August 31, 2018 Read More →

FirstEnergy asks bankruptcy court for approval to shed liabilities for environmental clean-ups

Plain Dealer:

CLEVELAND, Ohio — FirstEnergy’s share price hit a 52-week high Thursday morning as news of its proposed “definitive settlement” with its bankrupt subsidiary FirstEnergy Solutions spread among investors.

The settlement, filed this week in federal bankruptcy court, is FirstEnergy’s latest effort to shed itself of past and future financial responsibilities connected with FES and a second subsidiary, FirstEnergy Nuclear Operating Co.

FirstEnergy’s stock price on the New York Stock Exchange hit $37.69 Thursday morning. The price declined slightly, to $37.38 in early-afternoon trading. The share price has been as low as $29.34 over the past year.

The 184-page settlement document, cobbled together by an army of lawyers, commits FirstEnergy to providing “more than $1.1 billion of total value” to the investors, banks, bondholders and other companies stuck with the debt owed by FES.

Included among the primary benefits would be a $225 million cash payment from FirstEnergy and another $628 million in FE notes that will mature on Dec. 31, 2022 — funds that would go to the FES “estate,” meaning money for its many creditors.

In exchange, the committees representing two investor groups and others, known as “unsecured creditors,” before the court, along with FES and FENOC have agreed not to seek additional money from the parent corporation in the future if things go wrong or expensive new problems arise. 

In other words, if the deal is approved by the bankruptcy court, FirstEnergy would be free of past debts and future financial entanglements connected to its former coal-fired power plants and its four nuclear reactors now owned by FirstEnergy Solutions.

Such a move could put FirstEnergy in conflict with the Nuclear Regulatory Commission.

After FES and FENOC announced in April that the company would close its nuclear plants by 2021, the NRC said each reactor’s decommissioning funds were adequate, based on their worth as of Dec. 31, 2016. 

But the NRC has yet to release its assessment of the adequacy of the invested funds as they stand today, particularly in light of the company’s decision to close the plants earlier than previously planned.

The NRC has agreed to consider a petition challenging the adequacy of the funds filed by consumer and environmental groups led by the Midwest-based Environmental Law and Policy Center. 

For its part, in financial reports to investors filed since the bankruptcy, FirstEnergy has not included a further financial obligation to the decommissioning funds of the four reactors.

FirstEnergy also agreed in the settlement to continue funding FES employee-related programs, such as pensions, severance programs and deferred compensation.

The settlement includes an escape for individual creditors who have refused to sign the agreement. They would still have the right to seek payment from FES or FirstEnergy at some future date.

The one major exception to the umbrella protection FirstEnergy has tried to negotiate is the 1,300 megawatt coal-burning Pleasants Power Station in West Virginia. FES has tentatively agreed to take possession of plant —  with the proviso that FirstEnergy be responsible for future environmental cleanups. The ownership transfer agreement must be worked out by Dec. 31, or it lapses.

Pleasants is currently owned by another wholly-owned FirstEnergy subsidiary, Allegheny Energy Supply, which would continue to have responsibility for environmental cleanups.

FirstEnergy previously tried to transfer ownership of Pleasants to a third subsidiary, Mon Power, which is a regulated utility in West Virginia. When state regulators balked, the company announced it would close the plant in 2019.

More: FirstEnergy stock price up on proposed $1 billion court settlement with FES and creditors

 

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