FirstEnergy Cuts Sale Price in Revised Deal to Shed Assets

Ohio-based FirstEnergy Corp. has dropped the price of several assets as it continues to work toward closing a deal to sell five of the company’s natural gas-fired power plants, along with a hydroelectric facility, to an equity group that specializes in energy investments.

FirstEnergy this week said it had cut the price of the facilities by $100 million, to $825 million, as part of its deal with New York-based LS Power Equity Partners III LP. FirstEnergy in January 2017 said it would sell four Pennsylvania natural gas-fired plants—the 683-MW Springdale Generating Facility, 45-MW Hunlock Creek gas plant, 88-MW Gans Generating Facility, and 88-MW Chambersburg Generating Facility—along with the 713-MW Bath County Hydro pumped storage facility in Virginia, to LS Power.

As part of the new deal with LS Power, FirstEnergy on September 7 said it not only was reducing the price but also would include its interest in the 43-MW natural gas-fired Buchanan Generating Facility in Virginia.

FirstEnergy in November 2016 said it wanted to separate its profitable utility businesses and exit the competitive generation market. CEO Chuck Jones said at the time “It’s not a business we want to be in,” and said the sale was part of the company’s strategy to become a fully regulated company within 18 months.

FirstEnergy in a statement said that after the sale to LS Power, the company’s portfolio will include ownership or control of about 15,337 MW of generation capacity from nuclear, coal, gas, hydro, wind, and solar facilities across Ohio, Pennsylvania, West Virginia, New Jersey, Virginia, and Illinois.

FirstEnergy said uneconomic power plants in its fleet have had a negative impact on its finances; the company earlier this year reported a loss of $6.2 billion in 2016. The company last year said it would shutter two more of its Ohio coal-fired plants by year-end 2020.

Negotiations to complete the deal with LS Power have dragged on. In its second-quarter financial report, FirstEnergy disclosed that in May its subsidiaries “exercised a provision in the purchase agreement that allows either party to terminate the purchase agreement without penalty after June 23, 2017.” The company said it would continue to pursue the deal, but noted its competitive generation group took a write-down of $131 million for the second quarter “as a result of these ongoing negotiations.”

FirstEnergy in a statement said it still expects the Pennsylvania plants will be sold by year-end 2017, and it expects ownership of the Virginia plants will be transferred early in 2018.

LS Power has previously purchased FirstEnergy assets; the company bought 11 hydroelectric plants from FirstEnergy in 2014. LS Power in July of this year closed a deal to acquire the 639-MW gas-fired Armstrong Power station in Pennsylvania, and the 640-MW gas-fired Troy Energy plant in Ohio, from Dynegy. The equity group in June 2017 said it had acquired almost 4,000 MW of generation capacity in the Northeast U.S. in a deal with TransCanada.

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)