Consolidated Report to the Financial Community EXHIBIT 99.2
Second Quarter 2005
(Released July 27, 2005)
Highlights | After-Tax EPS Variance Analysis | 2nd Qtr. | ||
n Normalized non-GAAP* earnings, excluding | 2Q 2004 Basic EPS - GAAP Basis | $ 0.62 | ||
unusual items, were $0.71 per share for the | Unusual Items - 2004 | 0.05 | ||
second quarter of 2005, compared with | 2Q 2004 Normalized Earnings - Non-GAAP Basis | $ 0.67 | ||
$0.67 per share for the second quarter of | Electric Gross Margin: | |||
2004. GAAP earnings were $0.54 per share, | - Nuclear Outage Replacement Power | (0.09) | ||
compared with $0.62 per share in the second | - Other Electric Gross Margin | 0.07 | ||
quarter of 2004. | Nuclear Operating Expenses | (0.06) | ||
Fossil Operating Expenses | 0.01 | |||
Pension and Other Employee Benefits | 0.05 | |||
Depreciation and Amortization | (0.02) | |||
Investment Income from COLI | 0.02 | |||
Financing Costs | 0.04 | |||
Other | 0.02 | |||
2Q 2005 Normalized Earnings - Non-GAAP Basis | $ 0.71 | |||
Unusual Items - 2005 | (0.17) | |||
2Q 2005 Basic EPS - GAAP Basis | $ 0.54 | |||
2Q 2005 Results vs. 2Q 2004
n | Electric distribution deliveries increased 2%. Residential and commercial deliveries increased 9% and 3%, respectively, while industrial deliveries decreased by 4%. Heating-degree-days were 26% higher than during the same period last year and 5% above normal. Cooling-degree-days were 9% lower than during the same period last year, although 12% above normal. Total electric generation sales rose 1% as a 2% increase in retail generation sales was partially offset by a 1% decrease in wholesale sales. |
n | Electric gross margin decreased $10 million, or $0.02 per share, after adjusting for changes in regulatory deferrals. Replacement power costs for refueling outages at Beaver Valley Unit 2 and the Perry Plant reduced electric gross margin by $0.09 per share. This was partially offset by higher generation sales and prices, as well as increased distribution deliveries that contributed an increase of $0.07 per share in electric gross margin. |
n | Nuclear operating expenses increased $33 million due to refueling outages at Beaver Valley Unit 2 and the Perry Plant this year versus no refueling outages last year. |
n | Fossil operating expenses decreased $7 million as a result of fewer planned outages. |
n | Pension and other employee benefit costs decreased approximately $26 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 | Total depreciation and amortization expenses, adjusted for changes in regulatory deferrals, increased by $12 million. The increase was primarily due to higher Ohio transition cost amortization and increased depreciation expense, partially offset by the deferral of incremental transmission and ancillary service-related MISO charges. |
n | Higher investment income from corporate-owned life insurance increased net income by $6 million. |
n | Net interest charges decreased $19 million. Financing activities during the quarter included $136 million in debt and preferred securities redemptions and $310 million of refinancing and repricing transactions. |
n | During the quarter, we recognized a one-time charge of $72 million, or $0.22 per share, associated with the write-off of deferred tax benefits that will not be realized due to legislative changes in Ohio’s tax system enacted in June. We also recognized a one-time benefit of $28 million, or $0.05 per share, from the creation of a new regulatory asset associated with the approval of the JCP&L Phase II rate settlement. |
2005 Revised Earnings and Cash Generation Guidance*
n | As a result of recent regulatory orders in Ohio and New Jersey, reduced fossil depreciation expenses, lower operating expenses, and favorable performance from our generation fleet, we have revised our 2005 normalized non-GAAP earnings guidance from $2.70 - $2.85 per share to $2.85 - $3.00 per share. Year-to-date normalized non-GAAP earnings now stand at $1.18 per share. We anticipate that the remaining earnings for the year, exclusive of any unusual items, will be allocated 55% to the third quarter and 45% to the fourth quarter. |
n | Total cash generation (non-GAAP) guidance for 2005 has been revised to $620 million (from $560 million), with free cash flow (non-GAAP) guidance revised to $535 million (from $425 million). Our estimated 2005 free cash flow reflects capital expenditures of $1.0 billion. |
2006 Earnings and Cash Generation Guidance*
n | Earnings guidance for 2006 has been established at $3.40 - $3.60 per share, exclusive of any unusual items. The increase over our revised 2005 earnings guidance reflects the net impact of a variety of regulatory and operating items, including the net reduction in Ohio transition cost amortization, increased generation margin, and growth in the wires business. |
n | Total cash generation (non-GAAP) guidance for 2006 has been established at a range of $300 million to $400 million, with a free cash flow (non-GAAP) guidance range of $280 million to $380 million. Our estimated 2006 free cash flow reflects a capital expenditure range of $1.0 billion to $1.1 billion. |
* The GAAP to Non-GAAP reconciliation statements are attached and available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005 Letter to the Investment Community, which is also posted on the website.
For additional information, please contact:
Kurt E. Turosky | Terrance G. Howson | Rey Y. Jimenez |
Director, Investor Relations | Vice President, Investor Relations | Principal, Investor Relations |
(330) 384-5500 | (973) 401-8519 | (330) 761-4239 |
Consolidated Report to the Financial Community - 2nd Quarter & #160; 2
FirstEnergy Corp.
