Morningstar Claims First Energy May Spin Off Allegheny Transmission Business

I was Googling power line stuff this morning and look what popped up on a Stock Analyst blog at Morningstar:


Below we summarize the takeaways from our meeting with Allegheny’s AYE management team at the Edison Electric Institute Financial Conference held Oct. 31-Nov. 2.

Allegheny management reaffirmed its target operating synergies from the merger, but some of its comments give us pause. There seemed to be a large disconnect between the value that Allegheny believes can be extracted from its retail power sales opportunities and what FirstEnergy FE has asserted it will achieve with the same customers. Since we assume just 50% of the target synergies are achieved, we think we’ve fully incorporated this potential discrepancy. Allegheny’s TrAIL transmission project is on schedule to go in service June 2011. The PATH project also appears to be moving forward. Management said the one competing line, a line sponsored by LS Power, is all but dead, easing PATH’s road to final approval. However, management suggested that FirstEnergy did not seem very interested in Allegheny’s transmission business and might be looking to spin it off as soon as possible to focus on generation. [emphasis mine]

Whoa — this is big news that neither Allegheny nor First Energy has mentioned in its merger case before the WV PSC.  Is First Energy really looking to break up Allegheny after the “merger”?

This may not be a merger at all, just another corporate dismemberment.  So what would happen to PATH and TrAIL?  Maybe AEP’s Transco is looking for some cheap castoffs for its “transmission portfolio”.

Should the WV PSC really be approving PATH in the middle of what may be First Energy’s corporate raid on Allegheny?

Note also that Allegheny’s boys put on a brave (and false) face about PATH.  They mentioned the Liberty Line alternative to PATH, but didn’t say anything about Dominion’s Alternative 1.