FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2000
Allegheny Energy, Inc.
(Exact name of registrant as specified in its charter)
Maryland 1-267 13-5531602
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
(Address of principal executive offices)
Registrant's telephone number,
Including area code: (301) 790-3400
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Item 1 - 8. Not Applicable
Item 9. Regulation FD Disclosure
As part of the Company's analyst conference
call on November 15, 2000, Mr. Morrell, Senior
Vice President and Chief Financial Officer of
Allegheny Energy, Inc. read the following
statement:
Good afternoon. I'm Mike Morrell, Senior
Vice President and Chief Financial Officer of
Allegheny Energy. Also with me are Rege Binder,
Vice President and Treasurer, David Bevilacqua,
Allegheny Energy Supply Company Director of
Development, Terry Walker, Director of Financial
Management and Greg Fries, Manager of Investor
Relations. Thank you for joining us to discuss
our successful bid for 1,710 megawatts of gas-
fired generating assets from Enron Corporation.
If you have not already received a copy of
our news release, please call Cindy Thomas at 301-
665-2717 or you can access this information at our
web site. If you need to leave the teleconference
before it has ended, you may listen to a recording
of the entire call by calling 800-938-1593 or 402-
220-0895 for international callers. The replay
pass code number is 14677. This rebroadcast will
be available from 6:00 p.m. this afternoon until
11:00 p.m. Friday, November 17, 2000, Eastern
Time. This call is also being broadcast live on
our web site, www.alleghenyenergy.com , and also
at the web site address, www.streetevents.com.
Beginning this afternoon, a rebroadcast will also
be available at these web sites through November
17, 2000.
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Yesterday, we announced that Allegheny Energy
Supply Company, LLC, our unregulated generation
subsidiary, signed a definitive agreement with
Enron Corporation under which Allegheny Energy
Supply will purchase three Enron natural gas-fired
generating facilities with a total generating
capacity of 1,710 megawatts. The acquisition will
be accretive to Allegheny Energy's earnings in
2001, excluding transaction costs and other costs
related to the transition.
The purchase includes the 546 megawatt
Gleason plant in Gleason, Tennessee; the 508
megawatt Wheatland plant in Wheatland, Indiana;
and the 656 megawatt Lincoln Energy Center in
Manhattan, Illinois. One of these plants, the
Lincoln plant in Illinois, is currently under a
short-term contract to sell a portion of its
output to a third party. These assets will
provide Allegheny Energy with 1,710 megawatts of
new natural gas-fired generating capacity within
the Eastern Central Area Reliability region
(ECAR), Mid-America Interconnected Network (MAIN)
and the Southeastern Electric Reliability Council
(SERC) reliability areas. After the close of the
transaction, Allegheny Energy will have total
generating capacity of more than 12,000 megawatts,
including previously announced development
projects.
These plants we are purchasing from Enron are
quite new and provide substantial geographic and
fuel diversity to our generating portfolio which
currently consists primarily of baseload coal-
fired plants in Pennsylvania and West Virginia.
These plants offer substantial optionality, which
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we expect will immediately add earnings and value
to our company.
Completion of this transaction requires
approval from the Federal Energy Regulatory
Commission, the Securities and Exchange Commission
and the Department of Justice/Federal Trade
Commission. We anticipate completing the
regulatory process by the second quarter of 2001.
The purchase price for these plants, which
have been in service since June 2000, was $1.028
billion, or about $600 per kilowatt. This price
is comparable to the all-in cost of new gas-fired
construction. While the locations of these plants
span three NERC regions, they are contiguous to
our existing operations and within easy reach of
major mid-west cities. Each plant is a simple
cycle, gas-fired facility that is capable of being
expanded to combined cycle operation as market
conditions warrant. And, each plant has an
established gas transportation and balancing
contract in place for 2 to 10 years. The gas
commodity will be competitively priced and will be
obtained through the Chicago hub, a very liquid
marketplace.
This transaction, along with our existing
generating facilities and previously announced
development projects, will give Allegheny Energy
more than 12,000 megawatts of generating capacity.
This generation portfolio will include 62% of low-
cost, coal-fired base load capacity, 31% of gas
and oil-fired capacity, and 7% hydro capacity.
The gas and oil-fired portion consists of 53% gas-
fired peaking capacity, 43% gas-fired combined
cycle capacity, and 4% oil-fired peaking capacity.
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We will finance this acquisition through a
combination of debt and equity. While we have not
determined the exact allocation between debt and
equity, the acquisition is accretive when modeled
based on a 50 percent debt/50 percent equity
financing scenario.
To be more specific on the earnings
available, our projections show that, in an
average year over the next five years, Allegheny
Energy Supply should receive at least $225 million
of revenue from these plants. Using a 35-year
depreciation and our expectations on other costs,
the net income available should be at least $60
million per year. If you further assume that
Allegheny Energy issues $500 million of equity, an
amount well in excess of the equity actually
needed to finance this transaction, the
transaction will be accretive to earnings per
share. At lower levels of equity issuance, the
transaction is even more accretive.
This means that Allegheny Energy's net income
and earnings per share should be higher than they
otherwise would have been in 2001, assuming a
closing early in the second quarter. While the
Company has not yet given any specific earnings
guidance for 2001, we expect to do so by year-end.
Such guidance will include the effects of our
announced development and acquisition projects and
will clearly support our guidance of earnings
growth from operations by more than 10% per year
over the 2000 - 2004 time period. If one looks at
Allegheny Energy Supply by itself, expected
earnings growth is substantially in excess of 10%
per year. With the addition of these generating
assets and the generation development plans
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already in place which provide us the assets,
location and scale to be a national player in the
competitive generation market, we believe we are
even better positioned to meet our growth goals
and Wall Streets expectations.
At this time, we will be happy to answer any
questions you may have. Our operator, Frank, will
queue your questions.
Forward-Looking Statements
Mr. Morrell's remarks were preceded by the
following statement:
Certain statements made during this conference
call constitute forward-looking statements with
respect to Allegheny Energy, Inc. Such forward-looking
statements involve known and unknown risks,
uncertainties, and other factors that may cause
the actual results, performance, or achievements
of Allegheny Energy to be materially different
from any future results, performance, or
achievements expressed or implied by such forward-
looking statements. Such factors may affect
Allegheny Energy's operations, markets, products,
services, and prices. Such factors include, among
others, the following: general and economic and
business conditions; industry capacity; changes in
technology; changes in political, social, and
economic conditions; regulatory matters;
litigation involving Allegheny Energy; regulatory
conditions applicable to Allegheny Energy; the
loss of any significant customers; and changes in
business strategy or development plans.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly
authorized.
Allegheny Energy, Inc.
By: /s/ MICHAEL P. MORRELL
Name: Michael P. Morrell
Title: Senior Vice President
Dated: November 16, 2000
