FirstEnergy to Settle Blackout Suit

07.27.2004

FirstEnergy Corp. on Tuesday said it will pay $89.9 million to settle a lawsuit against the company and some of its officers and directors alleging violation of federal securities laws related to the 2003 blackout.

The settlement does not constitute an admission of wrongdoing and is subject to court approval.

The company's insurance carriers will pay $71.9 million of the settlement, and the company will pay $18 million, which will result in a charge against FirstEnergy's second-quarter earnings of 3 cents per share. Analysts surveyed by Thomson First Call currently expect the company to earn 65 cents a share in the second quarter.

The suit is related to alleged violations of federal securities laws and related state laws in connection with the extended outage at the Davis-Besse Nuclear Power Station, the Aug. 14 regional blackout in which 50 million people were without power, and financial restatements related to transition assets being recovered in Ohio.

On Aug. 22 Philadelphia-based law firm Berger & Montague filed a class-action lawsuit in U.S. District Court in Akron on behalf of anyone who purchased stock in the utility company between April 24, 2002, and Aug. 5, when it announced plans to restate its earnings for all of 2002 and the first quarter of this year, which reduced the company's results by a total of $99 million.

The firm said at the time that the suit was unrelated to the blackout.

The federal securities cases were consolidated into a single action, as were the federal derivative cases. Those actions are pending in federal court in Akron and two state court derivative cases also are pending.

The settlements are subject to final court approval.

FirstEnergy shares recently closed up 9 cents at $37.92 on the New York Stock Exchange.

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