— Allegheny Energy Inc., Hagerstown, Md., Monday said it plans an initial public offering of up to 18% of its unregulated generating subsidiary, an action that will separate the company’s deregulated and regulated businesses.
Allegheny filed an application with the Securities and Exchange Commission to create a new holding company that would own 100% of its unregulated generating subsidiary, Allegheny Energy Supply Co. LLC. The balance of the unregulated company’s shares would be distributed to Allegheny Energy’s stockholders next year, subject to market and other conditions, Allegheny Energy said.
These transactions would create two independent companies, Allegheny Energy said, strategically positioned to capitalize on the opportunities in the rapidly evolving energy marketplace. The strategy is an increasingly familiar one among big electric utilities. Southern Co., Atlanta, Ga.; UtiliCorp United Inc., and Reliant Energy Inc., Houston, have sold portions of their unregulated units to the public.
The separation will allow Allegheny Energy and Allegheny Energy Supply to focus on their distinct businesses and appeal to distinct sets of shareholders.
“Our separation into two companies will sharpen the strategic focus of both, enabling each to hone in on core competencies, determine the best means of serving customers, and respond to the changing business landscape, Allegheny Energy CEO Alan Noia said in a statement.
Noia said the move is the proper course for both Allegheny Energy and Allegheny Energy Supply, with each company going forward to compete in two distinct markets that have emerged in electric power industry over the past several years.
After the IPO, regulated utilities, which distribute electricity and natural gas in parts of Maryland, Pennsylvania, Ohio, Virginia and West Virginia, would be owned by Allegheny Energy. It would also continue to own Allegheny Ventures, which invests in telecommunications and energy-related projects.
Allegheny Energy Supply operates plants with about 9,500 Mw of capacity and sells power in mid-Atlantic and Midwestern states in the unregulated wholesale and retail markets. The company will own or control about 14,500 Mw of electricity by 2005.