In recent weeks, investors, analysts, policymakers, media and other stakeholders have been combing through the FirstEnergy Solutions (FES) bankruptcy settlement with creditors and former parent corporation, FirstEnergy (FE). One provision of interest allows FirstEnergy to participate in 50-50 sharing of federal or state bailout revenues.
An analysis by Bank of America Merrill Lynch states that: “This was framed as a way to reward FirstEnergy for any success with legislation and keep FirstEnergy management incentivized to remain involved in those efforts.”
Under that term sheet, FE has up to three years after the bankruptcy to exercise the warrant that entitles it to 50% of recoveries after FES’s unsecured creditors recover 60% of their claims.
Bottom line: FirstEnergy has a vested interest in federal or state bailouts and will continue lobbying federal and state officials for policies that will disrupt and distort a well-functioning market, even though it is no longer in the generation market. 5/3/2018