Progress ponders barge, rail sale
By STEVE HUETTEL
© St. Petersburg Times, published January 5, 2001
Progress Energy is putting the first pieces of the former Florida Progress up for sale.
The Raleigh, N.C., company has hired a financial consultant for advice on selling all or part of rail and barge subsidiaries obtained in Carolina Power & Light Co.'s $5.3-billion purchase of the parent of Florida Power just more than a month ago.
Florida Power got into the transportation businesses to move coal from mines in the Appalachian Mountains to power plants in Florida. But neither Progress Rail Services nor Memco Barge Lines has a place in the combined new company's focus on the utility business, spokesman Keith Poston said.
"Our core business is the generation and distribution of energy and investments in telecommunications," he said. "Progress Rail and Memco are successful businesses but don't fit into the long-term strategy of our core business."
Progress Rail employs about 3,500 workers at more than 50 locations in the United States, Mexico and Canada. The company earned $21-million on $880-million in revenues in 1999 from a wide range of railroad businesses, from refurbishing freight cars to welding rails to selling switches and crossing equipment.
Memco Barge, a carrier of coal and other dry-bulk cargo, has about 550 employees. The company owns the fifth-largest barge fleet on the nation's inland waterway system, with some 1,200 barges and 21 towboats. It earned $11-million on revenues of $156-million in 1999.
Even before closing the deal for Florida Progress on Nov. 30, CP&L officials said they might sell some subsidiaries to help pay off debt from the purchase. Speculation centered on Electric Fuels Corp., mainly because CP&L buys fuel for its coal-burning plants from suppliers.
Progress Energy intends to keep Electric Fuels' biggest moneymaker, its coal-based synthetic fuel plants that reaped $38.8-million in federal tax credits in 1999.
The company hasn't decided whether to keep three coal mines in West Virginia and Kentucky that provide 15 percent of the fuel for Florida Power's coal-burning plant in Crystal River, Poston said.
Morgan Stanley Dean Witter & Co. will look over the various pieces of Progress Rail and Memco Barge, identify potential buyers and advise Progress Energy on which parts to sell and the best time to do it, Poston said.
"It's obviously too early to speculate on any impact, if any at all, on employees," he said.
Dave Parker, an analyst for Robert W. Baird & Co. Inc. in Tampa, said investors like the idea of players in the increasingly competitive utility industry concentrating on a few core businesses.
"Progress Energy is in five different businesses, and it probably needs to get down to three," he said. "They need to be very focused on what they do."
Florida Power began refurbishing freight cars and parts to keep up its fleet of rail cars for carrying coal, said Allan Phillips, a spokesman at Progress Rail's headquarters in Albertville, Ala.
During the 1990s, Electric Fuels bought a variety of small rail businesses. The company made $200-million in acquisitions in 1998 and $47-million in 1999.
TECO Energy examined its barge business in a re-evaluation of the Tampa utility in 1999 and decided to keep it.
Chief executive Robert Fagan said Thursday that demand is strong, especially for moving bulk cargo besides coal, such as wheat and iron. "It's a good business . . . and it's going to continue to grow," he said.
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