In tune with the memorandum of understanding signed in February 2011, FirstEnergy Corp. (FE) has now signed an agreement with American Municipal Power Inc. to sell the Fremont Energy Center in Fremont, Ohio.
FirstEnergy said it will receive about $485 million for the Fremont plant, which is under construction and currently has an output capacity of 685 megawatts (MW). The company expects the deal to close by July 1, 2011.
FirstEnergy said the consideration for the sale might increase by a maximum of $16 million to reflect additional output and transmission export capacity up to the plant’s nameplate capacity of 707 MW. Also, American Municipal Power has agreed to reimburse the construction costs incurred by FirstEnergy between February 1, 2011, and the closing date, if the transaction materializes. These costs would not exceed $25.3 million.
FirstEnergy Generation Corp., a subsidiary of FirstEnergy Corp., currently owns the Fremont Energy Center, which is a natural gas combined cycle generation plant. Construction of the plant is scheduled to be complete in 2011.
The Fremont Energy Center comprises of two natural gas turbines and a steam turbine capable of producing 544 MW of load-following capacity and 163 MW of peaking capacity.
FirstEnergy had acquired the partially complete plant in January 2008 from Calpine Corporation, as a part of Calpine’s bankruptcy proceeding. The sale of Fremont to American Municipal Power is consistent with FirstEnergy’s current efforts to divest non-strategic assets and use the proceeds to provide the company with additional financial strength and flexibility.
In the later part of February 2011, FirstEnergy completed the strategic acquisition of Allegheny Energy Inc., creating one of the nation’s largest energy companies.
Headquartered in Akron, Ohio, FirstEnergy Corp. is a diversified electric utility holding company consisting of 10 regulated electric distribution companies serving 6.1 million customers from Ohio to New Jersey. Operating across seven states the company’s net annual revenue is estimated to total about $16 billion with profits nearing $1.4 billion.
FirstEnergy currently has a short term Zacks #3 Rank (Hold). The company is presently at par with its peers, American Electric Power Co. Inc. (AEP) and Dominion Resources Inc. (D), based on the short term Zacks Rank. We also maintain our long-term Neutral’ recommendation on the stock.
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