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Retail Supplier Parent Expects Lower Commodity Margin in 2014, Cuts Dividend
FirstEnergy Corp. announced a cut in its dividend as it also reported 2014 guidance which includes lower contribution from its competitive energy services segment.
FirstEnergy's board declared a revised quarterly dividend of $0.36 per share, which equates to an indicated annual dividend of $1.44 per share. Since 2008 the company had paid a quarterly dividend of $0.55 per share, which was an annual rate of $2.20 per share.
Among other things, FirstEnergy lowered the dividend due to, "competitive market realities," as well as economic conditions.
"The revised dividend also provides our company with additional financial flexibility to pursue regulated growth opportunities over the next several years," said FirstEnergy President and Chief Executive Officer Anthony Alexander.
FirstEnergy also announced 2014 operating earnings guidance of $2.45 to $2.85 per share, with the Competitive Energy Services segment contributing $0.35 to $0.49 per share ($150-$205 million).
The Competitive Energy Services segment is primarily comprised of FirstEnergy Solutions and Allegheny Energy Supply, and serves more than 2.7 million customers through a multi-channel approach (30% residential, 40% commercial and 30% industrial). FirstEnergy’s competitive generating portfolio consists of more than 13,000 MW of capacity.
Final Competitive Energy Services 2013 operating earnings guidance was $0.71 to $0.75 per share. The forecast decline for 2014 is largely attributable to a $0.55 per share decline in Commodity Margin. Commodity Margin includes retail, wholesale, and capacity revenues; fuel, purchased power, capacity and net transmission expenses
Assumptions for 2014 Commodity Margin include a competitive energy sales target of 99 million MWh (retail and wholesale) and competitive generation output of 77 million MWh.
Specifically, FirstEnergy's Competitive Energy Services segment is forecast to achieve retail sales and revenues as follows:
FirstEnergy does expect Competitive Energy Services capacity revenue to increase by $150 million in 2014 compared to 2013.
FirstEnergy forecasts 2014 Adjusted EBITDA for Competitive Energy Services as $800-$850 million.
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January 22, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
Channel Million MWh $ Million $/MWh
LCI 44.3 $2,310 $52
MCI 3.5 $205 $58
Gov Agg 18.4 $1,080 $59
Mass Market 6.4 $420 $66
Total Retail 72.6 $4,015 $55
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