Consolidated Statements of Income
(In thousands except for per share amounts)
Consolidated Statements of Income | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 2,478,413 | $ | 2,645,165 | $ | (166,752 | ) | $ | 4,915,602 | $ | 5,300,777 | $ | (385,175 | ) | ||||||||
(2) | FE Facilities | 56,391 | 50,301 | 6,090 | 102,099 | 94,720 | 7,379 | ||||||||||||||||
(3) | MYR | 129,254 | 77,024 | 52,230 | 221,635 | 165,899 | 55,736 | ||||||||||||||||
(4) | Other | 265,220 | 219,672 | 45,548 | 490,661 | 413,669 | 76,992 | ||||||||||||||||
(5) | Total Revenues | 2,929,278 | 2,992,162 | (62,884 | ) | 5,729,997 | 5,975,065 | (245,068 | ) | ||||||||||||||
Expenses | |||||||||||||||||||||||
(6) | Fuel | 280,228 | 191,562 | 88,666 | 513,117 | 389,921 | 123,196 | ||||||||||||||||
(7) | Purchased power | 652,368 | 903,573 | (251,205 | ) | 1,314,811 | 1,839,540 | (524,729 | ) | ||||||||||||||
(8) | Other operating expenses | 729,199 | 704,390 | 24,809 | 1,482,093 | 1,368,833 | 113,260 | ||||||||||||||||
(9) | FE Facilities | 56,212 | 49,028 | 7,184 | 103,904 | 95,506 | 8,398 | ||||||||||||||||
(10) | MYR | 127,181 | 78,980 | 48,201 | 219,590 | 167,403 | 52,187 | ||||||||||||||||
(11) | Provision for depreciation | 149,025 | 146,155 | 2,870 | 291,657 | 291,965 | (308 | ) | |||||||||||||||
(12) | Amortization of regulatory assets | 306,572 | 270,986 | 35,586 | 617,413 | 581,188 | 36,225 | ||||||||||||||||
(13) | Deferral of new regulatory assets | (120,162 | ) | (68,315 | ) | (51,847 | ) | (179,669 | ) | (112,720 | ) | (66,949 | ) | ||||||||||
(14) | General taxes | 167,865 | 157,732 | 10,133 | 353,044 | 336,722 | 16,322 | ||||||||||||||||
(15) | Total Expenses | 2,348,488 | 2,434,091 | (85,603 | ) | 4,715,960 | 4,958,358 | (242,398 | ) | ||||||||||||||
Income Before Interest and | |||||||||||||||||||||||
(16) | Income Taxes | 580,790 | 558,071 | 22,719 | 1,014,037 | 1,016,707 | (2,670 | ) | |||||||||||||||
Net interest charges: | |||||||||||||||||||||||
(17) | Interest expense | 161,714 | 179,542 | (17,828 | ) | 326,358 | 352,048 | (25,690 | ) | ||||||||||||||
(18) | Capitalized interest | (4,697 | ) | (5,280 | ) | 583 | (4,952 | ) | (11,750 | ) | 6,798 | ||||||||||||
(19) | Subsidiaries' preferred stock dividends | 3,733 | 5,389 | (1,656 | ) | 10,286 | 10,670 | (384 | ) | ||||||||||||||
(20) | Net interest charges | 160,750 | 179,651 | (18,901 | ) | 331,692 | 350,968 | (19,276 | ) | ||||||||||||||
(21) | Income taxes | 241,275 | 176,560 | 64,715 | 362,550 | 291,530 | 71,020 | ||||||||||||||||
(22) | Income before discontinued operations | 178,765 | 201,860 | (23,095 | ) | 319,795 | 374,209 | (54,414 | ) | ||||||||||||||
(23) | Discontinued operations | (773 | ) | 2,185 | (2,958 | ) | 17,923 | 3,835 | 14,088 | ||||||||||||||
(24) | Net Income | $ | 177,992 | $ | 204,045 | $ | (26,053 | ) | $ | 337,718 | $ | 378,044 | $ | (40,326 | ) | ||||||||
Basic Earnings Per Common Share: | |||||||||||||||||||||||
(25) | Before discontinued operations | $ | 0.54 | $ | 0.61 | $ | (0.07 | ) | $ | 0.98 | $ | 1.15 | $ | (0.17 | ) | ||||||||
(26) | Discontinued operations | - | 0.01 | (0.01 | ) | 0.05 | 0.01 | 0.04 | |||||||||||||||
(27) | Basic Earnings Per Common Share | $ | 0.54 | $ | 0.62 | $ | (0.08 | ) | $ | 1.03 | $ | 1.16 | $ | (0.13 | ) | ||||||||
Weighted Average Number of | |||||||||||||||||||||||
(28) | Basic Shares Outstanding | 328,063 | 327,284 | 779 | 327,986 | 327,171 | 815 | ||||||||||||||||
Diluted Earnings Per Common Share: | |||||||||||||||||||||||
(29) | Before discontinued operations | $ | 0.54 | $ | 0.61 | $ | (0.07 | ) | $ | 0.97 | $ | 1.14 | $ | (0.17 | ) | ||||||||
(30) | Discontinued operations | - | 0.01 | (0.01 | ) | 0.05 | 0.01 | 0.04 | |||||||||||||||
(31) | Diluted Earnings Per Common Share | $ | 0.54 | $ | 0.62 | $ | (0.08 | ) | $ | 1.02 | $ | 1.15 | $ | (0.13 | ) | ||||||||
Weighted Average Number of | |||||||||||||||||||||||
(32) | Diluted Shares Outstanding | 329,879 | 329,103 | 776 | 329,679 | 329,061 | 618 | ||||||||||||||||
Consolidated Report to the Financial Community - 2ndQuarter 3
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended June 30, 2005 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Supply | |||||||||||||||||||||||
Regulated | Management | Facilities | Reconciling | ||||||||||||||||||||
Services | Services | Services | Other (a) | Adjustments (b) | Consolidated | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 1,164,685 | $ | 1,313,728 | $ | - | $ | - | $ | - | $ | 2,478,413 | ||||||||||
(2) | FE Facilities | - | - | 56,391 | - | - | 56,391 | ||||||||||||||||
(3) | MYR | - | - | - | 129,254 | - | 129,254 | ||||||||||||||||
(4) | Other | 186,174 | 64,879 | - | 7,527 | 6,640 | 265,220 | ||||||||||||||||
(5) | Internal Revenues | 79,972 | - | - | - | (79,972 | ) | - | |||||||||||||||
(6) | Total Revenues | 1,430,831 | 1,378,607 | 56,391 | 136,781 | (73,332 | ) | 2,929,278 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 280,228 | - | - | - | 280,228 | ||||||||||||||||
(8) | Purchased power | - | 652,368 | - | - | - | 652,368 | ||||||||||||||||
(9) | Other operating expenses | 408,174 | 398,889 | - | (4,048 | ) | (73,816 | ) | 729,199 | ||||||||||||||
(10) | FE Facilities | - | - | 56,212 | - | - | 56,212 | ||||||||||||||||
