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FirstEnergy (FE) Announces Financing & 5-Year Capital Plans

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FirstEnergy (FE - Free Report) announces plans to issue $1 billion of equity to Blackstone Infrastructure Partners at $39.08 per share and divest its 19.9% stake in FET (the holding company for FirstEnergy's three regulated transmission subsidiaries) to Brookfield Super-Core Infrastructure Partners for $2.4 billion.

The sale is likely to occur in the first half of 2022, subject to customary closing conditions including approval from the Federal Energy Regulatory Commission and a review by the Committee on Foreign Investments in the United States.

Motive Behind the Move

These transactions will strengthen FirstEnergy’s financial position, fund incremental investment opportunities and address all equity plans. Along with these, proceeds from the transactions will support a more resilient electric grid, boost the transition to low-carbon energy plus increase focus on customer-focused emerging technologies and electric vehicle infrastructure.

The strategic moves will further back FirstEnergy’s goal to become carbon neutral by 2050 with an interim target of 30% reduction in greenhouse gas emissions under the company's direct control by 2030.

Guidance

Concurrent with this news, FirstEnergy also provided 2022 earnings guidance in the range of $2.30-$2.50 per share with the Zacks Consensus Estimate being $2.56, higher than $2.40, the midpoint of the range. Its expected capital investment budget for 2022 is $3.3 billion. Its 2022 annualized dividend rate is on par with the 2021 level of $1.56 per share, subject to board approval.

The utility expected its long-term earnings per share growth rate to be 6-8% and increased its capital investment plan for the 2021-2025 forecast period by $2.2 billion, summing it to $17 billion including $10 billion in sustainable energy investments.

Transition in Utility Space

A clear transition is quite evident in the U.S. utility space with utilities announcing plans to cut carbon emissions from their operations. The clean energy shift is possible for the sector owing to abundant availability of clean natural gas and other alternative energy sources like solar, water as well as wind. Many U.S. utilities pledged to go carbon neutral by 2050 and a few prominent utilities among those are Exelon Corporation (EXC - Free Report) , Duke Energy (DUK - Free Report) and DTE Energy (DTE - Free Report) .

Price Performance

In the past six months, shares of FirstEnergy have gained 2.3% against the industry’s 0.6% decline.

Six Months Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

FirstEnergy carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.