Exhibit 99.2
Consolidated Report to the Financial Community
ThirdQuarter 2011
(Released November 1, 2011) (Unaudited)
HIGHLIGHTS | ||||
After-Tax EPS Variance Analysis | 3rd.Qtr. | |||
● | Normalized non-GAAP* earnings, excluding special items, were $1.34 per share for the | 3Q 2010 Basic EPS – GAAP Basis | $0.59 | |
third quarter of 2011, compared with $1.28 per share for the third quarter of 2010. | Special Items – 2010 | 0.69 | ||
GAAP earnings for the third quarter of 2011 were $1.22 per share, compared with $0.59 | 3Q 2010 Normalized Earnings – Non-GAAP Basis* | $1.28 | ||
per share for the third quarter of 2010. | Commodity Margin | 0.19 | ||
O&M Expenses | (0.06) | |||
Depreciation | (0.02) | |||
General Taxes | (0.01) | |||
Financing Costs | (0.05) | |||
Increased Common Shares Outstanding | (0.35) | |||
The following explanations reflect variances for FirstEnergy, excluding the Allegheny Companies. | Allegheny Companies - Third Quarter 2011 | 0.32 | ||
Third quarter 2011 earnings associated with the Allegheny Companies are noted separately. | Purchase Accounting | 0.04 | ||
3Q 2011 Normalized Earnings – Non-GAAP Basis* | $1.34 | |||
Special Items - 2011 | (0.12) | |||
● | Total electric distribution deliveries increased by 610,000 Megawatt-hours (MWH), or 2.1%. | 3Q 2011 Basic EPS – GAAP Basis | $1.22 | |
Residential deliveries increased by 101,000 MWH, or 0.9%; commercial deliveries | ||||
decreased 67,000 MWH, or 0.7%, while industrial deliveries increased by 578,000 MWH, | ||||
or 6.5%. Since the increase in total deliveries was predominantly attributed to the industrial class, whose base distribution revenues are derived primarily on peak | ||||
demand as opposed to energy consumption, there was no material impact to earnings compared to the same period last year. Cooling-degree-days were 2% lower | ||||
than the same period last year, but 30% above normal. |
*The 2011 GAAP to non-GAAP reconciliation statements can be found on page 18 of this report and all GAAP to non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
● | Higher commodity margin increased earnings by $0.19 per share, due primarily to the combination of higher direct and government aggregation sales, lower fuel expenses and purchased power costs, partially offset by lower Provider of Last Resort (POLR) and wholesale sales, and higher transmission costs. |
Commodity Margin EPS Summary
Commodity Margin EPS - 3Q11 vs 3Q10 | Rate | Volume | Total | |||||||
Contract Generation Sales | ||||||||||
- Direct Sales | ($0.03) | $0.42 | $0.39 | |||||||
- Government Aggregation Sales | $0.00 | $0.09 | $0.09 | |||||||
- Mass Market Sales | ($0.01) | $0.05 | $0.04 | |||||||
Subtotal - Retail Sales | ($0.04) | $0.56 | $0.52 | |||||||
- POLR Sales | $0.03 | ($0.58) | ($0.55) | |||||||
- Structured Sales | $0.00 | ($0.02) | ($0.02) | |||||||
Total - Contract Generation Sales | ($0.01) | ($0.04) | ($0.05) | |||||||
Wholesale Sales | ($0.02) | ($0.01) | ($0.03) | |||||||
PJM Capacity, FRR Auction | ($0.02) | $0.14 | $0.12 | |||||||
REC Sales | $0.00 | $0.01 | $0.01 | |||||||
Fuel Expense | $0.15 | $0.04 | $0.19 | |||||||
Purchased Power | $0.09 | $0.01 | $0.10 | |||||||
Capacity Expense | $0.09 | ($0.19) | ($0.10) | |||||||
Net MISO - PJM Transmission | ($0.15) | $0.10 | ($0.05) | |||||||
Total Increase / (Decrease) | $0.13 | $0.06 | $0.19 | |||||||
(a) Contract Generation Sales – FirstEnergy Solutions Corp.’s (FES) contract generation sales decreased by 975,000 MWH, or 4%, and decreased earnings by $0.05 per share. In line with FES’ strategy to realign its sales portfolio, POLR sales decreased by 6.9 million MWH, or 73%, as a result of lower POLR obligation and increased shopping in Ohio, as well as elimination of our POLR requirement in Pennsylvania. This was partially offset by higher direct sales, which increased by 4.9 million MWH, or 62%, and higher governmental aggregation sales, which increased by 0.9 million MWH, or 25%. FES continues to successfully execute its retail strategy by gaining new customers in recently deregulated markets in Pennsylvania following the expiration of POLR obligations in December 2010. FES retail sales also grew significantly in Ohio and continues to expand in other markets, including Illinois, Michigan, New Jersey, and Maryland.
FES Contract Generation Sales - 3Q11 vs. 3Q10 | ||||||||||||||||
(thousand MWH) | Retail | Other | ||||||||||||||
Direct | Aggr. | Mass Market | POLR | Structured | Total | |||||||||||
Contract Generation Sales Increase / (Decrease) | 4,858 | 915 | 489 | (6,856) | (381) | (975) | ||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 2 |
(b) Wholesale Sales – FES wholesale electricity sales decreased by 409,000 MWH, or 23%, and decreased earnings by $0.03 per share. |
(c) PJM Capacity, Fixed Resource Requirement (FRR) Auction – Higher capacity revenues increased earnings by $0.12 per share, primarily due to FES receiving capacity revenues beginning in June 2011 in connection with transitioning the ATSI zone from MISO to PJM. |
(d) Renewable Energy Credit (REC) Sales – Net REC activity increased earnings by $0.01 per share due to increased sales of RECs partially offset by increased costs imposed by renewable obligation requirements. |
(e) Fuel Expenses – FES generation output for the quarter decreased by 905,000 MWH, or 4%, primarily due to outages at Sammis Unit #6 and load following fossil units. Lower fuel expenses increased earnings by $0.01 per share, as the reduction in generation output more than offset higher average prices in the third quarter of 2011. In addition, the benefit of fuel-contract restructuring in the third quarter of 2011 increased earnings by $0.18 per share. |
Generation Output - 3Q11 vs. 3Q10 | ||||||||||||
(thousand MWH) | Fossil | Nuclear | Total | |||||||||
Generation Output | (896) | (9) | (905) | |||||||||
(f) Purchased Power – Power purchases decreased by 176,000 MWH or 5%. Spot purchases in MISO increased by 1.9 million MWH, while spot purchases in PJM decreased by 1.9 million MWH. Lower power prices in MISO compared to prices in PJM increased earnings by $0.09 per share, while lower bilateral purchases increased earnings by $0.01 per share. |
FES Purchased Power - 3Q11 vs. 3Q10 | ||||||||||||
(thousand MWH) | Bilaterals | Spot | Total | |||||||||
Purchased Power Increase / (Decrease) | (207) | 31 | (176) | |||||||||
(g) Capacity Expenses – Higher capacity expense decreased earnings by $0.10 per share as a result of FES serving more retail load. |
(h) Net MISO-PJM Transmission Expenses – FES net MISO-PJM transmission costs decreased earnings by $0.05 per share due primarily to higher congestion,
network, and transmission line loss expense in PJM.
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 3 |
● | Higher O&M expenses reduced earnings by $0.06 per share. Contributing factors include outage preparation costs at the Davis-Besse plant, higher fossil O&M expenses associated with outages during the third quarter of 2011, and higher incentive compensation expense. During the quarter, Hurricane Irene storm restoration costs, primarily impacting JCP&L and Met-Ed, totaled $78 million. A total of $53 million in expenses was related to O&M activities, of which $50 million was deferred for future recovery from customers. |
● | Higher depreciation expense decreased earnings by $0.02 per share, primarily due to the placement of the Sammis Air Quality Control projects in-service at the end of 2010, partially offset by the absence of depreciation expense associated with the Lake Plants, which were impaired in August 2010, and Burger, which was retired in December 2010. |
● | Higher general taxes decreased earnings by $0.01 per share, primarily due to higher payroll and gross receipts tax. |
● | Financing costs decreased earnings by $0.05 per share. Lower capitalized interest decreased earnings by $0.04 per share, while higher interest expense reduced earnings by $0.01 per share. |
● | The increase in shares outstanding, resulting from the merger with Allegheny Energy, reduced earnings by $0.35 per share. |
● | The Allegheny Companies contributed $0.32 per share in earnings during the third quarter of 2011. |
● | The impact of purchase accounting associated with the merger with Allegheny Energy contributed $0.04 per share in earnings during the third quarter of 2011. |
● | The following special items were recognized during the third quarter of 2011: |
Special Items | EPS | ||||||||||||
Trust Securities Impairment | ($0.01) | ||||||||||||
Merger Transaction / Integration Costs | (0.01) | ||||||||||||
Non-Core Asset Sales / Impairments | (0.02) | ||||||||||||
Mark-to-Market Adjustments | (0.01) | ||||||||||||
Litigation Resolution | (0.01) | ||||||||||||
Merger Accounting - Commodity Contracts | (0.06) | ||||||||||||
Total | ($0.12) | ||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 4 |
Merger Benefits
FirstEnergy is on track to achieve the 2011 merger benefits target resulting from the merger with Allegheny Energy. Through September 2011, FirstEnergy has taken actions and completed savings initiatives that are expected to allow it to capture merger benefits of approximately $165 million pre-tax on an annual basis, or 79% of the $210 million annual target. The $165 million realized from savings initiatives completed through September, along with the impact of initiatives still underway, are being reflected in earnings throughout 2011.
