FirstEnergy seeks to sell its interests in 3,003-MW Bath County hydropower facility and other energy plants

FirstEnergy

The U.S. Securities and Exchange Commission on Dec. 6 released a Form 8-K submitted by Akron, Ohio-based FirstEnergy Corp. that indicates certain FirstEnergy subsidiaries entered into new credit facilities for negotiating the sale of several generating assets, including the company’s interests in the 3,003-MW Bath County pumped-storage hydropower facility.

Located in Virginia and completed in 1985, the Bath County facility is the largest pumped-storage plant in terms of generating capacity in the world.

Published reports indicate that on Nov. 4, FirstEnergy financial documents said the company had lost US$381 million on revenue of $11.2 billion for the first nine months of 2016 and also expects to end the year with a loss.

According to the 8-K filing, FirstEnergy seeks a purchase price of $885 million for some of its assets, including more than $300 million in debt that would be assumed by the buyer. The document also reported FirstEnergy has secured a new $6.9 billion credit facility, replacing $7.2 billion in debt set to expire in the first quarter of 2019.

In its filing, the company also said it continues to explore "all alternatives for the remaining generation assets at (FirstEnergy Supply) and AE Supply, including, but not limited to, legislative efforts to convert generation from competitive operations to a regulated or regulated-like construct."

Several local news articles quoted FirstEnergy President and Chief Operating Officer, Charles Jones, as saying, “Strategic options will be implemented over the next 12- to 18-months. The company intends to act quickly.”

Jones reportedly went on to say it is possible that FirstEnergy could sell off all, or most, of its coal, nuclear, hydro, gas and oil power plants that make up its FirstEnergy Supply unit.

Also on Nov. 4, Moody’s Investor Service downgraded FirstEnergy Solutions (FES) corporate family rating to Caa1 from Ba2 and the probability of default rating to Caa1-PD from Ba2-PD, saying the company’s rating outlook remains negative.

"We believe FirstEnergy will exit its unregulated merchant generating businesses, and we view regulatory or political intervention within the 18-month timeframe as unlikely, making a restructuring or bankruptcy filing a more likely outcome," said Swami Venkataraman, senior vice president at Moody's.

"While FES is expected to be free cash flow positive through 2019, other near term risks include the outcome of a pending arbitration related to certain coal transportation contracts, and remarketing obligations for about $500 million in revenue bonds at FES during 2018."

The 8-K filing confirms the utility is in fact moving relatively quickly to reduce its debt, in part caused by lower than expected performance in the energy business.

Included in the offering are a total of 13 power plants and interests in the Bath hydroelectric facility too include: Six plants powered by natural gas; four fossil-fuel coal plants; and three nuclear power plants. Some units could be closed if buyers are not found, Jones said.

Last month, FirstEnergy said it would work with American Electric Power's Ohio utility to push for the state's power markets to be re-regulated. The two utilities previously won support from state regulators for struggling coal and nuclear generation, but federal regulators subsequently blocked the deals, leading to talk of plant sales and re-regulation.

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