FirstEnergy (NYSE:FE) on Sunday announced $3.4 billion in new equity financing investments from two global investors that the company believes will position it for a long-term earnings-per-share growth rate of 6 to 8%.
The company announced that it will issue $1 billion in common equity to New York City-based Blackstone Infrastructure Partners (NYSE:BX) at $39.08/share and appoint a Blackstone representative to its board of directors no later than its next annual meeting.
FirstEnergy further announced that it had agreed to sell a 19.9% minority interest in its transmission subsidiary First Energy Transmission (FET) to Toronto-based Brookfield Super-Core Infrastructure Partners (NYSE:BAM) for $2.4 billion in cash.
FET is a holding company for FirstEnergy’s three FERC-regulated transmission subsidiaries that operate 24,000 miles of high-voltage power lines across six states. The sale of a minority interest in FET to raise cash has been under discussion for several months.
Under questioning from analysts at FirstEnergy’s third-quarter earnings call two weeks ago, CFO Jon Taylor described the interest in FET as “very strong, and preliminary indications are very supportive of our financial plan and targets.”
The sale, subject to FERC approval and review by the Committee on Foreign Investments in the U.S., is expected to close in the first half of 2022, FirstEnergy said.
The company believes the transactions will enhance its credit profile, which was recently returned to investment-grade, and provide enough cash to address all of its needs for new equity now and in the near future. The company is planning major grid upgrades.
In a statement accompanying the news of the equity sale and minority interest sale, FirstEnergy CEO Steven Strah called the two agreements “key catalysts to fulfill our long-term strategy and drive smart grid and clean energy initiatives for our customers and communities.”
Donald T. Misheff, non-executive chairman of FirstEnergy’s board, said, “The entire board, including our voting and non-voting members, unanimously supports these important actions.
“This represents a pivotal moment in the company’s trajectory and positions FirstEnergy to drive shareholder value.”