Utility holding steady with Pro One sale

Monday, September 1, 2003

TOPEKA, Kan. - Despite a new plan that frees the company from specific debt-reduction timelines and targets, Westar said it will proceed with the sale of Protection One, calling it the best option for reducing Westar’s $3 billion debt load.
Officials at Westar confirmed in August that the company had received several bids for Protection One, but could not comment on the number or type of suitors trying to woo Westar into a sale. Westar reportedly is hoping to garner about $1 billion in sales of its assets, including its 88 percent stake in Protection One and its 45 percent interest in ONEOK Inc. a natural gas company, although Karla Olsen, a Westar spokesperson, said the company couldn’t discuss potential prices or price ranges for the two entities.

The company has already reduced its 45 percent share in ONEOK to 15 percent, and said it remained to be seen whether Protection One could also be divested in pieces rather than as a single entity, Olsen said. The remaining shares of the company are publicly traded.

Members of the Kansas City Commission in late July approved a new plan that will deliver more than $20 million in rebates to Westar’s utility ratepayers and removes a requirement that the company shave its debt in half by Aug. 1. Instead, the company will have to adjust its percent of capital derived from shareholders to 40 percent - up from its current level of 30 percent - and rely less on debt.

In the new plan, the KCC said that most of the cash needed to pay down debt could be garnered from the sale of the two companies.

“That’s the smart thing to do and that’s the path we are pursuing,” Olsen said.

In January, the KCC ordered Westar to separate its regulated utility businesses from its non-regulated businesses, including Protection One, although officials have said selling the company simply makes the most sense.

Protection One officials had little comment on the continued efforts to sell, but said that the new plan between Westar and the KCC has had no impact on executive management’s investigation of strategic alternatives for the company.

“Regarding the bidding process, the details, at this point, must remain confidential and cannot be discussed publicly,” said Robin Lampe, senior director, corporate communications for Protection One.

The company closed its sale of Protection One Europe to two investment funds managed by ABN Amro Capital France, a transaction that was expected to help reduce the consolidated debt level for Westar Energy by $114 million.

Westar has already classified Protection One as discontinued operations in its quarterly results for the period ending June 30. That was done to because Westar “is not taking into consideration any earnings results,” Olsen said.