Utility again works on plant sales

10/18/2002

FirstEnergy Corp. hopes to have a deal to sell its suburban Toledo Bay Shore power plant and three other coal-fired plants in December, just a few months after it cancelled a $1.5 billion deal because the then-buyer couldn't pay for it.

The utility, which owns Toledo Edison, said it would use proceeds from the sale to reduce its heavy debt. News that the sale of the Bay Shore plant in Oregon, which has 185 employees, may be close came amid a conference call yesterday with analysts learning of FirstEnergy's financial situation in the third quarter.

The company reported a flat profit per-share of $1.06 for the quarter ending Sept. 30, compared with $1.07 for the same period a year ago. It said its latest profit was $310 million, up from $234 million a year ago, which was prior to its takeover of GPU, Inc., an energy company. FirstEnergy's revenues were $3.6 billion in the latest quarter, up from $3.3 billion a year ago.

The planned sale of the coal-fired plants is based on interest from unnamed parties, and could be completed by late next year, FirstEnergy said. The cancellation of the earlier deal with NRG Energy, Inc., meant the Ohio utility didn't receive about $1 billion it planned to have to pay off its debts.

Richard Marsh, FirstEnergy's chief financial officer, said the company will seek bids from buyers in November and could strike a tentative deal ''if the bids are acceptable.''

In another key development revealed yesterday, Tom Navin, company treasurer, said FirstEnergy has achieved the required level of its customers who chose another energy supplier to permit it to continue billing all homeowners and renters in its service territory a surcharge to recoup its $8.8 billion in debts. That surcharge was permitted for five years by the Public Utilities Commission of Ohio if FirstEnergy met certain conditions when the electric industry was deregulated in 2000 in Ohio. There are three years left on that surcharge.

If FirstEnergy did not get 20 percent of the residential customers in its territory to switch to another supplier by 2005, it would have had to forfeit $500 million of that surcharge amount.

Much of the call with Wall Street analysts focused on the company's earnings and expenses with respect to the ongoing problems at the company's troubled Davis-Besse nuclear plant near Oak Harbor, Ohio.

Gary Leidich, executive vice president of the firm's nuclear operating unit, said the company plans to receive approval from the Nuclear Regulatory Commission by early in 2003 to restart the plant, which was shut down in February after severe corrosion was found on its reactor vessel head. About 60 percent of the repairs are completed, he said.

The company's earnings lost 20 cents a share in the quarter due to the negative impact of Davis-Besse, which required $50 million to $70 million in repairs and forced the utility to buy power to offset the loss of generation by the nuclear plant, said Mr. Marsh, the financial officer.

FirstEnergy also had two one-time charges on its balance sheet that hurt earnings, including an 11 cents per share charge relating to a court ruling in Pennsylvania stopping its subsidiaries from deferring some energy costs related to deregulation, and a 2 cents per share charge related to company staff cuts.

The losses were partially offset by high demand for power this summer, Mr. Marsh said. Residential demand jumped 13 percent.

The news yesterday was received favorably by investors. The company's stock closed up $1.85 a share at $28.15 on the New York Stock Exchange. The firm also declared a quarterly dividend of 37.5 cents per share, payable Dec. 1 to shareholders of record Nov. 7.