FirstEnergy Looking Past Dark Days

Merrill Lynch analyst Steven Fleishman questions whether the long-awaited restart date is now feasible.

"Given the heightened nature of this review, it is not clear whether restart could occur prior to resolving this legal process," wrote Fleishman, who nevertheless has a buy rating on the stock.

FirstEnergy will formally ask to restart the nuclear power plant later this week. But even if the company gains approval, it could face future risks associated with the criminal probe.

"What is not yet clear is whether the legal action will be taken against the company, or employees of the company that may have provided false information, or both," Fleishman wrote. "The greatest potential penalty, we believe, would be risk to [FirstEnergy's] nuclear operating license."

Fleishman did, however, downplay this possibility since FirstEnergy has been allowed to operate its other nuclear plants throughout the two-year probe.

Tree-Trimming

But FirstEnergy faces other hurdles. A damaging report, issued last month by a U.S./Canadian task force, singled out the company as the primary culprit of a huge blackout last summer. Even Ford, who has an overweight rating on the stock, was disturbed by the findings.

"Troubling to us was FirstEnergy's violation of four [Federal Energy Regulatory Commission] standards out of six identified in total," Ford wrote last month. "The personnel and, in particular, procedural shortfalls were also disappointing."

According to the findings -- which FirstEnergy is contesting -- the company did not respond promptly to a power line outage, notify other systems of an impending emergency, use proper tools to assess the situation or adequately train its operators. It was also cited for poor tree-trimming, blamed for the first outage that led to the cascading blackout.

Even so, FirstEnergy could escape both government fines and civil penalties.

Ford noted that "the response from various agencies might have been critical, but not putative." He also pointed out that plaintiffs would have to prove that FirstEnergy was guilty of "willful, gross negligence" -- a tough hurdle -- to recover any damages.