Exhibit 99.2
Consolidated Report to the Financial Community
First Quarter 2005
(Released April 27, 2005)
Highlights | After-Tax EPS Variance Analysis | 1st Qtr. | ||
n Normalized non-GAAP earnings for the | 1Q 2004 Basic EPS - GAAP Basis | $ 0.53 | ||
first quarter of 2005, excluding unusual | Davis-Besse Incremental Expenses - 2004 | 0.12 | ||
items, were $0.47 per share, compared with | 1Q 2004 Normalized Earnings - Non-GAAP Basis | $ 0.65 | ||
first quarter 2004 normalized non-GAAP | Electric Gross Margin: | |||
earnings of $0.65 per share. GAAP | - Nuclear Outage Replacement Power | (0.12) | ||
earnings were $0.49 per share compared | - Remaining Electric Gross Margin | 0.04 | ||
with GAAP earnings of $0.53 per share in | Nuclear Operating Expenses | (0.12) | ||
the first quarter of 2004, which included | Fossil Operating Expenses | 0.02 | ||
replacement power costs associated with | Pension and Other Employee Benefits | 0.05 | ||
the Davis-Besse extended outage. | General Taxes & Non-Core Businesses | (0.03) | ||
Investment Income from COLI | (0.02) | |||
Interest Expense | 0.02 | |||
Other | (0.02) | |||
1Q 2005 Normalized Earnings - Non-GAAP Basis | $ 0.47 | |||
Unusual Items - 2005 | 0.02 | |||
1Q 2005 Basic EPS - GAAP Basis | $ 0.49 | |||
1Q 2005 Results vs. 1Q 2004
n | Electric distribution deliveries increased 3%. Commercial and industrial deliveries increased 5% and 4% respectively, while residential deliveries were unchanged. Heating-degree-days were comparable to the same period last year, but 6% above normal. Total electric generation sales were flat, as the 1% increase in retail generation sales offset a 3% decrease in wholesale sales. |
n | Electric gross margin decreased $42 million, or $0.08 per share, after adjusting for changes in regulatory deferrals and last year's Davis-Besse replacement power costs. Replacement power costs related to the three nuclear outages reduced electric gross margin by $0.12 per share. However, this was partially offset by a record first quarter output from our fossil fleet, which contributed an improvement of $0.04 per share in electric gross margin. |
n | Nuclear operating expenses increased $67 million due to a refueling outage and a 26-day forced outage at Perry, as well as a 23-day planned mid-cycle outage at Davis-Besse. |
n | Fossil operating expenses decreased $10 million as a result of fewer planned outages. |
n | Pension and other employee benefit costs decreased approximately $28 million due to the voluntary $500-million contribution to the pension plan in September 2004, favorable market returns in 2004, and changes in health care benefits. |
n | General taxes increased $6 million as a result of higher payroll and state gross receipts taxes. The net income contribution from non-core businesses declined by $7 million principally due to the divestiture of certain of these units. |
n | Declines in investment income from corporate owned life insurance reduced net income by $5 million. |
n | Interest costs, before capitalized interest and premiums associated with preferred stock redemptions, decreased $8 million. During the quarter, we redeemed debt and preferred securities totaling $133 million, which will reduce financing costs by $7 million in 2005. |
n | During the quarter, we recognized after-tax gains on non-core asset sales totaling $22 million, which were partially offset by an after-tax expense of $14.4 million associated with the EPA New Source Review case settlement. We also recognized an additional $3.5 million expense for the proposed NRC fine at Davis-Besse, bringing the total liability accrued to $5.5 million. The net impact of these unusual items was to increase earnings by $0.02 per share. |
2005 Earnings and Cash Generation Guidance* | |
n | Earnings guidance for 2005, excluding unusual charges, remains at $2.70 to $2.85 per share. |
n | Total cash generation (Non-GAAP) guidance for 2005 remains at $560 million. |
* | The GAAP to Non-GAAP reconciliation statements are attached and available on FirstEnergy Corp.'s website at www.firstenergycorp.com/ir |
For additional information, please contact: | ||
Kurt E. Turosky | Terrance G. Howson | Thomas C. Navin |
Director, Investor Relations | Vice President, Investor Relations | Treasurer |
(330) 384-5500 | (973) 401-8519 | (330) 384-5889 |
2
FirstEnergy Corp.
