CLEVELAND - Four high-powered private investor groups have agreed to sink nearly $2.5 billion into FirstEnergy for 18 months in exchange for helping the company shed its money-losing power plants, or get them returned to regulation and protection from competition.

FirstEnergy Solutions owns the Davis-Besse, Perry nuclear power plants in Ohio and the two-reactor Beaver Valley nuclear power plant in western Pennsylvania. The company also owns two large coal-fired plants on the Ohio River.

The hedge funds will advise the company on how to re-organize itself and its unregulated subsidiary FirstEnergy Solutions or help transform it, if FirstEnergy Solutions files for bankruptcy protection as expected, the company said.

The Akron-based utility Monday announced that the four private investment groups would buy $2.5 billion in FirstEnergy shares -- $1.62 billion in preferred stock and $850 million in common stock. After 18 months, the investors must convert their preferred stock into common stock, which they may sell.

The private funds include affiliates of New York-based multi-billion dollar Elliott Management Corp., Dallas-based Bluescape Resources Co., Singapore-based GIC Private Limited (formerly the Government of Singapore Investment Corp.) and New York City-based Zimmer Partners LP.

The announcement sparked a surge of buying on the New York Stock Exchange and FirstEnergy's share price closed up 10.4 percent or $3.05 a share, at $32.45.

FirstEnergy Solutions both generates and sells power but cannot always compete with the price of power generated by wind and natural gas.

Warnings signs since 2014

The company has tried without success since 2014 to have its local companies such as the Cleveland Electric Illuminating Co. increase charges to funnel additional dollars to the power plants. Top managers have warned they will sell or close the plants rather than run them at a loss.

Will the sun set on the Perry Nuclear Power Plant in North Perry? "At this point, without some type of regulatory support it would not be prudent to put any more capital into those plants,'' said James Pearson, chief financial officer of FirstEnergy. (Plain Dealer file)

FirstEnergy also has appealed to federal authorities to order transmission grid managers to develop special fees that reflect what the company argues is the value the old power plants bring to keeping the lights on because they operate around the clock and have plenty of fuel on-site.

The Federal Energy Regulatory Commission recently rejected the idea, forcing FirstEnergy back to Ohio lawmakers for another try and special fees for the nuclear plants. The FERC rejection convinced the company it was time to seek outside investments -- and help -- from the hedge funds.

An Ohio Senate committee hearing has been set for Thursday to hear from the company once again.

Company praises buy-in

FirstEnergy presents the buy-in from the hedge funds as just the boost it needs. "We are pleased that these premier investors are demonstrating confidence in our plan to transform FirstEnergy into a fully regulated utility," said Charles "Chuck" Jones, president and CEO in a release.

James Pearson, chief financial officer of FirstEnergy, who will sit on a newly created committee with representatives of the hedge funds, said the buy-in helps the company pay down debts and keep up its bond credit ratings.

Pearson said developments should occur quickly.

"FirstEnergy has been very straightforward in any discussions with creditors," he said in an interview Monday.

Pearson made it clear the company is prepared to move on.

"We are not going to invest any more in FirstEnergy Solutions. We have contributed a significant amount of . . . support trying to save the plants. But at this point, without some type of regulatory support it would not be prudent to put any more capital into those plants,'' Pearson said.

Key deadline in April

The beginning of the end could come before early April when FirstEnergy Solutions has a $100 million debt payment due, he said.

Stressing that the decision is not up to FirstEnergy but to the board of directors at FirstEnergy Solutions, Pearson said making the payment would be a difficult decision.

"It would be very difficult from my perspective for the FirstEnergy Solutions board to determine that they were going to make that payment, based on current conditions. Based on where energy prices are, where capacity prices are, it would be very difficult to justify that that is a viable entity," he said.

At the point when FirstEnergy Solutions opts to file for bankruptcy protection, the parent company -- with advice from its hedge fund investors -- "will advise company management regarding a rapid and constructive restructuring of FirstEnergy Solutions in the event the FES Board decides to seek bankruptcy protection," the company

on Monday.