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Energis Shares Plunge 70 Percent

February 21, 2002

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LONDON (AP) _ Shares in Energis PLC, a former star among British telecommunications businesses, plunged by almost 70 percent Thursday after the struggling firm expressed concern that bankers might cancel a loan of more than $1 billion.

Energis said it hopes to sell money-losing operations in continental Europe and cut 400 jobs in Britain as part of a radical restructuring aimed at cutting costs.

The company’s shares plunged by 69.8 percent to close at 4 pence (6 cents) in trading on the London Stock Exchange. Energis stock peaked at 793.5 pence ($11.35) per share less than two years ago, before the global telecommunications industry suffered a crippling downturn.

Energis, an e-business and telecom services firm, is a spin-off of National Grid Group PLC, which owns and operates electricity and telecoms networks in Britain and the United States.

Energis surprised investors with a profit warning last month. Saddled with debts of 1.2 billion pounds ($1.7 billion), it warned Thursday that it might fail to comply with unspecified financial conditions on a 725 million pound ($1.04 billion) loan. If it fails to meet these conditions by March 31, the end of its financial year, Energis’ bankers could cancel the loan and force repayment of any borrowings, said Mark Beeden, a company spokesman.

Energis later asked a syndicate of banks to relax the conditions of its loan agreement. Beeden said it expected the banks to respond to the request within three weeks.

``Speed is of the essence,″ he said.

National Grid, which still owns 32.6 percent of Energis, warned the firm not to assume it could rely on National Grid for additional financial support. National Grid competed a $3 billion acquisition last month of Niagara Mohawk Holdings Inc., the second-largest gas and electricity utility in New York state.

Analysts said Energis’ decision to sell its unprofitable businesses in Germany, the Netherlands and elsewhere in Europe is a step in the right direction, though they warned that finding a buyer for the assets might prove difficult given depressed market conditions.

Some analysts said Energis might have to pay for another company to take the European businesses off its hands, as this could be cheaper than shutting the units down.

Beeden insisted that the European companies are all fundamentally sound.

``We’re pulling away because we cannot sustain funding those businesses through to profitability,″ he said.

Energis said it was restructuring its British business to improve efficiency, accountability and controls. It would eliminate 10 percent of its 4,000-strong work force in an effort to centralize and streamline its staff.

The company had announced an earlier round of 450 job cuts last year.

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