Consolidated Statements of Income
(In thousands except for per share amounts)
Consolidated Statements of Income | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2005 | 2004 | Change | ||||||||||||
Revenues | ||||||||||||||
(1) | Electric sales | $ | 2,437,189 | $ | 2,655,612 | $ | (218,423 | ) | ||||||
(2) | FE Facilities | 55,704 | 58,054 | (2,350 | ) | |||||||||
(3) | MYR | 92,381 | 88,875 | 3,506 | ||||||||||
(4) | Other | 227,438 | 193,997 | 33,441 | ||||||||||
(5) | Total Revenues | 2,812,712 | 2,996,538 | (183,826 | ) | |||||||||
Expenses | ||||||||||||||
(6) | Fuel | 232,889 | 198,359 | 34,530 | ||||||||||
(7) | Purchased power | 662,443 | 935,967 | (273,524 | ) | |||||||||
(8) | Other operating expenses | 752,894 | 664,443 | 88,451 | ||||||||||
(9) | FE Facilities | 60,085 | 59,776 | 309 | ||||||||||
(10) | MYR | 92,409 | 88,423 | 3,986 | ||||||||||
(11) | Provision for depreciation | 142,632 | 145,850 | (3,218 | ) | |||||||||
(12) | Amortization of regulatory assets | 310,841 | 310,202 | 639 | ||||||||||
(13) | Deferral of new regulatory assets | (59,507 | ) | (44,405 | ) | (15,102 | ) | |||||||
(14) | General taxes | 185,179 | 178,990 | 6,189 | ||||||||||
(15) | Total Expenses | 2,379,865 | 2,537,605 | (157,740 | ) | |||||||||
(16) | Income Before Interest and Income Taxes | 432,847 | 458,933 | (26,086 | ) | |||||||||
Net interest charges: | ||||||||||||||
(17) | Interest expense | 164,657 | 172,510 | (7,853 | ) | |||||||||
(18) | Capitalized interest | (255 | ) | (6,470 | ) | 6,215 | ||||||||
(19) | Subsidiaries' preferred stock dividends | 6,553 | 5,281 | 1,272 | ||||||||||
(20) | Net interest charges | 170,955 | 171,321 | (366 | ) | |||||||||
(21) | Income Taxes | 121,104 | 115,086 | 6,018 | ||||||||||
(22) | Income before discontinued operations | 140,788 | 172,526 | (31,738 | ) | |||||||||
(23) | Discontinued operations | 18,938 | 1,473 | 17,465 | ||||||||||
(24) | Net Income | $ | 159,726 | $ | 173,999 | $ | (14,273 | ) | ||||||
Basic Earnings Per Common Share: | ||||||||||||||
(25) | Before discontinued operations | $ | 0.43 | $ | 0.53 | $ | (0.10 | ) | ||||||
(26) | Discontinued operations | 0.06 | - | 0.06 | ||||||||||
(27) | Basic Earnings Per Common Share | $ | 0.49 | $ | 0.53 | $ | (0.04 | ) | ||||||
Weighted Average Number of | ||||||||||||||
(28) | Basic Shares Outstanding | 327,908 | 327,057 | 851 | ||||||||||
Diluted Earnings Per Common Share: | ||||||||||||||
(29) | Before discontinued operations | $ | 0.42 | $ | 0.53 | $ | (0.11 | ) | ||||||
(30) | Discontinued operations | 0.06 | - | $ | 0.06 | |||||||||
(31) | Diluted Earnings Per Common Share | $ | 0.48 | $ | 0.53 | $ | (0.05 | ) | ||||||
Weighted Average Number of | ||||||||||||||
(32) | Diluted Shares Outstanding | 329,427 | 329,034 | 393 |
3
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended March 31, 2005 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Regulated | Supply | Facilities | Other (a) | Reconciling | Consolidated | ||||||||||||||||||
Services | Management Services | Services | Adjustments (b) | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 1,161,824 | $ | 1,275,365 | $ | - | $ | - | $ | - | $ | 2,437,189 | ||||||||||
(2) | FE Facilities | - | - | 55,704 | - | - | 55,704 | ||||||||||||||||
(3) | MYR | - | - | - | 92,381 | - | 92,381 | ||||||||||||||||
(4) | Other | 176,974 | 19,350 | - | 19,970 | 11,144 | 227,438 | ||||||||||||||||
(5) | Internal Revenues | 78,365 | - | - | - | (78,365 | ) | - | |||||||||||||||
(6) | Total Revenues | 1,417,163 | 1,294,715 | 55,704 | 112,351 | (67,221 | ) | 2,812,712 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 232,889 | - | - | - | 232,889 | ||||||||||||||||
(8) | Purchased power | - | 662,443 | - | - | - | 662,443 | ||||||||||||||||
