January 26, 2018 Read More →

FirstEnergy, Major U.S. Utility, Will Close Ohio Nuclear Plant and Is Considering Shutdown of Coal-Fired Generation Stations as Well

Toledo Blade:

The utility’s Davis-Besse nuclear plant is headed for a premature closing.

The outlook for FirstEnergy’s coal-fired power plants and its other nuclear plants — its twin-reactor Beaver Valley nuclear plant west of Pittsburgh and its Perry nuclear plant east of Cleveland — is just as bleak, said James Pearson, FirstEnergy’s chief financial officer.

While no date has been set for the permanent closing of Davis-Besse or other plants yet, Mr. Pearson said their days under FirstEnergy ownership have become numbered and they are “probably impossible to sell in today’s market,” especially in states such as Ohio and Pennsylvania that have deregulated electricity markets.

Both of those states embraced deregulation in 1996, a decade before a global fracking boom brought on by a revolutionary horizontal drilling technique resulted in record-low natural gas prices. That, along with growing investments in wind and solar power that dropped prices for the renewable energy sector, made nuclear and coal non-competitive.

“Those units cannot generate enough cash to cover costs,” Mr. Pearson said of FirstEnergy’s nuclear and coal-fired plants.

FirstEnergy is one of several utilities heavily invested in nuclear and coal that lobbied government officials on the state and federal levels for special consideration, claiming those industries have unique attributes.

Most efforts have been defeated, one of the biggest being a Federal Energy Regulatory Commission ruling earlier this month that denied Trump administration efforts to help out nuclear and coal-fired power plants.

Now, with an April 2 deadline looming for a $100 million debt-principal payment, FirstEnergy Solutions has its back against a wall.

With combined debt estimated at $3.5 billion and losses mounting daily on the competitive side of its business because of the budget drains from its nuclear and coal-fired plants, the utility has turned to a combination of hedge funds managed by four high-powered private investor groups to help move it forward with a regulated growth strategy.

The groups — New York-based Elliott Management Corp., Dallas-based Bluescape Resources Co., Singapore-based GIC Private Limited (formerly the Government of Singapore Investment Corp.), and New York-based Zimmer Partners LP — have agreed to invest $2.5 billion in FirstEnergy, but only if it cuts ties with its plants deemed non-competitive.

Mr. Pearson said whatever happens will almost assuredly mean the end of FirstEnergy Nuclear Operating Co., the corporate division in charge of Davis-Besse, Perry, and Beaver Valley, as well as the shutdown of the utility’s massive Sammis and Mansfield plants and other coal-fired power plants.

“The longer we go down this path, the deeper we would get into debt,” he said.

A recent letter to shareholders states the utility’s new business model will be based around a focus on its most competitive assets, which do not include nuclear and coal.

The moves — when they happen — will likely signal the end of commercial-scale nuclear power generation in Ohio. FirstEnergy is one of several utilities operating coal-fired plants in this part of the country.

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