FirstEnergy Corp. announced a $2.5 billion investment in the company that includes $1.62 billion in mandatory convertible preferred equity and $850 million of common equity.

As part of the deal, FirstEnergy will form a Restructuring Working Group. The group will accelerate the company's exit from its competitive generation business and focus on its regulated operations.

A statement says the RWG will advise management regarding a "rapid and constructive restructuring of FirstEnergy Solutions in the event the FES Board decides to seek bankruptcy protection."

The statement says that the company's competitive energy services business unit lost $6.9 billion in 2016, or $16.23 a share. Its regulated distribution business posted net income of $651 million. Its regulated transmission business posted net income of $331 million.

The investment comes from affiliates of Elliott Management Corp., Bluescape, GIC and Zimmer Partners.

Proceeds from the investment will be used to reduce holding company debt by $1.45 billion and fund its pension by $750 million, with the remainder used for general corporate purposes.

(Read "Utility CEO Warns of National 'Disaster' from Natural Gas.")

Asset Sale

In September, FirstEnergy agreed to sell 1,615 megawatts (MW) of natural gas and hydroelectric generation assets in Pennsylvania and Virginia to a unit of LS Power Equity Partners III, LP. The assets were sold for an all-cash price of $825 million as part of the company's effort to move to a fully regulated company and exit from commodity-exposed generation.

On January 5, FirstEnergy made a $500 million contribution to its pension plan. The company says the additional $750 million contribution results in no required contributions in 2019 and 2020. FirstEnergy estimates a 2021 contribution of approximately $80 million.

FirstEnergy earlier had said that it expected to issue at least $1.5 billion of common equity through 2019. The investment, disclosed January 22, will satisfy that need, the company says. As a result, the company does not anticipate the need to issue additional equity through the end of 2020.

Elliott manages two hedge funds, which combined have approximately $34 billion of assets. Bluescape is a private investment firm focused on value-oriented investments in the upstream oil, gas and power industries.

GIC is Singapore's sovereign wealth fund and was established in 1981.

Zimmer Partners is a registered investment advisory firm located in New York, focused on utility and infrastructure-related investments.