S&P Places FirstEnergy (FE) on CreditWatch Negative; Withdraws Allegheny Energy's Rating

S&P Global Ratings today placed its 'BBB-' corporate credit ratings on FirstEnergy Solutions Corp. (FES), and affiliates FirstEnergy Generation Corp., FirstEnergy Nuclear Generation Corp., Allegheny Energy Supply Co. LLC (AYE Supply), and Allegheny Generating Co. on CreditWatch with negative implications. We will resolve the CreditWatch listing after reviewing FirstEnergy Corp.'s strategic plan and discussing the supply business's importance to the parent with management.

In addition, we are withdrawing the corporate credit rating on Allegheny Energy Inc. at the issuer's request.

The CreditWatch listing affects about $3.6 billion of debt at FES and affiliates.

We currently view FES and AYE Supply as core subsidiaries of parent FirstEnergy Corp. (FirstEnergy), and the 'BBB-' ratings continue to be driven by ratings on FirstEnergy on a consolidated basis. In general, the core designation reflects our view of a subsidiaries' strategic importance to the parent company, including an expectation that they would not be sold and that the parent company would support them under the vast majority of contemplated stress scenarios.

We currently consider FES and affiliates as core to the parent. We note, however, that our analysis of group status can change over time.

"As part of the CreditWatch resolution we will reassess the core designation of FES and its affiliates due to the decreasing relative size of the competitive businesses to the parent company, and because of the widening gap between the business risk profiles of FirstEnergy's regulated and competitive operations," said S&P Global Ratings credit analyst Aneesh Prabhu.

While FirstEnergy currently continues to support its competitive businesses, it has been our experience that when differences in the business risk profiles of a company's operating segments increase, they are often accompanied by reduced support for the riskier businesses in periods of duress. We will reassess FirstEnergy's strategy and posture towards FES and AYE Supply and we would lower these ratings if we determine that these companies are no longer core to parent FirstEnergy.

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