Williams says it might take on energy trading partner

Thursday, May 23rd 2002, 12:00 am

By: News On 6

TULSA, Okla. (AP) _ Williams Cos. is considering adding a financially stronger partner in its energy trading business to help stave off a possible credit downgrade by rating agencies.

The Tulsa-based company said Wednesday it is considering several options to strengthen its balance sheet as Moody's Investors Service considers downgrading $13 billion of its debt.

``We're certainly evaluating all options, given our credit crunch,'' said Bill Hobbs, president of Williams' energy trading division. ``One option is bringing in a partner with a stronger balance sheet.

``We're really in early discussions with various parties,'' Hobbs told analysts in a conference call, declining to name the parties.

Hobbs said the company also is considering an ``influx of equity'' or joint-ventures to bolster its finances.

Williams is at least the third energy trader to consider a partnering strategy. Earlier this year, executives of Calpine Corp. and Mirant Corp. discussed linking with large financial institutions to boost their credit.

Since Enron Corp. filed for bankruptcy, the entire energy trading sector has been shaken by a loss of confidence from investors and lenders.

Moody's took a negative outlook on Williams in February. The rating service said this month that it was reviewing the company's debt, which is currently ``Baa2,'' an investment grade two notches above junk.

A downgrade could force Williams to promise cash or other assets as collateral for long-term contracts, thereby increasing the cost of doing business. That would leave Williams with less money to pay down debts and make it harder to sign other natural gas and power deals.

Andrew Sunderman, the chief financial officer of the company's trading unit, said the company should soon learn the outcome of its negotiations with Moody's.

``Everyone in Williams is optimistic we will come out of this with the same flexibility,'' Sunderman said. ``We will maintain our solid investment grade credit.''

Williams already has taken steps to strengthen its balance sheet by $5.7 million, cutting spending, selling assets and issuing securities and debt. More asset sales are likely, Hobbs said.