(11) | MYR | - | - | - | 127,181 | - | 127,181 | ||||||||||||||||
(12) | Provision for depreciation | 134,995 | 7,128 | - | 523 | 6,379 | 149,025 | ||||||||||||||||
(13) | Amortization of regulatory assets | 306,572 | - | - | - | - | 306,572 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (120,162 | ) | - | - | - | - | (120,162 | ) | ||||||||||||||
(15) | General taxes | 149,676 | 13,568 | - | 761 | 3,860 | 167,865 | ||||||||||||||||
(16) | Total Expenses | 879,255 | 1,352,181 | 56,212 | 124,417 | (63,577 | ) | 2,348,488 | |||||||||||||||
(17) | Income Before Interest and Income Taxes | 551,576 | 26,426 | 179 | 12,364 | (9,755 | ) | 580,790 | |||||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | 99,301 | 8,840 | 234 | 2,131 | 51,208 | 161,714 | ||||||||||||||||
(19) | Capitalized interest | (4,133 | ) | (525 | ) | - | (2 | ) | (37 | ) | (4,697 | ) | |||||||||||
(20) | Subsidiaries' preferred stock dividends | 3,733 | - | - | - | - | 3,733 | ||||||||||||||||
(21) | Net interest charges | 98,901 | 8,315 | 234 | 2,129 | 51,171 | 160,750 | ||||||||||||||||
(22) | Income taxes | 185,597 | 7,425 | 2,944 | 3,957 | 41,352 | 241,275 | ||||||||||||||||
(23) | Income before discontinued operations | 267,078 | 10,686 | (2,999 | ) | 6,278 | (102,278 | ) | 178,765 | ||||||||||||||
(24) | Discontinued operations | - | - | 222 | (995 | ) | - | (773 | ) | ||||||||||||||
(25) | Net Income | $ | 267,078 | $ | 10,686 | $ | (2,777 | ) | $ | 5,283 | $ | (102,278 | ) | $ | 177,992 | ||||||||
(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. | |||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter ; 4
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended June 30, 2004 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Supply | |||||||||||||||||||||||
Regulated | Management | Facilities | Reconciling | ||||||||||||||||||||
Services | Services | Services | Other (a) | Adjustments (b) | Consolidated | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 1,125,486 | $ | 1,519,679 | $ | - | $ | - | $ | - | $ | 2,645,165 | ||||||||||
(2) | FE Facilities | - | - | 50,301 | - | - | 50,301 | ||||||||||||||||
(3) | MYR | - | - | - | 77,024 | - | 77,024 | ||||||||||||||||
(4) | Other | 152,713 | 30,593 | - | 41,583 | (5,217 | ) | 219,672 | |||||||||||||||
(5) | Internal Revenues | 79,597 | - | - | - | (79,597 | ) | - | |||||||||||||||
(6) | Total Revenues | 1,357,796 | 1,550,272 | 50,301 | 118,607 | (84,814 | ) | 2,992,162 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 191,562 | - | - | - | 191,562 | ||||||||||||||||
(8) | Purchased power | - | 903,573 | - | - | - | 903,573 | ||||||||||||||||
(9) | Other operating expenses | 375,078 | 355,665 | - | 24,610 | (50,963 | ) | 704,390 | |||||||||||||||
(10) | FE Facilities | - | - | 49,028 | - | - | 49,028 | ||||||||||||||||
(11) | MYR | - | - | - | 78,980 | - | 78,980 | ||||||||||||||||
(12) | Provision for depreciation | 126,652 | 8,770 | 527 | 41 | 10,165 | 146,155 | ||||||||||||||||
(13) | Amortization of regulatory assets | 270,986 | - | - | - | - | 270,986 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (68,315 | ) | - | - | - | - | (68,315 | ) | ||||||||||||||
(15) | General taxes | 135,428 | 17,551 | - | 669 | 4,084 | 157,732 | ||||||||||||||||
(16) | Total Expenses | 839,829 | 1,477,121 | 49,555 | 104,300 | (36,714 | ) | 2,434,091 | |||||||||||||||
(17) | Income Before Interest and Income Taxes | 517,967 | 73,151 | 746 | 14,307 | (48,100 | ) | 558,071 | |||||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | 112,193 | 11,098 | 143 | 737 | 55,371 | 179,542 | ||||||||||||||||
(19) | Capitalized interest | (4,072 | ) | (1,167 | ) | - | 80 | (121 | ) | (5,280 | ) | ||||||||||||
(20) | Subsidiaries' preferred stock dividends | 5,389 | - | - | - | - | 5,389 | ||||||||||||||||
(21) | Net interest charges | 113,510 | 9,931 | 143 | 817 | 55,250 | 179,651 | ||||||||||||||||
(22) | Income taxes | 170,946 | 25,920 | 318 | (22,103 | ) | 1,479 | 176,560 | |||||||||||||||
(23) | Income before discontinued operations | 233,511 | 37,300 | 285 | 35,593 | (104,829 | ) | 201,860 | |||||||||||||||
(24) | Discontinued operations | - | - | 1,172 | 1,013 | - | 2,185 | ||||||||||||||||
(25) | Net Income | $ | 233,511 | $ | 37,300 | $ | 1,457 | $ | 36,606 | $ | (104,829 | ) | $ | 204,045 | |||||||||
(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. | |||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter ; 5
FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
Three Months Ended June 30, 2005 vs. Three Months Ended June 30, 2004 | |||||||||||||||||||||||
Power | |||||||||||||||||||||||
Supply | |||||||||||||||||||||||
Regulated | Management | Facilities | Reconciling | ||||||||||||||||||||
Services | Services | Services | Other (a) | Adjustments (b) | Consolidated | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1) | Electric sales | $ | 39,199 | $ | (205,951 | ) | $ | - | $ | - | $ | - | $ | (166,752 | ) | ||||||||
(2) | FE Facilities | - | - | 6,090 | - | - | 6,090 | ||||||||||||||||
(3) | MYR | - | - | - | 52,230 | - | 52,230 | ||||||||||||||||
(4) | Other | 33,461 | 34,286 | - | (34,056 | ) | 11,857 | 45,548 | |||||||||||||||
