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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Investors greeted the bankruptcy filing by units of FirstEnergy Corporation (NYSE:FE) (Akron, Ohio) with a collective yawn this week. And no wonder: The parent company, which is not part of the proceedings, has been talking about a possible Chapter 11 bankruptcy for its competitive-power units for some time. That suggests any concerns investors might have about a bankruptcy filing by those units has already been priced into FirstEnergy's stock.
On Saturday, March 31, FirstEnergy Solutions (FES), its subsidiaries and FirstEnergy Nuclear Operating Company (FENOC) filed for Chapter 11 reorganization in the U.S. Bankruptcy Court in the Northern District of Ohio. A few days before that filing, on March 28, FES informed the PJM Interconnection LLC (Valley Forge, Pennsylvania), the regional grid operator, that its four nuclear units would be deactivated or sold during the next three years.
Until those plants are closed, FES plans to continue operating them. The plants are: the one-unit Davis-Besse nuclear plant east of Toledo, Ohio; the one-unit Perry nuclear plant east of Cleveland, Ohio; and the two-unit Beaver Valley nuclear complex west of Pittsburgh, Pennsylvania. The collective generating capacity of these four units is about 3,974 megawatts (MW).
In a March 31 statement accompanying FES' bankruptcy filing, Donald R. Schneider, president of FES, said, "Given the prospective timing of federal and state review and our ongoing cash needs and debt service obligations, the FES and FENOC boards of directors determined that the Chapter 11 filing represents our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief. We believe that this decision will best serve our customers, employees and business partners."
He added the Chapter 11 process would give FES and FENOC a chance to improve the viability of their operations. That could involve breaking and renegotiating contracts. Schneider also said the companies would also continue seeking legislative and regulatory relief at the state and federal level.
FES also reportedly asked the bankruptcy court to void about $765 million of power purchase agreements (PPAs) for renewable energy it signed between 2003 and 2011. FES wants the bankruptcy court to end the PPAs and to prevent the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) from opening a proceeding that would keep the PPAs operating while FES restructures, sells or retires its plants.
One day after informing PJM of its plans to close the four nuclear units and two days before it filed for Chapter 11 protection, FES appealed to the U.S. Department of Energy (DoE) (Washington, D.C.) for an emergency order to keep certain coal-fired and nuclear units in PJM open under a little-used provision of the Federal Power Act. Corporate parent FirstEnergy and its chief coal supplier, Murray Energy Corporation (St. Clairsville, Ohio), had asked the Trump administration to use that law to intervene to protect the company's uneconomic plants last year, but was rebuffed. Then they joined with other energy groups in seeking subsidies to reflect the "resilience" those units provided to the grid. That, too, was rejected. For more on that, see October 12, 2017, article - How Will FERC Respond to Wholesale Power Fix Drafted by Energy Department? and January 9, 2018, article - FERC Rejects Awarding Subsidies to Coal and Nuclear Units.
Corporate parent FirstEnergy also has been unsuccessful in obtaining support at the Ohio legislature for an estimated $300 million in annual subsidies to keep its two Ohio nuclear plants operating. For more on that, see October 4, 2017, article - Electricity Scrum Set to Resume in Ohio Legislature.
The companies' requests for financial support have been roundly criticized by other power companies. The March 29 request also brought howls of protest from a broad coalition of energy companies, including Oil & Gas producers, whose natural gas is powering units across PJM and the rest of the country.
In its letter to PJM, FES reportedly said the Davis-Besse nuclear plant will close on May 31, 2020. Perry and Beaver Valley Unit 1 will close May 31, 2021. Beaver Valley Unit 2 will permanently close on October 31, 2021.
According to a report in Politico, the PJM Interconnection sent the DoE a letter saying "there was no need to use the agency's emergency powers to keep FES' (coal and nuclear) power plants operating." The organization asked DoE to allow PJM to follow its normal process of assessing the impact of plant retirements to go forward. The grid operator also said it's not concerned about the loss of the three nuclear plants FES has said it wants to retire: "PJM can state without reservation there is no immediate threat to system reliability."
Todd Schneider, a spokesman at corporate parent FirstEnergy, declined to comment on the Chapter 11 filing by its subsidiaries. "FirstEnergy Corporation is not part of the Chapter 11 process," he said in an interview. "The filing has no impact to our customers. For us, it's pretty much business as usual--the lights are shining brightly." He did say the corporate parent has been talking about a possible Chapter 11 filing by its subsidiaries since 2016.
FES and FENOC have stumbled badly in competitive electric markets, as they were unable to compete in power auctions against less-expensive gas-fired and renewable energy. Saddled with uneconomic coal-fired and nuclear units, the subsidiaries have caused their parent to take multibillion-dollar asset-impairment charges in recent years. As a result, FirstEnergy decided to exit the merchant power business in 2016 and focus instead on its regulated businesses, which include 10 electric distribution companies in six states and a 24,000-mile transmission system. For more on that, see February 6, 2017, article - Stung by Competitive Power Markets, FirstEnergy Focuses on T&D Investments.
