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FirstEnergy offers shares at $30 each

09/13/03

Thomas W. Gerdel
Plain Dealer Reporter

FirstEnergy Corp. yesterday priced its public offering of 28 million shares at $30 each.

The Akron utility also has granted underwriters an option to buy 4.2 million additional shares to cover over-allotments in case brokers have requests from investors for more shares.

"We're very pleased," said Kristen Baird, a FirstEnergy spokeswoman. "It shows confidence in the strategy that we have in place."

Investors also appeared to like it, pushing FirstEnergy shares to $31.81, up 71 cents, in trading yesterday on the New York Stock Exchange, even though the additional shares will dilute future per-share earnings.

Baird said FirstEnergy will reduce its short-term borrowings with the net proceeds from the stock offering - the money the utility receives after all the underwriters' fees are taken out. Gross proceeds from the 28 million shares would total about $840 million, but the net proceeds would not be known until next week, Baird said. The company has about $14.5 billion in debt.

The price of the shares was less than that reported by Bloomberg News late Thursday, when banks told the news service the shares would sell for $30.75. However, FirstEnergy had no signed agreement to sell the shares at that price, said Ralph DiNicola, a FirstEnergy spokesman. The difference would be $24 million, assuming the additional shares are sold.

FirstEnergy disclosed yesterday that it had received a request by the Securities and Exchange Commission asking for more data on the method the company used in calculating how it would restate its 2002 earnings, which it did Aug. 5.

The SEC request arrived at FirstEnergy's offices late Thursday.

Asked to explain whether the company's pricing was affected by the arrival of the SEC request, DiNicola said he was told "the timing was awkward" by FirstEnergy Chief Financial Officer Richard Marsh.

"The letter came when the terms of the transaction were being finalized," DiNicola added. "How that played out, I don't know."

Analysts said the sale of the shares would be looked on favorably by credit ratings agencies. FirstEnergy wants to reduce its debt to avert a drop in its ratings.

James Halloran, an analyst at National City Wealth Management in Cleveland, estimated that net proceeds to FirstEnergy could be as high as $940 million if all the additional 4.2 million shares are sold.

"I think it's very probable that all those additional shares will be sold," Halloran said.

Despite last month's blackout, its earnings restatements and other setbacks, FirstEnergy still has strong cash flow and a secure dividend, Halloran said.

To reach this Plain Dealer reporter:

tgerdel@plaind.com, 216-999-4114

"


2003 The Plain Dealer. Used with permission.
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