(5) | Internal Revenues | 375 | - | - | - | (375 | ) | - | |||||||||||||||
(6) | Total Revenues | 73,035 | (171,665 | ) | 6,090 | 18,174 | 11,482 | (62,884 | ) | ||||||||||||||
Expenses | |||||||||||||||||||||||
(7) | Fuel | - | 88,666 | - | - | - | 88,666 | ||||||||||||||||
(8) | Purchased power | - | (251,205 | ) | - | - | - | (251,205 | ) | ||||||||||||||
(9) | Other operating expenses | 33,096 | 43,224 | - | (28,658 | ) | (22,853 | ) | 24,809 | ||||||||||||||
(10) | FE Facilities | - | - | 7,184 | - | - | 7,184 | ||||||||||||||||
(11) | MYR | - | - | - | 48,201 | - | 48,201 | ||||||||||||||||
(12) | Provision for depreciation | 8,343 | (1,642 | ) | (527 | ) | 482 | (3,786 | ) | 2,870 | |||||||||||||
(13) | Amortization of regulatory assets | 35,586 | - | - | - | - | 35,586 | ||||||||||||||||
(14) | Deferral of new regulatory assets | (51,847 | ) | - | - | - | - | (51,847 | ) | ||||||||||||||
(15) | General taxes | 14,248 | (3,983 | ) | - | 92 | (224 | ) | 10,133 | ||||||||||||||
(16) | Total Expenses | 39,426 | (124,940 | ) | 6,657 | 20,117 | (26,863 | ) | (85,603 | ) | |||||||||||||
(17) | Income Before Interest and Income Taxes | 33,609 | (46,725 | ) | (567 | ) | (1,943 | ) | 38,345 | 22,719 | |||||||||||||
Net interest charges: | |||||||||||||||||||||||
(18) | Interest expense | (12,892 | ) | (2,258 | ) | 91 | 1,394 | (4,163 | ) | (17,828 | ) | ||||||||||||
(19) | Capitalized interest | (61 | ) | 642 | - | (82 | ) | 84 | 583 | ||||||||||||||
(20) | Subsidiaries' preferred stock dividends | (1,656 | ) | - | - | - | - | (1,656 | ) | ||||||||||||||
(21) | Net interest charges | (14,609 | ) | (1,616 | ) | 91 | 1,312 | (4,079 | ) | (18,901 | ) | ||||||||||||
(22) | Income taxes | 14,651 | (18,495 | ) | 2,626 | 26,060 | 39,873 | 64,715 | |||||||||||||||
(23) | Income before discontinued operations | 33,567 | (26,614 | ) | (3,284 | ) | (29,315 | ) | 2,551 | (23,095 | ) | ||||||||||||
(24) | Discontinued operations | - | - | (950 | ) | (2,008 | ) | - | (2,958 | ) | |||||||||||||
(25) | Net Income | $ | 33,567 | $ | (26,614 | ) | $ | (4,234 | ) | $ | (31,323 | ) | $ | 2,551 | $ | (26,053 | ) | ||||||
(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. | |||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 60; 6
FirstEnergy Corp.
Financial Statements
(In thousands)
Condensed Consolidated Balance Sheet | ||||||||||
As of | As of | |||||||||
June 30, 2005 | December 31, 2004 | |||||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 49,748 | $ | 52,941 | ||||||
Receivables | 1,444,552 | 1,356,437 | ||||||||
Other | 809,735 | 602,969 | ||||||||
Total Current Assets | 2,304,035 | 2,012,347 | ||||||||
Property, Plant, and Equipment | 13,652,235 | 13,478,356 | ||||||||
Investments | 3,314,068 | 3,273,966 | ||||||||
Deferred charges | 11,940,905 | 12,303,275 | ||||||||
Total Assets | $ | 31,211,243 | $ | 31,067,944 | ||||||
Liabilities and Capitalization | ||||||||||
Current Liabilities: | ||||||||||
Currently payable long-term debt | $ | 943,740 | $ | 940,944 | ||||||
Short-term borrowings | 554,824 | 170,489 | ||||||||
Accounts payable | 696,310 | 610,589 | ||||||||
Other | 1,559,098 | 1,586,413 | ||||||||
Total Current Liabilities | 3,753,972 | 3,308,435 | ||||||||
Capitalization: | ||||||||||
Common stockholders' equity | 8,640,396 | 8,589,294 | ||||||||
Preferred stock | 213,719 | 335,123 | ||||||||
Long-term debt and other long-term obligations | 9,568,954 | 10,013,349 | ||||||||
Total Capitalization | 18,423,069 | 18,937,766 | ||||||||
Noncurrent Liabilities | 9,034,202 | 8,821,743 | ||||||||
Total Liabilities and Capitalization | $ | 31,211,243 | $ | 31,067,944 | ||||||
Adjusted Capitalization (Including Off-Balance Sheet Items) | ||||||||||||||||
As of June 30, | ||||||||||||||||
2005 | % Total | 2004 | % Total | |||||||||||||
Total common equity | $ | 8,640,396 | 41 | % | $ | 8,432,963 | 39 | % | ||||||||
Preferred stock | 213,719 | 1 | % | 335,123 | 2 | % | ||||||||||
Long-term debt * | 10,512,694 | 49 | % | 11,393,700 | 52 | % | ||||||||||
Short-term debt | 554,824 | 3 | % | 74,436 | 0 | % | ||||||||||
Off-balance sheet debt equivalents: | ||||||||||||||||
Sale-leaseback net debt equivalents | 1,294,166 | 6 | % | 1,352,729 | 6 | % | ||||||||||
Accounts receivable factoring ** | - | 0 | % | 178,000 | 1 | % | ||||||||||
Total | $ | 21,215,799 | 100 | % | $ | 21,766,951 | 100 | % | ||||||||
GENERAL INFORMATION | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
L-t debt and preferred stock redemptions | $ | 494,610 | $ | 721,023 | $ | 828,398 | $ | 989,943 | ||||||||
New L-t debt issues | $ | 245,350 | $ | 303,162 | $ | 245,350 | $ | 884,720 | ||||||||
Short-term debt increase (decrease) ** | $ | 245,803 | $ | (59,563 | ) | $ | 385,614 | $ | (447,104 | ) | ||||||
Capital expenditures | $ | 232,791 | $ | 196,094 | $ | 461,675 | $ | 334,500 | ||||||||
* Includes amounts due to be paid within one year, JCP&L securitization of $273 million and $289 million in 2005 and 2004, respectively. | ||||||||||||||||
** Off-balance sheet accounts receivable factoring agreement renewed as an on-balance sheet short-term debt financing agreement in June 2005. | ||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 60; 7
FirstEnergy Corp.