Earlier this year, FirstEnergy announced plans to invest more than $10 billion in its regulated businesses through 2021. The company operates electric-distribution utilities that serve about 6 million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. For more on the company's investment plans in Ohio, see March 7, 2018, article - FirstEnergy to Strengthen Ohio Grid.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
On Saturday, March 31, FirstEnergy Solutions (FES), its subsidiaries and FirstEnergy Nuclear Operating Company (FENOC) filed for Chapter 11 reorganization in the U.S. Bankruptcy Court in the Northern District of Ohio. A few days before that filing, on March 28, FES informed the PJM Interconnection LLC (Valley Forge, Pennsylvania), the regional grid operator, that its four nuclear units would be deactivated or sold during the next three years.
Until those plants are closed, FES plans to continue operating them. The plants are: the one-unit Davis-Besse nuclear plant east of Toledo, Ohio; the one-unit Perry nuclear plant east of Cleveland, Ohio; and the two-unit Beaver Valley nuclear complex west of Pittsburgh, Pennsylvania. The collective generating capacity of these four units is about 3,974 megawatts (MW).
In a March 31 statement accompanying FES' bankruptcy filing, Donald R. Schneider, president of FES, said, "Given the prospective timing of federal and state review and our ongoing cash needs and debt service obligations, the FES and FENOC boards of directors determined that the Chapter 11 filing represents our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief. We believe that this decision will best serve our customers, employees and business partners."
He added the Chapter 11 process would give FES and FENOC a chance to improve the viability of their operations. That could involve breaking and renegotiating contracts. Schneider also said the companies would also continue seeking legislative and regulatory relief at the state and federal level.
FES also reportedly asked the bankruptcy court to void about $765 million of power purchase agreements (PPAs) for renewable energy it signed between 2003 and 2011. FES wants the bankruptcy court to end the PPAs and to prevent the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) from opening a proceeding that would keep the PPAs operating while FES restructures, sells or retires its plants.
One day after informing PJM of its plans to close the four nuclear units and two days before it filed for Chapter 11 protection, FES appealed to the U.S. Department of Energy (DoE) (Washington, D.C.) for an emergency order to keep certain coal-fired and nuclear units in PJM open under a little-used provision of the Federal Power Act. Corporate parent FirstEnergy and its chief coal supplier, Murray Energy Corporation (St. Clairsville, Ohio), had asked the Trump administration to use that law to intervene to protect the company's uneconomic plants last year, but was rebuffed. Then they joined with other energy groups in seeking subsidies to reflect the "resilience" those units provided to the grid. That, too, was rejected. For more on that, see October 12, 2017, article - How Will FERC Respond to Wholesale Power Fix Drafted by Energy Department? and January 9, 2018, article - FERC Rejects Awarding Subsidies to Coal and Nuclear Units.
Corporate parent FirstEnergy also has been unsuccessful in obtaining support at the Ohio legislature for an estimated $300 million in annual subsidies to keep its two Ohio nuclear plants operating. For more on that, see October 4, 2017, article - Electricity Scrum Set to Resume in Ohio Legislature.
The companies' requests for financial support have been roundly criticized by other power companies. The March 29 request also brought howls of protest from a broad coalition of energy companies, including Oil & Gas producers, whose natural gas is powering units across PJM and the rest of the country.
In its letter to PJM, FES reportedly said the Davis-Besse nuclear plant will close on May 31, 2020. Perry and Beaver Valley Unit 1 will close May 31, 2021. Beaver Valley Unit 2 will permanently close on October 31, 2021.
According to a report in Politico, the PJM Interconnection sent the DoE a letter saying "there was no need to use the agency's emergency powers to keep FES' (coal and nuclear) power plants operating." The organization asked DoE to allow PJM to follow its normal process of assessing the impact of plant retirements to go forward. The grid operator also said it's not concerned about the loss of the three nuclear plants FES has said it wants to retire: "PJM can state without reservation there is no immediate threat to system reliability."
Todd Schneider, a spokesman at corporate parent FirstEnergy, declined to comment on the Chapter 11 filing by its subsidiaries. "FirstEnergy Corporation is not part of the Chapter 11 process," he said in an interview. "The filing has no impact to our customers. For us, it's pretty much business as usual--the lights are shining brightly." He did say the corporate parent has been talking about a possible Chapter 11 filing by its subsidiaries since 2016.
FES and FENOC have stumbled badly in competitive electric markets, as they were unable to compete in power auctions against less-expensive gas-fired and renewable energy. Saddled with uneconomic coal-fired and nuclear units, the subsidiaries have caused their parent to take multibillion-dollar asset-impairment charges in recent years. As a result, FirstEnergy decided to exit the merchant power business in 2016 and focus instead on its regulated businesses, which include 10 electric distribution companies in six states and a 24,000-mile transmission system. For more on that, see February 6, 2017, article - Stung by Competitive Power Markets, FirstEnergy Focuses on T&D Investments.
Earlier this year, FirstEnergy announced plans to invest more than $10 billion in its regulated businesses through 2021. The company operates electric-distribution utilities that serve about 6 million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. For more on the company's investment plans in Ohio, see March 7, 2018, article - FirstEnergy to Strengthen Ohio Grid.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
