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Florida Progress in search of savior

There will be no kilts in Florida, no gathering of the clan electric in St. Petersburg.

Poised to buy Florida Power Corp. last week, Scotland's biggest power company at the last minute dropped a deal that had been months in the making.

Ultimately, the thriftiness of Scottish Power PLC overwhelmed its zeal to become the foreign owner of Florida's second-largest investor-owned utility.

Scottish Power _ a Glasgow company that marked its U.S. trading debut last fall with a kilted bagpiper playing on the floor of the New York Stock Exchange _ made one final inspection of Florida Power. Apparently, it didn't like enough of what it saw to write a multibillion-dollar check, and walked away from the deal.

So it's back to the highlands for Scottish Power, and back to the drawing board for Florida Power and its parent company, Florida Progress Corp.

The good news is that we won't see haggis _ the classic Scottish dish of entrails boiled inside a sheep's stomach _ showing up on too many Tampa Bay area restaurant menus. The bad news is that Florida Power, which charges Florida consumers the highest electricity rates of the state's big power companies, still has a "For Sale" sign on its door.

That waiting-to-be-sold period can be hard on a company, its employees, its customers and even the business community.

"From an employee perspective, I don't think we would be any worse off if Florida Power is sold," said 16-year employee Ed Mobsby, a representative of the International Brotherhood of Electrical Workers whose union members make up 2,000 of the utility's 5,000 employees.

"Given how anti-employee the company has become, we might be better off if it is sold," Mobsby said. Two weeks ago, the electrician was told he no longer had a job at Florida Power.

For customers, any sale of Florida Power is unlikely to bring much change in electricity rates in the short term. And in the long run, rates may be affected as much by deregulation of the power industry as by a new owner of the utility.

If Florida Power is sold, it would likely mean the region's locally headquartered utility would be run from afar _ possibly from another country. That loss could undermine a part of Florida already short on corporate headquarters, and would raise concerns about the ongoing commitment of one of the area's biggest civic boosters and contributors to charities.

Who will buy the power company now?

That's the nagging question bandied about this weekend in New Orleans where the directors and executives of Florida Progress gathered. Their original mission was to meet in secret, approve the utility's sale to Scottish Power and prepare for a formal announcement this week.

With that deal now dead on arrival, the investment bankers hired by Florida Progress must go back to knocking on other doors of prospective purchasers. Arcane rules governing the electricity business make it tough for U.S. power companies to buy one another.

Must Florida Power be sold? It's in a hot-growth state. It has 1.3-million customers, with more moving daily into an expansive service territory that stretches from Tampa Bay east to Orlando and north to Tallahassee.

That's not enough, executives of the parent company say. Florida Progress has to get bigger to compete in a power business that's expected to become more competitive in the years ahead. Analysts agree.

The company's so-so performance over the recent years and its remarkable lack of strategic direction have sealed its fate. Florida Progress lately has spent much of its time spinning off an unwanted real estate and airplane leasing business, writing off a troubled Oklahoma insurance subsidiary and spending more than $100-million to repair its one and only nuclear power plant.

Forget the company's stock price, which at $40 a share is buoyed by the market boom and takeover speculation. Look at the recent book values, representing the net worth, of Florida Progress:

In 1992, it was $1.70-billion.

In 1993, it rose to $1.80-billion.

In 1994, it rose to $1.93-billion.

In 1995, it increased to $2.06-billion.

In 1996, it dipped to $1.92-billion.

In 1997, it dropped to $1.77-billion, almost where it started five years ago.

The company has become a seller, not a buyer.

Its sales appeal is enhanced by the revival, after an outage of more than 16 months, of its Crystal River nuclear power plant. "Nobody was interested before because of Crystal River," said analyst Nancy Messer of Morgan Stanley in New York.

Now they are, and Messer credits the swift corporate cleanup by Florida Progress chief executive Richard Korpan.

"Korpan has shown some leadership behind the scenes to shape this company up," the analyst said. (Of course, that's the same compliment paid to another Florida corporate cost-cutting champion, Al "Chainsaw" Dunlap.)

While Florida Progress has spruced up its balance sheet, it has missed chances to expand. Florida Progress overlooked a big opportunity, right under its nose, to move into the natural gas business when its across-the-bay rival, TECO Energy Inc., snapped up Peoples' Gas last year.

Left alone, Florida Progress has enough internal growth from its service territory and diversified businesses to sustain 4 percent to 5 percent earnings growth in the near future, says analyst Doug Preiser at McDonald & Co. in Cleveland.

But long term, he warned, "their backs are pushed against the wall."

The exit of Scottish Power only raises the stakes.

To ex-employee Mobsby, the transformation of Florida Power from a well-oiled machine to some "For Sale" commodity is seen in simpler terms.

"Florida Power seems to be run by attorneys and accountants now," he said. "Nobody knows how to run a power company anymore."

Florida Progress

1982

Florida Power Corp. shareholders approve a plan to form Florida Progress Corp., a holding company that would own the utility and its subsidiaries.

1985

Florida Power's Crystal River nuclear power plant shuts down five months for refueling and repairs.

1986

Florida Progress buys Mid-Continent Life Insurance for $50-million in Florida Progress stock.

The Crystal River nuclear plant shuts down for six months after cracks are found in coolant pump shafts. The NRC fines the utility $130,000 for security breach and inadequate training.

1988

The NRC fines Florida Power $50,000 for incidents in which nuclear plant operators failed to control highly radioactive areas.

1990

Subsidiary Talquin Corp. completes the Barnett Tower in downtown St. Petersburg. The high-rise also serves as the corporate headquarters for Florida Progress.

1991

Jack B. Critchfield becomes chairman of Florida Progress Corp., succeeding Andrew H. Hines Jr., who retired after 40 years with the company.

1993

Financial problems at Mid-Continent surface. To cover reserves, the company started raising premiums on "level" policies that were guaranteed never to increase.

1996

The NRC fines Florida Power $500,000 for violations at Crystal River nuclear plant. The fine is the largest levied against the plant.

Florida Progress Corp. spins off its aircraft leasing and real estate operations into Echelon International Corp.

Florida Power shuts down the Crystal River plant. Each day the plant is off line, the company spends nearly $300,000 in replacement fuel costs to meet electricity needs.

1997

Insurance regulators in Oklahoma declare Mid-Continent insolvent and put it into receivership. The company is short $164-million in reserves.

Florida Progress Corp. names Richard Korpan as chief executive. Korpan succeeds Jack Critchfield, who served as CEO for seven years.

Texas regulators order Mid-Continent to stop selling new policies in that state, the company's largest market.

Florida Progress Corp. and its partners, Cinergy Corp. of Cincinnati and New Century Energies of Denver, form Cadence, an energy-management firm. The partnership is a marketing alliance that will target large national companies in the retail, restaurant, grocery and lodging industries.

1998

After being shut down for 17 months, the Crystal River plant restarts in February.

_ Compiled from Times files by news researcher John Martin.

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