(9) | Other operating expenses | 417,784 | 408,526 | - | 3,561 | (76,977 | ) | 752,894 | |||||||||||||||
(10) | FE Facilities | - | - | 60,085 | - | - | 60,085 | ||||||||||||||||
(11) | MYR | - | - | - | 92,409 | - | 92,409 | ||||||||||||||||
(12) | Provision for depreciation | 125,665 | 10,057 | - | 585 | 6,325 | 142,632 | ||||||||||||||||
(13) | Amortization of regulatory assets | 310,841 | - | - | - | - | 310,841 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (59,507 | ) | - | - | - | - | (59,507 | ) | ||||||||||||||
(15) | General taxes | 146,418 | 31,055 | - | 946 | 6,760 | 185,179 | ||||||||||||||||
(16) | Total Expenses | 941,201 | 1,344,970 | 60,085 | 97,501 | (63,892 | ) | 2,379,865 | |||||||||||||||
(17) | Income Before Interest and Income Taxes | 475,962 | (50,255 | ) | (4,381 | ) | 14,850 | (3,329 | ) | 432,847 | |||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | 94,496 | 7,394 | 209 | 739 | 61,819 | 164,657 | ||||||||||||||||
(19) | Capitalized interest | (2,827 | ) | 2,548 | - | 2 | 22 | (255 | ) | ||||||||||||||
(20) | Subsidiaries' preferred stock dividends | 6,553 | - | - | - | - | 6,553 | ||||||||||||||||
(21) | Net interest charges | 98,222 | 9,942 | 209 | 741 | 61,841 | 170,955 | ||||||||||||||||
(22) | Income taxes | 154,873 | (24,681 | ) | (3,051 | ) | 9,549 | (15,586 | ) | 121,104 | |||||||||||||
(23) | Income before discontinued operations | 222,867 | (35,516 | ) | (1,539 | ) | 4,560 | (49,584 | ) | 140,788 | |||||||||||||
(24) | Discontinued operations | - | - | 12,848 | 6,090 | - | 18,938 | ||||||||||||||||
(25) | Net Income | $ | 222,867 | $ | (35,516 | ) | $ | 11,309 | $ | 10,650 | $ | (49,584 | ) | $ | 159,726 |
(a) | Other consists of MYR (a construction service company); natural gas operations and telecommunications services. |
(b) | Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions. |
4
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended March 31, 2004 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Regulated | Supply | Facilities | Other (a) | Reconciling | Consolidated | ||||||||||||||||||
Services | Management Services | Services | Adjustments (b) | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 1,153,819 | $ | 1,501,793 | $ | - | $ | - | $ | - | $ | 2,655,612 | ||||||||||
(2) | FE Facilities | - | - | 58,054 | - | - | 58,054 | ||||||||||||||||
(3) | MYR | - | - | - | 88,875 | - | 88,875 | ||||||||||||||||
(4) | Other | 136,089 | 19,902 | - | 26,866 | 11,140 | 193,997 | ||||||||||||||||
(5) | Internal Revenues | 79,598 | - | - | - | (79,598 | ) | - | |||||||||||||||
(6) | Total Revenues | 1,369,506 | 1,521,695 | 58,054 | 115,741 | (68,458 | ) | 2,996,538 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 198,359 | - | - | - | 198,359 | ||||||||||||||||
(8) | Purchased power | - | 935,967 | - | - | - | 935,967 | ||||||||||||||||
(9) | Other operating expenses | 366,096 | 346,068 | - | 17,745 | (65,466 | ) | 664,443 | |||||||||||||||
(10) | FE Facilities | - | - | 59,776 | - | - | 59,776 | ||||||||||||||||
(11) | MYR | - | - | - | 88,423 | - | 88,423 | ||||||||||||||||
(12) | Provision for depreciation | 127,643 | 8,530 | 602 | (621 | ) | 9,696 | 145,850 | |||||||||||||||
(13) | Amortization of regulatory assets | 310,202 | - | - | - | - | 310,202 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (44,405 | ) | - | - | - | - | (44,405 | ) | ||||||||||||||
(15) | General taxes | 147,103 | 24,389 | - | 932 | 6,566 | 178,990 | ||||||||||||||||
(16) | Total Expenses | 906,639 | 1,513,313 | 60,378 | 106,479 | (49,204 | ) | 2,537,605 | |||||||||||||||
(17) | Income Before Interest and Income Taxes | 462,867 | 8,382 | (2,324 | ) | 9,262 | (19,254 | ) | 458,933 | ||||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | 105,222 | 12,492 | 190 | 642 | 53,964 | 172,510 | ||||||||||||||||
