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FirstEnergy Unit to Invest $166M on Electric System Upgrade

Zacks Equity Research

FirstEnergy Corporation FE announced that its electric distribution company, Mon Power, will invest $166 million in 2017 to strengthen distribution and transmission infrastructure. The objective of this investment is to improve service reliability for Mon Power's customers in the 34-county West Virginia service area.

Details of the Projects

Last year FirstEnergy invested nearly $250 million to improve quality of service for Mon Power’s customers. The investment was directed on hundreds of large and small transmission and distribution projects, including building new substations and transmission lines, adding equipment to existing locations, installing voltage-regulating equipment and automated controls, and replacing poles.

The company's 2017 capital investment will be focused on continuing the work initiated in 2016 and also on rebuilding distribution circuits to improve service reliability.

FirstEnergy’s Modernization Drive
FirstEnergy’s modernization drive will boost the company’s service reliability and lead to customer retention. Its “Energizing the Future” plan is aimed at upgrading and expanding its regulated transmission capabilities. Under this initiative, the company is on track to invest nearly $1 billion in 2017 and $3.2–$4.8 billion over the 2017-2021 period.

All these investments are aimed to enhance the resiliency of the existing systems of FirstEnergy and lower the possibility of downtime and service interruptions which the customers might experience during natural calamities.

Price Movement

FirstEnergy has underperformed the Zacks Categorized Utility-Electric Power industry over the past 12 months. Shares of the company lost 13.6% compared with the industry’s decline of 0.5%.

The chief reason for this is that FirstEnergy, like most other unregulated utilities, has been grappling with its 13,162 MW competitive energy business for the last few quarters, despite consistent efforts to expand the regulated generation mix. FirstEnergy is exposed to market volatilities due to considerable mix of competitive energy business in total revenue.

Zacks Rank & Key Picks

FirstEnergy carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Fortis Inc.FTS , Pampa Energia S.A. PAM and Entergy Corporation ETR.

Fortis Inc., a Zacks Rank #1(Strong Buy) stock, has seen 100% upward estimate revision for 2017 over the last 60 days. Its estimates increased from $1.83 per share to $1.92. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pampa Energia, a Zacks Rank #2 (Buy) stock, has seen one upward estimate revision for 2017 over the last 60 days. Its estimates increased from $1.43 per share to $1.63.

Entergy Corporation has witnessed 100% upward estimate revisions for 2017 over the last 60 days. The company carries a Zacks Rank #2 as well. Its estimates increased from $4.60 per share to $5.02.

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