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Northwestern Corporation Message Board

  • ifwecudtalk ifwecudtalk Aug 1, 2005 10:09 PM Flag

    Give this a look!!

    NorthWestern owners should give offer a look


    The attempt by five Montana cities to purchase NorthWestern Corp.'s utility business is a longshot, but it's worth taking.

    Over the past half decade, Montanans have made several runs at taking back their own electric-power destiny.

    They felt like they had to at least try after the Legislature and Gov. Marc Racicot gave that destiny away by passing, in 1997, electricity deregulation.

    That legislation subsequently was rolled back, but the damage was done. We don't have to recount here the demise of Montana Power Co., the purchase of its pieces by, among others, South Dakota and Pennsylvania utilities, and the subsequent increases in power rates.

    The highest-profile effort was a ballot initiative three years ago to have the state buy a dozen privately owned hydroelectric dams in order to provide a steady, low-cost source of power for residents. It failed by a large margin.

    Parallel to that, however, there have been several community-based efforts to increase power generation in the state by building new plants, or to get into the power-marketing business.

    Great Falls has been at the forefront of some of those efforts, and we continue to support them.

    Under way at present is an offer, organized by five cities including Great Falls, to buyNorthWestern Corp., the South Dakota company that bought Montana Power Co.'s marketing and distribution business.

    NorthWestern's executives and board of directors strenuously oppose the effort, and the cities � organized into a nonprofit company called Montana Public Power, Inc. � are taking their offer of about $2 billion straight to the shareholders.

    It's a longshot, but it's not unprecedented and MPPI's organizers make a strong case.

    They start with what they describe as NorthWestern's limited options.

    They acknowledge that since emerging from bankruptcy the company has focused on its core business, but they say it can't make shareholder-satisfying profits in that regulated business over the long run.

    That leaves two options, says Missoula Mayor Mike Kadas: diversify into areas outside the regulated utility, which is what got NorthWestern into bankruptcy court in the first place; or further cut expenses, which MPPI spokesmen say would be bad for business in the long run.

    "They're in this box that we don't think is beneficial to Montana in the long run," Kadas said.

    Because a public power entity would have some tax and financing advantages, as well as no need for profits or dividends, MPPI has made an offer that at least one financial analyst says is "as high as I could ever imagine these assets being worth."

    For its part, NorthWestern says the offer poses for the company some unacceptable risks, not the least of which is the considerable cost to the company of preparing for such a sale. If MPPI backs out, there's no recourse for the company, shareholders or ratepayers.

    NorthWestern also is critical of the fact that the buyout would be financed 100 percent with debt, but that's typical of purchases by public utilities, which don't have shareholders or profit requirements.

    Comparing that debt load to a similar-size debt load that forced NorthWestern into bankruptcy is comparing apples and oranges.

    The utility cash flow would be more than sufficient to service the debt and attend to overdue capital expenditures, MPPI says.

    We don't pretend to know what will become of MPPI's offer � as we noted above, it is a longshot.

    We do hope the shareholders will give it a good look, however.

    Originally published August 1, 2005

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