FirstEnergy Corp. has agreed to divest an additional 30% stake in subsidiary FirstEnergy Transmission LLC to Brookfield Super-Core Infrastructure Partners LP for $3.5 billion in cash, according to a Feb. 2 news release.
FirstEnergy Transmission is the holding company of American Transmission Systems Inc., Mid-Atlantic Interstate Transmission and Trans-Allegheny Interstate Line Co., comprising one of the largest transmission systems in PJM Interconnection LLC.
In May 2022, FirstEnergy sold a 19.9% stake in its transmission subsidiary to Brookfield for $2.38 billion.
At the closing of the most recent sale, FirstEnergy will remain the majority owner of FirstEnergy Transmission and will retain nearly 70% of its overall regulated transmission assets. The company also owns transmission assets in New Jersey, Pennsylvania, West Virginia and Maryland that are not part of FirstEnergy Transmission.
FirstEnergy said the transaction will bolster its financial position and support its growth as it proceeds with its clean energy transition. Proceeds from this second deal will be used to pay debt as the company aims for a funds-from-operations to debt ratio of 14% to 15%.
In 2022, FirstEnergy reduced its holding company debt by $2.5 billion, or more than 30%, from year-end 2021.
"This agreement efficiently raises capital at an attractive valuation and speaks to the strength and potential of our regulated growth strategies," said John Somerhalder, FirstEnergy's board chair, interim president and CEO. "It positions FirstEnergy to drive value for shareholders as we further optimize our financial position and plan for additional smart grid and clean energy investments in our regulated transmission and distribution businesses."
Subject to customary closing conditions and regulatory approvals, the transaction is expected to close by early 2024.
JP Morgan Securities LLC is serving as lead financial adviser and Citigroup Global Markets is acting as financial adviser to FirstEnergy for this transaction. Moelis & Co. LLC is financial adviser and provided a fairness opinion to the FirstEnergy board. Jones Day is legal adviser to FirstEnergy. Skadden Arps Slate Meagher & Flom LLP is legal adviser to Brookfield.
Capital plan increased
FirstEnergy also said it has raised its 2021 to 2025 growth plan to $18 billion, from the previous $17 billion announced in 2021.
Later this year, the company will update its long-term growth forecast, including additional grid and low-carbon investments.
The company will provide 2023 guidance in its fourth-quarter and full-year 2022 earnings announcement on Feb. 13.
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