Financial Statements
(In thousands)
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 177,992 | $ | 204,045 | $ | 337,718 | $ | 378,044 | ||||||||
Adjustments to reconcile net income to net cash from | ||||||||||||||||
operating activities: | ||||||||||||||||
Depreciation and amortization of regulatory assets, | ||||||||||||||||
nuclear fuel, and leases | 354,365 | 371,958 | 766,979 | 805,439 | ||||||||||||
Deferred purchased power and other costs | (82,990 | ) | (60,974 | ) | (192,223 | ) | (144,881 | ) | ||||||||
Deferred income taxes and investment tax credits | 76,041 | (100,056 | ) | 61,885 | (94,133 | ) | ||||||||||
Loss (income) from discontinued operations | 773 | (2,185 | ) | (17,923 | ) | (3,835 | ) | |||||||||
Change in working capital and other | (163,855 | ) | (81,228 | ) | (25,320 | ) | 38,777 | |||||||||
Cash flows from operating activities | $ | 362,326 | $ | 331,560 | $ | 931,116 | $ | 979,411 | ||||||||
Cash flows from financing activities | (109,174 | ) | (573,360 | ) | (468,394 | ) | (813,384 | ) | ||||||||
Cash flows from investing activities | (284,595 | ) | 61,069 | (465,915 | ) | (180,464 | ) | |||||||||
Net decrease in cash and cash equivalents | (31,443 | ) | (180,731 | ) | (3,193 | ) | (14,437 | ) | ||||||||
Cash and cash equivalents at beginning of period | 81,191 | 280,269 | 52,941 | 113,975 | ||||||||||||
Cash and cash equivalents at end of period | $ | 49,748 | $ | 99,538 | $ | 49,748 | $ | 99,538 | ||||||||
REGULATORY DEFERRALS | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||
Ohio Transition Plan and MISO costs | ||||||||||||||||||||||
Beginning balance | $ | 769,526 | $ | 498,020 | $ | 710,019 | $ | 453,614 | ||||||||||||||
Deferral of shopping incentives | 57,583 | 52,238 | $ | 5,345 | 102,996 | 93,799 | $ | 9,197 | ||||||||||||||
Interest on shopping incentives | 11,098 | 14,265 | (3,167 | ) | 21,531 | 14,265 | 7,266 | |||||||||||||||
Deferral of new regulatory assets | 23,716 | 1,811 | 21,905 | 27,377 | 4,656 | 22,721 | ||||||||||||||||
Current period deferrals | $ | 92,397 | $ | 68,314 | $ | 24,083 | $ | 151,904 | $ | 112,720 | $ | 39,184 | ||||||||||
Ending Balance | $ | 861,923 | $ | 566,334 | $ | 861,923 | $ | 566,334 | ||||||||||||||
Deferred Energy Costs - New Jersey | ||||||||||||||||||||||
Beginning balance | $ | 472,400 | $ | 425,400 | $ | 445,600 | $ | 440,900 | ||||||||||||||
Deferral (recovery) of energy costs | 45,400 | (22,700 | ) | $ | 68,100 | 72,200 | (38,200 | ) | $ | 110,400 | ||||||||||||
Ending Balance | $ | 517,800 | $ | 402,700 | $ | 517,800 | $ | 402,700 | ||||||||||||||
UNUSUAL ITEMS | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||
Gain (Loss) on Non-Core Asset Sales | ||||||||||||||||||||||
FES Natural Gas Business (a) | $ | - | $ | - | $ | - | $ | 8,229 | $ | - | $ | 8,229 | ||||||||||
FirstCommunications (b) | - | - | - | 6,800 | - | 6,800 | ||||||||||||||||
FSG Subsidiary - Elliott-Lewis (a) (f) | - | - | - | 51 | - | 51 | ||||||||||||||||
Venture Capital Funds (b) | - | - | - | 2,015 | - | 2,015 | ||||||||||||||||
Great Lakes Energy Partner (b) (g) | - | 15,777 | (15,777 | ) | - | 15,777 | (15,777 | ) | ||||||||||||||
MYR Subsidiary (a) | - | - | - | (524 | ) | - | (524 | ) | ||||||||||||||
FSG Subsidiary - Cranston (a) (h) | (42 | ) | - | (42 | ) | (42 | ) | - | (42 | ) | ||||||||||||
Total Gain on Non-Core Asset Sales | (42 | ) | 15,777 | (15,819 | ) | 16,529 | 15,777 | 752 | ||||||||||||||
Litigation Settlement (c) | - | (17,980 | ) | 17,980 | - | (17,980 | ) | 17,980 | ||||||||||||||
EPA Settlement - Environmental Projects (c) | - | - | - | (10,000 | ) | - | (10,000 | ) | ||||||||||||||
EPA Penalty (c) (i) | - | - | - | (8,500 | ) | - | (8,500 | ) | ||||||||||||||
NRC Fine (c) (i) | - | - | - | (3,450 | ) | - | (3,450 | ) | ||||||||||||||
JCP&L Rate Settlement (d) | 27,765 | - | 27,765 | 27,765 | - | 27,765 | ||||||||||||||||
Total-Pretax Items | 27,723 | (2,203 | ) | 29,926 | 22,344 | (2,203 | ) | 24,547 | ||||||||||||||
Ohio Tax Write-off (e) | (71,702 | ) | - | (71,702 | ) | (71,702 | ) | - | (71,702 | ) | ||||||||||||
EPS Effect | $ | (0.17 | ) | $ | (0.05 | ) | $ | (0.12 | ) | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.10 | ) | ||||
(a) Included in "Discontinued Operations" | (f) Before income tax benefit of $12.2 million | |||||||||||||||||||||
(b) Included in "Other Revenues" | (g) Before income taxes of $22.6 million | |||||||||||||||||||||
(c) Included in "Other Operating Expenses" | (h) Before income tax benefit of $0.4 million | |||||||||||||||||||||
(d) Included in "Deferral of New Regulatory Assets" | (i) No income tax benefit | |||||||||||||||||||||
(e) Included in "Income Taxes" | ||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 60; 8
FirstEnergy Corp.