(19) | Capitalized interest | (5,112 | ) | (1,305 | ) | - | (53 | ) | - | (6,470 | ) | ||||||||||||
(20) | Subsidiaries' preferred stock dividends | 5,281 | - | - | - | - | 5,281 | ||||||||||||||||
(21) | Net interest charges | 105,391 | 11,187 | 190 | 589 | 53,964 | 171,321 | ||||||||||||||||
(22) | Income taxes | 144,808 | (1,150 | ) | (1,041 | ) | 3,547 | (31,078 | ) | 115,086 | |||||||||||||
(23) | Income before discontinued operations | 212,668 | (1,655 | ) | (1,473 | ) | 5,126 | (42,140 | ) | 172,526 | |||||||||||||
(24) | Discontinued operations | - | - | 402 | 1,071 | - | 1,473 | ||||||||||||||||
(25) | Net Income | $ | 212,668 | $ | (1,655 | ) | $ | (1,071 | ) | $ | 6,197 | $ | (42,140 | ) | $ | 173,999 |
(a) | Other consists of MYR (a construction service company); natural gas operations and telecommunications services. |
(b) | Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions. |
5
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Regulated | Supply | Facilities | Other (a) | Reconciling | Consolidated | ||||||||||||||||||
Services | Management | Services | Adjustments (b) | ||||||||||||||||||||
Services | |||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 8,005 | $ | (226,428 | ) | $ | - | $ | - | $ | - | $ | (218,423 | ) | ||||||||
(2) | FE Facilities | - | - | (2,350 | ) | - | - | (2,350 | ) | ||||||||||||||
(3) | MYR | - | - | - | 3,506 | - | 3,506 | ||||||||||||||||
(4) | Other | 40,885 | (552 | ) | - | (6,896 | ) | 4 | 33,441 | ||||||||||||||
(5) | Internal Revenues | (1,233 | ) | - | - | - | 1,233 | - | |||||||||||||||
(6) | Total Revenues | 47,657 | (226,980 | ) | (2,350 | ) | (3,390 | ) | 1,237 | (183,826 | ) | ||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 34,530 | - | - | - | 34,530 | ||||||||||||||||
(8) | Purchased power | - | (273,524 | ) | - | - | - | (273,524 | ) | ||||||||||||||
(9) | Other operating expenses | 51,688 | 62,458 | - | (14,184 | ) | (11,511 | ) | 88,451 | ||||||||||||||
(10) | FE Facilities | - | - | 309 | - | - | 309 | ||||||||||||||||
(11) | MYR | - | - | - | 3,986 | - | 3,986 | ||||||||||||||||
(12) | Provision for depreciation | (1,978 | ) | 1,527 | (602 | ) | 1,206 | (3,371 | ) | (3,218 | ) | ||||||||||||
(13) | Amortization of regulatory assets | 639 | - | - | - | - | 639 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (15,102 | ) | - | - | - | - | (15,102 | ) | ||||||||||||||
(15) | General taxes | (685 | ) | 6,666 | - | 14 | 194 | 6,189 | |||||||||||||||
(16) | Total Expenses | 34,562 | (168,343 | ) | (293 | ) | (8,978 | ) | (14,688 | ) | (157,740 | ) | |||||||||||
(17) | Income Before Interest and Income Taxes | 13,095 | (58,637 | ) | (2,057 | ) | 5,588 | 15,925 | (26,086 | ) | |||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | (10,726 | ) | (5,098 | ) | 19 | 97 | 7,855 | (7,853 | ) | |||||||||||||
(19) | Capitalized interest | 2,285 | 3,853 | - | 55 | 22 | 6,215 | ||||||||||||||||
(20) | Subsidiaries' preferred stock dividends | 1,272 | - | - | - | - | 1,272 | ||||||||||||||||
(21) | Net interest charges | (7,169 | ) | (1,245 | ) | 19 | 152 | 7,877 | (366 | ) | |||||||||||||
(22) | Income taxes | 10,065 | (23,531 | ) | (2,010 | ) | 6,002 | 15,492 | 6,018 | ||||||||||||||
(23) | Income before discontinued operations | 10,199 | (33,861 | ) | (66 | ) | (566 | ) | (7,444 | ) | (31,738 | ) | |||||||||||
(24) | Discontinued operations | - | - | 12,446 | 5,019 | - | 17,465 | ||||||||||||||||
(25) | Net Income | $ | 10,199 | $ | (33,861 | ) | $ | 12,380 | $ | 4,453 | $ | (7,444 | ) | $ | (14,273 | ) |
(a) | Other consists of MYR (a construction service company); natural gas operations and telecommunications services. |
(b) | Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions. |
6
FirstEnergy Corp.
