QUOTE AND NEWS
Benzinga  May 23  Comment 
Jefferies reduces its rating on FirstEnergy (NYSE: FE) from Hold to Underperform and reduces its price target from $48 to $40. Jefferies comments, "We are downgrading FirstEnergy to Underperform from Hold based on increasing regulatory risk in...
Benzinga  May 23  Comment 
Analysts at Goldman Sachs downgraded Ariba Inc (NASDAQ: ARBA) from “buy” to “neutral.” ARBA's shares closed at $44.87 yesterday. Ariba's trailing-twelve-month ROE is -1.35%. Analysts at Deutsche Bank downgraded Patriot Coal Corporation...
PR Newswire  May 22  Comment 
READING, Pa., May 22, 2012 /PRNewswire/ -- FirstEnergy Corp. (NYSE: FE) subsidiary Pennsylvania Electric Company (Penelec) will consolidate its service operations to increase efficiency and to enhance response times in the utility's Altoona,
PR Newswire  May 17  Comment 
GREENSBURG, Pa., May 17, 2012 /PRNewswire/ -- Residential customers of West Penn Power can earn up to $1,200 in rebates through a new home energy audit program. The Whole House Program also can help customers increase the comfort of their home while
PR Newswire  May 15  Comment 
AKRON, Ohio, May 15, 2012 /PRNewswire/ -- Shareholders of FirstEnergy Corp. (NYSE: FE) today reelected 14 members to its Board of Directors and voted on other company and shareholder proposals at the company's 2012 Annual Meeting held in Akron, Ohio.
Market Intelligence Center  May 10  Comment 
FirstEnergy (NYSE:FE) closed Wednesday's downbeat trading session at $47.11. In the past year, the stock has hit a 52-week low of $38.77 and 52-week high of $47.52. FirstEnergy (FE) stock has been showing support around $46.36 and resistance in...
Benzinga  May 10  Comment 
Below are the top large-cap electric utilities stocks on the NYSE and the NASDAQ in terms of revenue. The trailing-twelve-month revenue at Korea Electric Power Corp (NYSE: KEP) is $38.22 billion. KEP's PEG ratio is 0.11. The...
PR Newswire  May 9  Comment 
AKRON, Ohio, May 9, 2012 /PRNewswire/ -- FirstEnergy Corp. (NYSE: FE) today announced that Vice President and Treasurer James F. Pearson will conduct an investor presentation at the Deutsche Bank 2012 Alternative Energy, Utilities & Power Conference
PR Newswire  May 4  Comment 
MORRISTOWN, N.J., May 4, 2012 /PRNewswire/ -- Jersey Central Power & Light (JCP&L) has been identified as one of the top 10 utility companies in the nation for the installation of new solar power within its service area. A report by the Solar
Reuters  May 3  Comment 
A U.S. power grid operator asked FirstEnergy Corp to keep running some units previously earmarked for retirement this year at three coal-fired plants in Ohio in an effort to maintain the reliability of the electric system, the company said.




 

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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