2011 Earnings Guidance
Normalized non-GAAP* earnings guidance for 2011, excluding special items, remains at $3.30 to $3.50 per share. We are reaffirming our 2012 and 2013 non-GAAP* earnings guidance of $3.20 to $3.50 per share.
* The 2011 GAAP to non-GAAP reconciliation statements can be found on page 18 of this report and all GAAP to non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
For additional information, please contact: |
Ronald E. Seeholzer | Irene M. Prezelj | Rey Y. Jimenez |
Vice President, Investor Relations | Exec. Director, Investor Relations | Manager, Investor Relations |
(330) 384-5415 | (330) 384-3859 | (330) 761-4239 |
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 5 |
FirstEnergy Corp.
Consolidated Statements of Income
(In millions, except for per share amounts)
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
(1 | ) | Regulated distribution | $ | 2,935 | $ | 2,745 | $ | 190 | $ | 7,688 | $ | 7,562 | $ | 126 | |||||||||||
(2 | ) | Competitive energy services | 2,029 | 1,601 | 428 | 5,426 | 4,330 | 1,096 | |||||||||||||||||
(3 | ) | Regulated independent transmission | 106 | 73 | 33 | 278 | 189 | 89 | |||||||||||||||||
(4 | ) | Other corporate & intersegment revenues | (351 | ) | (691 | ) | 340 | (1,037 | ) | (1,913 | ) | 876 | |||||||||||||
(5 | ) | Total Revenues | 4,719 | 3,728 | 991 | 12,355 | 10,168 | 2,187 | |||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||
(6 | ) | Fuel | 632 | 400 | 232 | 1,720 | 1,084 | 636 | |||||||||||||||||
(7 | ) | Purchased power | 1,349 | 1,319 | 30 | 3,755 | 3,620 | 135 | |||||||||||||||||
(8 | ) | Other operating expenses | 1,024 | 738 | 286 | 3,130 | 2,112 | 1,018 | |||||||||||||||||
(9 | ) | Provision for depreciation | 292 | 182 | 110 | 794 | 565 | 229 | |||||||||||||||||
(10 | ) | Amortization of regulatory assets | 122 | 176 | (54 | ) | 344 | 549 | (205 | ) | |||||||||||||||
(11 | ) | General taxes | 269 | 206 | 63 | 748 | 587 | 161 | |||||||||||||||||
(12 | ) | Impairment of long-lived assets | 9 | 292 | (283 | ) | 41 | 294 | (253 | ) | |||||||||||||||
(13 | ) | Total Operating Expenses | 3,697 | 3,313 | 384 | 10,532 | 8,811 | 1,721 | |||||||||||||||||
(14 | ) | Operating Income | 1,022 | 415 | 607 | 1,823 | 1,357 | 466 | |||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||
(15 | ) | Investment income | 48 | 46 | 2 | 100 | 93 | 7 | |||||||||||||||||
(16 | ) | Interest expense | (267 | ) | (208 | ) | (59 | ) | (763 | ) | (628 | ) | (135 | ) | |||||||||||
(17 | ) | Capitalized interest | 17 | 41 | (24 | ) | 55 | 122 | (67 | ) | |||||||||||||||
(18 | ) | Total Other Expense | (202 | ) | (121 | ) | (81 | ) | (608 | ) | (413 | ) | (195 | ) | |||||||||||
(19 | ) | Income Before Income Taxes | 820 | 294 | 526 | 1,215 | 944 | 271 | |||||||||||||||||
(20 | ) | Income taxes | 311 | 119 | 192 | 490 | 364 | 126 | |||||||||||||||||
(21 | ) | Net Income | 509 | 175 | 334 | 725 | 580 | 145 | |||||||||||||||||
(22 | ) | Loss attributable to noncontrolling interest | (2 | ) | (4 | ) | 2 | (17 | ) | (19 | ) | 2 | |||||||||||||
(23 | ) | Earnings Available to FirstEnergy Corp. | $ | 511 | $ | 179 | $ | 332 | $ | 742 | $ | 599 | $ | 143 | |||||||||||
(24 | ) | Earnings Per Share of Common Stock | |||||||||||||||||||||||
(25 | ) | Basic | $ | 1.22 | $ | 0.59 | $ | 0.63 | $ | 1.89 | $ | 1.97 | $ | (0.08 | ) | ||||||||||
(26 | ) | Diluted | $ | 1.22 | $ | 0.59 | $ | 0.63 | $ | 1.88 | $ | 1.96 | $ | (0.08 | ) | ||||||||||
(27 | ) | Weighted Average Number of | |||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||
(28 | ) | Basic | 418 | 304 | 114 | 392 | 304 | 88 | |||||||||||||||||
(29 | ) | Diluted | 420 | 305 | 115 | 394 | 305 | 89 | |||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 6 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended September 30, 2011 | |||||||||||||||||||||
Competitive | Regulated | Other & | |||||||||||||||||||
Regulated | Energy | Independent | Reconciling | ||||||||||||||||||
Distribution (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,809 | $ | 1,611 | $ | - | $ | - | $ | 4,420 | |||||||||
(2 | ) | Other | 125 | 103 | 106 | (48 | ) | 286 | |||||||||||||
(3 | ) | Internal revenues | 1 | 315 | - | (303 | ) | 13 | |||||||||||||
(4 | ) | Total Revenues | 2,935 | 2,029 | 106 | (351 | ) | 4,719 | |||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | 92 | 540 | - | - | 632 | ||||||||||||||
(6 | ) | Purchased power | 1,293 | 362 | - | (306 | ) | 1,349 | |||||||||||||
(7 | ) | Other operating expenses | 498 | 540 | 15 | (29 | ) | 1,024 | |||||||||||||
(8 | ) | Provision for depreciation | 159 | 110 | 17 | 6 | 292 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | 123 | - | (1 | ) | - | 122 | |||||||||||||
(10 | ) | General taxes | 200 | 55 | 9 | 5 | 269 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | 9 | - | - | 9 | ||||||||||||||
(12 | ) | Total Operating Expenses | 2,365 | 1,616 | 40 | (324 | ) | 3,697 | |||||||||||||
(13 | ) | Operating Income | 570 | 413 | 66 | (27 | ) | 1,022 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income | 32 | 28 | - | (12 | ) | 48 | |||||||||||||
(15 | ) | Interest expense | (147 | ) | (82 | ) | (13 | ) | (25 | ) | (267 | ) | |||||||||
(16 | ) | Capitalized interest | 3 | 9 | 1 | 4 | 17 | ||||||||||||||
(17 | ) | Total Other Expense | (112 | ) | (45 | ) | (12 | ) | (33 | ) | (202 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 458 | 368 | 54 | (60 | ) | 820 | |||||||||||||
(19 | ) | Income taxes | 170 | 136 | 20 | (15 | ) | 311 | |||||||||||||
(20 | ) | Net Income | 288 | 232 | 34 | (45 | ) | 509 | |||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | (2 | ) | (2 | ) | ||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 288 | $ | 232 | $ | 34 | $ | (43 | ) | $ | 511 | ||||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | (7 | ) | $ | (61 | ) | $ | - | $ | (16 | ) | $ | (84 | ) | |||||||
After-tax special items | $ | (4 | ) | $ | (38 | ) | $ | - | $ | (8 | ) | $ | (50 | ) | |||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 7 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended September 30, 2010 | |||||||||||||||||||||
Competitive | Regulated | Other & | |||||||||||||||||||
Regulated | Energy | Independent | Reconciling | ||||||||||||||||||
Distribution (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,609 | $ | 940 | $ | - | $ | - | $ | 3,549 | |||||||||
(2 | ) | Other | 76 | 62 | 73 | (32 | ) | 179 | |||||||||||||
(3 | ) | Internal revenues | 60 | 599 | - | (659 | ) | - | |||||||||||||
(4 | ) | Total Revenues | 2,745 | 1,601 | 73 | (691 | ) | 3,728 | |||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | - | 400 | - | - | 400 | ||||||||||||||
(6 | ) | Purchased power | 1,473 | 505 | - | (659 | ) | 1,319 | |||||||||||||
(7 | ) | Other operating expenses | 400 | 345 | 15 | (22 | ) | 738 | |||||||||||||
(8 | ) | Provision for depreciation | 102 | 67 | 9 | 4 | 182 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | 176 | - | - | - | 176 | ||||||||||||||
(10 | ) | General taxes | 167 | 28 | 8 | 3 | 206 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | 292 | - | - | 292 | ||||||||||||||
(12 | ) | Total Operating Expenses | 2,318 | 1,637 | 32 | (674 | ) | 3,313 | |||||||||||||
(13 | ) | Operating Income | 427 | (36 | ) | 41 | (17 | ) | 415 | ||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income | 24 | 27 | - | (5 | ) | 46 | |||||||||||||
(15 | ) | Interest expense | (125 | ) | (56 | ) | (6 | ) | (21 | ) | (208 | ) | |||||||||
(16 | ) | Capitalized interest | - | 23 | - | 18 | 41 | ||||||||||||||
(17 | ) | Total Other Expense | (101 | ) | (6 | ) | (6 | ) | (8 | ) | (121 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 326 | (42 | ) | 35 | (25 | ) | 294 | ||||||||||||
