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Shareholders may decide MPC merger

Shareholders may decide MPC merger

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Company may sell utility assets and convert to Touch America

HELENA - Montana Power Co. has tentatively scheduled a special meeting Sept. 14 to let shareholders decide whether to sell its remaining utility assets and convert the company into a telecommunications firm called Touch America.

MPC filed documents Tuesday with the Securities and Exchange Commission outlining the transaction and explaining the risks to shareholders. The proposal would have to get approval from owners of at least two-thirds of the 105 million shares of Montana Power common stock.

Spokesman Cort Freeman emphasized that the "proxy statement" is not final and that the SEC could require changes.

"We're prohibited from saying anything about the subject at this point," he said. "As a preliminary (document), it's subject to change."

Montana Power faces several complications in converting itself into a new and different kind of company. For one thing, shareholders are acutely aware that the value of company stock has plummeted to a 10-year low despite high expectations for the telecommunications business.

The stock peaked at $65 a share in March 2000. It closed Friday at $11.

Touch America's profits have increased consistently in the past couple of years, but its status as a "telecom" company has driven both the dramatic rise and the dramatic fall of Montana Power stock in the past 18 months.

Jim Bellessa, a senior analyst for Davidson Cos. who tracks Montana Power for investors, sees some hope for recovery. Other analysts are not optimistic, and Bellessa concedes there is skepticism about the entire telecommunications and broadband industry.

Opponents of utility deregulation in Montana also are preparing voter initiatives that would try to undo portions of deregulation laws and/or force public purchase of the former MPC power plants.

"Electric deregulation is turning out to be a mess for everyone, customers and (company) shareholders alike," said Sen. Ken Toole, D-Helena, a persistent critic of deregulation and a key figure in the initiative drafting. "To me, it's just a system that is collapsing - collapsing under the weight of greed."

Montana Power plans to sell its gas and electric distribution systems to South Dakota-based NorthWestern Corp. for $1 billion. Montana Power serves 285,000 electric and 150,000 natural gas customers.

Shareholders would be asked to approve the merger of Montana Power Co. into a Montana Power limited liability partnership as a subsidiary of Touch America Holdings. The Montana Power partnership then would be sold to NorthWestern, leaving Touch America Holdings with only two companies: Touch America and Tetragenics Co., which develops computer-based monitoring systems.

Shareholders of MPC would become shareholders of Touch America Holdings.

Montana Power executives and its board are strongly behind the change, saying it will help Touch America Holdings concentrate on expanding its business.

The heart of Touch America's business is an 18,000-mile, fiber-optic broadband network that can transmit high-speed data across much of the country. The company plans to expand the network to 26,000 miles by the end of this year.

Company officials acknowledge in the SEC documents filed this past week that moving into the volatile, competitive telecom business carries substantial risk.

Whether shareholders approve the merger or not, the company must get approval from the state Public Service Commission to sell the utility assets to NorthWestern, and that could delay the sale for months.

The commission wants to say whether and how profits from the sale may be divided among consumers and shareholders, and Montana Power insists the company should keep all the profits.

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