Statistical Summary
ELECTRIC SALES STATISTICS | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
(kWh in millions) | 2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||||
Electric Generation Sales | |||||||||||||||||||||||||
Retail- Regulated | 20,073 | 19,245 | 4.3 | % | 41,719 | 39,987 | 4.3 | % | |||||||||||||||||
Retail - Competitive | 3,444 | 3,751 | -8.2 | % | 6,858 | 7,767 | -11.7 | % | |||||||||||||||||
Total Retail | 23,517 | 22,996 | 2.3 | % | 48,577 | 47,754 | 1.7 | % | |||||||||||||||||
Wholesale * | 7,164 | 7,230 | -0.9 | % | 13,595 | 13,838 | -1.8 | % | |||||||||||||||||
Total Electric Generation Sales | 30,681 | 30,226 | 1.5 | % | 62,172 | 61,592 | 0.9 | % | |||||||||||||||||
Electric Distribution Deliveries | |||||||||||||||||||||||||
Ohio - Residential | 3,811 | 3,342 | 14.0 | % | 8,334 | 7,943 | 4.9 | % | |||||||||||||||||
- Commercial | 3,616 | 3,489 | 3.6 | % | 7,377 | 7,090 | 4.0 | % | |||||||||||||||||
- Industrial | 5,842 | 6,000 | -2.6 | % | 11,656 | 11,664 | -0.1 | % | |||||||||||||||||
- Other | 95 | 92 | 3.3 | % | 193 | 186 | 3.8 | % | |||||||||||||||||
Total Ohio | 13,364 | 12,923 | 3.4 | % | 27,560 | 26,883 | 2.5 | % | |||||||||||||||||
Pennsylvania - Residential | 2,426 | 2,271 | 6.8 | % | 5,600 | 5,412 | 3.5 | % | |||||||||||||||||
- Commercial | 2,593 | 2,532 | 2.4 | % | 5,287 | 5,082 | 4.0 | % | |||||||||||||||||
- Industrial | 2,585 | 2,754 | -6.1 | % | 5,205 | 5,144 | 1.2 | % | |||||||||||||||||
- Other | 20 | 19 | 5.3 | % | 42 | 39 | 7.7 | % | |||||||||||||||||
Total Pennsylvania | 7,624 | 7,576 | 0.6 | % | 16,134 | 15,677 | 2.9 | % | |||||||||||||||||
New Jersey - Residential | 2,216 | 2,109 | 5.1 | % | 4,570 | 4,474 | 2.1 | % | |||||||||||||||||
- Commercial | 2,297 | 2,242 | 2.5 | % | 4,526 | 4,387 | 3.2 | % | |||||||||||||||||
- Industrial | 751 | 784 | -4.2 | % | 1,495 | 1,528 | -2.2 | % | |||||||||||||||||
- Other | 22 | 14 | 57.1 | % | 43 | 33 | 30.3 | % | |||||||||||||||||
Total New Jersey | 5,286 | 5,149 | 2.7 | % | 10,634 | 10,422 | 2.0 | % | |||||||||||||||||
Total Residential | 8,453 | 7,722 | 9.5 | % | 18,504 | 17,829 | 3.8 | % | |||||||||||||||||
Total Commercial | 8,506 | 8,263 | 2.9 | % | 17,190 | 16,559 | 3.8 | % | |||||||||||||||||
Total Industrial | 9,178 | 9,538 | -3.8 | % | 18,356 | 18,336 | 0.1 | % | |||||||||||||||||
Total Other | 137 | 125 | 9.6 | % | 278 | 258 | 7.8 | % | |||||||||||||||||
Total Distribution Deliveries | 26,274 | 25,648 | 2.4 | % | 54,328 | 52,982 | 2.5 | % | |||||||||||||||||
Electric Sales Shopped | |||||||||||||||||||||||||
Ohio - Residential | 1,725 | 1,539 | 12.1 | % | 3,608 | 3,419 | 5.5 | % | |||||||||||||||||
- Commercial | 1,789 | 1,726 | 3.7 | % | 3,564 | 3,424 | 4.1 | % | |||||||||||||||||
- Industrial | 1,235 | 1,134 | 8.9 | % | 2,402 | 2,211 | 8.6 | % | |||||||||||||||||
Total Ohio | 4,749 | 4,399 | 8.0 | % | 9,574 | 9,054 | 5.7 | % | |||||||||||||||||
Pennsylvania - Residential | 5 | 6 | -16.7 | % | 11 | 12 | -8.3 | % | |||||||||||||||||
- Commercial | 22 | 41 | -46.3 | % | 46 | 78 | -41.0 | % | |||||||||||||||||
- Industrial | 383 | 548 | -30.1 | % | 830 | 1,080 | -23.1 | % | |||||||||||||||||
Total Pennsylvania | 410 | 595 | -31.1 | % | 887 | 1,170 | -24.2 | % | |||||||||||||||||
New Jersey - Residential | 1 | 233 | -99.6 | % | 2 | 520 | -99.6 | % | |||||||||||||||||
- Commercial | 490 | 599 | -18.2 | % | 1,032 | 1,200 | -14.0 | % | |||||||||||||||||
- Industrial | 551 | 577 | -4.5 | % | 1,114 | 1,051 | 6.0 | % | |||||||||||||||||
Total New Jersey | 1,042 | 1,409 | -26.0 | % | 2,148 | 2,771 | -22.5 | % | |||||||||||||||||
Total Electric Sales Shopped | 6,201 | 6,403 | -3.2 | % | 12,609 | 12,995 | -3.0 | % | |||||||||||||||||
* 2004 excludes the reporting of PJM sales and purchases on a gross basis. | |||||||||||||||||||||||||
OPERATING STATISTICS | As of June 30, | ||||||||||||
For 12 Months Ended | 2005 | 2004 | |||||||||||
