Fortis plans 'substantial investments'

CALGARY - - After spending nearly $1.5 billion to buy Aquila Network's electricity holdings in Alberta and British Columbia, Canadian power company Fortis Inc. says it's planning "substantial investments" to improve the newly acquired business.

Fortis, based in St. John's, Nfld., finalized the Aquila deal a week ago and intends to make quick improvements to the customer service department. The company also plans to hire more linesmen, relying less on third-party contracts in order to improve quality control.

"There will have to be substantial investment in the first few years and we're prepared to make those investments, in terms of human capital, technical capital and financial capital," FortisAlberta president Philip Hughes said.

"So we will be concentrating on taking these two companies to where we think they should be and then as time goes on, I expect we will advance and make other acquisitions or corporate development in other areas."

Hughes said specific capital spending amounts would not be known for several months as Fortis learns the specifics of its new operations. But he said the company has more than enough financing available.

"If you have well-run companies that are doing well, you will be able to access capital. If you focus on what your strengths are, you will be able to access capital."

First on the agenda are plans to split the former holdings of Aquila Networks Canada into two separate entities along provincial lines.

FortisAlberta will own and operate the electrical distribution system for a large portion of rural central and southern Alberta, distributing power to more than 385,000 customers across about 100,000 kilometres of power lines.

In British Columbia, the company is an integrated utility with four hydroelectric power plants, 10,000 km of transmission and distribution lines and about 140,000 customers in the Okanagan and Kootenay regions of interior B.C.

Fortis already has operations in Newfoundland, Prince Edward Island and Ontario. It also is the primary distributor of electricity in the Central American country of Belize and has holdings in the Grand Cayman Islands in the Caribbean.

Although all business segments are operated independently, they are still 100 per cent owned by parent company Fortis Inc.

Missouri-based Aquila entered Canada nearly 16 years ago when it bought the B.C. operations of West Kootenay Power, but made its major expansion in 2000 by entering Alberta's deregulated market with the acquisition of Calgary-based TransAlta's transmission system.

Aquila Inc. had hoped to use its western base to expand into Ontario and elsewhere in Canada, but severe financial difficulties forced it to put international holdings - including its Canadian operations - up for sale last year.

Unlike Aquila, Fortis says it has the money to make necessary capital expenditures power lines and personnel.

"Where a company is in financial difficulty, obviously there isn't the availability of investment," said Hughes.

Aquila's tenure in Alberta was not without its difficulties. Last July, the provincial energy regulator ordered the company to pay back about $50 million in overcollections over a two-year period.

A month later, the company was sued by Epcor, a large Alberta utility company owned by the City of Edmonton. The lawsuit alleged that Aquila failed to correct billing problems and perform its duties under agreements to provide power to thousands of Epcor's rural customers.

For its part, Fortis says it hopes to resolve the inherited litigation over the next several months. And Hughes said the company will focus early efforts on improving customer service.

"We're known for very good, straight-forward customer service, treating customers with respect and also being responsive to them."