FirstEnergy Corp. subsidiary Allegheny Energy Supply Co. LLC (AE Supply) has struck a nonbinding agreement with an undisclosed party to sell 1,572 MW of natural gas and hydro generating assets for $885 million.
The sale would include four gas/oil-fired power plants in Pennsylvania and the Bath County Pumped Storage hydro power facility in Virginia. FirstEnergy wants out of the competitive power generation business because it's dragging down the rest of the company. Management told analysts during the company's third quarter earnings call that it could sell up to 13 power plants in Ohio and Pennsylvania alone.
The nonbinding agreement, disclosed in a U.S. Securities and Exchange Commission filing last week, would include the buyer assuming $305 million in debt. FirstEnergy said it expects to net $580 million.
Gas assets included in the deal are the 628 MW Springdale Units 1-5, the 88 MW Chambersburg Plant,, the 88 MW Gans Plant and the 44 MW Hunlock Creek facility. The company also plans to divest its interest in the 1,212 MW Bath County hydro facility.
The 43 MW gas/oil-fired Buchanan Plant in Virginia is also expected to be marketed in a separate sales process and AE Supply is considering selling its 1,300 MW coal-fired Pleasants Plant in West Virginia.
FirstEnergy CEO Charles Jones said last month that "competitive market conditions continue to deteriorate, punctuated by weak power prices, insufficient results from recent capacity auctions and anemic forecasts." A strategic review of the company's competitive generation business is currently underway as it aims to become a fully regulated company as soon as possible. The company said it wants to become fully regulated within the next 12-18 months.
FirstEnergy and its subsidiaries also entered into new five-year credit facilities last week. The company and its 10 regulated utilities entered a $4 billion revolving facility, up from the previous $3.5 billion facility. FirstEnergy Transmission LLC and subsidiaries entered into an amended $1 billion facility, while FirstEnergy entered a $1.2 billion term loan that replaces separate $1 billion and $200 million loans.
The company has said that if it can't sell certain power plants then it would be forced to close some. Jones also warned that if FirstEnergy Solutions, which makes up part of its competitive energy services segment, can't extend or refinance its debt, then it would be forced to seek bankruptcy protection.