(19 | ) | Income taxes | 124 | (16 | ) | 13 | (2 | ) | 119 | ||||||||||||
(20 | ) | Net Income | 202 | (26 | ) | 22 | (23 | ) | 175 | ||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | (4 | ) | (4 | ) | ||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 202 | $ | (26 | ) | $ | 22 | $ | (19 | ) | $ | 179 | |||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | (21 | ) | $ | (311 | ) | $ | (1 | ) | $ | (1 | ) | $ | (334 | ) | ||||||
After-tax special items | $ | (15 | ) | $ | (195 | ) | $ | - | $ | (1 | ) | $ | (211 | ) | |||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 8 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Three Months Ended September 30, 2011 vs. Three Months Ended September 30, 2010 | |||||||||||||||||||||
Energy | Competitive | Regulated | Other & | ||||||||||||||||||
Delivery | Energy | Independent | Reconciling | ||||||||||||||||||
Services (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 200 | $ | 671 | $ | - | $ | - | $ | 871 | |||||||||
(2 | ) | Other | 49 | 41 | 33 | (16 | ) | 107 | |||||||||||||
(3 | ) | Internal revenues | (59 | ) | (284 | ) | - | 356 | 13 | ||||||||||||
(4 | ) | Total Revenues | 190 | 428 | 33 | 340 | 991 | ||||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | 92 | 140 | - | - | 232 | ||||||||||||||
(6 | ) | Purchased power | (180 | ) | (143 | ) | - | 353 | 30 | ||||||||||||
(7 | ) | Other operating expenses | 98 | 195 | - | (7 | ) | 286 | |||||||||||||
(8 | ) | Provision for depreciation | 57 | 43 | 8 | 2 | 110 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | (53 | ) | - | (1 | ) | - | (54 | ) | |||||||||||
(10 | ) | General taxes | 33 | 27 | 1 | 2 | 63 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | (283 | ) | - | - | (283 | ) | ||||||||||||
(12 | ) | Total Operating Expenses | 47 | (21 | ) | 8 | 350 | 384 | |||||||||||||
(13 | ) | Operating Income | 143 | 449 | 25 | (10 | ) | 607 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income (loss) | 8 | 1 | - | (7 | ) | 2 | |||||||||||||
(15 | ) | Interest expense | (22 | ) | (26 | ) | (7 | ) | (4 | ) | (59 | ) | |||||||||
(16 | ) | Capitalized interest | 3 | (14 | ) | 1 | (14 | ) | (24 | ) | |||||||||||
(17 | ) | Total Other Loss | (11 | ) | (39 | ) | (6 | ) | (25 | ) | (81 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 132 | 410 | 19 | (35 | ) | 526 | |||||||||||||
(19 | ) | Income taxes (benefits) | 46 | 152 | 7 | (13 | ) | 192 | |||||||||||||
(20 | ) | Net Income | 86 | 258 | 12 | (22 | ) | 334 | |||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | 2 | 2 | ||||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 86 | $ | 258 | $ | 12 | $ | (24 | ) | $ | 332 | ||||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | 14 | $ | 250 | $ | 1 | $ | (15 | ) | $ | 250 | ||||||||||
After-tax special items | $ | 11 | $ | 157 | $ | - | $ | (7 | ) | $ | 161 | ||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 9 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended September 30, 2011 | |||||||||||||||||||||
Competitive | Regulated | Other & | |||||||||||||||||||
Regulated | Energy | Independent | Reconciling | ||||||||||||||||||
Distribution (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 7,336 | $ | 4,167 | $ | - | $ | - | $ | 11,503 | |||||||||
(2 | ) | Other | 351 | 283 | 278 | (117 | ) | 795 | |||||||||||||
(3 | ) | Internal revenues | 1 | 976 | - | (920 | ) | 57 | |||||||||||||
(4 | ) | Total Revenues | 7,688 | 5,426 | 278 | (1,037 | ) | 12,355 | |||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | 189 | 1,531 | - | - | 1,720 | ||||||||||||||
(6 | ) | Purchased power | 3,616 | 1,062 | - | (923 | ) | 3,755 | |||||||||||||
(7 | ) | Other operating expenses | 1,322 | 1,807 | 51 | (50 | ) | 3,130 | |||||||||||||
(8 | ) | Provision for depreciation | 428 | 305 | 42 | 19 | 794 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | 339 | - | 5 | - | 344 | ||||||||||||||
(10 | ) | General taxes | 556 | 150 | 25 | 17 | 748 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | 30 | - | 11 | 41 | ||||||||||||||
(12 | ) | Total Operating Expenses | 6,450 | 4,885 | 123 | (926 | ) | 10,532 | |||||||||||||
(13 | ) | Operating Income | 1,238 | 541 | 155 | (111 | ) | 1,823 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income | 84 | 49 | - | (33 | ) | 100 | |||||||||||||
(15 | ) | Interest expense | (427 | ) | (226 | ) | (34 | ) | (76 | ) | (763 | ) | |||||||||
(16 | ) | Capitalized interest | 7 | 31 | 2 | 15 | 55 | ||||||||||||||
(17 | ) | Total Other Expense | (336 | ) | (146 | ) | (32 | ) | (94 | ) | (608 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 902 | 395 | 123 | (205 | ) | 1,215 | |||||||||||||
(19 | ) | Income taxes | 334 | 146 | 45 | (35 | ) | 490 | |||||||||||||
(20 | ) | Net Income | 568 | 249 | 78 | (170 | ) | 725 | |||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | (17 | ) | (17 | ) | ||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 568 | $ | 249 | $ | 78 | $ | (153 | ) | $ | 742 | ||||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | (110 | ) | $ | (286 | ) | $ | (4 | ) | $ | (73 | ) | $ | (473 | ) | ||||||
After-tax special items | $ | (72 | ) | $ | (189 | ) | $ | (3 | ) | $ | (60 | ) | $ | (324 | ) | ||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 10 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended September 30, 2010 | |||||||||||||||||||||
Competitive | Regulated | Other & | |||||||||||||||||||
Regulated | Energy | Independent | Reconciling | ||||||||||||||||||
Distribution (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 7,250 | $ | 2,348 | $ | - | $ | - | $ | 9,598 | |||||||||
(2 | ) | Other | 233 | 170 | 189 | (89 | ) | 503 | |||||||||||||
(3 | ) | Internal revenues | 79 | 1,812 | - | (1,824 | ) | 67 | |||||||||||||
(4 | ) | Total Revenues | 7,562 | 4,330 | 189 | (1,913 | ) | 10,168 | |||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | - | 1,084 | - | - | 1,084 | ||||||||||||||
(6 | ) | Purchased power | 4,159 | 1,285 | - | (1,824 | ) | 3,620 | |||||||||||||
(7 | ) | Other operating expenses | 1,090 | 1,037 | 45 | (60 | ) | 2,112 | |||||||||||||
(8 | ) | Provision for depreciation | 312 | 215 | 28 | 10 | 565 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | 543 | - | 6 | - | 549 | ||||||||||||||
(10 | ) | General taxes | 459 | 92 | 22 | 14 | 587 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | 294 | - | - | 294 | ||||||||||||||
(12 | ) | Total Operating Expenses | 6,563 | 4,007 | 101 | (1,860 | ) | 8,811 | |||||||||||||
(13 | ) | Operating Income | 999 | 323 | 88 | (53 | ) | 1,357 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income | 78 | 41 | - | (26 | ) | 93 | |||||||||||||
(15 | ) | Interest expense | (375 | ) | (169 | ) | (17 | ) | (67 | ) | (628 | ) | |||||||||
(16 | ) | Capitalized interest | 2 | 70 | 1 | 49 | 122 | ||||||||||||||
(17 | ) | Total Other Expense | (295 | ) | (58 | ) | (16 | ) | (44 | ) | (413 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 704 | 265 | 72 | (97 | ) | 944 | |||||||||||||
(19 | ) | Income taxes | 267 | 101 | 27 | (31 | ) | 364 | |||||||||||||
(20 | ) | Net Income | 437 | 164 | 45 | (66 | ) | 580 | |||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | (19 | ) | (19 | ) | ||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 437 | $ | 164 | $ | 45 | $ | (47 | ) | $ | 599 | ||||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | (67 | ) | $ | (362 | ) | $ | (2 | ) | $ | (2 | ) | $ | (433 | ) | ||||||
After-tax special items | $ | (57 | ) | $ | (227 | ) | $ | (1 | ) | $ | (3 | ) | $ | (288 | ) | ||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 11 |
FirstEnergy Corp.
