Monday, Mar. 19, 1984

Nuclear Fallout

Lilco struggles to survive

Few utilities have suffered more than the Long Island Lighting Co. from the problems plaguing the U.S. nuclear power industry. For nearly 20 years, Lilco has been trying to bring its Shoreham, N.Y., nuclear plant on line. That facility is now hopelessly behind schedule, and the cost of the project, originally budgeted at $261 million, is approaching $4.1 billion, or more than 15 times the initial estimates.

Last week the struggling firm outlined a survival program that includes layoffs of nearly 1,000 employees, or 20% of its work force, together with pay cuts of up to 25% for those who remain. Lilco Chairman William Catacosinos, 53, who took charge at the end of January after the abrupt resignation of former Chairman Charles Pierce, 61, also said the company will pay no common-stock dividends in 1984. Catacosinos called the actions necessary to save the utility from slipping into bankruptcy by the end of the year. Said he: "What we're trying to do is save this company. The truth is that we are in trouble and it's serious."

Shoreham has been dogged by mismanagement, construction foul-ups and community opposition, among other obstacles. Last year, as the utility was battling for approval of evacuation plans to be used in the event of a major radiation leak, the plant's diesel generators were found to be defective. Back-up generators are now being installed at a cost of $100 million, while the malfunctioning ones are being repaired and tested.

Like many troubled nuclear power facilities around the country, Shoreham's fate is controlled at least as much by public authorities as it is by Lilco's beleaguered management. The federal Nuclear Regulatory Commission has yet to license the plant for operation. Locally, officials of Long Island's Suffolk County are convinced that a serious accident at the plant would cause nuclear fallout to envelop nearby residents before they could flee. Said Deputy Suffolk County Executive Frank Jones: "Shoreham should not and cannot go on line. It should be abandoned." Some county officials now argue that Shoreham should be converted to a coal-burning plant.

Meanwhile, Lilco cannot charge its customers for much of its mushrooming costs, currently estimated at $400 million a month in interest and other overhead, until Shoreham begins to provide electricity. Says Paine Webber's corporate vice president Peter Jadrosich: "If they don't bring Shoreham into service, they're going to bleed to death."

The utility's seemingly Intractable problems have already dragged the price of its stock from a high of $19.75 a share in 1978 to $7 at the close of last week. Investors are likely to be wary of the shares for some time, since Catacosinos says that Lilco will not resume paying dividends until the company is in considerably better financial shape.

Nevertheless, many experts see improving long-term prospects for Lilco, if not for Shoreham. The austerity measures that Catacosinos announced last week will save the company $374 million this year without reducing essential customer services. The firm must still find $70 million to $100 million in additional savings before the end of the year, or it will have to raise new funds. New York State officials are not prepared to allow the utility to go bankrupt, but a consensus has yet to develop on how to provide aid. One possibility: a tax-free state loan to help Lilco manage its debt until Shoreham's problems are resolved.