Financial Statements
(In thousands)
Condensed Consolidated Balance Sheet | ||||||||||
As of | As of | |||||||||
March 31, 2005 | December 31, 2004 | |||||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 81,191 | $ | 52,941 | ||||||
Receivables | 1,258,843 | 1,356,437 | ||||||||
Other | 726,256 | 602,969 | ||||||||
Total Current Assets | 2,066,290 | 2,012,347 | ||||||||
Property, Plant, and Equipment | 13,550,063 | 13,478,356 | ||||||||
Investments | 3,257,113 | 3,273,966 | ||||||||
Deferred charges | 12,387,097 | 12,303,275 | ||||||||
Total Assets | $ | 31,260,563 | $ | 31,067,944 | ||||||
Liabilities and Capitalization | ||||||||||
Current Liabilities: | ||||||||||
Currently payable long-term debt | $ | 957,168 | $ | 940,944 | ||||||
Short-term borrowings | 310,125 | 170,489 | ||||||||
Accounts payable | 663,018 | 610,589 | ||||||||
Other | 1,709,643 | 1,586,413 | ||||||||
Total Current Liabilities | 3,639,954 | 3,308,435 | ||||||||
Capitalization: | ||||||||||
Common stockholders' equity | 8,621,022 | 8,589,294 | ||||||||
Preferred stock | 238,719 | 335,123 | ||||||||
Long-term debt and other long-term obligations | 9,722,893 | 10,013,349 | ||||||||
Total Capitalization | 18,582,634 | 18,937,766 | ||||||||
Noncurrent Liabilities | 9,037,975 | 8,821,743 | ||||||||
Total Liabilities and Capitalization | $ | 31,260,563 | $ | 31,067,944 |
Adjusted Capitalization (Including Off-Balance Sheet Items) | ||||||||||||||||
As of March 31, | ||||||||||||||||
2005 | % Total | 2004 | % Total | |||||||||||||
Total common equity | $ | 8,621,022 | 40 | % | $ | 8,344,723 | 37 | % | ||||||||
Preferred stock | 238,719 | 1 | % | 335,123 | 2 | % | ||||||||||
Long-term debt | 10,680,061 | 50 | % | 11,886,804 | 53 | % | ||||||||||
Short-term debt | 310,125 | 2 | % | 133,999 | 1 | % | ||||||||||
Off-balance sheet debt equivalents: | ||||||||||||||||
Sale-leaseback net debt equivalents | 1,353,000 | 6 | % | 1,408,416 | 6 | % | ||||||||||
Accounts receivable factoring | 142,000 | 1 | % | 200,000 | 1 | % | ||||||||||
Total | $ | 21,344,927 | 100 | % | $ | 22,309,065 | 100 | % | ||||||||
* | Includes amounts due to be paid within one year, JCP&L securitization of $277 million and $293 million in 2005 and 2004, respectively. |
GENERAL INFORMATION | Three Months Ended March 31, | ||||||
2005 | 2004 | ||||||
L-t debt and preferred stock redemptions | $ | 333,788 | $ | 268,920 | |||
New L-t debt issues | $ | - | $ | 581,558 | |||
Short-term debt increase (decrease) | $ | 139,811 | $ | (387,541 | ) | ||
Capital expenditures | $ | 228,884 | $ | 138,406 | |||
7
&nb sp;
FirstEnergy Corp.
Financial Statements
(In thousands)
Condensed Consolidated Statements of Cash Flows | ||||||||||
Three Months Ended March 31, | ||||||||||
2005 | 2004 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 159,726 | $ | 173,999 | ||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||
Depreciation and amortization of regulatory assets, nuclear fuel, and leases | 412,614 | 433,521 | ||||||||
Deferred purchased power and other costs | (109,233 | ) | (83,907 | ) | ||||||
Deferred income taxes and investment tax credits | (14,156 | ) | 5,923 | |||||||
Income from discontinued operations | (18,938 | ) | (1,473 | ) | ||||||
Change in working capital and other | 109,784 | 91,454 | ||||||||
Cash flows from operating activities | $ | 539,797 | $ | 619,517 | ||||||