Consolidated Income Segments
(In millions)
Nine Months Ended September 30, 2011 vs. Nine Months Ended September 30, 2010 | |||||||||||||||||||||
Energy | Competitive | Regulated | Other & | ||||||||||||||||||
Delivery | Energy | Independent | Reconciling | ||||||||||||||||||
Services (a) | Services (b) | Transmission (c) | Adjustments (d) | Consolidated | |||||||||||||||||
Revenues | |||||||||||||||||||||
(1 | ) | Electric sales | $ | 86 | $ | 1,819 | $ | - | $ | - | $ | 1,905 | |||||||||
(2 | ) | Other | 118 | 113 | 89 | (28 | ) | 292 | |||||||||||||
(3 | ) | Internal revenues | (78 | ) | (836 | ) | - | 904 | (10 | ) | |||||||||||
(4 | ) | Total Revenues | 126 | 1,096 | 89 | 876 | 2,187 | ||||||||||||||
Operating Expenses | |||||||||||||||||||||
(5 | ) | Fuel | 189 | 447 | - | - | 636 | ||||||||||||||
(6 | ) | Purchased power | (543 | ) | (223 | ) | - | 901 | 135 | ||||||||||||
(7 | ) | Other operating expenses | 232 | 770 | 6 | 10 | 1,018 | ||||||||||||||
(8 | ) | Provision for depreciation | 116 | 90 | 14 | 9 | 229 | ||||||||||||||
(9 | ) | Amortization of regulatory assets | (204 | ) | - | (1 | ) | - | (205 | ) | |||||||||||
(10 | ) | General taxes | 97 | 58 | 3 | 3 | 161 | ||||||||||||||
(11 | ) | Impairment of long-lived assets | - | (264 | ) | - | 11 | (253 | ) | ||||||||||||
(12 | ) | Total Operating Expenses | (113 | ) | 878 | 22 | 934 | 1,721 | |||||||||||||
(13 | ) | Operating Income | 239 | 218 | 67 | (58 | ) | 466 | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
(14 | ) | Investment income (loss) | 6 | 8 | - | (7 | ) | 7 | |||||||||||||
(15 | ) | Interest expense | (52 | ) | (57 | ) | (17 | ) | (9 | ) | (135 | ) | |||||||||
(16 | ) | Capitalized interest | 5 | (39 | ) | 1 | (34 | ) | (67 | ) | |||||||||||
(17 | ) | Total Other Income | (41 | ) | (88 | ) | (16 | ) | (50 | ) | (195 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 198 | 130 | 51 | (108 | ) | 271 | |||||||||||||
(19 | ) | Income taxes (benefits) | 67 | 45 | 18 | (4 | ) | 126 | |||||||||||||
(20 | ) | Net Income | 131 | 85 | 33 | (104 | ) | 145 | |||||||||||||
(21 | ) | Loss attributable to noncontrolling interest | - | - | - | 2 | 2 | ||||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 131 | $ | 85 | $ | 33 | $ | (106 | ) | $ | 143 | ||||||||
Included in GAAP Earnings (e): | |||||||||||||||||||||
Pre-tax special items | $ | (43 | ) | $ | 76 | $ | (2 | ) | $ | (71 | ) | $ | (40 | ) | |||||||
After-tax special items | $ | (15 | ) | $ | 38 | $ | (2 | ) | $ | (57 | ) | $ | (36 | ) | |||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and from non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||
(b) | Supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy's Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. | ||||||||||||||||||||
(c) | Revenues are primarily derived from the formula rate recovery of costs and a return on investment for capital expenditures in connection with TrAIL, PATH and other projects and revenues from providing transmission services to electric energy providers, power marketers and receiving transmission-related revenues from operation of a portion of the FirstEnergy transmission system (ATSI). Its results reflect transmission expenses related to the delivery of the respective generation loads. | ||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions. | ||||||||||||||||||||
(e) | See pages 17 and 18 for additional details related to special items. | ||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 12 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Balance Sheets | ||||||||
As of | As of | |||||||
Assets | Sep. 30, 2011 | Dec. 31, 2010 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 291 | $ | 1,019 | ||||
Receivables | 1,880 | 1,568 | ||||||
Other | 1,420 | 1,111 | ||||||
Total Current Assets | 3,591 | 3,698 | ||||||
Assets Pending Sale | 402 | - | ||||||
Property, Plant and Equipment | 29,267 | 19,788 | ||||||
Investments | 3,132 | 3,002 | ||||||
Deferred Charges and Other Assets | 10,269 | 8,317 | ||||||
Total Assets | $ | 46,661 | $ | 34,805 | ||||
Liabilities and Capitalization | ||||||||
Current Liabilities: | ||||||||
Currently payable long-term debt | $ | 1,840 | $ | 1,486 | ||||
Short-term borrowings | - | 700 | ||||||
Accounts payable | 1,009 | 872 | ||||||
Other | 2,014 | 1,640 | ||||||
Total Current Liabilities | 4,863 | 4,698 | ||||||
Liabilities Related to Assets Pending Sale | 401 | - | ||||||
Capitalization: | ||||||||
Total equity | 13,015 | 8,513 | ||||||
Long-term debt and other long-term obligations | 15,823 | 12,579 | ||||||
Total Capitalization | 28,838 | 21,092 | ||||||
Noncurrent Liabilities | 12,559 | 9,015 | ||||||
Total Liabilities and Capitalization | $ | 46,661 | $ | 34,805 | ||||
General Information | ||||||||||||||||
Three Months Ended Sep. 30 | Nine Months Ended Sep. 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Debt redemptions | $ | (579 | ) | $ | (15 | ) | $ | (1,581 | ) | $ | (422 | ) | ||||
New long-term debt issues | $ | 100 | $ | 251 | $ | 603 | $ | 251 | ||||||||
Short-term borrowings decrease | $ | (656 | ) | $ | (452 | ) | $ | (700 | ) | $ | (171 | ) | ||||
Property additions | $ | 511 | $ | 470 | $ | 1,529 | $ | 1,467 | ||||||||
Adjusted Capitalization** | ||||||||||||||||
As of September 30 | As of December 31 | |||||||||||||||
2011 | % Total | 2010 | % Total | |||||||||||||
Total equity (GAAP)* | $ | 13,015 | 42 | % | $ | 8,513 | 36 | % | ||||||||
Long-term debt and other long-term obligations | 15,823 | 51 | % | 12,579 | 55 | % | ||||||||||
Currently payable long-term debt | 1,840 | 7 | % | 1,486 | 6 | % | ||||||||||
Short-term borrowings | - | - | 700 | 3 | % | |||||||||||
Adjustments: | ||||||||||||||||
Sale-leaseback net debt equivalents | 1,312 | 4 | % | 1,357 | 6 | % | ||||||||||
Securitization debt and cash | (1,058 | ) | -4 | % | (1,295 | ) | -6 | % | ||||||||
Adjusted capitalization (Non-GAAP) | $ | 30,932 | 100 | % | $ | 23,340 | 100 | % | ||||||||
*Includes $(1,436) million and $(1,539) million, respectively, of Accumulated Other Comprehensive Loss | ||||||||||||||||
** Excludes "Liabilities Related to Assets Pending Sale" | ||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 13 |
FirstEnergy Corp.
