A report released Monday by a Cleveland-based research institute blasts Akron-based FirstEnergy Corp. and it’s “financial spiral.”
The Institute for Energy Economics and Financial Analysis says its mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.
The financial analysis “finds FirstEnergy turning to regulatory capture and ratepayer bailouts as it struggles to reverse a deepening spiral of debt service and revenue declines,” a news release about the 53-page report says.
FirstEnergy called the report “misleading and biased.”
The Institute said its report “describes a company in near free fall, in part because of its untimely acquisition in 2011 of Allegheny Energy, a mostly coal-fired electricity company vulnerable to better-diversified competitors.”
“The company is wedded to a failed strategy of long-term dependence on coal-fired generation. We do not anticipate any significant short-term or medium-term improvement in FirstEnergy’s financial condition,” conclude the authors, Tom Sanzillo, IEEFA’s director of finance, and Cathy Kunkel, an IEEFA fellow.
FirstEnergy, one of the largest electric companies in the United States, has more than six million customers in New Jersey, New York, Ohio, Pennsylvania, Maryland and West Virginia.
First Energy’s stock price is down more than 30 percent since July 2012, even as the broader stock market and energy stocks in general have soared, the report said. FirstEnergy cut shareholder dividends by 35 percent in January 2014 and increased short-term annual debt obligations by 21 percent from 2012 to 2013. Its credit rating has dropped well below those of competitors. It has written off billions of dollars in lost value from its fleet of coal plants. And while most other utilities are moving to curb coal-fired generation, First Energy continues to use coal to produce two-thirds of the electricity it creates, the report said.
FirstEnergy spokesman Todd Schneider said “FirstEnergy has taken significant actions — particularly in the past 12 months — to improve our financial position, lower our cost structure, and position the company for more stable and predictable growth through our regulated holdings, and overcome the lingering effects of the recession as well as challenging capacity and energy markets.
“We believe the strategies we have put in place, together with our commitment to operational excellence and financial discipline, will provide long-term value and predictable, sustainable growth to our investors. ”