HELENA — Financially ailing NorthWestern Corp., which owns the company that bought Montana Power Co. last year, is on the mend financially and doesn't plan to declare bankruptcy, its chief executive officer told state public service commissioners Thursday.
However, in response to a question, CEO Gary Drook acknowledged that top officials of the South Dakota company had discussed bankruptcy as "a strategic option."
Drook, a director of the South Dakota company who took over as CEO in January, tried to assure at times skeptical commissioners that NorthWestern is taking the right steps to improve its shaky finances. NorthWestern Corp. owns NorthWestern Energy, which bought Montana Power Co.'s utility business last year and provides electricity to 295,000 customers and natural gas to 158,000 consumers in Montana.
NorthWestern has no plans for "massive layoffs" or early retirement plans in Montana, Drook said. However, there may be "opportunities through attrition to consolidate jobs, but there's nothing drastic," he said.
Among the steps NorthWestern has taken to improve its finances are putting up for sale two money-losing subsidiaries, Blue Dot, which provides heating and ventilation services, and Expanets, a telecommunications company. Any sales proceeds would go toward paying down the company's $2.2 billion in debt, he said.
Also on the market, Drook said, is Montana First Megawatts, the mothballed natural gas power plant being built near Great Falls. NorthWestern Energy sunk $60 million into the proposed $160 million plant that was to generate 240 megawatts. It halted construction in July 2002 after the PSC refused to approve the project as prudent at the time.
Drook added there is no market for a power plant today unless it has an agreement to sell its power.
He said he wanted to do as much as he could to remove any uncertainty about the company's finances from the commissioners' minds and said Montanans could still count on service from the utility.
"There is no doubt in my mind the lights aren't going to go off and the gas isn't going to stop running," he said. "It may have a different set of owners."
Some of the belt-tightening steps were suggested by the PSC in an unusually tough order that imposed certain conditions in January before authorizing NorthWestern to borrow $280 million from Credit Suisse First Boston.
NorthWestern has faced major financial problems the past year, posting a $893 million loss in 2002 and seeing its credit ratings downgraded, which means it costs the company more to borrow money. The company, which has suspended paying dividends on its common stock, faces four shareholders' lawsuits. NorthWestern's stock closed Thursday at $2.26 a share, down 5 cents from the previous day and down from $23 a share the past year.
Drook said the company also has taken steps to reduce costs, strengthen its internal controls to assure more financial accountability and replaced some top executives. NorthWestern has closed one of the two offices at its headquarters in Sioux Falls and reduced the staff there by 35 percent, he said.
"I'll be as tough on expenses, I think, as you'll be," Drook told the PSC.
He said his vision is for NorthWestern, with "laser-like focus," to concentrate on its core utility businesses. Drook said the company's financial picture really is like "A Tale of Two Cities," with the utility businesses running well and the nonutility businesses struggling.
Commissioner Tom Schneider, D-Helena, asked Drook to what extent NorthWestern is examining the potential consequences of declaring bankruptcy and what it would mean for Montana.
"I don't think the board would be doing its duty if it didn't ask if it's a possibility," Drook said. "The board has begun to look at that — if that were to occur — what would be our options." Still, he played down the possibility of a bankruptcy declaration.
In response to a question from Commissioner Matt Brainard, R-Florence, about the Great Falls project's future, Drook said, "If we can get a power purchase agreement, Montana First Megawatts will get sold and it will get built. If not, it will be scrapped."
In response to a question, Drook said the investments in Blue Dot and Expanets were sound, but NorthWestern simply didn't know how to run these businesses properly.
Drook told the commissioners he appreciated their tolerance and patience as the company tries to regain a strong financial footing.
"I don't plan to spend the next five years cleaning this thing up," he said. "I hope five years from today we're a much bigger and better utility than we are today. Before I can do that, we've got some problems I can take care of."
In February 2002, NorthWestern Corp. bought the utility business of Montana Power Co. for about $1.1 billion, including absorbing $488 million in debts.