FirstEnergy under fire after blackout

Resumen de Prensa            Enervía, martes, 19 agosto 2003

FUENTE: Financial Times


The electricity group at the centre of last week's blackouts came under pressure in the financial markets on Monday as investors fretted about the fall-out from the largest power failure in US history.


Shares in FirstEnergy, the Ohio-based utility which owns three of the four power lines thought to have triggered the blackouts, fell 10 per cent by early afternoon on Monday amid concerns that the company, already struggling with more than $15bn of debt, could face credit ratings downgrades and even civil lawsuits if it is found to be responsible.

Investigators are still examining the reasons for the collapse in the power system that affected an estimated 50m people. However, they believe the problems started with the failure of transmission lines, some of which are owned by FirstEnergy. The company on Monday sought to deflect the speculation, arguing that the causes of the collapse could not yet be established and that the problems extended beyond its area.

"It is clear that the transmission grid in the Eastern Interconnection, not just within our own system, was experiencing unusual electrical conditions at various times prior to the event. These included unusual voltage and frequency fluctuations and load swings on the grid."

FirstEnergy said at the weekend that three of its transmission lines had gone down an hour before the blackout and that an alarm which warns of problems with these lines failed. However, a spokesman said the company "knew these lines were down. We are investigating why they were, right now, and we are working with the US-Canadian task force, to gather and look at the data."

Even if FirstEnergy's lines are shown to have triggered the blackout, experts said the cascading power failure which left large parts of the Midwest and North East of the United States in the dark was evidence of a broader failure of the transmission grid.

Standard & Poors warned that the investigations could distract FirstEnergy from dealing with its financial problems, and said it could lower the company's investment-grade credit rating. FirstEnergy has been trying to reduce its debt.

The company has recently suffered problems with its Davis-Besse nuclear plant, which was shut down after inspectors found evidence of corrosion.

Steven Fleishman, analyst at Merrill Lynch, noted: "While information is still fluid, First-Energy's system appears to have been the instigator of the blackout. This would be bad news for any utility but is particularly significant for FirstEnergy given its reliability issues in New Jersey and extended outage at the Davis-Besse nuclear plant."