System Load Factor | 61.9 | % | 65.3 | % | |||||||||
Capacity Factors: | |||||||||||||
Fossil | 60.8 | % | 58.6 | % | |||||||||
Nuclear | 84.8 | % | 78.3 | % | |||||||||
Generation Output: | |||||||||||||
Fossil | 63 | % | 64 | % | |||||||||
Nuclear | 37 | % | 36 | % | |||||||||
WEATHER | 2005 | Normal | 2004 | ||||||||||
Composite Heating-Degree-Days | |||||||||||||
2nd Quarter | 684 | 654 | 544 | ||||||||||
Year-to-Date | 3,663 | 3,477 | 3,532 | ||||||||||
Composite Cooling-Degree-Days | |||||||||||||
2nd Quarter | 275 | 245 | 301 | ||||||||||
Year-to-Date | 275 | 246 | 301 | ||||||||||
Consolidated Report to the Financial Community - 2nd Quarter ; 9
FirstEnergy Corp. | |||||||||||||
2005 EPS and Cash Flow | |||||||||||||
2005 Earnings Per Share (EPS) | |||||||||||||
(Reconciliation of GAAP to Non-GAAP) | |||||||||||||
Three Months | Six Months | Annual | |||||||||||
Ended June 30 | Ended June 30 | Guidance | |||||||||||
Basic EPS (GAAP basis) | $ | 0.54 | $ | 1.03 | $ | 2.70 - $2.85 | |||||||
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 | ||||||||||
JCP&L Rate Settlement | (0.05 | ) | (0.05 | ) | (0.05) | ||||||||
Ohio tax write-off | 0.22 | 0.22 | 0.22 | ||||||||||
Basic EPS (non-GAAP basis) | $ | 0.71 | $ | 1.18 | $ | 2.85 - $3.00 | |||||||
Reconciliation of June 2005 Year-to-Date 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 | $ | 338 | ||||||||
Adjustments: | ||||||||||
Depreciation | 292 | |||||||||
Amortization and deferral of regulatory assets | 438 | |||||||||
Deferred purchased power costs | (192 | ) | ||||||||
Deferred income taxes and ITC, net | 62 | |||||||||
Conversion of off-balance sheet receivables financing | ||||||||||
to on-balance sheet | (155 | ) | ||||||||
Other, including changes in working capital * | 148 | |||||||||
Net Cash from Operating Activities (GAAP) | $ | 931 | ||||||||
Other Items: | ||||||||||
Capital expenditures | (429 | ) | ||||||||
Nuclear fuel fabrication | (63 | ) | ||||||||
Decommissioning | (51 | ) | ||||||||
Common stock dividends | (270 | ) | ||||||||
Conversion of off-balance sheet receivables financing | ||||||||||
to on-balance sheet | 155 | |||||||||
Other, net | (80 | ) | ||||||||
Free Cash Flow (Non-GAAP) | $ | 193 | ||||||||
Non-core asset sales | 58 | |||||||||
Cash generation (Non-GAAP) | $ | 251 | ||||||||
* Includes $242 million from Ohio School Council's prepayment for electric service. | ||||||||||
Consolidated Report to the Financial Community - 2nd Quarter ; 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: | ||||||||||
GAAP Earnings Guidance | $ | 887 - $937 | ||||||||
Adjustments: | ||||||||||
Depreciation | 572 | |||||||||
Amortization and deferral of regulatory assets | 908 | |||||||||
Deferred purchased power costs | (450 | ) | ||||||||
Deferred income taxes and ITC, net | 45 | |||||||||
Conversion of off-balance sheet receivables financing | ||||||||||
to on-balance sheet | (155 | ) | ||||||||
Other, including changes in working capital * | 225 | |||||||||
Net Cash from Operating Activities (GAAP) | $ | 2,057 | ||||||||
Other Items: | ||||||||||
Capital expenditures | (1,005 | ) | ||||||||
Nuclear fuel fabrication | (80 | ) | ||||||||
Decommissioning | (100 | ) | ||||||||
Common stock dividends | (542 | ) | ||||||||
Conversion of off-balance sheet receivables financing | ||||||||||
to on-balance sheet | 155 | |||||||||
Other, net | 50 | |||||||||
Free Cash Flow (Non-GAAP) | $ | 535 | ||||||||
Non-core asset sales | 85 | |||||||||
Cash Generation (Non-GAAP) | $ | 620 | ||||||||
* Includes net $220 million from Ohio School Council's prepayment for electric service. | ||||||||||
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at | ||||||||||
www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005 | ||||||||||
Letter to the Investment Community, which is also posted on the website. |
Consolidated Report to the Financial Community - 2nd Quarter 60; 11
FirstEnergy Corp.
