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With Ohio bailout law secured, FirstEnergy Solutions successor moves to increase share buybacks by $300 million

With Ohio bailout law secured, FirstEnergy Solutions successor moves to increase share buybacks by $300 million
COLUMBUS, Ohio — Leaders of a former FirstEnergy subsidiary, which Ohio electricity customers will soon begin paying $150 million annually to subsidize under a nuclear bailout law Ohio officials passed last year, have moved to spend an extra $300 million on repurchasing the company’s own stock.

The stock buybacks, meant to benefit corporate shareholders, come less than a year after an aggressive multi-year lobbying effort by FirstEnergy that culminated in Gov. Mike DeWine and state lawmakers approving $1 billion in bailout money funded by surcharges on Ohioans’ electric bills. The company and elected officials who backed the bailout argued without state money, the power plants and their parent company would become insolvent.

The board of directors for the company now known as Energy Harbor on Friday voted to increase authorization for its stock buyback program from $500 million to $800 million, according to an investor presentation the company posted to its website. Energy Harbor can buy back the stock any time until Aug. 27., under the terms of a company plan, approved as the Akron company spun off from FirstEnergy as it emerged from bankruptcy proceedings earlier this year.

Private companies buy shares of their own stock to help increase overall share prices by reducing the number of shares available on the market. While the company’s stock is not listed on any U.S. stock exchange, shares of Energy Harbor are available for purchase by the general public through private brokerage companies.

The company’s stock was trading at $36.01 a share when markets closed Tuesday evening, more than double the $15.75 it cost when shares first began trading on April 7.

The Energy Harbor investors presentation says the company’s “visible” cash flow generated by its nuclear plants is supported by “clean air zero emission credits,” a term for the subsidy created by the nuclear bailout law, called House Bill 6. Energy Harbor owns the Perry Nuclear Power Plant in Lake County and the Davis-Besse Nuclear Power Station near Toledo. It argues “free cash flow increase from potential future carbon policy offers meaningful upside for Energy Harbor.”

In a statement, the company said money for the stock buyback “is not related to the funding generated by House Bill 6 which does not begin until April 2021.”

“Once received, HB6 funds will be used to keep our nuclear units in Ohio operating, maintain more than 4,000 jobs, and generate 90 percent of the carbon free electricity for the State of Ohio,” the statement said.

But Ned Hill, an economic development professor at Ohio State University and critic of HB6, said he’s not surprised that Energy Harbor would move to repay its investors now that their subsidy is secure.

He also said contrary to the company’s arguments that it was in financial trouble, thus requiring the bailout, the increased share buyback is a sign Energy Harbor management is confident it’s going to make money.

“This was an act of socialism, where you socialize the risk and privatize the benefits,” Hill said. “So it’s no big surprise they’re now going to make sure their investors get a return from their investment in the political process. They won, so they get their cash.”

The subsidy is paid for by a rate increase on all Ohio electricity customers. Under the bill, from 2021 until 2027, every Ohio electricity customer would have to pay a new monthly surcharge that ranges from 85 cents for residential customers to $2,400 for large industrial plants. The new charges will be offset by the elimination of different subsidies that paid for renewable energy projects.

FirstEnergy spent years underwriting an expensive lobbying campaign to get the legislation passed that included spending millions of dollars to help elect politicians who ended up supporting the bailout. That included helping then-State Rep. Larry Householder win a bitterly contested fight among Republican state lawmakers to lead the Ohio House. Company officials argued that without the subsidy, the aging plants would close, their jobs would be lost and Ohio’s energy options would be diminished.

FirstEnergy emerged from bankruptcy in February, after spinning off FirstEnergy Solutions as a separate company. FirstEnergy now focuses on transmission and distribution of electricity through power lines. FirstEnergy Solutions changed its name to Energy Harbor, and now owns the nuclear power plants.

Todd Snitchler, a former chairman of the Ohio Public Utilities Commission who now runs a trade group for power plants that compete with Energy Harbor, said the stock buyback underscores arguments he and other House Bill 6 opponents made last year.

“If you look at the state of Ohio, and all the things that are going on there, and you find a company that’s found a way to extract $1 billion from the pockets of Ohioans and is returning $800 million to their investors, that doesn’t sound like a timely move to maintain a good appearance or good reputation,” said Snitchler a former Republican Ohio state lawmaker. “Given the struggle this country is going through, this feels poorly timed.”

Spokespeople for Householder, Senate President Larry Obhof and Gov. Mike DeWine have not returned messages seeking comment for this story.

Read previous cleveland.com coverage

FirstEnergy Solutions emerges from bankruptcy, becomes Energy Harbor

Nuclear bailout bill passes Ohio legislature, signed by Gov. Mike DeWine

Nuclear bailout bill shows how big money can be put to work in the Ohio Statehouse

FirstEnergy and its allies, seeking nuclear plant bailout, have spent millions on influence campaign

The Perry nuclear power plant in Lake County

The Perry nuclear plant in Lake County, seen here, and the Davis Besse plant near Toledo both will receive subsidies through a recently passed nuclear bailout law passed last year. (John Kuntz, The Plain Dealer)

Source: Cleveland.com

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LINK:  https://www.cleveland.com/open/2020/05/with-ohio-bailout-law-secured-firstenergy-solutions-successor-moves-to-increase-share-buybacks-by-300-million.html?utm_source=Energy+News+Network+daily+email+digests&utm_campaign=2e8de7cb74-EMAIL_CAMPAIGN_2020_05_11_11_36_COPY_01&utm_medium=email&utm_term=0_724b1f01f5-2e8de7cb74-89225679

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from the Toledo Blade:

FirstEnergy’s bad math

Just a year ago, FirstEnergy was crying poor and demanding a $1 billion bailout to save its nuclear power plants and the northwest Ohio jobs that go with them. Now, set to begin taking in the $150 million a year subsidy from its customers, the company plans to spend $800 million on a stock buyback plan to benefit its stockholders.

