NorthWestern to spend $1 billion on Montana Power assets

Sioux Falls-based NorthWestern Corp. said it will acquire Montana Power Co.'s electric and natural gas transmission and distribution business for about $1.1 billion in cash, including approximately $488 million in existing Montana Power debt. The transaction is targeted to close during the first half of 2001and leaves Montana Power closer than ever to being a pure telecommunications company.


Sioux Falls-based NorthWestern Corp. said it will acquire Montana Power Co.'s electric and natural gas transmission and distribution business for about $1.1 billion in cash, including approximately $488 million in existing Montana Power debt.

The transaction is targeted to close during the first half of 2001and leaves Montana Power closer than ever to being a pure telecommunications company. In early trading Montana Power was trading up a bit at 59/256, while NorthWestern was down 1/16.

Montana Power Chairman Bob Gannon said the cash proceeds from the NorthWestern sales, plus the sale of its utility business, and nonregulated businesses in oil, natural gas, coal, and independent power production, totaling some $1.3 billion, will be reinvested in Touch America, the company's telecommunications subsidiary.

"This is our future and focus," Gannon said. Touch America will have an 18,000 route-mile fiber optic and wireless network by yearend 2000 and 26,000 route miles by yearend 2001.

NorthWestern said the acquisition will be accounted for as a purchase and is expected to add to earnings/share upon its completion. The company's revenues�derived from four partner entities�have risen from $150 million to $5 billion in the past 5 years. The acquisition is expected to boost revenue by more than $590 million/year.

The Montana Power acquisition will extend the company's service offerings to an additional 439,000 electric and natural gas customers in Montana and enhance its ability to reach new customers in the western US, said Merle D. Lewis, NorthWestern chairman and CEO.

Upon completion of the transaction, NorthWestern will distribute natural gas and electricity to more than 575,000 customers in Montana, South Dakota, and Nebraska.

The combined electric distribution and transmission system will consist of more than 20,000 miles of electric lines and associated terminal facilities. The combined natural gas distribution system will include over 5,000 miles of pipelines. Through these systems, NorthWestern will have the capacity to provide energy to wider regions of the country. NorthWestern anticipates additional benefits from the transaction, including:

Montana Power currently serves more than 288,000 electric and 151,000 natural gas customers in a 107,000-square-mile area in central and western Montana. In addition, its natural gas pipelines will provide NorthWestern access to competitively-priced Canadian gas supply and interconnections with four major pipeline companies: Nova, Havre Pipeline Co., Williston Basin Interstate Pipeline Co., and Colorado Interstate Gas Co., the company said.

NorthWestern's partners include Expanets, a midmarket provider of networked communications solutions and services; Blue Dot, a national provider of air conditioning, heating, plumbing, and related services; CornerStone Propane Partners LP, the nation's fifth largest retail propane distributor; and NorthWestern Public Service Corp., a Midwest electric, natural gas and communication utility.

NorthWestern said it expects to maintain the Butte headquarters of Montana Power's energy distribution businesses and, under the agreement, the company will continue to operate under the "The Montana Power Co." name in Montana.

The transaction is subject to regulatory but not financing conditions, the companies reported. Credit Suisse First Boston acted as financial advisor, and Paul, Hastings Janofsky & Walker LLP acted as legal counsel to NorthWestern. Goldman, Sachs & Co. acted as financial advisor, and Millbank, Tweed, Hadley & McCloy LLP acted as legal counsel to Montana Power.

More in Pipelines & Transportation