Akron-Based FirstEnergy Warns of Default As Soon as April
Big changes are coming to one of Akron’s largest employers. FirstEnergy may soon separate itself from its power generating business. Chief Financial Officer, Jim Pearson talks about what’s ahead.
First Energy is a major national player in the electric utility business. It is known for its nuclear power stations and coal-fired generating plants. It also has 24,000 miles of transmission lines and 6 million residential and commercial customers.
Soon, the power plants could be gone. Chief Financial Officer Jim Pearson discussed changes in the core structure of the company that are just months away.
Although closely related, First Energy’s main businesses fall into two different categories.
“First, we have competitive generation, which I equate to manufacturing. It produces energy in a competitive environment where it is not regulated and the market sets the price.”
“Our second business, which we are going to focus on going forward, is the regulated business. And that is essentially the transporting of the product that power generation creates to people’s homes and business. And those rates are regulated.”
The competitive generation side “has an independent board of directors that is separate from the FirstEnergy board. And they look at whether payments should be made for upcoming debt payments and principle payments. And we have a very large principal payment coming due at the competitive business unit … at the beginning of April.
“Based on current conditions as well as looking at their cash-flow forecast going forward, it cannot be seen as a viable entity. So I think a very major decision is in the near term on what happens with that business segment.”
“If they decide not to make that (payment), they would be considered in default and they would file for a restructuring or bankruptcy. We would essentially de-consolidate them from our entity. We would turn over the assets to the creditors. And then the decisions would be made from there.”