If that math seems a bit fuzzy, that’s because it is.

But FirstEnergy specializes in that kind of bad math. Consider, for instance, that the bankrupt company argued it was in such dire financial straits that only a consumer bailout could save Davis-Besse and Perry nuclear power plants. Without the bailout, FirstEnergy would become insolvent, the plants would close, jobs would be lost, electric bills would climb, they warned.

Read more Blade editorials

A group of congressmen has put forward a proposal that curbs the exploitation of children online, but does not adversely affect the digital privacy of Americans, as the EARN IT bill would.

So the General Assembly approved House Bill 6, which adds a surcharge to bills of Ohio’s electric customers from 2021 to 2027.

But at the same time, FirstEnergy gave $1.88 million to Generation Now Inc. to fight a referendum campaign to roll back the bailout.

FirstEnergy and its employees also contributed more than $1 million to lawmakers, candidates, and other public officials between 2017 and 2019, when the measure to add a bailout charge to consumers’ bill passed the General Assembly.

FirstEnergy has since emerged from bankruptcy and spun off FirstEnergy Solutions, which was then renamed Energy Harbor. That company owns the nuclear power plants.

And its stockholders stand to benefit from the stock buyback plan. Companies use stock buybacks to repurchase their own stock and drive up the price of the rest of the shares.

Energy Harbor officials say the buyback and the bailout are unrelated because the surcharge won’t show up on consumers’ bills until 2021. That explanation doesn’t add up, but keep in mind this company is prone to fishy math.

The stock buyback plan is a brazen slap in the face to every Ohio customer who will have to pony up to subsidize a pair of nuclear power plants that are financially troubled in the age of cheap oil and natural gas.

Ohio’s lawmakers and its utility regulators should comb through every law and agreement relating to Energy Harbor in search of a way to claw back some of the money the company is sucking out of this state.

And failing that, they must, at the very least, remember this episode the next time the energy company comes with hat in hand, demanding its customers cough up even more.

Davis-Besse nuclear power plant in Oak Harbor.

LINK:  https://www.toledoblade.com/opinion/editorials/2020/05/15/firstenergy-bad-math-house-bill-6-ohio-nuclear-power-plants/stories/20200513117?utm_source=Energy+News+Network+daily+email+digests&utm_campaign=34186089a1-EMAIL_CAMPAIGN_2020_05_11_11_36_COPY_01&utm_medium=email&utm_term=0_724b1f01f5-34186089a1-89225679

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Reply by First Energy:

To the editor: Blade unfair to FirstEnergy

I was greatly disappointed to read the May 15 editorial “FirstEnergy’s Bad Math.” Full of misleading statements and assumptions, it should more accurately be titled “Toledo Blade’s Bad Journalism.”

While The Blade even acknowledges the full separation between FirstEnergy Corp. and FirstEnergy Solutions (formerly FES, now Energy Harbor), the editorial still attempts to marry recent actions taken by Energy Harbor to FirstEnergy Corp.

The fact is the two companies have no relationship to one another, and the actions of Energy Harbor have no legal, financial, or other bearing on FirstEnergy Corp.

In late 2016, FirstEnergy Corp. made the decision to exit from its competitive generating business — FES — and become a fully regulated utility company.

Soon after, FES appointed an independent board of directors and retained its own separate legal and financial advisers.

The finances of the two companies were separated in early 2018, and in March, 2018, FES filed for Chapter 11 bankruptcy. FES emerged from bankruptcy as Energy Harbor earlier this year.

FirstEnergy Corp. and its other subsidiaries were not part of the Chapter 11 filing. To suggest the company was “crying poor and demanding a $1 billion bailout,” or was a “bankrupt company” is patently false.

Our regulated utility operating companies have remained strong, delivering reliable and affordable electricity to our more than 6 million customers.

It’s a shame The Blade insists on continuing its long history of smearing our good name, in this case by tying it to actions by a company that has no legal, financial, or operational connection to ours.

While it could be passed off as ignorance or bad reporting by an individual reporter, an editorial board cannot use these excuses to justify such blatant smear tactics.

CHARLES JONES

President and Chief Executive Officer,

FirstEnergy Corp.

 

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A slap in the face to every ratepayer in Ohio.

Ohio legislators knew that their “yes” vote on HB6 would help the rich get richer on the backs of hardworking Ohioans.

And now, in the midst of a pandemic when so many consumers in Ohio are struggling to make ends meet —  is when FirstEnergy Solutions is returning an $800 million audacious payoff to their investors.

The Plain Dealer recently reported that, “The company and elected officials who backed the bailout argued without state money, the power plants and their parent company would become insolvent.”

FirstEnergy gutted Ohio’s renewable energy and energy efficiency standards to provide a pay off to their investors. We knew that, but it still stings.

Carol, we can’t change that our legislature passed this atrocity. But we will remember how they voted when they run for reelection this November.

Thanks for your continued support,

Ohio Citizen Action
http://www.ohiocitizen.org/

p.s. Every gift, no matter the size, is much appreciated and will keep our young activists on the front lines of democracy.

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