FirstEnergy’s Slide Persists As It Scrambles For A Ratepayer Bailout

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FirstEnergy’s Slide Persists As It Scrambles For A Ratepayer Bailout

FirstEnergy’s Slide Persists As It Scrambles For A Ratepayer Bailout  by Cathy Kunkel, IEEFA.org

FirstEnergy’s most recent quarterly numbers and its outlook for 2015 are both dismal and in line with a report we published last fall, “FirstEnergy Seeks a Subsidized Turnaround.”

If anything, FirstEnergy’s problems have only gotten worse since we issued our report:

  • FirstEnergy’s net income (revenues less expenses) continues to decline. Here’s the spiral: From $869 million in 2011 to $392 million in 2013 to $299 million in 2014.
  • Its earnings per share fell to its lowest point in a decade. Earnings per share in 2014 were $0.51, down from $0.90 in 2013.
  • Its long-term debt, already among the highest in the utility industry, increased from $15.8 billion in 2013 to $19.2 billion in 2014, and on its fourth-quarter earnings call, the company’s chief financial officer conceded that the parent holding company is carrying more debt than “we are comfortable with.”

FirstEnergy’s weak performance stems from its merchant generation business, which is dominated by obsolete coal-fired generation that is struggling to compete in the wholesale power markets. FirstEnergy’s merchant generation segment posted negative net income in 2014 — even more negative than in 2013. Financial analysts at UBS are continuing to value FirstEnergy’s merchant business at $0 (UBS re-iterated its buy rating after the recent earnings call, noting that while “investor expectations have been declining” the company “appears to have missed even the low bar.”

Bonhoeffer Fund July 2022 Performance Update