Rating Research confirms FirstEnergy's low quality 'B' reputation rating

Industry executives cited problems over 12 months ago

Rating Research Worldwide Headquarters
1905 River Road
Bedminster, NJ 07921-2759
Phone: 908-470-1260
Fax: 908-234-9997

Contact: Jane Barr 908-432-7666

Bedminster, N.J. (21 August 2003) - Over a year ago electric power industry executives expressed serious concerns about FirstEnergy in research conducted by Rating Research LLC (RRC), the leading reputation rating agency, resulting in the assignment of a low quality B Reputation Strength Rating to the now beleaguered utility. The reputation study, including telephone interviews with senior industry executives and financial analysts, was released in July 2002. "Today we confirmed the B reputation rating assigned to FirstEnergy 18 months ago," said Dory Gasorek, Principal and Chair of RRC’s Rating Committee. "Our definition of a B rating is totally consistent with FirstEnergy's current situation. Specifically, a B-rated company has a low quality reputation and carries an above-average risk of what we describe as 'reputation default' with a likelihood of falling into 'reputation distress.'"

RRC asserts that companies whose reputations are rated B are unable to leverage their reputation in times of controversy and are likely to have to price their products and services at a discount to market.

FirstEnergy is currently under scrutiny for its possible role it the recent power outage as well as prior issues. In early August a Federal judge ruled that the company had violated the Clear Air Act at one of its coal power plants. Additionally, the Nuclear Regulatory Commission is reviewing the safety of First Energy’s nuclear plant that has been the subject of a Congressional hearing.

FirstEnergy Ranked Low Among 21 Power Companies

In RRC's study, FirstEnergy ranked last among 21 companies with industry executives perceiving it as having weak management, poor regulatory relationships and an inability to adapt to changing markets appropriately. Specifically, industry executives ranked FirstEnergy at or near the bottom on eight of nine key reputation dimensions and on specific reputation components such as: effectively delivers products and services; invests to keep its workforce updated; and is environmentally conscious, among others.

Surprisingly, financial analysts perceived the company as one of the most ethical and trustworthy companies in the study, while industry executives scored it at the bottom of the industry on these components.

“FirstEnergy has made an effort to connect with the financial community through frequent analyst meetings and conference calls, possibly contributing to the more positive perceptions by analysts,” noted Ms. Gasorek. “On the behavioral measure ‘personally willing to support in times of controversy,’ financial analysts were more favorable by as much as 20 points. Clearly, the company will need all the support they can garner in the coming months.”

RRC is a joint venture between The Ratrix Group and Opinion Research Corporation. The agency plans to update its electric power study this fall.

For additional questions about RRC’s Electric Power Reputation Strength Study call Jane Barr.