Cash flows from financing activities | (359,220 | ) | (240,024 | ) | ||||||
Cash flows from investing activities | (152,327 | ) | (213,199 | ) | ||||||
Net increase in cash and cash equivalents | 28,250 | 166,294 | ||||||||
Cash and cash equivalents at beginning of period | 52,941 | 113,975 | ||||||||
Cash and cash equivalents at end of period | $ | 81,191 | $ | 280,269 |
REGULATORY DEFERRALS | Three Months Ended March 31, | ||||||||||||
2005 | 2004 | Change | |||||||||||
Ohio Transition Plan | |||||||||||||
Beginning balance | $ | 710,019 | $ | 453,615 | |||||||||
Deferral of shopping incentives | 55,846 | 41,696 | $ | 14,150 | |||||||||
Deferral of new regulatory assets | 3,661 | 2,709 | 952 | ||||||||||
Current period deferrals | $ | 59,507 | $ | 44,405 | $ | 15,102 | |||||||
Ending Balance | $ | 769,526 | $ | 498,020 | |||||||||
Deferred Energy Costs - New Jersey | |||||||||||||
Beginning balance | $ | 445,600 | $ | 440,900 | |||||||||
Deferral (recovery) of energy costs | 26,800 | (15,500 | ) | $ | 42,300 | ||||||||
Ending Balance | $ | 472,400 | $ | 425,400 |
UNUSUAL ITEMS | Three Months Ended March 31, | |||||||||||||||||||||
2005 | 2004 | Change | ||||||||||||||||||||
Gain (Loss) on Non-Core Asset Sales: | ||||||||||||||||||||||
FES Natural Gas Business (a) | $ | 8,229 | $ | - | $ | 8,229 | ||||||||||||||||
First Communications | 6,800 | - | 6,800 | |||||||||||||||||||
FSG Subsidiary - Elliott-Lewis (a) (b) | 51 | - | 51 | |||||||||||||||||||
Venture Capital Funds | 2,015 | - | 2,015 | |||||||||||||||||||
MYR subsidiary (a) | (524 | ) | - | (524 | ) | |||||||||||||||||
16,571 | - | 16,571 | ||||||||||||||||||||
EPA Settlement - Environmental Projects | (10,000 | ) | - | (10,000 | ) | |||||||||||||||||
EPA Penalty (c) | (8,500 | ) | - | (8,500 | ) | |||||||||||||||||
NRC Fine (c) | (3,450 | ) | - | (3,450 | ) | |||||||||||||||||
Total - pre-tax amounts | $ | (5,379 | ) | $ | - | $ | (5,379 | ) | ||||||||||||||
EPS Effect | $ | 0.02 | $ | - | $ | 0.02 | ||||||||||||||||
(a) | Included in Discontinued operations |
(b) | Before $12.2 million income tax benefit |
(c) | No income tax benefit |
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&nb sp;
FirstEnergy Corp.
Statistical Summary
ELECTRIC SALES STATISTICS | Three Months Ended March 31, | |||||||||||||||
(kWh in millions) | 2005 | 2004 | Change | |||||||||||||
Electric Generation Sales | ||||||||||||||||
Retail - Regulated | 21,645 | 20,742 | 4.4 | % | ||||||||||||
Retail - Competitive | 3,414 | 4,016 | -15.0 | % | ||||||||||||
Total Retail | 25,059 | 24,758 | 1.2 | % | ||||||||||||
Wholesale* | 6,432 | 6,607 | -2.6 | % | ||||||||||||
Total Electric Generation Sales | 31,491 | 31,365 | 0.4 | % | ||||||||||||
Electric Distribution Deliveries | ||||||||||||||||
Ohio - Residential | 4,523 | 4,601 | -1.7 | % | ||||||||||||
- Commercial | 3,761 | 3,600 | 4.5 | % | ||||||||||||
- Industrial | 5,815 | 5,664 | 2.7 | % | ||||||||||||
- Other | 98 | 93 | 5.4 | % | ||||||||||||
Total Ohio | 14,197 | 13,958 | 1.7 | % | ||||||||||||
Pennsylvania - Residential | 3,174 | 3,140 | 1.1 | % | ||||||||||||
- Commercial | 2,694 | 2,550 | 5.6 | % | ||||||||||||
- Industrial | 2,620 | 2,390 | 9.6 | % | ||||||||||||
�� - Other | 21 | 20 | 5.0 | % | ||||||||||||
Total Pennsylvania | 8,509 | 8,100 | 5.0 | % | ||||||||||||
New Jersey - Residential | 2,354 | 2,366 | -0.5 | % | ||||||||||||
