Fitch affirms FirstEnergy

Fitch Ratings said it affirmed the issuer default ratings of FirstEnergy Corp. and Allegheny Energy, Inc. following the close of its stock-for-stock merger on Feb. 25.

The outlook for FirstEnergy is negative. The outlook for Allegheny Energy is stable.

FirstEnergy's debt-to-EBITDA ratio was 3.9x as of the year ended Dec. 31.

Ratings for FirstEnergy reflect the operations of Allegheny Energy, the additional coal generation from the acquisition of Allegheny Energy's generation portfolio and the distribution utility subsidiaries of Allegheny Energy and a growing transmission business, the agency said.

Concerns incorporate weakening credit measures, higher business risk at generation subsidiary, a deregulated market in Pennsylvania, regulatory uncertainty in Ohio and exposure to stricter environmental legislation, the agency said.

Ratings for FirstEnergy also reflect the company's large portfolio of low-cost generation assets and higher business risk as the company becomes more dependent on market-based generation rates, Fitch noted.

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