FirstEnergy Gets $2.5 Billion From Elliott, Bluescape Investor Group -- Update

By FeaturesDow Jones Newswires

FirstEnergy Corp. has raised $2.5 billion in a private stock offering from a group led by activist investor Elliott Management Corp. and private-equity firm Bluescape, the Ohio-based utility said Monday.

The unexpected investment comes at a turbulent time for FirstEnergy. Its unregulated wholesale power subsidiary has been struggling to compete amid low prices and has been widely expected to seek bankruptcy protection in coming months.

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The company had said it was shedding assets and planned to become a fully regulated utility. This plan was dealt a significant setback earlier this month when the federal government rejected a request to shift a large coal facility from its unregulated to its regulated business.

It is not clear if the activists intend to steer FirstEnergy in a new direction. FirstEnergy said it has created a five-member restructuring working group -- the new investors will get two seats, including Bluescape Executive Chairman C. John Wilder -- to maximize value and accelerate the company's exit from the wholesale power business.

FirstEnergy said Monday the investor group, which includes Singapore's sovereign-wealth fund GIC and hedge-fund firm Zimmer Partners LP, could end up owning 16% to 17% of the company

The investment -- which includes $850 million in common stock and $1.62 billion in convertible preferred stock -- fulfills the company's goal of issuing at least $1.5 billion of common stock through next year, FirstEnergy said.

"We are pleased that these premier investors are demonstrating confidence in our plan to transform FirstEnergy into a fully regulated utility," said Charles E. Jones, First Energy chief executive, in prepared remarks. "Elliott and Bluescape have proven value-added expertise and investment acumen in power and utility restructurings."

FirstEnergy plans to use the proceeds to pay down its debt and put money toward its pension fund, among other things. It also said it doesn't anticipate new equity issuances, excluding stock-investment plans and employee-benefits programs, through the end of 2020.

Elliott and Bluescape in other instances have teamed up to push for changes at companies. Last year, NRG Energy Inc. announced a plan to sell assets, slash costs and lower its debt after receiving pressure from the investors in a bid to boost the company's value.

Mr. Wilder of Dallas-based Bluescape had served as chief executive of Texas utility TXU Corp. He led a turnaround at the power producer before the company was sold in 2007, the year Bluescape was founded.

FirstEnergy serves 6 million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. Last year, it reached an agreement to sell 1,615 megawatts of natural gas and hydroelectric generation plants for $825 million in cash, about $100 million less than a similar agreement reached months earlier.

FirstEnergy shares rose 12% to $32.86 in midday trading, adding roughly $1.5 billion to its market value. The company had a market capitalization of $13.08 billion through Friday's close.

--Allison Prang contributed to this article.

Write to Bowdeya Tweh at Bowdeya.Tweh@wsj.com and Russell Gold at russell.gold@wsj.com

(END) Dow Jones Newswires

January 22, 2018 15:21 ET (20:21 GMT)

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