Kate Thomas
OGJ Online Staff
HOUSTON, Feb. 14
The Tulsa, Okla., company Jan. 29 delayed the release of its 2001 yearend and fourth quarter results, while assessing the impact of restructuring $2.2 billion in debt associated with its former subsidiary Williams Communications Group Inc. (WCG)
The communications company, spun off from Williams in 2001, has contingent debt with credit rating and equity price triggers that could affect Williams Cos. Inc.'s earnings. Williams said in December it was attempting to restructure the debt and eliminate the triggers.
Malcolm said WCG has said it will submit a restructuring plan to its banks by Feb. 25. He told analysts at the UBS Warburg conference in New York WCG faces a possible write down of assets and banks may try to retain the right to claim WCG is in default on loans.
Shares of Williams were up 0.60% to $16.73 in midafternoon trading on the New York Stock Exchange.
Once the plan is submitted to the bank, Malcolm said Williams will report earnings. Assuming a 50% impairment, he said, the after-tax impact on Williams would be $660 million. "It is a number we can manage," Malcolm said. "We have the ability to manage whatever the outcome from WCG."
He said Williams will do whatever is necessary to preserve its investment grade credit rating and will be meeting later in the month with credit ratings agencies, while they begin a bottoms up analysis of its marketing and trading unit. Earlier, Williams said it would cut capital expenditures and sell assets to improve its balance sheet.
With respect to operations, deal flow is "spectacular," Malcolm said. While closings have slowed because of its recent problems, he said, the company has 140 deals in negotiations. Given the deal flow, Malcolm said the company fully expects to have 25,000 Mw of electric generation operating by 2003 yearend.
He predicted a 15%/year growth rate in marketing and trading is "very achievable." In terms of power plant development, he said Williams is interested in the Southeast, Midwest, the Northwest. But Texas and New England appear to be overbuilt.
Acquisition of Barrett Resources, a gas exploration and production company, is providing a "nice hedge" against Williams's growing power portfolio, Malcolm said, and ownership of physical assets is providing credibility with counterparties.
In contrast to a few years ago, "we are seeing projects along all five of our pipelines," Malcolm said. As a result, he expects the pipeline group to grow 8-9%.