WPS Resources Corporation Completes Purchase of Michigan Natural Gas Distribution Operations
03 Abril 2006 - 9:44AM
PR Newswire (US)
GREEN BAY, Wis., April 3 /PRNewswire-FirstCall/ -- In a major
expansion of its natural gas distribution business, WPS Resources
Corporation (NYSE:WPS) today announced that it has completed the
acquisition of natural gas distribution operations in Michigan from
Aquila, Inc. (NYSE:ILA). The addition of regulated natural gas
distribution operations in a complementary jurisdiction to WPS
Resources' existing regulated electric and natural gas operations
in Wisconsin and Michigan will transition WPS Resources to a
larger, stronger regional energy company. "We are excited about
completing this acquisition in less than seven months of the
announcement and bringing these high quality assets and people into
the WPS organization," said Larry Weyers, Chairman, President, and
CEO of WPS Resources. "This acquisition is a great strategic fit
with our existing operations given the geographic and operational
profile of our combined asset base. We are building the scale and
scope of our regulated operations in a jurisdiction where we
already operate. Natural gas distribution is a core business for
us. All aspects relating to the acquisition and integration of
these operations remain on schedule. We still anticipate being able
to attain the financial results from these operations that we
expected when we first announced the acquisition in September 2005.
This is an opportunity for our company to deliver on our commitment
of providing value to our customers, employees, and shareholders."
Weyers said that WPS Resources will not reduce field staff, but
instead is welcoming the 182 Michigan employees into its existing
ranks of 2,945 employees. The Transaction Under the terms of the
agreement, which was announced on September 21, 2005, WPS Resources
paid total cash consideration of approximately $315 million for
Aquila's natural gas distribution operations in Michigan including
estimated closing adjustments relating primarily to working capital
of approximately $45 million. The transaction is subject to
post-closing adjustments to true up the estimated closing
adjustments after the closing date when final accounting data is
available. Under WPS Resources' corporate structure, the assets
will be owned and operated by WPS Resources' wholly owned
subsidiary, Michigan Gas Utilities Corporation. Permanent financing
for this acquisition and the pending acquisition of Aquila's
natural gas distribution operations in Minnesota is expected to be
issued later this year and will include a combination of common
equity and long-term debt. WPS Resources anticipates maintaining
its current dividend policy and its investment grade credit
ratings. The acquisition required the approval of the Michigan
Public Service Commission, which was granted on November 10, 2005.
The Minnesota portion of the acquisition announced in September
2005 is expected to close in the first half of 2006. About the
Acquired Natural Gas Distribution Operations The Michigan natural
gas distribution operations provide gas distribution service to
about 161,000 customers mainly in southern Michigan in 147 cities
and communities including Otsego, Grand Haven, and Monroe with 182
employees. Annual natural gas throughput is approximately 36
billion cubic feet per year. In addition to having access to
several major natural gas pipelines, it owns a 3.6 billion cubic
foot natural gas storage field. The assets operate under a
cost-of-service environment and are currently allowed an 11.4%
authorized return on equity on a 45% equity component of the
regulatory capital structure. Gary W. Erickson, formerly President
of Upper Peninsula Power Company (a WPS Resources subsidiary
operating in the Upper Peninsula of Michigan), is President of
Michigan Gas Utilities Corporation. Combined with the acquired
Michigan assets, WPS Resources will serve roughly 469,000 natural
gas customers through its regulated utilities with annual natural
gas throughput of 118.6 billion cubic feet. WPS Resources already
serves more than 476,000 electric customers through its regulated
electric utilities. For new Michigan customers, the transition to
WPS Resources will be seamless. Aquila will continue to provide
billing and call center functions until July 2006, when those
functions will be handled by Alliance Data Systems Corporation, a
$1.5 billion provider of transaction services, credit services, and
marketing services. With the goal of providing optimal value for
customers and shareholders, outsourcing to a nationally recognized
leader in the industry was determined to be the best choice in
terms of customer care and efficiency. "We thoroughly reviewed the
options available for providing customer care services while
operating under an aggressive time frame for closing the
acquisition transaction and selected Alliance Data Systems
Corporation to provide the outsourced services," said Larry Weyers.
"Implementation of the outsourced billing and call center functions
is on track for cutover in July 2006 as initially contemplated in
the contract with Alliance Data Systems." The Michigan natural gas
distribution operations are attractive regulated assets in a
growing Midwest region that supports WPS Resources' focus on high
quality regulated investments. Owning multi-state operations
enhances regulatory diversification and affords an opportunity to
deploy best practices within the new asset base. The addition of
these assets makes WPS Resources a stronger regional energy
company. Financial Advisor J. P. Morgan Securities Inc. acted as
exclusive financial adviser to WPS Resources and provided a
fairness opinion in connection with the transaction.
Forward-Looking Statements This press release contains
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. You can identify these statements
by the fact that they do not relate strictly to historical or
current facts and often include words such as "anticipate,"
"expect," "intend" and other similar words. Forward-looking
statements are beyond the ability of WPS Resources to control and,
in many cases, WPS Resources cannot predict what factors would
cause actual results to differ materially from those indicated by
forward-looking statements. Please see WPS Resources' periodic
reports filed with the Securities and Exchange Commission
(including its 10-K and 10- Qs) for a listing of certain factors
that could cause actual results to differ materially from those
contained in forward-looking statements. About WPS Resources
Corporation WPS Resources Corporation (NYSE:WPS), based in Green
Bay, Wisconsin, is a holding company with four major subsidiaries
providing electric and natural gas energy and related services in
both regulated and nonregulated energy markets. Its principal
subsidiary is Wisconsin Public Service Corporation, a regulated
electric and natural gas utility serving northeastern Wisconsin and
a portion of Michigan's Upper Peninsula. Wisconsin Public Service
serves more than 425,000 electric customers and 308,000 natural gas
customers. Another subsidiary, Upper Peninsula Power Company, is a
regulated electric utility serving Michigan's Upper Peninsula.
Upper Peninsula Power serves approximately 52,000 electric
customers. Michigan Gas Utilities Corporation, is a regulated
natural gas utility serving 161,000 customers in lower Michigan.
WPS Resources' major nonregulated subsidiary consists of WPS Energy
Services, Inc., a diversified nonregulated energy supply and
services company serving commercial, industrial and wholesale
customers and aggregated groups of residential customers. Its
principal market is the northeast quadrant of the United States and
adjacent portions of Canada. Its principal operations are in
Illinois, Maine, Michigan, Ohio, Texas, Virginia, and Wisconsin in
the United States and Alberta, Ontario, and Quebec in Canada. WPS
Energy Services also owns and/or operates nonregulated electric
generation facilities in Wisconsin, Maine, Pennsylvania, New York,
and New Brunswick, Canada; steam production facilities in Arkansas
and Oregon; a partial interest in a synthetic fuel processing
facility in Kentucky, and steam production facilities located in
Arkansas and Oregon. DATASOURCE: WPS Resources Corporation CONTACT:
Joseph P. O'Leary, Senior Vice President and Chief Financial
Officer of WPS Resources Corporation, +1-920-433-1463 Web site:
http://www.wpsr.com/
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