2006 Cash Flow Guidance
Reconciliation of 2006 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: | |||||||
GAAP Earnings Guidance | $ | 1,120 - $1,185 | |||||
Adjustments: | |||||||
Depreciation | 595 | ||||||
Amortization and deferral of regulatory assets | 780 | ||||||
Deferred purchased power costs | (380 | ) | |||||
Deferred income taxes and ITC, net | (110 | ) | |||||
Other, including changes in working capital | 32 | ||||||
Net Cash from Operating Activities (GAAP) | $ | 2,070 | |||||
Other Items: | |||||||
Capital expenditures | (1,000) - (1,100 | ) | |||||
Nuclear fuel fabrication | (160 | ) | |||||
Common stock dividends | (570 | ) | |||||
Other, net | 40 | ||||||
Free Cash Flow (Non-GAAP) | $ | 280 - 380 | |||||
Non-core asset sales | 20 | ||||||
Cash Generation (Non-GAAP) | $ | 300 - 400 | |||||
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at | |||||||
www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005 Letter to the Investment | |||||||
Community, which is also posted on the website. |
Consolidated Report to the Financial Community - 2nd Quarter 60; 12
RECENT DEVELOPMENTS
Regulatory Update
On May 18, 2005, the Public Utilities Commission of Ohio (PUCO) granted the accounting authority for FirstEnergy’s Ohio utility operating companies to defer, for future recovery, incremental transmission and ancillary service-related charges incurred as a participant in the Midwest Independent Transmission System Operator, Inc. The PUCO’s order applies to charges incurred from December 30, 2004, through January 1, 2006, and authorizes the companies to accrue carrying charges on the deferral balances. The amount to be deferred will reflect actual incremental expenses, including line losses and carrying charges. In a separate case, pending before the PUCO, the companies propose to begin recovery of these incremental costs on January 1, 2006, through a tariff rider, which also would amortize the deferred balance over five years. On July 22, we filed a settlement stipulation reached with various parties including the Ohio Consumers’ Counsel and the PUCO staff that provides for the requested recovery. If the settlement stipulation is approved by the PUCO, the actual amounts to be recovered in 2006 will be submitted to the PUCO on or before November 1, 2005.
On May 25, 2005, the New Jersey Board of Public Utilities approved a stipulated settlement agreement resolving the Jersey Central Power & Light (JCP&L) Phase II rate case filing, and a second stipulated settlement agreement resolving the motion for reconsideration of the 2003 decision in the JCP&L Phase I rate proceeding. The stipulated agreements are expected to increase JCP&L’s annual revenues by $51.1 million and result in a net annual earnings per share impact of approximately $0.12 per share. For 2005, the total impact is expected to be approximately $0.11 per share, which includes a $0.06 per share increase from revenues commencing on June 1 of this year and a one-time benefit of $0.05 per share from the creation of a new regulatory asset associated with accelerated tree trimming costs expensed in 2003 and 2004.
On May 27, 2005, FirstEnergy’s Ohio utility operating companies filed a request with the PUCO to establish a generation charge adjustment factor (GCAF) rider, as permitted under the Rate Stabilization Plan. The filing reflects projected increases in fuel and related costs in 2006 compared with 2002 costs. The companies request the tariff rider be implemented on January 1, 2006. Based on projected fuel costs and 2006 Ohio retail sales to which the GCAF rider will apply, the estimated revenue from the implementation of this rider is approximately $93 million in 2006.
Rating Agency Actions
On May 16, 2005, Standard & Poor's Ratings Services revised its outlook on FirstEnergy and its subsidiaries to "positive" from "stable" and affirmed its 'BBB-' corporate credit ratings on the companies. Standard & Poor’s stated that the outlook revision and rating affirmation reflect the successful restart of the Perry and Beaver Valley nuclear stations after their respective refueling outages.
On July 18, 2005, Moody's Investors Service changed its ratings outlook on FirstEnergy and its subsidiaries to "positive" from "stable", citing the companies’ improved finances and utility operations. FirstEnergy’s senior unsecured rating by Moody’s is ‘Baa3’.
Intra-System Generation Asset Transfers
In May 2005, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE), and Pennsylvania Power Company entered into certain agreements implementing a series of intra-system generation asset transfers, required under the restructuring plans approved in Ohio and Pennsylvania. When concluded, these transfers will result in the respective undivided ownership interests of the above utilities in FirstEnergy’s nuclear, fossil and hydroelectric plants being owned by FirstEnergy subsidiaries, FirstEnergy Nuclear Generation Corp., a new Ohio corporation, and FirstEnergy Generation Corp., respectively, separate and apart from the above utility subsidiaries. The generating plant interests that are being transferred do not include interests of CEI, TE and OE in certain of the plants that are currently subject to sale and leaseback arrangements with unaffiliated third parties.
Record Generation Output
FirstEnergy set a new generation output record of 19.1 million MWhs in the second quarter and 37.9 million MWhs for the first six months of the year. The output record was attributable to the outstanding performance of our generation fleet, particularly the 2,360 MW Bruce Mansfield Plant, which operated at a 97.4% availability factor for the six-month period.
On May 3, 2005, FirstEnergy’s Sammis Unit 2 became the longest-running single-turbine steam generating unit in the nation’s history when it surpassed a continuous-operation record of 819 days.
Consolidated Report to the Financial Community - 2nd Quarter 13
New Credit Facility
On June 14, 2005, FirstEnergy and certain of its subsidiaries, including all of its operating utility subsidiaries, entered into a new five-year syndicated credit facility totaling $2 billion. The new facility replaced FirstEnergy’s $1 billion and $375 million three-year credit agreements, as well as OE's $125 million three-year credit agreement and $250 million two-year credit agreement, which expired in May 2005. Borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sublimit as well as applicable regulatory and other limitations.
Nuclear Plant Update
On April 28, 2005, Beaver Valley Unit 2 returned to service following a scheduled refueling outage. Major work included replacement of fuel assemblies and a thorough inspection of the reactor vessel head and under-vessel, which were found to be in good condition.
On May 6, 2005, the Perry Plant returned to service following a scheduled refueling outage. The scope of the outage was increased by about 30% to enhance plant reliability, including work on the main generator, refurbishment of high-voltage breakers and modification of the emergency diesel generators’ exhaust system.
On May 20, 2005, the Nuclear Regulatory Commission (NRC) announced the return of Davis-Besse to the standard oversight process, effective July 1, 2005, augmented to include inspections supporting the NRC’s start-up order of March 8, 2004.
On July 8, 2005, the NRC issued their 95003 inspection report on the Perry plant. The inspection report concluded that Perry is being operated safely, however, the NRC will continue to provide increased oversight as FirstEnergy Nuclear Operating Company continues to implement Perry’s Performance Improvement Initiative.
Forward-Looking Statements: This Consolidated Report to the Financial Community 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 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 the settlement agreement resolving the New Source Review litigation, 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, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power 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. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
Consolidated Report to the Financial Community - 2nd Quarter 14