Financial Statements
(In millions)
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | $ | 509 | $ | 175 | $ | 725 | $ | 580 | ||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||
Depreciation and amortization of regulatory assets | 414 | 358 | 1,138 | 1,114 | ||||||||||||
Nuclear fuel and lease amortization | 60 | 47 | 152 | 123 | ||||||||||||
Deferred purchased power and other costs | (54 | ) | (46 | ) | (222 | ) | (192 | ) | ||||||||
Deferred income taxes and investment tax credits | 84 | 100 | 636 | 259 | ||||||||||||
Deferred rents and lease market valuation liability | 44 | 41 | (17 | ) | (21 | ) | ||||||||||
Accrued compensation and retirement benefits | 46 | 75 | 95 | 48 | ||||||||||||
Commodity derivative transactions, net | (1 | ) | (11 | ) | (22 | ) | (40 | ) | ||||||||
Pension trust contribution | (113 | ) | - | (375 | ) | - | ||||||||||
Asset impairments | 18 | 294 | 59 | 315 | ||||||||||||
Cash collateral paid, net | (35 | ) | 9 | (66 | ) | (54 | ) | |||||||||
Interest rate swap transactions | - | 86 | - | 129 | ||||||||||||
Gain on investment securities held in trusts | (49 | ) | (20 | ) | (56 | ) | (39 | ) | ||||||||
Change in working capital and other | 275 | 107 | 182 | (149 | ) | |||||||||||
Cash flows provided from operating activities | 1,198 | 1,215 | 2,229 | 2,073 | ||||||||||||
Cash flows provided from (used for) financing activities | (1,363 | ) | (386 | ) | (2,402 | ) | (870 | ) | ||||||||
Cash flows used for investing activities* | (20 | ) | (478 | ) | (555 | ) | (1,445 | ) | ||||||||
Net change in cash and cash equivalents | $ | (185 | ) | $ | 351 | $ | (728 | ) | $ | (242 | ) | |||||
*Includes $590 million of cash received from the Allegheny merger for the nine months ended September 30, 2011. | ||||||||||||||||
Deferral and Amortization | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||||
Ohio Amended ESP Amortization (Deferral) | |||||||||||||||||||||||||
Uncollectible customer accounts | $ | - | $ | (1 | ) | $ | 1 | $ | (2 | ) | $ | (3 | ) | $ | 1 | ||||||||||
Economic development costs & interest | 17 | 1 | 16 | 3 | 8 | (5 | ) | ||||||||||||||||||
Generation cost rider true-up & interest | 13 | (6 | ) | 19 | (11 | ) | 1 | (12 | ) | ||||||||||||||||
Distribution reliability costs (RDD/NDD) | (1 | ) | 14 | (15 | ) | 123 | 85 | 38 | |||||||||||||||||
Ohio Transmission Amortization | |||||||||||||||||||||||||
Transmission costs | 6 | (16 | ) | 22 | 5 | (37 | ) | 42 | |||||||||||||||||
Ohio Other Amortization (Deferral) | |||||||||||||||||||||||||
Generation related deferral | 23 | 17 | 6 | (45 | ) | (36 | ) | (9 | ) | ||||||||||||||||
Distribution related deferral | 26 | 2 | 24 | 36 | 50 | (14 | ) | ||||||||||||||||||
All Other | - | 48 | (48 | ) | - | 129 | (129 | ) | |||||||||||||||||
Pennsylvania Amortization (Deferral) | |||||||||||||||||||||||||
PJM transmission costs | (58 | ) | (20 | ) | (38 | ) | (126 | ) | (4 | ) | (122 | ) | |||||||||||||
NUG costs | 49 | 15 | 34 | 162 | 38 | 124 | |||||||||||||||||||
Storm costs | (14 | ) | - | (14 | ) | (18 | ) | - | (18 | ) | |||||||||||||||
All Other | 67 | 22 | 45 | 112 | 67 | 45 | |||||||||||||||||||
New Jersey Amortization (Deferral) | |||||||||||||||||||||||||
NUG costs | 26 | 81 | (55 | ) | 122 | 207 | (85 | ) | |||||||||||||||||
Storm costs | (48 | ) | (1 | ) | (47 | ) | (50 | ) | (19 | ) | (31 | ) | |||||||||||||
All Other | 18 | 20 | (2 | ) | 46 | 63 | (17 | ) | |||||||||||||||||
Allegheny Amortization (Deferral)* | (2 | ) | N/A | (2 | ) | (13 | ) | N/A | (13 | ) | |||||||||||||||
Total Amortization (Deferral) | $ | 122 | $ | 176 | $ | (54 | ) | $ | 344 | $ | 549 | $ | (205 | ) | |||||||||||
*Represents data for March 2011 - September 2011 only. | |||||||||||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 14 |
FirstEnergy Corp.
Statistical Summary
Electric Sales Statistics (kWh in millions) | ||||||||||||||||
Electric Distribution Deliveries | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
Pre-Merger Companies | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||
Ohio | - Residential | 5,058 | 4,993 | 1.3% | 13,824 | 13,522 | 2.2% | |||||||||
- Commercial | 4,192 | 4,273 | -1.9% | 11,795 | 11,814 | -0.2% | ||||||||||
- Industrial | 5,563 | 5,043 | 10.3% | 15,439 | 14,757 | 4.6% | ||||||||||
- Other | 86 | 86 | 0.0% | 257 | 263 | -2.3% | ||||||||||
Total Ohio | 14,899 | 14,395 | 3.5% | 41,315 | 40,356 | 2.4% | ||||||||||
Pennsylvania | - Residential | 3,135 | 3,095 | 1.3% | 9,123 | 9,063 | 0.7% | |||||||||
- Commercial | 2,099 | 2,061 | 1.8% | 5,931 | 6,026 | -1.6% | ||||||||||
- Industrial | 3,333 | 3,251 | 2.5% | 9,868 | 9,483 | 4.1% | ||||||||||
- Other | 19 | 21 | -9.5% | 59 | 62 | -4.8% | ||||||||||
Total Pennsylvania | 8,586 | 8,428 | 1.9% | 24,981 | 24,634 | 1.4% | ||||||||||
New Jersey | - Residential | 3,250 | 3,254 | -0.1% | 7,757 | 7,875 | -1.5% | |||||||||
- Commercial | 2,676 | 2,700 | -0.9% | 7,096 | 7,268 | -2.4% | ||||||||||
- Industrial | 636 | 660 | -3.6% | 1,865 | 1,911 | -2.4% | ||||||||||
- Other | 23 | 23 | 0.0% | 67 | 67 | 0.0% | ||||||||||
Total New Jersey | 6,585 | 6,637 | -0.8% | 16,785 | 17,121 | -2.0% | ||||||||||
Total Residential | 11,443 | 11,342 | 0.9% | 30,704 | 30,460 | 0.8% | ||||||||||
Total Commercial | 8,967 | 9,034 | -0.7% | 24,822 | 25,108 | -1.1% | ||||||||||
Total Industrial | 9,532 | 8,954 | 6.5% | 27,172 | 26,151 | 3.9% | ||||||||||
Total Other | 128 | 130 | -1.5% | 383 | 392 | -2.3% | ||||||||||
Total Pre-Merger Companies Distribution Deliveries | 30,070 | 29,460 | 2.1% | 83,081 | 82,111 | 1.2% | ||||||||||
AYE Companies* | ||||||||||||||||
Pennsylvania | 5,134 | 5,188 | -1.0% | 11,630 | N/A | N/A | ||||||||||
West Virginia | 3,603 | 3,596 | 0.2% | 7,999 | N/A | N/A | ||||||||||
Maryland | 1,843 | 1,817 | 1.4% | 4,019 | N/A | N/A | ||||||||||
Total AYE Distribution Deliveries | 10,580 | 10,601 | -0.2% | 23,648 | N/A | N/A | ||||||||||
Total Distribution Deliveries | 40,650 | 29,460 | 38.0% | 106,729 | 82,111 | 30.0% | ||||||||||
* Represents data beginning in March 2011. Q3 2010 is shown for informational purposes only and is excluded from the "Total Distribution Deliveries" line item. | ||||||||||||||||
Weather | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2011 | 2010 | Normal | 2011 | 2010 | Normal | |||||||||||
Composite Heating-Degree-Days | 66 | 51 | 91 | 3,485 | 3,240 | 3,534 | ||||||||||
Composite Cooling-Degree-Days | 829 | 862 | 644 | 1,145 | 1,242 | 889 | ||||||||||
Shopping Statistics(1) | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
OE | 75% | 61% | 73% | 56% | ||||||||
PP | 59% | 55% | 57% | 54% | ||||||||
CEI | 84% | 67% | 82% | 61% | ||||||||
TE | 75% | 69% | 73% | 65% | ||||||||
JCP&L | 42% | 33% | 43% | 33% | ||||||||
Met-Ed | 48% | 3% | 45% | 1% | ||||||||
Penelec | 59% | 4% | 53% | 3% | ||||||||
MP | N/A | N/A | N/A | N/A | ||||||||
PE(2) | 44% | N/A | 44% | N/A | ||||||||
WP | 52% | N/A | 50% | N/A | ||||||||
(1) Based upon average quarterly MWH, except for MP, PE and WP which is based upon March - September MWH. | ||||||||||||
(2) Represents Maryland only. |
Competitive Operating Statistics* | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Capacity Factors: | |||||||||||||
Nuclear | 98% | 98% | 88% | 87% | |||||||||
Fossil - Baseload | 76% | 83% | 69% | 72% | |||||||||
Fossil - Load Following | 48% | 55% | 51% | 57% | |||||||||
Generation Output: | |||||||||||||
Nuclear | 30% | 42% | 31% | 42% | |||||||||
Fossil - Baseload | 55% | 39% | 51% | 38% | |||||||||
Fossil - Load Following | 13% | 18% | 15% | 21% | |||||||||
Peaking/Hydro | 3% | 1% | 2% | - | |||||||||
* Includes data for AYE's unregulated generating plants beginning in March 2011. |
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 15 |
FirstEnergy Corp.
