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TEXT-S&P affirms FirstEnergy BBB corporate credit rtg
Reuters, 04.14.03, 3:30 PM ET


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(The following statement was released by the ratings agency) NEW YORK (Standard & Poor's) April 14, 2003--Standard & Poor's Ratings Services said today that it affirmed its 'BBB' corporate credit rating on FirstEnergy Corp. and its subsidiaries. The outlook remains negative.

Akron, Ohio-based FirstEnergy had $14.5 billion of debt (including off-balance-sheet debt) as of Dec. 31, 2002.

The ratings on FirstEnergy reflect above average regulatory support in Ohio and adequate regulatory support in Pennsylvania and New Jersey, power generation that is contracted to its transmission and distribution subsidiaries through 2005, and hedging of its short power position arising from the Pennsylvania provider-of-last-resort obligation.

"We maintain a negative outlook on the company because of FirstEnergy's aggressive financial profile and the extended outage at the Davis Besse nuclear facility. Although the company generates free cash flows, in the absence of any significant asset sales, FirstEnergy relies on its free cash flows to implement a deleveraging plan, which has annual targets," said Standard & Poor's credit analyst Aneesh Prabhu.

"We expect FirstEnergy to achieve a debt to capital ratio of about 60% in 2003 and improve to about 50% by 2005. If the outage at Davis Besse is further extended and causes further delays to FirstEnergy's deleveraging plans, ratings may be lowered," added Mr. Prabhu. "On the other hand, the outlook can be revised to stable if Davis Besse restarts and FirstEnergy is able to execute its deleveraging plan successfully."

Standard & Poor's also said that key issues being monitored for FirstEnergy include the restart of Davis Besse, the New Jersey rate case, capture of merger synergies, and controlling capital expenditure at estimated levels. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

Copyright 2003, Reuters News Service

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