Brookfield Super-Core Infrastructure Partners to
acquire additional 30% ownership interest in FirstEnergy
Transmission, LLC (FET); FirstEnergy to remain majority owner and
sole operator
Attractive valuation and efficient form of
financing support accelerated balance sheet improvements; nearly
$1 billion increase in 5-year capital
plan focused on smart grid and clean energy transition
AKRON,
Ohio, Feb. 2, 2023 /PRNewswire/ -- FirstEnergy
Corp. (NYSE: FE) today announced it has entered into a definitive
agreement to sell an additional 30% ownership interest in its
FirstEnergy Transmission, LLC (FET) business to Brookfield
Super-Core Infrastructure Partners (Brookfield). Upon closing of the transaction,
proceeds from the $3.5 billion
all-cash deal will further strengthen FirstEnergy's financial
position and support its goal to be a premier utility with
sustainable, long-term growth as it enables the clean energy
transition.
FET is the holding company for three of FirstEnergy's
FERC-regulated transmission utility subsidiaries: American
Transmission Systems, Incorporated (ATSI); Mid-Atlantic Interstate
Transmission, LLC (MAIT); and Trans-Allegheny Interstate Line
Company (TrAILCo) – which comprise one of the largest transmission
systems in PJM. FirstEnergy also owns transmission assets in
New Jersey, Pennsylvania, West
Virginia and Maryland that
are not part of FET.
In May 2022, FirstEnergy completed
the sale of a 19.9% non-controlling interest in FET to Brookfield. Upon closing of the transaction
announced today, FirstEnergy will remain the majority owner of FET,
and FirstEnergy's workforce will continue to operate the business.
FirstEnergy will retain nearly 70% of its overall regulated
transmission portfolio.
"We are pleased to expand our partnership with Brookfield, one of the world's largest and
most respected infrastructure investors," said John W. Somerhalder, FirstEnergy's board chair,
interim president and chief executive officer. "This agreement
efficiently raises capital at an attractive valuation and speaks to
the strength and potential of our regulated growth strategies. It
positions FirstEnergy to drive value for shareholders as we further
optimize our financial position and plan for additional smart grid
and clean energy investments in our regulated transmission and
distribution businesses."
During 2022, FirstEnergy reduced holding company debt by
$2.5 billion, or more than 30%
compared to year-end 2021. Proceeds from this second transaction
with Brookfield will be used to
accelerate improvements in the company's credit profile as it
targets a funds-from-operations to debt ratio of 14-15%, consistent
with strong investment-grade companies.
Additionally, FirstEnergy today announced it has increased its
2021-2025 long-term growth plan to nearly $18 billion, an increase of approximately
$1 billion from the $17 billion target established in 2021. Later
this year, the company plans to provide an updated long-term growth
forecast, which will include additional investments to support a
more resilient and modern grid and the transition to a low-carbon
future. FirstEnergy plans to provide full year 2023 guidance and
other financial updates when it releases fourth quarter and full
year 2022 earnings on February
13.
"This additional investment in FirstEnergy Transmission
demonstrates our commitment to building strong partnerships with
premier infrastructure asset owners and operators, like
FirstEnergy, that share our focus on long-term value creation,"
said Eduardo Salgado, Managing
Partner in Brookfield's
Infrastructure Group and head of Brookfield Super-Core
Infrastructure Partners (BSIP). "This is a very attractive
opportunity that firmly aligns with BSIP's strategy of investing in
high quality, resilient businesses that combine growth and
defensive characteristics to generate stable cash flows across
market cycles."
The transaction is expected to close by early 2024, subject to
customary closing conditions, including receiving applicable
regulatory approvals and clearances.
J. P. Morgan Securities LLC is serving as lead financial advisor
and Citigroup Global Markets is serving as financial advisor to
FirstEnergy for this transaction. Moelis & Company LLC is
serving as financial advisor and provided a fairness opinion to the
FirstEnergy Board of Directors. Jones
Day is serving as legal advisor to FirstEnergy. Skadden,
Arps, Slate, Meagher & Flom LLP is serving as legal advisor to
Brookfield.
FirstEnergy is dedicated to integrity, safety, reliability and
operational excellence. Its 10 electric distribution companies form
one of the nation's largest investor-owned electric systems,
serving customers in Ohio,
Pennsylvania, New Jersey, West
Virginia, Maryland and
New York. The company's
transmission subsidiaries operate approximately 24,000 miles of
transmission lines that connect the Midwest and Mid-Atlantic
regions. Follow FirstEnergy on
Twitter @FirstEnergyCorp or online
at www.firstenergycorp.com. Additional information about the
transaction can be found on our Investor Information website,
https://investors.firstenergycorp.com/investor-materials/webcasts-and-presentations/.
