"The problem is the steam is running out" of our earnings engine, Mr. Rogers told the 250 shareholders in the audience. "Wall Street is waiting for us to do another deal."
Cinergy shares closed Wednesday at $35.31 1/4, down 7.8 percent so far in 1998.
Mr. Rogers reiterated that he is having "a lot of conversations with many people" about possible mergers, partnerships or acquisitions. But he wouldn't comment on any specific deals, dodging a shareholder's question about rumors of a possible deal between Cinergy and British utility PowerGen.
Mr. Rogers acknowledged a shareholder's comment that Cinergy shares have been "in the doldrums" the last six months to a year as the market has continued to hit new highs. But he was quick to point out that utilities generally have underperformed in recent months and that Cinergy had outperformed its peers the previous two years.
Cinergy's earnings growth also has averaged 10 percent a year since 1994, handily outpacing the industry average of 2 percent to 3 percent, Mr. Rogers added.
Before opening the floor to questions, Mr. Rogers took 20 minutes of the hour-and-10-minute meeting to outline the biggest challenges facing Cinergy. The first dealt with deregulation of the electric utility industry and the importance Cinergy is placing on monitoring and helping to shape the new rules the industry will operate by. "Today, we're operating in a world where you don't know the rules yet. . . . The sooner we get the rules in place the better," he said.
He also talked about Cinergy's need to develop "greater scale and scope" to allow it to compete on a national level. Mr. Rogers mentioned possible changes to environmental laws and the "potential Draconian impact" that they could have on utilities that depend on coal-fired power plants, as Cinergy does.
Mr. Rogers mentioned that Cinergy would continue to spawn start-up businesses to take advantage of deregulation and the possibility of Cinergy getting into businesses unrelated to power generation such as long-distance telephone service.
One shareholder asked about the probability of Cinergy cutting its dividend to fund growth of new businesses. Mr. Rogers said management is "committed to our dividend."
In closing, Mr. Rogers talked about the importance of training Cinergy's 7,600 employees to deal with and take advantage of the changes being brought on by deregulation. Mr. Rogers played a 10-minute video in which various employees talked about internal changes and new technologies being used by them to work more efficiently and save money.
