FirstEnergy Corp. (NYSE:FE) recently announced that it is seeking authorization to construct the Center for Advanced Energy Technology in Ohio. The facility will be dedicated solely for training employees on digital grid technologies in order to enhance the company's ability to serve customers.
FirstEnergy aims to invest approximately $37 million for building the Center, which is to be located next to its existing West Akron campus, OH. Once the necessary permits are sanctioned, the company anticipates the facility to become operational by next spring.
Outcome of the Proposal
Per the announcement, the new center will be responsible for training FirstEnergy’s employees regarding new grid technologies, which include digital relay devices that are capable of pinpointing the location of equipment failure. With a campus-area of 88,000-square-foot, this facility will also be used to evaluate and test the efficacy of the devices to ensure their compliance with latest industry standards.
Engineers and technicians in this facility will get a hands-on experience, with a simulation for real-world environment, for upgrading and maintaining power grids. Approximately 20-25 employees of the company will be assigned to staff the facility. The Center will provide classroom space for up to 50 trainees.
The Center will reinforce the company's efforts to modernize its electric grid that is spread across six states. Notably, this venture is part of FirstEnergy’s ambitious “Energizing the Future” project that was initiated by the company to bolster its power grid and minimize outages. Toward this, the company aims to invest nearly $1 billion in 2017 and $4.2-$5.8 billion over 2017-2021, under the initiative.
In fact, FirstEnergy has been involved with upgradation and replacement of old transmission lines in its service area since 2014. Additionally, it has added newer and smarter technology into the grid, renewed substations with new equipment and enhanced security features for enhancing the quality of electric services. These upgrades are expected to improve its service reliability to customers.
Our View
Currently, FirstEnergy provides electric services to over 1 million customers in northeast and north central Ohio. Surely, the center once operational will help cater to the needs of FirstEnergy’s Ohio customers and improve the quality of services availed by them.
Lately, the company has been strengthening operations in Ohio where it caters to a wide customer base. Toward this, it has neared the completion of a modernization project worth $26 million. (Read more: FirstEnergy Nears Completion of Transmission Project in Ohio)
Moreover, the company's Ohio utilities proposed a $450 million investment plan for redesigning and modernization plan with the Public Utilities Commission of Ohio for reducing the frequency and duration of power outages at Ohio Edison, Cleveland Electric Illuminating and Toledo Edison divisions. (Read more: FirstEnergy Corp Proposes $450M Modernization Investment)
We expect such measures to improve the company's transmission system across its service territory, which in turn will most likely get translated into notable earnings growth for the company. This can be evidenced by FirstEnergy’s performance in the last few quarters. Notably, the company has been successful in delivering an average positive earnings surprise of 4.67% in the trailing four quarters.
Price Movement
Shares of FirstEnergy have returned 4% outperforming the industry’s growth of 0.7% in the last three months.
This can be attributed to the company's focus on continuous upgrading of transmission lines and modernizing efforts in its distribution network, through solid investments.
Zacks Rank & Key Picks
FirstEnergy carries a Zacks Rank #3 (Hold). Investors can consider some better-ranked stocks from the same space such as IDACORP, Inc. (NYSE:IDA) , Atlantic Power Corporation (NYSE:AT) and NextEra Energy, Inc. (NYSE:NEE) , all of which carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDACORP delivered positive earnings surprise of 8.43% in third-quarter 2017. Its 2017 current year estimates have risen by 2% to $4.08 per share in the last 60 days.
Atlantic Power recorded positive earnings surprise of 50% in third-quarter 2017. Its 2017 current year estimates have narrowed to a loss of 22 cents per share from a loss of 27 cents in the last 60 days.
NextEra Energy delivered positive earnings surprise of 5.71% in third-quarter 2017. Its 2017 current year estimates have risen by 0.1% to $6.73 per share in the last 60 days.
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NextEra Energy, Inc. (NEE): Free Stock Analysis Report
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