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FirstEnergy secures $2.5bn investment from Elliott, Bluescape investor group

EBR Staff Writer Published 23 January 2018

US-based electric utility FirstEnergy has received $2.5bn in equity investment from a group of fund managers, including Elliott Management.

Other investors comprise investment firm Bluescape, Singapore sovereign fund GIC and Zimmer Partners.

FirstEnergy expects the investment, which includes $1.62bn in mandatory convertible preferred equity and $850m of common equity, to strengthen balance sheet as well as support its transition to high performance, fully regulated utility company.

The proceeds will be used by the firm to reduce debt by $1.45bn and also contribute $750m to its pension fund. The remainder will be used for general corporate purposes, FirstEnergy said.

FirstEnergy, which had $21.1bn in debt as of September 2017, earlier announced its plan to divest its competitive power generation business unit FirstEnergy Solutions.

The divestment plans were driven by increased pressure due to plunging natural gas prices, increase in renewable energy and weak power prices.

FirstEnergy president and CEO Charles Jones said: "This investment will enable us to accelerate FirstEnergy's growth and infrastructure improvement plans for our transmission and distribution business, which will benefit our six million customers."

As part of the deal, the Akron, Ohio-based utility will form a restructuring working group (RWG), which will focus on reducing the time needed to exit the unregulated power business.

FirstEnergy’s unregulated wholesale power business is widely expected to go for bankruptcy protection, as it struggles to compete amid low prices.

RWG will also consider options to maximize value and certainty to FirstEnergy Solutions, a unit of FirstEnergy.

If FirstEnergy Solutions’ board decides to seek bankruptcy protection, the working group will advise the FirstEnergy management on ways to rapidly and constructively restructure the unit.

Bluescape executive chairman C John Wilder said: "This meaningful equity investment and renewed focus on FirstEnergy's substantial regulated investment opportunities across its utility franchise, along with the RWG's laser focus on helping the company exit competitive generation in a constructive and timely manner, will transform FirstEnergy into a premier, high performance pure-play regulated utility.”

Earlier, FirstEnergy said it plans to issue at least $1.5bn of common equity through 2019.


Image: FirstEnergy headquarters in downtown Akron, Ohio, US. Photo: courtesy of DangApricot/Wikipedia.