- Commercial | 2,229 | 2,146 | 3.9 | % | ||||||||||||
- Industrial | 743 | 744 | -0.1 | % | ||||||||||||
- Other | 22 | 20 | 10.0 | % | ||||||||||||
Total New Jersey | 5,348 | 5,276 | 1.4 | % | ||||||||||||
Total Residential | 10,051 | 10,107 | -0.6 | % | ||||||||||||
Total Commercial | 8,684 | 8,296 | 4.7 | % | ||||||||||||
Total Industrial | 9,178 | 8,798 | 4.3 | % | ||||||||||||
Total Other | 141 | 133 | 6.0 | % | ||||||||||||
Total Distribution Deliveries | 28,054 | 27,334 | 2.6 | % | ||||||||||||
Electric Sales Shopped | ||||||||||||||||
Ohio - Residential | 1,884 | 1,880 | 0.2 | % | ||||||||||||
- Commercial | 1,776 | 1,698 | 4.6 | % | ||||||||||||
- Industrial | 1,164 | 1,076 | 8.2 | % | ||||||||||||
Total Ohio | 4,824 | 4,654 | 3.7 | % | ||||||||||||
Pennsylvania - Residential | 6 | 7 | -14.3 | % | ||||||||||||
- Commercial | 25 | 36 | -30.6 | % | ||||||||||||
- Industrial | 447 | 533 | -16.1 | % | ||||||||||||
Total Pennsylvania | 478 | 576 | -17.0 | % | ||||||||||||
New Jersey - Residential | 1 | 286 | -99.7 | % | ||||||||||||
- Commercial | 542 | 602 | -10.0 | % | ||||||||||||
- Industrial | 564 | 474 | 19.0 | % | ||||||||||||
Total New Jersey | 1,107 | 1,362 | -18.7 | % | ||||||||||||
Total Electric Sales Shopped | 6,409 | 6,592 | -2.8 | % |
* | 2004 excludes the reporting of PJM sales and purchases on a gross basis. |
OPERATING STATISTICS | As of March 31, | ||||||||||||
For 12 Months Ended | 2005 | 2004 | |||||||||||
System Load Factor | 66.7 | % | 65.1 | % | |||||||||
Capacity Factors: | |||||||||||||
Fossil | 59.1 | % | 59.4 | % | |||||||||
Nuclear | 88.5 | % | 66.6 | % | |||||||||
Generation Output: | |||||||||||||
Fossil | 61 | % | 68 | % | |||||||||
Nuclear | 39 | % | 32 | % | |||||||||
WEATHER | 2005 | Normal | 2004 | ||||||||||
Composite Heating-Degree-Days | |||||||||||||
1st Quarter | 2,979 | 2,823 | 2,988 | ||||||||||
Composite Cooling-Degree-Days | |||||||||||||
1st Quarter | 0 | 1 | 0 | ||||||||||
9
FirstEnergy Corp.
2005 EPS and Cash Flow
2005 Earnings Per Share (EPS) | ||||||||||
(Reconciliation of GAAP to Non-GAAP) | ||||||||||
Three Months Ended March 31 | Annual Guidance | |||||||||
Basic EPS (GAAP basis) | $ | 0.49 | $ | 2.72 - $2.87 | ||||||
Excluding Unusual Items: | ||||||||||
Gain on non-core asset sales | (0.07 | ) | (0.07 | ) | ||||||
EPA Settlement | 0.04 | 0.04 | ||||||||
NRC Fine | 0.01 | 0.01 | ||||||||
Basic EPS (non-GAAP basis) | $ | 0.47 | $ | 2.70 - $2.85 | ||||||
Reconciliation of First Quarter 2005 Cash From Operating Activities (GAAP) to | |||||||
Free Cash Flow (Non-GAAP) and Cash Generation (Non-GAAP) | |||||||
(in millions) | |||||||
Net Cash from Operating Activities: | |||||||
Net Income | $ | 160 | |||||
Adjustments: | |||||||
Depreciation | 143 | ||||||
Amortization and deferral of regulatory assets | 251 | ||||||
Deferred purchased power costs | (109 | ) | |||||
Deferred income taxes and ITC, net | (14 | ) | |||||
Other, including changes in working capital | 109 | ||||||
Net Cash from Operating Activities (GAAP) | $ | 540 | |||||
Other Items: | |||||||
Capital expenditures | (196 | ) | |||||
Nuclear fuel fabrication | (33 | ) | |||||
Decommissioning | (25 | ) | |||||
Common stock dividends | (135 | ) | |||||
Miscellaneous | (48 | ) | |||||
Free Cash Flow (Non-GAAP) | $ | 103 | |||||
Miscellaneous asset sales/other | 53 | ||||||
Cash generation (Non-GAAP) | $ | 156 |
10
FirstEnergy Corp.