Forward-Looking Statements: This news release
includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 based on
information currently available to management. Such statements are
subject to certain risks and uncertainties and readers are
cautioned not to place undue reliance on these forward-looking
statements. These statements include declarations regarding
management's intents, beliefs and current expectations. These
statements typically contain, but are not limited to, the terms
"anticipate," "potential," "expect," "forecast," "target," "will,"
"intend," "believe," "project," "estimate," "plan" and similar
words. Forward-looking statements involve estimates, assumptions,
known and unknown risks, uncertainties and other factors that may
cause actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements, which may
include the following: the completion of the transactions
contemplated by the Purchase Agreement on the anticipated terms and
timing or at all, including the receipt of regulatory approvals;
the potential liabilities, increased costs and unanticipated
developments resulting from government investigations and
agreements, including those associated with compliance with or
failure to comply with the Deferred Prosecution Agreement entered
into on July 21, 2021 with the U.S.
Attorney's Office for the Southern District of Ohio; the risks and uncertainties associated
with government investigations and audits regarding Ohio House Bill
6, as passed by Ohio's 133rd
General Assembly ("HB 6") and related matters, including potential
adverse impacts on federal or state regulatory matters, including,
but not limited to, matters relating to rates; the risks and
uncertainties associated with litigation, arbitration, mediation,
and similar proceedings, particularly regarding HB 6 related
matters, including risks associated with obtaining dismissal of the
derivative shareholder lawsuits; changes in national and regional
economic conditions, including recession, inflationary pressure,
supply chain disruptions, higher energy costs, and workforce
impacts, affecting us and/or our customers and those vendors with
which we do business; weather conditions, such as temperature
variations and severe weather conditions, or other natural
disasters affecting future operating results and associated
regulatory actions or outcomes in response to such conditions;
legislative and regulatory developments, including, but not limited
to, matters related to rates, compliance and enforcement activity,
cybersecurity, and climate change; the ability to accomplish or
realize anticipated benefits from our FE Forward initiative and our
other strategic and financial goals, including, but not limited to,
overcoming current uncertainties and challenges associated with the
ongoing government investigations, executing our transmission and
distribution investment plans, greenhouse gas reduction goals,
controlling costs, improving our credit metrics, growing earnings
and strengthening our balance sheet; the changing market conditions
affecting the measurement of certain liabilities and the value of
assets held in our pension trusts may negatively impact our
forecasted growth rate, results of operations, and may also cause
us to make contributions to our pension sooner or in amounts that
are larger than currently anticipated; the risks associated with
cyber-attacks and other disruptions to our, or our vendors',
information technology system, which may compromise our operations,
and data security breaches of sensitive data, intellectual property
and proprietary or personally identifiable information; mitigating
exposure for remedial activities associated with retired and
formerly owned electric generation assets; the ability to access
the public securities and other capital and credit markets in
accordance with our financial plans, the cost of such capital and
overall condition of the capital and credit markets affecting us,
including the increasing number of financial institutions
evaluating the impact of climate change on their investment
decisions; actions that may be taken by credit rating agencies that
could negatively affect either our access to or terms of financing
or our financial condition and liquidity; changes in assumptions
regarding factors such as economic conditions within our
territories, the reliability of our transmission and distribution
system, or the availability of capital or other resources
supporting identified transmission and distribution investment
opportunities; changes in customers' demand for power, including,
but not limited to, economic conditions, the impact of climate
change, or energy efficiency and peak demand reduction mandates;
the potential of non-compliance with debt covenants in our credit
facilities; the ability to comply with applicable reliability
standards and energy efficiency and peak demand reduction mandates;
changes to environmental laws and regulations, including, but not
limited to, those related to climate change; labor disruptions by
our unionized workforce; changes to significant accounting
policies; any changes in tax laws or regulations, including, but
not limited to, the Inflation Reduction Act of 2022, or adverse tax
audit results or rulings; and the risks and other factors discussed
from time to time in our Securities and Exchange Commission ("SEC")
filings. Dividends declared from time to time on FirstEnergy
Corp.'s common stock during any period may in the aggregate vary
from prior periods due to circumstances considered by FirstEnergy
Corp.'s Board of Directors at the time of the actual declarations.
A security rating is not a recommendation to buy or hold securities
and is subject to revision or withdrawal at any time by the
assigning rating agency. Each rating should be evaluated
independently of any other rating. These forward-looking statements
are also qualified by, and should be read together with, the risk
factors included in FirstEnergy Corp.'s filings with the SEC,
including, but not limited to, the most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q, and any subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The
foregoing review of factors also should not be construed as
exhaustive. New factors emerge from time to time, and it is not
possible for management to predict all such factors, nor assess the
impact of any such factor on FirstEnergy Corp.'s business or the
extent to which any factor, or combination of factors, may cause
results to differ materially from those contained in any
forward-looking statements. FirstEnergy Corp. expressly disclaims
any obligation to update or revise, except as required by law, any
forward-looking statements contained herein or in the information
incorporated by reference as a result of new information, future
events or otherwise.
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SOURCE FirstEnergy Corp.