Continuing the expansion beyond its core utility operations,FirstEnergy Corp. made a splash in the unregulated sector last weekwhen its energy services marketing arm, FirstEnergy Services,announced a management and supply deal with Republic TechnologiesInternational, Inc. (RTI), one of the largest producers of specialbar-quality steel products in the U.S. The deal, which is thelargest service agreement FirstEnergy has ever signed, couldproduce more than $1 billion in commodity and energy service salesover the span of the five-year contract.

FirstEnergy Services will manage the supply and delivery of allof RTI’s electric and natural gas needs during the life of thecontract, which went into effect last Tuesday. In addition,FirstEnergy Services will provide consolidated billing andanalyses; heating, ventilation, air-conditioning; and otherenergy-related services. A spokesman for the company said thatother affiliates, besides FirstEnergy Services, will likely carryout the supply and management functions of the contract. RTI hasnumerous facilities in the eastern half of the U.S. Due tocompetitive reasons, FirstEnergy would not disclose how much gas orpower RTI consumes.

With a market share of approximately 23%, RTI’s specialbar-quality steel products are hot-rolled and cold-finished carbonand alloy steel bar and rod used primarily in critical applicationsin automotive and industrial equipment. RTI has aggregate annualsteel melting capacity of 3.4 million tons, hot-rolling productioncapacity of approximately 2.9 million tons and 550,000 tons ofcold-finishing production.

“FirstEnergy Services presented RTI with a comprehensive energysupply and service package that went well beyond what we’ve seenfrom other suppliers. We were very impressed with the potentialenergy savings and productivity enhancements available throughFirstEnergy Services,” said David Stockman, senior managingdirector of The Blackstone Group, RTI’s parent company.

The deal represents a shift in emphasis for FirstEnergy, whosecore operating states, Pennsylvania and Ohio, are both activelyengaged in gas and electric deregulation. “Right now, you’d stillhave to say the utilities are our core businesses,” said DavePoeppelmeier, a FirstEnergy spokesman. The company’s four electricutility operating companies – Ohio Edison and its PennsylvaniaPower subsidiary, The Illuminating Co. and Toledo Edison – serve2.2 million customers. “But this deal clearly demonstrates ourability to offer not only effective regulated services, but alsounregulated services as well.”

Although the RTI deal is FirstEnergy’s largest energy servicescontract to date, the Akron, OH-based company is not inexperiencedin energy management. FirstEnergy’s Facilities Services Group isthe largest energy services operation of its kind in the Northeastaccording to FirstEnergy. It includes 11 mechanical construction,contracting and energy management companies, with revenuesexceeding $400 million.

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