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FirstEnergy Auction Results Disappoint, Stock Down

The Associated Press

NEW YORK (AP) — Results from FirstEnergy Corp.'s Ohio energy supply and pricing auction came in below analyst expectations, prompting downgrades and a tumble in stock price Friday.

Shares of the regional electric utility dropped $4.68, or 11.5 percent, to $35.68 in Friday morning trading. The stock earlier traded as low as $35.26, a level not seen since December 2003.

After the close of the market Thursday, the company said nine successful bidders secured a portion of the Ohio utility companies' total energy needs.

The auction resulted in an overall weighted average wholesale price of $61.50 per megawatt-hour for power generation and transmission. The new price will be effective between June 1, 2009, and May 31, 2011, for customers who choose not to shop with an alternative supplier.

Deutsche Bank analyst Ameet Thakkar said the auction results came in below consensus predictions and "meaningfully below" even Thakkar's lowest expectations. Thakkar maintained a "Hold" rating on FirstEnergy's stock, but lowered the price target to $35.

Jefferies & Co. analyst Paul Fremont called the results "disappointing" and downgraded the company to "Hold" from "Buy" and slashed his price target by $12 to $38 per share.

He also lowered 2009 earnings estimates by 50 cents to $3.85, based on lower than expected results from the auction. Fremont lowered his 2010 profit estimate by $1.10 to $3.45 and introduced a 2011 earnings estimate of $4.20.