QUOTE AND NEWS
Forbes  5 hrs ago  Comment 
The worst performing sector as of midday Thursday is the Utilities sector, higher by 0.7%. Within that group, Edison International (NYSE: EIX) and FirstEnergy (NYSE: FE) are two large stocks that are lagging, showing a loss of 0.2% and 0.1%,...
USDA  Oct 23  Comment 
WASHINGTON, October 23, 2014 – Agriculture Secretary Tom Vilsack today announced that USDA has funded the first two loans under the new Energy Efficiency and Conservation Loan Program, which is designed to help consumers reduce energy bills...
Forbes  Oct 21  Comment 
Shareholders of FirstEnergy Corp. (NYSE: FE) looking to boost their income beyond the stock's 4.1% annualized dividend yield can sell the April 2015 covered call at the $36 strike and collect the premium based on the $1.00 bid, which annualizes to...
Benzinga  Oct 16  Comment 
FirstEnergy Corp. (NYSE: FE) learned on Wednesday, October 15, that the second nurse who helped care for the Ebola victim in Dallas – and was later diagnosed with the virus – visited with one Akron-area employee of the company during her stay...
Market Intelligence Center  Oct 13  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artifical Intelligence Center found a trading opportunity with FirstEnergy Corp. (FE) that should provide a 3.50% return in just 186 days. Sell one Apr. '15...
Forbes  Oct 9  Comment 
The best performing sector as of midday Thursday is the Utilities sector, losing just 1.2%. Within that group, FirstEnergy  (NYSE: FE) and Southern (NYSE: SO) are two large stocks leading the way, with FE showing a gain of 0.4% and SO down 0.1%....
Forbes  Oct 8  Comment 
In afternoon trading on Wednesday, Utilities stocks are the best performing sector, up 1.6%. Within that group, FirstEnergy (NYSE: FE) and Pinnacle West Capital (NYSE: PNW) are two large stocks leading the way, showing a gain of 2.6% and 2.6%,...
USAToday.com  Oct 4  Comment 
Dryers are notorious energy hogs, but this Whirlpool is a rare energy-efficient dryer.
SeekingAlpha  Sep 25  Comment 
By Stock Market Sherpa: Utilities stocks have long been a staple of any income investment portfolio. In an environment where most government bonds are yielding less than 3%, a utilities stock yielding 4% or above looks mighty attractive. However,...
Insurance Journal  Sep 23  Comment 
A major electricity provider in northeast Ohio is installing special security fencing and thermal-imaging cameras at some substations to keep out would-be metal thieves. Akron-based FirstEnergy is spending $15 million this year on such efforts to...




 

FirstEnergy (NYSE: FE) is a electric utility holding company. FirstEnergy holds directly or indirectly eight electric utility operating subsidiaries and other energy companies located primarily in Ohio, Pennsylvania, and New Jersey.[1] FirstEnergy generates its revenues from the electric services provided by its subsidiaries. Its operations are divided into the energy delivery services and competitive energy services.[2] The Company is in transitioning all of its holdings to a market-rate price structure, which further exposes its subsidiaries to volatile commodity prices for coal and natural gas.

Business Growth

FirstEnergy earned $784 million in net income on revenues of $13.3 billion in 2010, versus net income of $1 billion on revenues of $12.6 billion in 2009.[3] The key determine for revenue growth is the demand for electric energy and overall energy prices. FirstEnergy has also grown its customer base by 35% through the acquisition of Allegheny Energy.[4]



Trends and Forces

FirstEnergy's new price structure increases its exposure to commodity prices

FirstEnergy plans to move all of its holdings to a market-rate structure, which has the potential of increasing its exposure to volatile commodity prices for power, coal and natural gas.[5] Traditionally, approximately 20% of FirstEnergy's generation business was exposed to market prices.[6] After completing its price structure transition, all of FirstEnergy's generation business will be exposed to power market prices. As a result, the company's profitability depends on the relationship between coal and gas prices as well as the demand for power.[7] Volatile commodity prices have the potential of straining the Company's profits as well as its cash flows.[8]



Deregulation in offers opportunity for higher revenues and increased competition

Like all utility companies, FirstEnergy is subject to regulatory and legislative risks that have the potential of raising costs and capping returns. Traditionally, the price that utility companies could charge consumers for electricity generation has been capped by state regulators.[9] However, many states have started deregulating their energy industries with the intent of lowering prices by letting retail customers "shop" for the company that generates their electricity.[10] New Jersey and Pennsylvania both have market-rate generation prices and Ohio has recently taken legislative steps in the same direction.[11]

In most states, however, utilities rates have actually increased in the short term following the removal of rate caps as companies move to align their prices with their costs. If electric prices in Ohio react as they have in other states, FirstEnergy will be able to charge more for its services in a competitive environment. FirstEnergy's low cost nuclear and coal-powered electrical facilities have the potential of giving the company a competitive advantage and lead to a rise in returns from these facilities. However, the Company has had to readjust its business model from a capped rate price structure to a market-rate price structure. Also as a result of deregulation, FirstEnergy faces increased competition, which has the potential of leading to lower prices.[12]

Competitors

FirstEnergy's distribution services are regulated by state governments and have a service monopoly over their areas.[13] In generation industry, FirstEnergy competes with numerous energy companies operating in the Midwest and East Coast.[14] Many industries have engaged in cost-cutting initiatives in order to combat lower demand and costlier feedstocks. In a manner similar to FirstEnergy, many utility companies have switched to a market-price structure in order to adapt to volatile commodity prices.[15]

In the generation space, FirstEnergy competes with the following:


References

  1. Reuters.com: FirstEnergy Profile
  2. Google Finance: FirstEnergy Profile
  3. FirstEnergy 2010 Annual Report
  4. FirstEnergy 2010 Annual Report
  5. First Energy Press Releases FirstEnergy Solutions Offering New Low Price on Electric Generation to Penelec Residential Customers
  6. IstockAnalyst: Our Outlook for Utilities Stock 3/30/2011
  7. IstockAnalyst: Our Outlook for Utilities Stock 3/30/2011
  8. IstockAnalyst: Our Outlook for Utilities Stock 3/30/2011
  9. Forbes.com:Electric Deregulation Finally Takes Off
  10. Forbes.com:Electric Deregulation Finally Takes Off
  11. Cleveland.com: Energy deregulation in Ohio: Utilities
  12. Forbes.com:Electric Deregulation Finally Takes Off
  13. FirstEnergy 2010 Annual Report
  14. FirstEnergy 2010 Annual Report
  15. Yahoo! finance: Competitors for FirstEnergy
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