Great news today at FirstEnergy's quarterly earnings call! Eternal optimist Tony Alexander (who is still waiting in vain for the economy to improve and power prices to increase) has stated that FirstEnergy's proposed West Virginia Harrison coal plant transfer is no longer critical!
"Our success with the actions we have already taken, particularly the bond deal at FirstEnergy Corp. means the Harrison transaction while still important to both West Virginia and FirstEnergy Solutions is no longer critical to the successful completion of our financial plan."
FirstEnergy management has finally admitted what I've been saying from the very beginning: The proposed plant transfer is all about raising cash to pay down debt at FES to improve FirstEnergy's balance sheet and maintain its credit position. It was never really "...expected to help insure reliable power for our West Virginia utility customers for many years to come," or to be "...very positive for the West Virginia economy and our customers of our utilities in West Virginia."
Obviously, FirstEnergy now realizes that the West Virginia PSC is not going to approve this transaction, so it has taken other measures necessary to patch up its balance sheet, such as selling bonds and its hydro assets (which are much more marketable than an antique coal plant). FirstEnergy has decisively removed all its precious balance sheet eggs from the precarious Harrison plant transfer basket. If the company had any faith left at all in the WV PSC approving the transaction, don't doubt that it would still be considered "critical." Instead, the transfer idea has simply been tossed onto the ever-growing waste heap of FirstEnergy's bad ideas.
FirstEnergy also stated that transfer at a price lower than its jacked-up merger plant cost (which magically doubled the value of the plant overnight), as suggested by several intervenors in the case, was "a non-starter." FirstEnergy would apparently rather give up entirely than sell the plant at a reduced rate. I think we're all in agreement here then, and Tony can keep his "great asset" because it really isn't "more important to West Virginia and Mon Power than is it to FirstEnergy."
"Our success with the actions we have already taken, particularly the bond deal at FirstEnergy Corp. means the Harrison transaction while still important to both West Virginia and FirstEnergy Solutions is no longer critical to the successful completion of our financial plan."
FirstEnergy management has finally admitted what I've been saying from the very beginning: The proposed plant transfer is all about raising cash to pay down debt at FES to improve FirstEnergy's balance sheet and maintain its credit position. It was never really "...expected to help insure reliable power for our West Virginia utility customers for many years to come," or to be "...very positive for the West Virginia economy and our customers of our utilities in West Virginia."
Obviously, FirstEnergy now realizes that the West Virginia PSC is not going to approve this transaction, so it has taken other measures necessary to patch up its balance sheet, such as selling bonds and its hydro assets (which are much more marketable than an antique coal plant). FirstEnergy has decisively removed all its precious balance sheet eggs from the precarious Harrison plant transfer basket. If the company had any faith left at all in the WV PSC approving the transaction, don't doubt that it would still be considered "critical." Instead, the transfer idea has simply been tossed onto the ever-growing waste heap of FirstEnergy's bad ideas.
FirstEnergy also stated that transfer at a price lower than its jacked-up merger plant cost (which magically doubled the value of the plant overnight), as suggested by several intervenors in the case, was "a non-starter." FirstEnergy would apparently rather give up entirely than sell the plant at a reduced rate. I think we're all in agreement here then, and Tony can keep his "great asset" because it really isn't "more important to West Virginia and Mon Power than is it to FirstEnergy."
I think FirstEnergy's answer to this question pretty much clears things up all around:
Dan Eggers - Credit Suisse: Just following up on Tony's comments and Leila's comments about Harrison. Can you just maybe help us understand how important it is you think at this point in time to move that asset over from a balance sheet perspective relative to a customer benefit perspective? And then given kind of the wide or the low bid made in the intervenor testimony, how important it is to take a lower price or accept a lower price to get this done relative to keep in at FES if the pricing doesn't makes sense?
James F. Pearson - SVP and CFO: I'll start off with that, Dan. Well, let me start off. I think the low price of the $565 million or whatever that's just a nonstarter. So, I'll leave that at that. From a balance sheet perspective, we think we are in pretty good shape by getting the FirstEnergy Corp. bond deal done where we upsize to $1.5 billion. We also feel that we're in very good position with the hydro asset sales. So, we feel real comfortable about that. And as you know, we plan to infuse equity from FirstEnergy down into Mon Power associated with this asset transfer. If the asset transfer doesn't go forward, we would likely infuse that equity that we have planned for Mon Power down into FES. So, I think we end up at a good position for the balance sheet there at FES.
Anthony J. Alexander - President and CEO: Dan, this is Tony. As I'm looking at this, I think, this is far more important to West Virginia and Mon Power in terms of providing them with a stable and long-term resource that they can rely on than it is at this point from a balance sheet standpoint at FES or at FirstEnergy.
Dan Eggers - Credit Suisse: But if it didn't transfer, you'd feel comfortable keeping that extra capacity at FES?
Anthony J. Alexander - President and CEO: Absolutely. It's a great asset. So that's not a consideration.
It sounds like the bloom has come off FirstEnergy's plant transfer rose. How refreshing for FirstEnergy to finally admit that they expect to LOSE on the Harrison proposal. So, why not withdraw your application and quit wasting everyone's time and money, FirstEnergy?