Statistical Summary
Summary of Sales, Power Purchases and Generation Output (kWh in millions) | ||||||||||||||||
Pre-Merger Companies | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
FES Contract Generation Sales | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||
POLR | ||||||||||||||||
- OH | 821 | 3,999 | (3,178) | 5,382 | 12,480 | (7,098) | ||||||||||
- PA | 1,696 | 5,374 | (3,678) | 6,414 | 15,533 | (9,119) | ||||||||||
Total POLR | 2,517 | 9,373 | (6,856) | 11,796 | 28,013 | (16,217) | ||||||||||
Structured/Standard Sales | ||||||||||||||||
- Bilaterals | 711 | 1,092 | (381) | 993 | 2,119 | (1,126) | ||||||||||
Total Structured/Standard Sales | 711 | 1,092 | (381) | 993 | 2,119 | (1,126) | ||||||||||
Direct - LCI | ||||||||||||||||
- OH | 6,360 | 4,875 | 1,485 | 16,839 | 12,693 | 4,146 | ||||||||||
- PA | 3,505 | 1,125 | 2,380 | 9,764 | 3,183 | 6,581 | ||||||||||
- NJ | 477 | 382 | 95 | 1,278 | 1,016 | 262 | ||||||||||
- MI | 538 | 438 | 100 | 1,440 | 1,126 | 314 | ||||||||||
- IL | 810 | 611 | 199 | 2,231 | 1,601 | 630 | ||||||||||
- MD | 168 | 81 | 87 | 441 | 208 | 233 | ||||||||||
Total Direct - LCI | 11,858 | 7,512 | 4,346 | 31,993 | 19,827 | 12,166 | ||||||||||
Direct - MCI | ||||||||||||||||
- OH | 573 | 298 | 275 | 1,344 | 832 | 512 | ||||||||||
- PA | 244 | 7 | 237 | 556 | 16 | 540 | ||||||||||
Total Direct - MCI | 817 | 305 | 512 | 1,900 | 848 | 1,052 | ||||||||||
Aggregation | ||||||||||||||||
- OH | 4,540 | 3,628 | 912 | 12,319 | 8,832 | 3,487 | ||||||||||
- IL | 3 | - | 3 | 3 | - | 3 | ||||||||||
Total Aggregation | 4,543 | 3,628 | 915 | 12,322 | 8,832 | 3,490 | ||||||||||
Mass Market | ||||||||||||||||
- OH | 224 | 137 | 87 | 529 | 342 | 187 | ||||||||||
- PA | 428 | 26 | 402 | 624 | 64 | 560 | ||||||||||
Total Mass Market | 652 | 163 | 489 | 1,153 | 406 | 747 | ||||||||||
Total Contract Generation Sales | 21,098 | 22,073 | (975) | 60,157 | 60,045 | 112 | ||||||||||
Wholesale Sales | ||||||||||||||||
- Spot | 1,334 | 1,743 | (409) | 2,714 | 3,281 | (567) | ||||||||||
�� Total Wholesale Sales | 1,334 | 1,743 | (409) | 2,714 | 3,281 | (567) | ||||||||||
Purchased Power | ||||||||||||||||
- Bilaterals | 540 | 747 | (207) | 2,008 | 2,511 | (503) | ||||||||||
- Spot | 2,940 | 2,909 | 31 | 9,121 | 6,691 | 2,430 | ||||||||||
Total Purchased Power | 3,480 | 3,656 | (176) | 11,129 | 9,202 | 1,927 | ||||||||||
Generation Output | ||||||||||||||||
- Fossil | 11,209 | 12,105 | (896) | 30,897 | 32,810 | (1,913) | ||||||||||
- Nuclear | 8,661 | 8,670 | (9) | 23,039 | 22,876 | 163 | ||||||||||
Total Generation Output | 19,870 | 20,775 | (905) | 53,936 | 55,686 | (1,750) | ||||||||||
Allegheny Companies* | ||||||||||||||||
AE Supply Contract Generation Sales | 2011 | 2011 | ||||||||||||||
POLR | 2,603 | 5,584 | ||||||||||||||
Structured/Standard Sales | 179 | 1,328 | ||||||||||||||
Direct - LCI | 413 | 983 | ||||||||||||||
Total Contract Generation Sales | 3,195 | 7,895 | ||||||||||||||
Wholesale Sales | 5,735 | 11,722 | ||||||||||||||
Purchased Power | 134 | 298 | ||||||||||||||
Generation Output - Competitive | 8,881 | 8,258 | 623 | 19,492 | ||||||||||||
*Represents data beginning in March 2011. Generation output for AYE Companies in 3Q 2010 is shown for informational purposes only. | ||||||||||||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 16 |
FirstEnergy Corp.
Special Items
(In millions)
Competitive | Regulated | |||||||||||||||||||||
Regulated | Energy | Independent | ||||||||||||||||||||
Special Items - Three Months Ended Sep. 30, 2011 | Distribution | Services | Transmission | Other | Consolidated | |||||||||||||||||
Pre-Tax Items: | ||||||||||||||||||||||
Regulatory charges | $ | (3 | ) | $ | - | $ | - | $ | - | $ | (3 | ) | ||||||||||
Trust securities impairment | (1 | ) | (8 | ) | - | - | (9 | ) | ||||||||||||||
Merger transaction/integration costs | (2 | ) | (2 | ) | - | - | (4 | ) | ||||||||||||||
Non-core asset sales/impairments | - | (1 | ) | - | (16 | ) | (17 | ) | ||||||||||||||
Mark-to-market adjustments | - | (6 | ) | - | - | (6 | ) | |||||||||||||||
Merger accounting - commodity contracts | (2 | ) | (39 | ) | - | - | (41 | ) | ||||||||||||||
Litigation resolution | 1 | (5 | ) | - | - | (4 | ) | |||||||||||||||
Debt redemption costs | - | - | - | - | - | |||||||||||||||||
Subtotal | (7 | ) | (61 | ) | - | (16 | ) | (84 | ) | |||||||||||||
Income taxes | 3 | 23 | - | 8 | 34 | |||||||||||||||||
After-Tax Effect | $ | (4 | ) | $ | (38 | ) | $ | - | $ | (8 | ) | $ | (50 | ) | ||||||||
Competitive | Regulated | |||||||||||||||||||||
Regulated | Energy | Independent | ||||||||||||||||||||
Special Items - Three Months Ended Sep. 30, 2010 | Distribution | Services | Transmission | Other | Consolidated | |||||||||||||||||
Pre-Tax Items: | ||||||||||||||||||||||
Regulatory charges | $ | (12 | ) | $ | - | $ | - | $ | - | $ | (12 | ) | ||||||||||
Trust securities impairment | - | (2 | ) | - | - | (2 | ) | |||||||||||||||
Merger transaction/integration costs | (9 | ) | (4 | ) | (1 | ) | (1 | ) | (15 | ) | ||||||||||||
Mark-to-market adjustments | - | (13 | ) | - | - | (13 | ) | |||||||||||||||
Lake plant charges | - | (292 | ) | - | - | (292 | ) | |||||||||||||||
Subtotal | (21 | ) | (311 | ) | (1 | ) | (1 | ) | (334 | ) | ||||||||||||
Income taxes | 6 | 116 | 1 | - | 123 | |||||||||||||||||
After-Tax Effect | $ | (15 | ) | $ | (195 | ) | $ | - | $ | (1 | ) | $ | (211 | ) | ||||||||
Competitive | Regulated | |||||||||||||||||||||
Regulated | Energy | Independent | ||||||||||||||||||||
Special Items - Nine Months Ended Sep. 30, 2011 | Distribution | Services | Transmission | Other | Consolidated | |||||||||||||||||
Pre-Tax Items: | ||||||||||||||||||||||
Regulatory charges | $ | (24 | ) | $ | - | $ | - | $ | (10 | ) | $ | (34 | ) | |||||||||
Trust securities impairment | (2 | ) | (16 | ) | - | - | (18 | ) | ||||||||||||||
Merger transaction/integration costs | (82 | ) | (87 | ) | (4 | ) | (5 | ) | (178 | ) | ||||||||||||
Non-core asset sales/impairments | - | (22 | ) | - | (27 | ) | (49 | ) | ||||||||||||||
Mark-to-market adjustments | - | (38 | ) | - | - | (38 | ) | |||||||||||||||
Merger accounting - commodity contracts | (4 | ) | (112 | ) | - | - | (116 | ) | ||||||||||||||
Litigation resolution | 2 | (10 | ) | - | (29 | ) | (37 | ) | ||||||||||||||
Debt redemption costs | - | (1 | ) | - | (2 | ) | (3 | ) | ||||||||||||||
Subtotal | (110 | ) | (286 | ) | (4 | ) | (73 | ) | (473 | ) | ||||||||||||
Income tax charge/income tax resolution | - | (1 | ) | - | (16 | ) | (17 | ) | ||||||||||||||
