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A Billings investment adviser is urging Montana political leaders of both parties to act now to protect key energy assets in case NorthWestern Corp. files for bankruptcy.

Gary Buchanan said Tuesday there is no firm indication the Sioux Falls, S.D., utility will follow Touch America into bankruptcy court, but Montana needs to be prepared.

Buchanan has been a political activist and steady critic of deregulation in Montana and the subsequent sale of the dams and other energy assets to out-of-state companies.

He has asked Republican Gov. Judy Martz and Democratic Attorney General Mike McGrath to seek injunctive relief against the NorthWestern Corp. Injunctive relief is a court order forcing a party to take a certain action or stop a certain action.

If NorthWestern's assets come up for sale, Montana cities or rural electric co-ops should be a bidder, Buchanan said.

"The state should be in the process to make sure these fundamental assets stay in strong Montana hands," he said. "This could include cities and rural cooperatives."

The Montana Public Service Commission is holding a 10 a.m. meeting in Helena today to discuss the bankruptcy possibility at NorthWestern.

Martz said she was interested, but passed on giving her own opinion for now.

"It's premature to comment on Mr. Buchanan's proposal," Martz said.

However, she asked her office's attorney, Jim Santoro, to discuss the proposal with McGrath or his staff right away.

For his part, McGrath already has started discussions.

"We're exploring options. What can the state do?" McGrath said. "What are the possibilities if NorthWestern did declare bankruptcy?"

When Montana Power was selling its last energy assets during 2002 — its transmission and distribution lines — many Montana cities and counties spent thousands of dollars preparing a bid.

NorthWestern won the competition and state regulators approved the company as a financially sound successor to Montana Power.

Since then, Buchanan said the South Dakota utility has redone its books for the first nine months of 2002. A planned profit of $1.53 per share turned into a loss of $30.04 per share.

"The PSC was asked to approve the sale based upon false information," he said.

NorthWestern has said the sale is a done deal.

The Montana Public Service Commission actually approved the sale in December 2001. Only NorthWestern's 2002 financial statements were redone, not statements from 2001.

Buchanan said the potential sale of transmission and distribution lines inside or outside of bankruptcy court is much more serious than Touch America selling its remaining fiber-optic assets. Power assets are essential, he argued.

"There's no time. The horses are almost out of the barn," he said.

NorthWestern has faced a series of setbacks since setting up business in Montana. The company ended long-standing dividend payments, renegotiated credit lines and lost its good credit rating.

The company also has announced it was delaying payment of many property tax bills in Montana. And the utility recently canceled five-year, low-cost electricity contracts with 42 Montana school districts and 29 cities.

NorthWestern said the contracts were with an unregulated subsidiary of the parent company — NorthWestern Energy Marketing — over which the PSC has no jurisdiction.

The company's stock closed Tuesday at $2.06 a share.

"We're sitting with a company controlling our power transmission with debts of $2.2 billion, which is 20 times the value of its stock," Buchanan said.

NorthWestern has responded by saying it has enough cash to operate for this year, and it doesn't have debt payments due until 2005.

But, it also has hinted at bankruptcy several times.

Last week, McGrath filed suit against 15 out-of-state energy companies claiming they milked millions from Montana businesses and customers by manipulating energy prices in 2000 and 2001.

One concern about NorthWestern's precarious financial health is that it cannot borrow money to sign long-term energy contracts. That means prices for natural gas and electricity in most of Montana are increasing rapidly as wholesale prices rise.

Buchanan owns Buchanan Capital, a Billings-based investment company. He used to work for D.A. Davidson & Co. and was a former Montana Commerce Director.

He toyed with the idea of running for governor as an Independent, but decided against it 14 months ago.

Martz appointed Buchanan to her now-defunct Montana Power Authority.

Jan Falstad can be contacted at (406) 657-1306 or at jfalstad@billingsgazette.com.

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