It's still not too late to save the State of West Virginia and all the intervenors in the case a whole lot of time and money going forward with a hearing on a case you no longer care about. FirstEnergy should withdraw now and let everyone cut their losses (well except for those shysters at Jackson Kelly, who are most likely counting on all the billable hours continuing this case provides -- because composing nonsensical and ridiculous discovery questions doesn't come cheap, does it?).
We're not going to quit until FirstEnergy throws in the towel completely.
Keep those petition signatures, letters and postcards opposing the plant sale to the PSC coming!
Other news and entertainment to be had during today's call:
1. AMP has pulled out of a MOU with FirstEnergy to build a peaker plant at its Eastlake site. This now puts a whole bunch of new transmission back on the table. But that's okay, transmission is an "investment opportunity" cash cow for FirstEnergy.
2. FirstEnergy has succeeded in persuading the Ohio State Senate to introduce a bill to gut the state's energy efficiency standard. "FirstEnergy is actively involved in this process and is advocating changes that we believe make more sense for our customers and help foster solid economic growth in Ohio, including the development of shale gas." Oh, nonsense! Again, it's not about FirstEnergy's customers or economic growth, it's all about FirstEnergy's bottom line. Utterly revolting.
3. FirstEnergy "took a look at" long term trends in residential sales, which have remained flat since 2007. The FirstEnergy sleuths are getting closer and closer to the truth with every earnings call. Maybe sometime in this decade they'll realize that residential growth is dead and cannot be revived because its all about energy efficiency. However, if you look closely at #2 above, you'll see that it's simply a matter of willful denial at this point.
4. Michael Lapides of Goldman Sachs got Donny Schneider off into a discussion of purchased power, where our hero stated, "We're very comfortable with being able to procure power to serve load. For years, prior to our merger with Allegheny, we served all of the Penelec and Met-Ed load, and I think that in total was about 30 terawatt hours a year, and we did almost of all of that with purchased power." But now, all of a sudden, FirstEnergy is telling the WV PSC that relying on purchased power to serve Mon Power/Potomac Edison load is too risky and too expensive and that purchasing Harrison is a better idea. Giggle break! :-) Was Lapides REALLY asking about "exposure?"
5. FirstEnergy was also grilled about their balance sheet hocus-pocus where the company is simply taking on short term debt at the holdco level to pay down debt at its FirstEnergy Solutions subsidiary, as well as another question about the source of funds for FE's "equity infusion" to either Mon Power or FES. The company avoided both questions. I'm not convinced that the analysts were fooled. In fact, I don't think FirstEnergy is fooling anyone but themselves anymore.
It's still not too late to save the State of West Virginia and all the intervenors in the case a whole lot of time and money going forward with a hearing on a case you no longer care about. FirstEnergy should withdraw now and let everyone cut their losses (well except for those shysters at Jackson Kelly, who are most likely counting on all the billable hours continuing this case provides -- because composing nonsensical and ridiculous discovery questions doesn't come cheap, does it?).
We're not going to quit until FirstEnergy throws in the towel completely.
Keep those petition signatures, letters and postcards opposing the plant sale to the PSC coming!
Other news and entertainment to be had during today's call:
1. AMP has pulled out of a MOU with FirstEnergy to build a peaker plant at its Eastlake site. This now puts a whole bunch of new transmission back on the table. But that's okay, transmission is an "investment opportunity" cash cow for FirstEnergy.
2. FirstEnergy has succeeded in persuading the Ohio State Senate to introduce a bill to gut the state's energy efficiency standard. "FirstEnergy is actively involved in this process and is advocating changes that we believe make more sense for our customers and help foster solid economic growth in Ohio, including the development of shale gas." Oh, nonsense! Again, it's not about FirstEnergy's customers or economic growth, it's all about FirstEnergy's bottom line. Utterly revolting.
3. FirstEnergy "took a look at" long term trends in residential sales, which have remained flat since 2007. The FirstEnergy sleuths are getting closer and closer to the truth with every earnings call. Maybe sometime in this decade they'll realize that residential growth is dead and cannot be revived because its all about energy efficiency. However, if you look closely at #2 above, you'll see that it's simply a matter of willful denial at this point.
4. Michael Lapides of Goldman Sachs got Donny Schneider off into a discussion of purchased power, where our hero stated, "We're very comfortable with being able to procure power to serve load. For years, prior to our merger with Allegheny, we served all of the Penelec and Met-Ed load, and I think that in total was about 30 terawatt hours a year, and we did almost of all of that with purchased power." But now, all of a sudden, FirstEnergy is telling the WV PSC that relying on purchased power to serve Mon Power/Potomac Edison load is too risky and too expensive and that purchasing Harrison is a better idea. Giggle break! :-) Was Lapides REALLY asking about "exposure?"
5. FirstEnergy was also grilled about their balance sheet hocus-pocus where the company is simply taking on short term debt at the holdco level to pay down debt at its FirstEnergy Solutions subsidiary, as well as another question about the source of funds for FE's "equity infusion" to either Mon Power or FES. The company avoided both questions. I'm not convinced that the analysts were fooled. In fact, I don't think FirstEnergy is fooling anyone but themselves anymore.
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