Thursday, August 12, 1999

Cinergy looks at cutting unit

Power-supply pacts may go

The Cincinnati Enquirer

        Cinergy Corp. expects to decide by November whether to sell all or part of its power-supply operations, including its troubled wholesale power trading business, the utility holding company's chief executive said Wednesday.

        In meetings with analysts in New York and Boston, Chief Executive Jim Rogers said Cinergy would consider divesting its business of arranging power-supply agreements as part of a broad look at all of its operations as the electric industry moves toward deregulation.

        Tuesday, Cinergy said its earnings were reduced in July by $73 million, or 46 cents a share, because it was unable to meet obligations to provide power under long-term supply contracts during the heat wave July 30.


        Cinergy would find it difficult to continue to serve its customers if it didn't also exit the business of trading electricity, Mr. Rogers said. “My bias is to be either totally in or totally out,” he told analysts and investors.

        Cinergy should find plenty of companies with an interest in the power-supply business, analysts said.

        “It's strategically located in the Ohio-Indiana region,” said Michael Worms, an analyst with Gerard Klauer Mattison & Co., who rates Cinergy as a “hold.” The location offers access to Chicago and other markets.

        The electric power industry, once viewed as horizontally integrated from power generation to transmission and distribution to homes and businesses, is increasingly being seen as a series of distinct businesses. For example, it's dividing into: a commodity business — the generation of electricity; a supply business — acting as a middleman arranging power supplies between generators and end users; and a distribution and transmission business — the pipes and wires which transmit power to customers.

        Exiting the power supply business would allow Cinergy to focus on its generating and transmission businesses, spokesman Steve Brash said.

        Bloomberg News contributed to this report.


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