FE
FirstEnergy Corp
Energy, Event Driven/Special Sit
12/05/2016
Presented
| Date | 12/01/2016 |
| Price | $30.99 |
| Market Cap | $13.23B |
| Ent Value | $36.10B |
| P/E Ratio | N/A |
| Book Value | $27.02 |
| Div Yield | 0.05% |
| Shares O/S | 427.00M |
| Ave Daily Vol | 4,355,131 |
| Short Int | 2.48% |
Current
| Price | $43.50 |
| Market Cap | $25.05B |
| FirstEnergy Corp. is a diversified energy company. It is engaged in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services through its subsidiaries. The company operates through three segments: Regulated Distribution, Regulated Transmission and Competitive Energy Services. The Regulated Distribution segment distributes electricity through FirstEnergy's utility operating companies, serving various customers within Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by FirstEnergy's utilities and the regulatory assets. The Competitive Energy Services segment supplies electricity to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and Maryland, and the provision of partial POLR and default service for some utilities in Ohio, Pennsylvania and Maryland, including the utilities. FirstEnergy was founded in 1996 and is headquartered in Akron, OH. |
Publicly traded companies mentioned herein: FirstEnergy Corp (FE)
Highlights
The presenter is short shares of FirstEnergy Corp (FE) at this time, and sees the potential for the stock to decline to ~$25 (from $31-32) in his base case. The company operates two main businesses: regulated distribution (roughly 65% of revenue) and Competitive Energy Services (~30%). The latter (aka CES) is FE’s unregulated merchant power business, and management recently announced plans to separate/ sever this business from FE’s regulated businesses. This has created some debate between bulls and bears about FirstEnergy’s future, but regardless of how the story plays out the presenter sees FE as needing to raise anywhere from $1.8 billion to $4 billion - likely via dilutive equity offerings - to maintain its investment grade credit profile. And, the rising interest rate environment and potential for comprehensive tax reform under a Trump presidency skew the risk even further to the downside for current shareholders (i.e., to $20/ share)
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