Separately, Mills said the nearly completed acquisition of Cogentrix Energy Inc., a Charlotte, N.C., privately held power producer, will help Aquila balance its portfolio so that 43% of earnings come from its owned assets and 57% come from the merchant services side. Currently, only 27% of the Kansas City firm's earnings come from its physical assets.
Aquila Exec: Practices Used In California Not Widespread
By DAVID BOGOSLAW
Of DOW JONES NEWSWIRES
NEW YORK -- The head of Aquila Inc.'s (ILA) merchant energy trading unit said Tuesday he doesn't believe the manipulative practices Enron Corp. (ENRNQ) is said to have used in the California wholesale power market are widespread in the industry.
"The California issue is not common. It's a pretty unique set of events that converged," said Edward K. Mills, president and chief operating officer of Aquila Merchant Services Inc., speaking at a power and merchant energy conference hosted by Salomon Smith Barney in New York.
Mills said he had heard discussions concerning possible faults in the design of the California market that may have motivated manipulative practices. He said he didn't see a convergence of the same issues across the rest of North America that would stimulate such behavior.
Mills also said he viewed wash transactions, in which the same amount of energy is bought and sold at the same price, as being used by firms seeking to increase trading volume at an accelerated pace.
Dynegy Inc. (DYN) is under investigation by the Securities and Exchange Commission for having done such round-trip trades with CMS Energy Corp. (CMS) in November 2001, ostensibly only to pump up trading volume.
"I don't see that as a go-forward issue and I don't necessarily see it as widespread across the counterparties we've done business with - and there are many, many, many counterparties we've done business with," he said.
Characterizing such transgressions as growing pains for deregulation in the industry, he also said it was misguided individuals, rather than firms, that were likely responsible for them.
Separately, Mills said the nearly completed acquisition of Cogentrix Energy Inc., a Charlotte, N.C., privately held power producer, will help Aquila balance its portfolio so that 43% of earnings come from its owned assets and 57% come from the merchant services side. Currently, only 27% of the Kansas City firm's earnings come from its physical assets.
He also expects Cogentrix's 97% hedged portfolio of long-term contracts to provide a source of predictable cash flow and earnings, alongside predictable customer relationships. The purchase, expected to close in the third quarter, also fits into Aquila's so-called Triple B-plus initiative, aimed at increasing earnings before interest, taxes, depreciation and amortization, or EBITDA, by $500 million a year and hence improve the company's creditworthiness over time.
Shares of Aquila closed at $16.64 Tuesday, up 79 cents, or 5%, on volume of 1 million, which is the average daily volume.
-By David Bogoslaw, Dow Jones Newswires; 201-938-5289; david.bogoslaw@dowjones.com
Updated May 14, 2002 7:09 p.m. EDT |
