This Company Contributed $2.5 Million To GOP - DUH!

FirstEnergy loses power

David Teather in New York
Tuesday August 19, 2003
The Guardian

The Ohio-based company linked to the worst blackout that America has ever faced is struggling with more than $12.5bn in debt. It was recently forced to restate last year's results and has caused controversy with its environmental and safety records.

Early indications from officials investigating the blackout have led them to the failure of a handful of lines in the Cleveland area owned by the firm, FirstEnergy Corporation.

Although FirstEnergy has not been squarely blamed for the disastrous loss of power for 50m people, the suggestion that it could be behind the crash was enough to further erode faith in the company. Analysts including Merrill Lynch moved to downgrade the company yesterday and its shares fell more than 10% in midday trading on Wall Street.

Earlier this month, FirstEnergy announced a loss of $58m for the second quarter and lowered its forecast for the full year. It also said it would restate its results for 2002 and part of 2003 in part to reflect changes to its accounting for power generation assets.

The results were hit by the cost of repairing its Davis-Besse nuclear power plant following the discovery of serious corrosion damage to the reactor last year. The plant east of Toledo is still offline and the company has spent $450m since the summer in repairs and buying power elsewhere to make up for the interruption in supply, putting a strain on its finances.

The safety record at the plant is under investigation by the nuclear regulatory commission.

The company said at the time it might issue equity to keep its debt rating, which is hovering just above the junk level. But Merrill warned that the blackout could spark a damaging spiral. "FirstEnergy's involvement in the blackout could impact the price or ability to issue equity and could also further impact the credit agencies view," the bank said in a note.

The North American Electric Reliability Council, which monitors the grid, pinpointed the Cleveland area as a possible starting point for the failure that cascaded across the north-east of the continent, over the weekend.

In a statement issued yesterday the firm said it was still gathering and analysing data before it could be determined what had happened. It stressed that there was still no hard evidence that FirstEnergy caused the problem. Tweet