FirstEnergy to Sell 707MW Plant - Analyst Blog

Electric utility FirstEnergy Corp. (FE) said it has agreed to sell its Fremont Energy Center in Fremont, Ohio, to American Municipal Power Inc. As a part of this agreement, FirstEnergy said it has signed a non-binding memorandum of understanding (MOU), which provides for both the parties to engage in exclusive negotiations toward American Municipal Power executing a definitive agreement by March 11, 2011, to purchase the facility on or about July 1, 2011. 

FirstEnergy Generation Corp., a subsidiary of FirstEnergy Corp., currently owns the Fremont Energy Center, a natural gas combined cycle generation plant with 707-megawatt (MW) of net capacity. The plant includes two natural gas turbines and a steam turbine capable of producing 544 MW of load-following capacity and 163 MW of peaking capacity. The plant is currently under construction and scheduled for completion in 2011. 

FirstEnergy acquired the partially complete plant in January 2008 from Calpine Corporation in that company's bankruptcy proceeding. The sale of Fremont to American Municipal Power is consistent with FirstEnergy's current efforts to divest non-strategic assets and use the proceeds to provide the company with additional financial strength and flexibility.

Headquartered in Akron, Ohio, FirstEnergy Corporation is a diversified electric utility holding company operating within a 36,100-square-mile contiguous service territory, including parts of Ohio, Pennsylvania, and New Jersey.

Through its subsidiaries and affiliates, the company engages in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services.

FirstEnergy is scheduled to release its fourth quarter and full-year 2010 earnings on February 16, 2011. The company expects to post 2010 adjusted earnings in the range of $3.60–$3.70 per share, which stands in line with the Zacks Consensus Estimate of $3.65. For the fourth quarter 2010, the Zacks Consensus earnings estimate is 79 cents.

FirstEnergy currently has a short term Zacks #2 Rank (Buy), on the belief that the company will benefit from the synergies of its proposed merger with Allegheny Energy Inc. (AYE). However, we prefer to remain on the sidelines with a ‘Neutral' recommendation until the company's merger proposal receives the necessary regulatory clearances.