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Alliant to Sell Stake in Chinese Power Plants

Posted on: Wednesday, 6 July 2005, 15:00 CDT

Alliant Energy Corp. took a big step toward relieving itself of the risk of operating international energy projects when it announced that it will sell its stake in 10 coal-fired power plants in China by the middle of next year.

The announcement came as the company disclosed that the fair market value of the plants has fallen by at least 50% from the company's estimate of $190 million at the end of March.

The Madison utility company expects to use proceeds from the sale to reduce debt at Alliant Energy Resources Inc., the parent company of its non-regulated businesses.

The company in April reduced its earnings forecast for 2005 in part because of disappointing results from its China investment. At that time, it hired a financial adviser to evaluate alternatives for the business.

The announcement came on the first business day after Bill Harvey took over as chief executive of Alliant from Erroll Davis Jr. Davis remains chairman.

At the company's annual shareholders meeting in May, Harvey said investments in energy projects in both Brazil and China had been disappointments, but said that other international investments notably New Zealand have been positive.

"This is not where we had planned to be, but it is where we are," Harvey said of the Brazil and China investments. "While we wish different outcomes there had unfolded, we will do what we must to protect our investments."

Nino Amato, president of the Wisconsin Industrial Energy Group and a former executive at Wisconsin Power & Light Co., welcomed the China announcement.

"It's lost half its value and will probably lose more, but it's a good thing to pull out," Amato said. "We hope they do the same with Mexico and Brazil."

When it reported earnings in April, Alliant said it had hired financial advisers to evaluate options not only for the China investment but also for investments in Brazil and in a Mexican golf course resort community.

In the first quarter of 2005, Alliant lost $32.1 million in its non-regulated businesses, which included losses in both China and Brazil.

Asked about Brazil and Mexico plans Tuesday, Alliant spokesman Scott Smith said, "We don't have anything to announce at this time."

The turnaround in the China strategy for Alliant has been swift. At the start of this year, the company was planning to invest more money in China, but Alliant said in April it would halt any further investment in China.

The company's coal plants have been hit hard by sizable jumps in the price of coal and the price of transporting coal, and the company has not been successful in recouping those increases through higher rates.

On Tuesday, the company said it plans to return to the United States roughly $43 million in cash held by its China business. In June, the company repatriated $19.3 million from China, Alliant said.

In all, Alliant's investments in four Chinese companies involve 10 power plants that generate more than 500 megawatts of electricity. Alliant's stake in those plants is roughly 350 megawatts, Smith said.

After the announcement, Alliant's stock price closed up 13 cents at $28.61 Tuesday.

Copyright 2005, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Source: Milwaukee Journal Sentinel

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