FirstEnergy Jumps After CEO Says Hopeful On Rail Settlement

Shares of electricity distributor FirstEnergy (FE) moved off session lows during its Q2 earnings conference call, after CEO Charles Jones said that management is scheduled to have discussions with First Energy Solutions' creditors next week. First Energy Solutions, FES is a unit of FirstEnergy.

ONGOING RAILROAD DISPUTE: In a regulatory filing from late April, FirstEnergy said that it had resolved a coal contract dispute with CSX (CSX) and BNSF Railway concerning a previously disclosed arbitration proceeding for $109M. In the filing from April, FirstEnergy said that it is vulnerable to additional proceedings with BNSF and Norfolk Southern (NSC) related to another long-term coal transportation contract. FirstEnergy added, "Although the proceedings are still in the early stages, the parties to this dispute are also engaged in settlement discussions. If the BNSF and Norfolk Southern dispute is not settled or definitive settlement agreements are not finalized with all the parties, the amount of damages owed to CSX, BNSF and Norfolk Southern could be material and may cause FES to seek protection under U.S. bankruptcy laws."

OPTIMISTIC ON SETTLEMENT: During its second quarter earnings' conference call, CEO Charles Jones said the company is hopeful that a settlement on the remaining dispute, between BNSF and Norfolk Southern. Jones, added, "In a recent development, we are scheduled to have discussions with FES creditors next week."

PRICE ACTION: Shares of FirstEnergy opened lower, but rallied after the CEO's comments and are now up almost 3% to $32.13 in afternoon trading.

Disclosure: None. 


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