2005 Cash Flow Guidance
Reconciliation of 2005 Estimated Cash from Operating Activities (GAAP) to | |||||||
Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP) | |||||||
(in millions) | |||||||
Net Cash from Operating Activities: | |||||||
Earnings Guidance | $ | 887 - $937 | |||||
Adjustments: | |||||||
Depreciation | 608 | ||||||
Amortization and deferral of regulatory assets | 1,061 | ||||||
Deferred purchased power costs | (425 | ) | |||||
Deferred income taxes and ITC, net | (170 | ) | |||||
Other, including changes in working capital | 104 | ||||||
Net Cash from Operating Activities (GAAP) | $ | 2,090 | |||||
Other Items: | |||||||
Capital expenditures | (979 | ) | |||||
Nuclear fuel fabrication | (90 | ) | |||||
Decommissioning | (100 | ) | |||||
Common stock dividends | (542 | ) | |||||
NUG trust contributions | 20 | ||||||
Miscellaneous | 26 | ||||||
Free Cash Flow (Non-GAAP) | $ | 425 | |||||
Miscellaneous asset sales / other | 135 | ||||||
Cash Generation (Non-GAAP) | $ | 560 | |||||
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RECENT DEVELOPMENTS
New Source Review Settlement
On March 18, 2005 a settlement was reached with the EPA, the U.S. Department of Justice, and the states of Connecticut, New Jersey, and New York that will result in significant reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from current levels at FirstEnergy's generating plants. The agreement, upon final approval by the U.S. District Court, Southern District of Ohio, will resolve all issues related to various parties' actions against the company's W. H. Sammis Plant in the pending New Source Review case.
Under the agreement, FirstEnergy will install environmental controls on all 7 units of the Sammis Plant, upgrade the existing scrubber systems at its Bruce Mansfield Plant, and achieve additional reductions at other power plants. Although the precise level and timing of capital expenditures required cannot yet be predicted, FirstEnergy's estimate is $1.1 billion over the 2005-2011 period, with 75% of the expenditures occurring between 2008-2011. Additionally, FirstEnergy will pay an $8.5 million civil penalty to the Department of Justice and contribute up to $25 million over five years to support environmentally beneficial projects.
Nuclear Regulatory Commission Fine
On April 21, FirstEnergy Nuclear Operating Company (FENOC) received a notice of violation from the Nuclear Regulatory Commission (NRC) and a proposed $5.45 million fine related to the corrosion issue at the Davis-Besse Nuclear Power Plant. The NRC said in a letter to FENOC that this action does not reflect the current performance of Davis-Besse and no further civil enforcement action is expected, absent any new information from the Department of Justice.
Planned Nuclear Outages
On February 9, Davis-Besse returned to service following the completion of its mid-cycle outage. During the outage, plant personnel completed inspections of the reactor vessel head and under vessel area. The inspections showed no indications of leakage.
As of April 27, Beaver Valley Unit 2 is finishing up its 11th refueling outage and in the process of reactor start-up. Major work activities included replacing 61 of 157 fuel assemblies, conducting a thorough inspection of the reactor vessel head and under-vessel area with no issues identified, and implementing other modifications and improvements. The unit operated safely and reliably for a record 537 consecutive days at a 100% availability factor since the plant was last refueled in the fall of 2003.
The Perry Plant is currently in process of completing its 10th refueling outage and we expect the Unit will commence restart within the next several days. During the outage, 288 of the reactor's 748 fuel rod assemblies were replaced. The scope and duration of the outage were expanded to address additional equipment repairs to the main electrical generator and emergency service water pumps, as well as to implement several improvements including: digital controls for the feedwater system, rebuilding various pumps and valves with upgraded materials, and implementing numerous enhancements to improve fuel reliability.
Sale of Non-Core Assets
During the first quarter, the Company divested several non-core assets including its remaining natural gas business, Elliot-Lewis and Spectrum (Facilities Services Group subsidiaries), Power Piping (an MYR subsidiary), and 51% of its ownership interest in First Communications. These divestitures are consistent with FirstEnergy's strategy to focus on its core electric business.
Regulatory Filings Update
On March 2, FERC approved FirstEnergy's request, on behalf of American Transmission System Inc., to defer an estimated $54 million of extraordinary vegetation management project costs expected to be incurred over the 2004-2007 period. In 2005, the expenditures are estimated at $19 million, the deferral of which is already reflected in the 2005 earnings guidance.
Record Generation Output
During the first quarter, FirstEnergy set a new generation output record of 18.5 million megawatt-hours, a 1.1% increase over the prior record of 18.3 million megawatt-hours established during the first quarter 2004. The output record was attributable to a 0.9 million megawatt-hour or 7.8% increase in fossil generation.
12
Forward-Looking Statements: This discussion includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), the receipt of approval from and entry of a final order by the U.S. District Court, Southern District of Ohio on the pending settlement agreement resolving the New Source Review litigation and the uncertainty of the timing and amounts of the capital expenditures (including that such amounts could be higher than anticipated) or levels of emission reductions related to this settlement, adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage and heightened scrutiny at the Perry Nuclear Power Plant in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital markets, further investigation into the causes of the August 14, 2003 regional power outage and the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
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