CVPS exercises option to sell Catamount Energy; Young announces plan to restore company's financial strength
November 21 2005 - 9:07AM
Business Wire
Central Vermont Public Service (NYSE:CV) today announced that its
wholly owned subsidiary, Catamount Resources Corp., will sell its
entire interest in subsidiary wind energy company Catamount Energy
Corp., to Diamond Castle, a New York-based private equity
investment firm, and its affiliated funds for $60 million in cash,
less $750,000 in certain transaction expenses. "The sale of
Catamount brings to a rewarding close our investment in the
independent power business," CVPS President Bob Young said. "The
sale provides us a solid return on our investment, and gives the
company myriad options for use of the proceeds as we look forward."
CVPS announced the sale of a 51 percent interest in Catamount to
Diamond Castle last month, but retained an option to sell the
entire business, which it has now exercised. CVPS was able to
exercise the option earlier than previously expected because
Diamond Castle waived a condition requiring completion of
Sweetwater III, a Catamount wind development in Texas that is
expected to be completed by early 2006. As a result of the sale
CVPS expects to realize approximately $52 million in cash and
recognize a net gain in the fourth quarter. The amount of the gain
has not yet been determined. The sale is scheduled to close in
December. The definitive agreements were filed with the Securities
Exchange Commission on a Form 8-K by the Company on October 18,
2005. "We are extremely proud of the business at Catamount," Young
said, "but the sale option was attractive, providing a major influx
of cash." CVPS is currently evaluating how it will apply the
proceeds of the sale, but it currently expects to return
approximately $52 million to shareholders, either through a stock
buy-back or a special dividend to shareholders. Young added, "We
will announce final plans for use of the funds within the next few
weeks." Returning CVPS to Financial Strength "The Catamount sale
complements a restoration plan we are implementing to return CVPS
to a strong financial position, which is critical for our investors
and our customers as we address power supply and transmission
issues" Young said. That plan includes: -- One-time 2005 budget
cuts of $750,000; -- Securing a $25 million revolving credit
facility in October 2005; -- $2.7 million in 2006 budget cuts,
including a 10 percent cut in Young's salary and a 5 percent
reduction in other officers' salaries, which will help offset
rising fuel and medical costs; -- Deferral of $4.8 million of
capital investments, which won't affect service, from 2006 to the
next few years; -- Restructuring the board of directors in 2006; --
Efforts to improve communication with Vermont regulators and find
common ground on customer and company needs. "CVPS has made
tremendous strides in recent years to reduce costs, improve service
and find efficiencies, and those efforts have made our rates
extremely competitive in the New England region," Young said. "We
are also working very closely with regulators on issues ranging
from winter heating to the region's winter capacity, and are
developing with them a renewed spirit of collaboration focused on
Vermont's energy future." "CVPS has implemented a comprehensive
plan to ensure the financial strength of the company, for the
benefit of shareholders and our customers, and that will be our
focus in the coming months," Young said. "Today we celebrate the
sale of Catamount, but tomorrow we get back to the important work
of ensuring the vibrancy of CVPS in the years ahead. That is
equally important to our customers and our owners." Mike Ranger, a
senior managing director of Diamond Castle, said "We thank CVPS for
their contribution in building Catamount, and remain enthusiastic
about the future prospects for the business which we are acquiring
with the participation of Catamount's management team." Catamount
CEO James Moore will stay on to lead Catamount, which will remain
at its headquarters on Allen Street in Rutland, Vt. Catamount,
formed in 1986, has focused exclusively on wind development since
2001. It has six operating projects in the United States and
Europe, and eight projects under development in Wales, Scotland,
Pennsylvania, Texas, and Vermont. CVPS, founded in 1929, is
Vermont's largest electric utility, serving about 150,000
customers. Catamount Resources Corp. was formed for the purpose of
holding CVPS's subsidiaries that invest in unregulated business
opportunities. Diamond Castle Holdings, LLC is a private equity
firm founded in September 2004. Lawrence Schloss, the former
chairman of Donaldson, Lufkin & Jenrette's and Credit Suisse
First Boston's successful private equity business, is the CEO of
Diamond Castle. Diamond Castle has 21 employees located in New York
and focuses on investments in the power, financial services, media
and telecom, and healthcare sectors. Statements contained in this
release that are not historical fact are forward-looking statements
intended to qualify for the safe-harbors from the liability
established by the Private Securities Litigation Reform Act of
1995. Statements made that are not historical facts are
forward-looking and, accordingly, involve estimates, assumptions,
risks and uncertainties that could cause actual results or outcomes
to differ materially from those expressed in the forward-looking
statements. There can be no assurance that such indicated results
will be realized. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
of this press release. CV does not undertake any obligation to
publicly release any revision to these forward-looking statements
to reflect events or circumstances after the date of this press
release.
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