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FirstEnergy sells shares to ease debt

09/12/03

Thomas W. Gerdel
Plain Dealer Reporter

FirstEnergy Corp. has sold 28 million shares at $30.75 each, raising about $861 million, according to Bloomberg News.

FirstEnergy spokesman Ralph DiNicola said he could not comment, citing strict disclosure rules by the Securities and Exchange Commission. However, DiNicola said he expected to have an announcement this morning.

"They got a pretty fair price for it, considering all the circumstances," said James Halloran, an energy analyst for National City Wealth Management in Cleveland, commenting on the Bloomberg report.

Halloran, who expects the Akron utility to use the money to reduce its short-term debt, said the successful completion of the share offering should be looked on favorably by credit rating agencies.

"It's right in the ballpark of what they were trying to raise," he said.

FirstEnergy wanted to reduce its debt to avert a drop in its credit ratings. Standard & Poor's and Moody's Investors Services have said they might lower the utility's bond ratings to below investment grade, or "junk" status, if it did not take steps to reduce debt. A lower rating would raise the cost of carrying FirstEnergy's $14.5 billion in debt.

The FirstEnergy shares were sold at a slight discount from yesterday's $31.10 closing price on the New York Stock Exchange. The shares were down 73 cents for the day. The utility's stock price has been recovering from the slide it took immediately following the Aug. 14 blackout, when it slipped to $27 or $28.

FirstEnergy also yesterday filed amended financial reports, correcting typographical and math mistakes that changed some previous statements by millions of dollars. Company spokeswoman Kristen Baird told the Associated Press the revised reports were "not material, and there were no changes to the bottom-line results."

She called the errors "unfortunate and not something we'd like to have happen. We were in a position where we had two weeks to do it, and we did not have a lot of time."

Baird said the amended filings concerned the annual filing for 2002 and quarterly filings for the first and second quarters of this year. Some errors were in the 2002 annual statement. One item, a reference to a decrease in net income of $404.2 million, should have read $392.2 million. In a table as part of the 2002 document, net income change for regulated services should have reported a decrease of $114.3 million, instead of a $103.7 million decrease.

Earlier in August, FirstEnergy restated results, lowering them for 2002 and the first quarter of 2003 and reducing projected earnings.

To reach this Plain Dealer reporter:

tgerdel@plaind.com, 216-999-4114


2003 The Plain Dealer. Used with permission.
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