Retail Supplier To Sell, Deactivate Affiliated Coal Generation

FirstEnergy Solutions announced that it will sell or de-activate nearly 2,400 MW of coal-fired generation, citing challenging market conditions

FirstEnergy Solutions plans to sell or deactivate the 136 MW Bay Shore Unit 1 in Oregon, Ohio, by October 1, 2020, resulting in impairment charges of $150 million

In addition, Units 1-4 of the company’s seven-unit W.H. Sammis Plant in Stratton, Ohio, collectively representing 720 MW of capacity, will be retired by May 31, 2020, resulting in impairment charges of $497 million

Sammis Units 1-4, each with 180 MW capacity, came online between 1959-1962.

Sammis Units 5-7 (1,490 MW) will continue to operate

In 2015, Bay Shore Unit 1 and Sammis Units 1-4 contributed about four percent of the electricity produced by the company’s generating plants. FirstEnergy does not intend to offer these units into the PJM capacity auction for the 2020-2021 timeframe.

Plant deactivations are subject to review for reliability impacts, if any, by PJM Interconnection

Additionally, as a result of low capacity prices associated with the 2019/2020 PJM Base Residual Auction in May 2016, as well as its annual update to its fundamental long-term capacity and energy price forecast in the second quarter of 2016, FirstEnergy determined that an interim impairment analysis of the goodwill at its Competitive Energy Services segment was necessary in connection with the preparation of its financial statements for the three-month period ended June 30, 2016. Based on such impairment analysis, FE’s second quarter 2016 results will include a pre-tax non-cash impairment charge of approximately $800 million, representing the total goodwill at the Competitive Energy Services segment, including $23 million at FirstEnergy Solutions (FES). Approximately $433 million of the goodwill is non-deductible for tax purposes, including $23 million at FES.

FirstEnergy also expects that its second quarter 2016 results will reflect a valuation allowance against state and local net operating loss carryforwards of $159 million that FE management believes, more likely than not, will not be realized, including $65 million at FES.

In addition, FE and FES expect that their second quarter 2016 results will reflect a charge of $58 million from settlement and termination costs on coal contracts associated with retired generating units.