Income tax effect of pre-tax items | 38 | 98 | 1 | 29 | 166 | |||||||||||||||||
After-Tax Effect | $ | (72 | ) | $ | (189 | ) | $ | (3 | ) | $ | (60 | ) | $ | (324 | ) | |||||||
Competitive | Regulated | |||||||||||||||||||||
Regulated | Energy | Independent | ||||||||||||||||||||
Special Items - Nine Months Ended Sep. 30, 2010 | Distribution | Services | Transmission | Other | Consolidated | |||||||||||||||||
Pre-Tax Items: | ||||||||||||||||||||||
Regulatory charges | $ | (52 | ) | $ | - | $ | - | $ | - | $ | (52 | ) | ||||||||||
Trust securities impairment | - | (21 | ) | - | - | (21 | ) | |||||||||||||||
Merger transaction/integration costs | (22 | ) | (10 | ) | (2 | ) | (2 | ) | (36 | ) | ||||||||||||
Non-core asset sales/impairments | - | (9 | ) | - | - | (9 | ) | |||||||||||||||
Mark-to-market adjustments | - | (30 | ) | - | - | (30 | ) | |||||||||||||||
Litigation resolution | 7 | - | - | - | 7 | |||||||||||||||||
Lake plant charges | - | (292 | ) | - | - | (292 | ) | |||||||||||||||
Subtotal | (67 | ) | (362 | ) | (2 | ) | (2 | ) | (433 | ) | ||||||||||||
Income tax charge/income tax resolution | (13 | ) | - | - | - | (13 | ) | |||||||||||||||
Income tax effect of pre-tax items | 23 | 135 | 1 | (1 | ) | 158 | ||||||||||||||||
After-Tax Effect | $ | (57 | ) | $ | (227 | ) | $ | (1 | ) | $ | (3 | ) | $ | (288 | ) | |||||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 17 |
FirstEnergy Corp.
Special Items, EPS Reconciliations and Liquidity
(In millions, except for per share amounts)
Special Items | ||||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Pre-tax Items - Income Increase (Decrease) | ||||||||||||||||||||
Regulatory charges (a) | $ | (3 | ) | $ | (12 | ) | $ | (34 | ) | $ | (52 | ) | ||||||||
Trust securities impairment (b) | (9 | ) | (2 | ) | (18 | ) | (21 | ) | ||||||||||||
Merger transaction/integration costs (c) | (4 | ) | (15 | ) | (178 | ) | (36 | ) | ||||||||||||
Non-core asset sales/impairments (d) | (17 | ) | - | (49 | ) | (9 | ) | |||||||||||||
Mark-to-market adjustments (e) | (6 | ) | (13 | ) | (38 | ) | (30 | ) | ||||||||||||
Merger accounting - commodity contracts (f) | (41 | ) | - | (116 | ) | - | ||||||||||||||
Litigation resolution (g) | (4 | ) | - | (37 | ) | 7 | ||||||||||||||
Debt redemption costs (h) | - | - | (3 | ) | - | |||||||||||||||
Lake plant charges (i) | - | (292 | ) | - | (292 | ) | ||||||||||||||
Total-Pretax Items | $ | (84 | ) | $ | (334 | ) | $ | (473 | ) | $ | (433 | ) | ||||||||
Income tax charge/Income tax resolution | $ | - | $ | - | $ | (17 | ) | $ | (13 | ) | ||||||||||
EPS Effect | $ | (0.12 | ) | $ | (0.69 | ) | $ | (0.82 | ) | $ | (0.95 | ) | ||||||||
(a) | For YTD 2011, $16 million included in "Amortization of regulatory assets"; $12 million included in "Other operating expenses"; $6 million included in "Revenues". For YTD 2010, $35 million included in "Amortization of regulatory assets"; $17 million included in "Other operating expenses". | |||||||||||||||||||
(b) | Included in "Investment income". | |||||||||||||||||||
(c) | For YTD 2011, $172 million Included in "Other operating expenses"; $6 million included in "Fuel". For YTD 2010, included in "Other operating expenses". | |||||||||||||||||||
(d) | For YTD 2011, $41 million included in "Impairment of long-lived assets"; $8 million included in "Revenues". For YTD 2010, $7 million included in "Depreciation"; $2 million included in Revenues - "Competitive energy services". | |||||||||||||||||||
(e) | For YTD 2011, included in "Other operating expenses". For YTD, 2010 included in "Purchased power". | |||||||||||||||||||
(f) | For YTD 2011, $45 million included in "Fuel"; $50 million included in Revenues - "Competitive energy services"; $21 million included in "Other operating expenses". | |||||||||||||||||||
(g) | For YTD 2011, $29 million included in "Other operating expenses"; $22 million included in "Revenues"; ($9) million included in "Amortization of regulatory assets; ($5) million included in "Purchased power". For YTD 2010, included in "Other operating expenses. | |||||||||||||||||||
(h) | Included in "Interest expense". | |||||||||||||||||||
(i) | Included in "Impairment of long-lived assets". | |||||||||||||||||||
Earnings Per Share (EPS) | ||||||||||||||||||||||||
(Reconciliation of GAAP to Non-GAAP) | ||||||||||||||||||||||||
Three Months Ended Sep. 30 | Nine Months Ended Sep. 30 | Estimate for Year | ||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||
Basic EPS (GAAP basis) | $ | 1.22 | $ | 0.59 | $ | 1.89 | $ | 1.97 | $ | 3.38 - $3.58 | $ | 3.03 - $3.33 | $ | 3.07 - $3.37 | ||||||||||
Excluding Special Items: | ||||||||||||||||||||||||
Regulatory charges | - | 0.02 | 0.05 | 0.11 | 0.05 | 0.01 | 0.02 | |||||||||||||||||
Trust securities impairment | 0.01 | - | 0.03 | 0.04 | 0.03 | - | - | |||||||||||||||||
Income tax charge - retiree drug change | - | - | - | 0.04 | - | - | - | |||||||||||||||||
Merger transaction/integration costs | 0.01 | 0.04 | 0.36 | 0.09 | 0.37 | 0.01 | 0.01 | |||||||||||||||||
Non-core asset sales/impairments | 0.02 | - | 0.08 | 0.02 | (0.85 | ) | - | - | ||||||||||||||||
Mark-to-market adjustments | 0.01 | 0.03 | 0.06 | 0.06 | 0.06 | - | - | |||||||||||||||||
Merger accounting - commodity contracts | 0.06 | - | 0.18 | - | 0.20 | 0.15 | 0.10 | |||||||||||||||||
Litigation resolution | 0.01 | - | 0.06 | (0.01 | ) | 0.06 | - | - | ||||||||||||||||
Lake plant charges | - | 0.60 | - | 0.60 | - | - | - | |||||||||||||||||
Basic EPS (Non-GAAP basis) | $ | 1.34 | $ | 1.28 | $ | 2.71 | $ | 2.92 | $ | 3.30 - $3.50 | $ | 3.20 - $3.50 | $ | 3.20 - $3.50 | ||||||||||
Liquidity position as of October 28, 2011 | |||||||
Company | Type | Maturity | Amount (M) | Available (M) | |||
FirstEnergy(1) | Revolving | June 2016 | $2,000 | $1,951 | |||
FES/AE Supply | Revolving | June 2016 | $2,500 | $2,485 | |||
TrAIL | Revolving | Jan. 2013 | $450 | $450 | |||
AGC | Revolving | Dec. 2013 | $50 | $0 | |||
(1) FirstEnergy Corp. and subsidiary borrowers | Subtotal: | $5,000 | $4,886 | ||||
Cash: | - | 834 | |||||
Total: | $5,000 | $5,720 | |||||
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 18 |
Recent Developments
Board of Directors
On September 20, 2011, FirstEnergy Corp. (FirstEnergy or FE) announced the election of Christopher D. Pappas to serve on its Board of Directors. Pappas is president and chief executive officer of Styron LLC (Trinseo SA), a leading global materials company located in Berwyn, Pa. The election of Pappas brings the size of FE's Board to 14 members.
