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FirstEnergy: Goal Is To Move Out of Competitive Business, Looking At Every Option That's Cash Flow, Credit Positive

August 1, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

"We will look at every option that's available to us that is positive from a cash and credit perspective to move out of [the merchant] business over time, and that's our goal," FirstEnergy Corp. CEO Chuck Jones said during an earnings call on Friday

"We do not see any short-term solutions to the current challenging market situation. Longer-term, we do not believe competitive generation is a good fit for FirstEnergy," Jones said.

"We will continue to seek opportunities, both within the competitive realm and the states, to further de-risk the business and convert megawatts from competitive markets to a regulated or regulated-like construct," Jones said

"I continue to believe that those companies that own generation, transmission, and distribution in a vertically-integrated or other type of fully-regulated model are best situated to provide reliable and affordable service to customers now and in the future," Jones said

While one of the company's goals has been to keep as much of its current generation fleet viable, "given the market conditions, we will look at all alternatives that are constructive from a balance sheet and cash perspective, including the possible sale or deactivation of additional units."

FirstEnergy's review will occur on a unit-by-unit basis

"Our long-term goal is to operate as a fully-regulated utility company," Jones said

"We cannot put investors and our company at risk as we wait for the country and PJM to address the issues with the current construct," Jones said

Jones said that FirstEnergy does not intend to infuse additional equity into its competitive business in order to support credit ratings.

Jones noted that, following the company's recent announcement of asset impairments and plant exit costs, S&P put FirstEnergy Solutions, Allegheny Energy Supply, and Allegheny Generating Company on credit watch. Jones said that the company expects both S&P and Moody's to review its competitive entities at committee meetings in the near future, which may result in non-investment grade credit ratings for those entities.

This could result in potential collateral calls of up to $300 million, Jones noted, who added that the company's available liquidity of about $3 billion would be more than adequate to cover such calls.

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