Coal’s woes have upside for FirstEnergy

Company identified $240 million of savings

If there’s an industry under more pressure than unregulated power plants, it’s the coal companies that supply them, said Chuck Jones, CEO of Akron-based FirstEnergy Corp., which has capitalized on coal’s troubles to the tune of $75 million.

FirstEnergy, which over the past several years has cut 4,769 megawatts of coal capacity, launched a cost-cutting initiative in April and already has identified $240 million of savings that could be realized by 2017. About half of that has come from renegotiating fuel contracts.

“The obvious context is if the competitive generating fleets — both nuclear and fossil — are under duress as a result of current market conditions, the second industry that’s under equal or maybe even more duress is the coal industry,” Mr. Jones told analysts during an earnings call Friday.

“And I think what we’re trying to do is work together, partner together for the survival of it.”

Falling commodity prices have spared no industry.

Oil and gas companies such as Consol Energy Inc. and Range Resources Corp. posted losses during the past quarter on depressed sales revenue. Steel companies, reeling from low prices, have shuttered plants, some of which drove down FirstEnergy’s industrial revenue, the company said. Even uranium prices are so in the dumps that FirstEnergy canceled a plan to stockpile the fuel meant to capitalize on the lows, figuring the price valley will be there “for a long time.”

FirstEnergy posted net income of $187 million, or 44 cents per share, during the second quarter, up from $64 million, or 16 cents per share, during the second quarter of 2014.

In addition to its generation fleet and transmission businesses, the company operates 10 electric utilities across six states, including West Penn Power in southwestern Pennsylvania.

Its revenue stayed flat at $3.5 billion compared to the same quarter last year.

Fuel costs at the company’s unregulated already power plants fell by $158 million since the year-ago quarter, but that was primarily driven by not running some coal plants as much and selling less electricity in general.

Still, the future fuel savings expected through the new cost-cutting initiative gave the company confidence to proceed with the construction of a new dewatering facility for the Bruce Mansfield Plant in Beaver County. It’s a move the company put on hold last year, even though the power plant would not be able to operate without the facility starting in 2017.

The renegotiated coal contract “makes that plant more competitive starting Sept. 1,” Mr. Jones said.

He said it’s likely the company will be able to shed even more in fuel costs in the future.

“Are there more opportunities?” said Don Moul, vice president of commodity operations at FirstEnergy. “We’re looking for those opportunities, but it’s going to probably take some innovative approaches in working with our suppliers to get there given the economics that we see right now.”

FirstEnergy’s stock price has been in the $30 range for the past six months. On Friday, the stock closed at $33.96.