Financial Matters
Dividend
On September 20, 2011, the Board of Directors declared an unchanged quarterly dividend of $0.55 per share of outstanding FE common stock. The dividend is payable December 1, 2011, to shareholders of record as of November 7, 2011.
Financing Activities
On July 14, 2011, Allegheny Generating Company (AGC) issued $100 million 5.06% Senior Notes due 2021. The proceeds were used to redeem $100 million 6.875% Senior Notes due 2023 on August 15, 2011.
During August and September, FE redeemed or repurchased approximately $410.3 million of Pollution Control Revenue Bonds (PCRBs), as summarized below:
Allegheny Energy Supply (AE Supply) | $ 37.5M | (a) | ||
FirstEnergy Generation Corp. (FGCO) | 158.1 | (b) | ||
FirstEnergy Nuclear Generation Corp. (NGC) | 158.9 | (b) | ||
Monongahela Power Company (MP) | 70.2 | (a) | ||
(a) Includes $14.4 million in PCRBs redeemed for which MP and AE Supply are co-obligors. | ||||
(b) Subject to market conditions, these bonds are being held for future remarketing. |
Asset Sales
On October 18, 2011, FE announced that Gunvor Group, Ltd. purchased a one-third interest in the Signal Peak coal mine in Montana. The sale strengthens FE’s balance sheet in the following ways:
● | Proceeds of nearly $260 million will be used to reduce FE’s net debt position |
● | De-consolidation of Signal Peak will result in debt reduction of $360 million and an increase to equity of $50 million on FE's consolidated balance sheet. |
● | Gain on sale and revaluation of remaining ownership stake will increase equity by approximately $370 million |
Following the sale, FE, through its wholly-owned subsidiary, FE Ventures Corp., has a one-third interest in Global Mining Holding Company, LLC, a joint venture that owns Signal Peak. FGCO has revised its coal purchase agreement with Signal Peak to reduce delivery from 7.5 million tons annually to an obligation to accept up to 2 million tons each year.
On October 18, 2011, FE closed on the sale of its Richland (432 MW) and Stryker (18 MW) plants for approximately $80 million. The proceeds from the sale of these non-core assets will be used to reduce FE’s net debt position.
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 19 |
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Regulatory Matters
Cost Recovery Filing
On September 1, 2011, MP and Potomac Edison Company submitted a joint filing to the West Virginia Public Service Commission (WVPSC) to recover costs associated with fuel and purchased power. Under a cost recovery clause established by the WVPSC in 2007, customer bills are adjusted periodically to reflect upward or downward changes in the cost of fuel and purchased power. If the proposal is adopted as filed, bills will increase approximately 3% overall, starting January 1, 2012.
Operational Matters
Emission Allowances Auction
On October 24, 2011, FirstEnergy Solutions (FES) announced that a competitive bidding auction process will be conducted to sell sulfur dioxide (SO2) and nitrogen oxides (NOX) emission allowances for 2012 and 2013. The allowances are the result of the U. S. Environmental Protection Agency’s recently enacted Cross State Air Pollution Rule (CSAPR). Bidding in the auction is tentatively scheduled to begin on November 17, 2011. Information regarding the November 2011 Auction is posted on an informational website, www.fescsaprauction.info. An ascending-price clock auction format will be used. The auction will be managed by CRA International, Inc. and will offer six products for sale:
● | CSAPR SO2 Allowances for 2012 |
● | CSAPR SO2 Allowances for 2013 |
● | CSAPR Annual NOX Allowances for 2012 |
● | CSAPR Annual NOX Allowances for 2013 |
● | CSAPR Seasonal NOX Allowances for 2012 |
● | CSAPR Seasonal NOX Allowances for 2013 |
Each of the products will be divided into identical blocks, or tranches, with each having a reserve price and a minimum quantity to sell at the reserve price. The minimum quantity of SO2 allowances being offered at the reserve price will be 50,000 for both 2012 and 2013.
Davis-Besse Outage
On October 1, 2011, the Davis-Besse Plant (908 MW) was safely shut down for a scheduled outage to install a new reactor vessel head and complete other maintenance activities. The new reactor head, which replaces a head installed in 2002, enhances safety, reliability and features control rod nozzles made of material less susceptible to cracking. On October 10, 2011, a sub-surface hairline crack was identified in one of the exterior architectural elements on the Shield Building, following opening of the building for installation of the new reactor head. These elements serve as architectural features and do not have structural significance. During investigation of the crack at the Shield Building opening, concrete samples and electronic testing found similar sub-surface hairline cracks in most of the building’s architectural elements. The team of industry-recognized structural concrete experts and Davis-Besse engineers evaluating this condition has determined the cracking does not affect the facility’s structural integrity or safety. FirstEnergy Nuclear Operating Company’s (FENOC) investigation also identified other indications. Included among them were sub-surface hairline cracks in two localized areas of the Shield Building similar to those found in the architectural elements. FENOC has determined these two areas are not associated with the architectural element cracking and are investigating them as a separate issue. FENOC’s overall investigation and analysis continues. Davis-Besse is currently expected to return to service around the end of November. For more information regarding the Davis-Besse outage, refer to the Letter to the Investment Community issued on October 31, 2011 as well as certain related information, which is available on FE’s Investor Information website – www.firstenergycorp.com/ir.
Consolidated Report to the Financial Community - 3rd Quarter 2011 | 20 |
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 include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results may differ materially due to: the speed and nature of increased competition in the electric utility industry. the impact of the regulatory process on the pending matters in the various states in which we do business including, but not limited to, matters related to rates, the status of the PATH project in light of PJM's direction to suspend work on the project pending review of its planning process, its re-evaluation of the need for the project and the uncertainty of the timing and amounts of any related capital expenditures, business and regulatory impacts from ATSI’s realignment into PJM Interconnection, L.L.C, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices and availability, financial derivative reforms that could increase our liquidity needs and collateral costs, the continued ability of FirstEnergy’s regulated utilities to collect transition and other costs, operation and maintenance costs being higher than anticipated, other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water intake and coal combustion residual regulations, the potential impacts of any laws, rules or regulations that ultimately replace CAIR including the Cross-State Air Pollution Rule (CSAPR) and the effects of the EPA’s recently released MACT proposal to establish certain mercury and other emission standards for electric generating units, the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units), adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to, the revocation or non-renewal of necessary licenses, approvals or operating permits by the NRC, including as a result of the incident at Japan’s Fukushima Daiichi Nuclear Plant), issues that could delay the current outage at Davis-Besse for the installation of the new reactor vessel head, including indications of cracking in the plant’s shield building currently under investigation, adverse legal decisions and outcomes related to Met-Ed’s and Penelec’s ability to recover certain transmission costs through their transmission service charge riders, the continuing availability of generating units and changes in their ability to operate at or near full capacity, replacement power costs being higher than anticipated or inadequately hedged, the ability to comply with applicable state and federal reliability standards and energy efficiency mandates, changes in customers’ demand for power, including but not limited to, changes resulting from the implementation of state and federal energy efficiency mandates, the ability to accomplish or realize anticipated benefits from strategic goals, efforts, and our ability, to improve electric commodity margins and the impact of, among other factors, the increased cost of coal and coal transportation on such margins, the ability to experience growth in the distribution business, the changing market conditions that could affect the value of assets held in FirstEnergy’s nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy to make additional contributions sooner, or in amounts that are larger than currently anticipated, the ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan, the cost of such capital and overall condition of the capital and credit markets affecting FirstEnergy and its subsidiaries, changes in general economic conditions affecting FirstEnergy and its subsidiaries, interest rates and any actions taken by credit rating agencies that could negatively affect FirstEnergy’s and its subsidiaries’ access to financing or their costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees, the continuing uncertainty of the national and regional economy and its impact on the major industrial and commercial customers of FirstEnergy’s subsidiaries, issues concerning the soundness of financial institutions and counterparties with which FirstEnergy and its subsidiaries do business, issues arising from the recently completed merger of FirstEnergy and Allegheny Energy, Inc. and the ongoing coordination of their combined operations including FirstEnergy’s ability to maintain relationships with customers, employees or suppliers, as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect, the risks and other factors discussed from time to time in FirstEnergy’s and its applicable subsidiaries’ SEC filings, and other similar factors. Dividends declared from time to time on FirstEnergy's common stock during any annual period may in aggregate vary from the indicated amount due to circumstances considered by FirstEnergy's Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy, or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. 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 - 3rd Quarter 2011 | 21 |