FirstEnergy Corp. has decided not to sell four coal-fired power plants
on the shore of Lake Erie.
After reviewing the two bids for the plants, the Akron utility said it
made more sense to keep them.
In keeping the plants, FirstEnergy will take an after-tax charge of $43
million, or 15 cents per share, including $33 million in noncash
depreciation charges that were not recorded when the plants were up for
sale and $10 million in fees related to the uncompleted transaction.
FirstEnergy also said its recently updated 2003 earnings guidance is
unaffected by the decision to keep the plants.
The utility did not disclose the bids but said they fell short of the
$1.5 billion agreement reached to sell the plants to NRG Energy Inc. of
Minneapolis. That deal, announced about a year ago, was canceled by
FirstEnergy in August because it said the buyer would not live up to the
original terms. At the time, the utility said it would seek other buyers
for the plants.
Yesterday, Ralph DiNicola, a FirstEnergy spokesman, said the market has
significantly softened since the original sale was announced. He said the
utility now is reviewing staffing and support services for the four plants
as part of its network.
The plants, located in Ashtabula, Cleveland, Eastlake and Oregon, near
Toledo, employ 600 workers. They are part of the company's network of 20
power plants.
FirstEnergy originally had hoped to use $1 billion from the sale of the
plants to repay debt. But the utility said yesterday that its main reason
for the sale was to improve the balance and diversity of its power
generation.
DiNicola said the sale would have accelerated debt repayment. But he
said the company already has repaid about $2 billion this year even
without the sale. Its debt remains about $14 billion, including debt from
last year's nearly $11 billion purchase of GPU Inc., owner of New Jersey's
second-largest utility.
"It's not a setback," said Brian Fox, an analyst at McDonald
Investments Inc., commenting on the failure to sell the plants.
Fox said FirstEnergy "is generating good cash flow" and can easily pay
the $700 million of debt coming due next year and anticipates repaying an
additional $500 million next year.
FirstEnergy shares closed at $32.96, up 16 cents, in trading yesterday
on the New York Stock Exchange.
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