Watch Live

Tweet TWEET

FirstEnergy Falls on Cash Flow Concern: Chicago Mover

FirstEnergy Corp. (FE), whose utilities serve 6 million customers in the U.S. Midwest and Northeast, fell to its lowest in four months after a UBS Securities LLC report said it needs to sell about $500 million in assets next year to preserve its credit rating.

FirstEnergy, based in Akron, Ohio, declined 1.2 percent to $40.72 at the close in New York, the lowest since Aug. 10, according to data compiled by Bloomberg.

The power company faces negative cash flows of about $1.1 billion from 2013 to 2015 as it pays off $1.4 billion in debt at its retail power marketing business and about $400 million held by a transmission unit, Julien Dumoulin-Smith, a New York-based UBS analyst, said in a report today.

“We believe the company continues to contemplate asset sales to meet its equity needs, which are likely around $500 million, to maintain its corporate credit rating,” Dumoulin- Smith said.

FirstEnergy has asked West Virginia regulators to allow it to shift ownership of a merchant coal plant to a regulated utility, adding about $1.1 billion to the rate base that determines the utility’s earnings.

FirstEnergy will need to sell other assets such as hydroplants or a coal mine to maintain its BBB- rating from Standard & Poor’s, said Dumoulin-Smith. He lowered the company’s target price by $2 a share to $43 a share on the prospect of the sales.

He also warned it may be snared in a probe that Ohio regulators announced yesterday of the state’s retail electric market.

“We see this development as a negative as it increases the risk of political interference in the market and seems to specifically target FirstEnergy,” Dumoulin-Smith said.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.