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8/14/03 4:00:00 PM ET

TEXT-Moody's may cut FirstEnergy Corp snr unsec rating
Reuters, 08.14.03, 1:51 PM ET


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(The following statement was released by the rating agency)


Approximately $14 Billion of Debt Affected

NEW YORK, Aug 14 - Moody's Investors Service has placed the debt ratings of FirstEnergy Corp. (nyse: FE - news - people) (FE: senior unsecured Baa2) and all of its subsidiaries under review for possible downgrade. The review is prompted by: 1) Weaker than expected operating performance and cash flow generation; 2) Less progress than expected in reducing debt; 3) Continuing high leverage relative to its peer group; 4) Negative impact on cash flow and earnings from the continuing nuclear plant outage at Davis-Besse. The company's results have been weaker than expected due partly to higher operating and maintenance expenses and costs to replace power during the extended outage at the Davis Bessie (D-B) nuclear facility. Mild weather in FE's service territory has also affected financial results. Poor market conditions for divestiture of wholesale generating assets has contributed to the slower than expected pace of delevering. Additionally, the longer than expected scheduled outages at the Beaver Valley and the Perry nuclear units dampened results for the second quarter due to higher costs for purchased power. The review of FE's subsidiaries reflects the potential for greater claims on cash by FE to meet its own financing needs. There are also challenges at the subsidiary level, including D-B and regulatory issues. Moody's review will consider the potential for improved performance when current operating issues are resolved, the prospects for continued debt reduction, and the likely impact of regulatory developments in Ohio and Pennsylvania. There is potential for the ratings differential between the FE operating utilities to narrow, reflecting the degree to which FE operates the regulated businesses as a single system, more closely linking the resources of the various member companies, including the active use of a money pool. Anticipating that D-B will be returned to service in the near future and that the company will continue to significantly reduce debt and improve its financial profile, Moody's does not expect that the outcome of the review will result in FE's senior unsecured debt rating falling below investment-grade. Ratings under review include the following: FirstEnergy Corp -- Senior Unsecured Baa2, Issuer Rating Baa2 Cleveland Electric Illuminating Company -- Senior Secured Baa2, Issuer Rating Baa3, Preferred Stock Ba2 Jersey Central Power & Light Company -- Senior Secured A2, Issuer Rating A3, Preferred Stock Baa2 Metropolitan Edison Company -- Senior Secured A2, Senior Secured Shelf (P)A2, Issuer Rating A3, Backed Preferred Shelf (P) Baa1, Preferred Shelf (P)Baa2 Pennsylvania Electric Company -- Senior Secured A2, Senior Unsecured A2, Issuer Rating A3 Ohio Edison Company -- Senior Secured Baa1, Senior Secured Shelf (P)Baa1, Issuer Rating Baa2, Preferred Stock Ba1 Pennsylvania Power Company -- Senior Secured Baa1, Senior Secured Shelf (P)Baa1, Issuer Rating Baa2, Preferred Stock Ba1 PNPP II Funding Corp. -- Backed Senior Secured Baa2 BVPS II Funding Corp. -- Backed Senior Secured Baa2 Toledo Edison Company -- Senior Secured Baa2, Issuer Rating Baa3, Preferred Stock Ba2 CTC Beaver Valley Funding Corp. -- Backed Senior Secured Baa3 CTC Mansfield Funding Corp. -- Backed Senior Secured Baa3 Beaver Valley II Funding Corp. -- Backed Senior Secured Baa3 FirstEnergy Corp. is a utility holding company headquartered in Akron, Ohio. Its seven electric utility operating companies comprise the nation's 4th largest investor-owned electric system, serving over 4 million customers in Ohio, Pennsylvania and New Jersey.

Copyright 2003, Reuters News Service

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