Dow Jones Newswires

CHICAGO -- FirstEnergy Corp. (NYSE:FE - News) hopes to restart its troubled Davis-Besse nuclear reactor next year, but would consider cutting the plant loose if it becomes necessary to avoid serious damage to the company, Chief Executive Peter Burg said Wednesday.

ADVERTISEMENT

The utility doesn't think such drastic action will be needed, but has envisioned alternatives including selling the plant, shutting it down or leasing it to another party, according to company spokeswoman Kristen Baird.

The company would review its options if it loses confidence in its ability to return Davis-Besse safely to service, Mr. Burg said.

"We will consider the alternative," he said, addressing an analyst conference. "We will not allow it to define our organization. We're not going to allow Davis-Besse to become a black hole for FirstEnergy."

Davis-Besse was plunged into a long and expensive repair outage last spring, when FirstEnergy discovered leaking boric acid had eaten almost entirely through the lid covering the reactor, a level of corrosion damage unprecedented in the industry. FirstEnergy plans to bring the plant back on line early next year, pending approval from the Nuclear Regulatory Commission.

FirstEnergy is making progress in its effort to return the Toledo, Ohio-area reactor to service early next year, Mr. Burg said. The company believes it can get the reactor back in working condition.

"We're confident in terms of the progress we're making at that facility," Mr. Burg said. "We're making steady progress in our restoration efforts."

The company also intends to seek a 20-year extension for Davis-Besse's operating license from the NRC and is now investing in maintenance needed to keep the plant on line for the long haul, spokesman Richard Wilkins said. The plant's current license expires in 2017.

FirstEnergy has estimated that costs associated with the Davis-Besse outage -- including repairs, replacement power while the unit is off and other maintenance work done to take advantage of the long outage -- will likely top $300 million.

On Tuesday, FirstEnergy lowered its 2003 earnings guidance to $3.35 to $3.55 a share from $3.70 to $3.90 a share, primarily to reflect an anticipated rise in non-cash pension and other post-employment benefit costs. Both estimates exclude the costs of the Davis-Besse outage.

The company has said Davis-Besse's estimated 2002 restart costs of $230 million to $265 million would take 46 to 53 cents a share off 2002 earnings, Ms. Baird said. The $115 million to $135 million cost for maintenance work done during the outage, part of that larger 2002 total, would mostly be expensed, the company said.

Another $50 million in maintenance costs at Davis-Besse is anticipated in 2003, along with $10 million to $15 million a month for replacement power until the 935-megawatt power plant restarts.

Separately Wednesday, officials said FirstEnergy has received several bids for four Ohio power plants and expects to make a decision by the end of this year.

The four aging coal-fired plants, which generate a combined 2,535 megawatts, were previously to be sold to merchant power generator NRG Energy. But the $1.5 billion deal with the struggling Xcel Energy Inc. (NYSE:XEL - News) subsidiary fell through in August.

FirstEnergy said in October that it hoped to execute another sales agreement for the plants and that a number of prospective buyers had shown interest.

The bids received this week, however, aren't binding. FirstEnergy, which wanted to use proceeds from the NRG deal to pay down debt, won't sell the plants if it doesn't like the offers, Anthony Alexander, president and chief operating officer, said Wednesday in the conference with analysts.

If the plants aren't sold this year but remain on the block, FirstEnergy will have to take a charge of $35 million, or 12 cents a share, in the fourth quarter to reflect depreciation expense.

If FirstEnergy concludes by the end of the year that it will keep the plants, the company would take an additional three cent charge in the fourth quarter to reflect transaction costs associated with the attempted sale, Ms. Baird said.

FirstEnergy called off the sale to debt-laden NRG Energy, which is now trying to arrange a prepackaged bankruptcy deal with its creditors, when it became apparent NRG wouldn't be able to complete the purchase. FirstEnergy also told NRG in August that it reserves the right to pursue legal action for damages, which could include suing to recover the difference in price between the failed deal and any new deal.

-By Jon Kamp, Dow Jones Newswires; 312-750-4129; jon.kamp@dowjones.com