FirstEnergy (FE): Analyst Comments on NJ Rate Reduction

Deutsche Bank maintained a Hold rating on FirstEnergy Corp. (NYSE: FE) with a price target of $42. Analyst Jonathan Arnold commented on rate reduction in NJ.

"This morning, the NJ Administrative Law Judge finally submitted an initial decision with the New Jersey Board of Public Utilities (NJ BPU) in the JCP&L rate case, which has been ongoing since 2012. The ALJ recommends a $107.5M rate decrease based on $1.9B rate base, a 9.75% ROE (in line with recent NJ decisions), and a 50/50 capital structure. Notably, the ALJ does not make any adjustment for the recent BPU decision in the Consolidated Tax Adjustment proceeding. Had they done so, we believe the ALJ would have recommended an even greater rate decrease. FE’s most recent request had been for a $9M rate increase based on $2.0B rate base, an 11% ROE, and a 54/46 equity/debt capital structure," said Arnold.

"Our model embeds a $30M rate decrease in this case effective in Q1-15. All else equal, the difference between our numbers and the ALJ represents about $0.10/sh of annual EPS. While the ALJ recommendation cannot be read positively for FE, we believe the market has largely been expecting a rate reduction in New Jersey for some time," he added.

For an analyst ratings summary and ratings history on FirstEnergy Corp. click here. For more ratings news on FirstEnergy Corp. click here.

Shares of FirstEnergy Corp. closed at $39.02 yesterday.

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