If FirstEnergy Corp. decides not to sell four predominantly coal-fired power plants in Ohio that it still has on its hands after a proposed sale to NRG Energy fell through this summer, the Ohio-based utility will recognize a one-time, non-cash charge of $35 million in the fourth quarter, a FirstEnergy official told financial analysts last Wednesday.

FirstEnergy in August said that it had canceled the $1.5 billion sale of four plants (2,535 MW) located along Lake Erie in Ohio to NRG Energy in anticipation of a breach of their sale agreement by NRG (see NGI, Aug. 12).

FirstEnergy President Tony Alexander in September said that the company was actively pursuing other sales opportunities with respect to those assets, noting that several parties had expressed an interest in the plants.

Alexander last week provided analysts with an update on the status of the company’s efforts to unload the plants at a conference held in New York City.

“We have received several indicative, non-binding bids for these assets,” he said. “They just came in yesterday. We have not had a chance yet to complete our review, nor have we yet discussed the bids with the bidders that have expressed an interest.” Alexander reiterated that the company expects to complete its review and announce its decision on the possible sale of the plants prior to year-end.

“As we’ve noted before, however, this remains a pretty difficult market to sell assets,” Alexander said. “We also said…that this is not a fire sale and if we don’t receive a bid that reflects what we believe to be the fair value of these units, we will keep them as part of our generation fleet.

“Since these units we’re being remarketed, however, we haven’t recorded depreciation expense for them since the sales agreement was terminated with NRG in August.”

If the company ultimately decides not to sell the plants as a result of bids being inadequate, FirstEnergy in the fourth quarter will recognize a one-time, non-cash charge of $35 million, or 12 cents per share, “to reflect this depreciation expense and also about a 3-cent per share charge for transaction costs.”

Meanwhile, Alexander noted that while the company continues its efforts to sell international assets, it’s also reviewing parts of its domestic business for possible sale.

“From a non-core, domestic asset standpoint, we’re primarily looking at some of our facility service and construction businesses,” Alexander said. “We’re constantly monitoring their performance and their fit in the markets in which they primarily operate — whether or not they’re going to open up, what the timeframe is for that opening up.”

“As opportunities arise, we continue to look at whether or not any of those companies warrant divestiture. I’ve got to admit it’s not as high on the list as getting rid of some of the international assets, but it is something that we are working on and continue to follow and watch.”

Citing an expected rise in non-cash pension and other post-employment benefit costs, FirstEnergy last week announced revised 2003 earnings guidance of $3.35 to $3.55 per share of common stock — a steep dropoff from the previously announced range of $3.70 to $3.90 per share.

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