Moody’s changes FirstEnergy to negative

Moody's Investors Service said it revised the outlook on Baa3 senior unsecured ratings at FirstEnergy Corp., FirstEnergy Solutions Corp., Allegheny Energy Supply Co. LLC and Allegheny Generating Co. to negative from stable.

The outlook revision follows an order by the FERC late on April 27 revoking the affiliate waiver between FirstEnergy's Ohio utilities and FirstEnergy Solutions.

This would imply that the PPA between FirstEnergy Solutions and FirstEnergy's Ohio utilities can no longer go into effect on June 1. If desired, FirstEnergy must submit the PPA to FERC for consideration, and the FERC Commission will commence a review process, which could take six to 12 months but potentially longer.

The negative outlook on Allegheny Generating reflects the fact that Allegheny Energy Supply it is the majority owner and main source of cash flow.

"It is possible that the FERC may yet approve a PPA at the conclusion of its hearings but the strength of the language in the FERC order and the lengthy, unpredictable timetable makes a negative outlook more appropriate at this time," Moody’s vice president and senior credit officer Swami Venkataraman said in a news release.

"Should the FERC eventually reject the PPA, any alternative business or financial measures to improve FirstEnergy's credit profile would need to be announced promptly and take effect in the near-term."

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