60;
EXHIBIT 99.2
Consolidated Report to the Financial Community
Second Quarter 2009
(Released August 3, 2009) (Unaudited)
HIGHLIGHTS | After-Tax EPS Variance Analysis | 2nd Qtr. | ||||
2Q 2008 Basic EPS – GAAP Basis | $0.86 | |||||
Special Items – 2008 | 0.01 | |||||
▪ | Normalized non-GAAP* earnings, excluding special items, were $0.87 per share for | 2Q 2008 Normalized Earnings – Non-GAAP Basis* | $0.87 | |||
the second quarter of 2009, unchanged from the same period last year. GAAP | Ohio Utilities Distribution Rate Increase | 0.04 | ||||
earnings for the second quarter of 2009 were $1.36 per share compared with $0.86 | Ohio Delivery Service Improvement Rider | 0.05 | ||||
per share in the prior year. | Ohio Transition Cost Recovery Margin | (0.15) | ||||
Generation Gross Margin | 0.08 | |||||
2Q 200 9 Results vs. 2Q 2008 | O&M Reductions | 0.22 | ||||
Deferred Distribution Costs - OH (2008) | (0.08) | |||||
▪ | Electric distribution deliveries declined 2.5 million megawatt-hours (MWH), or 9%, | Pension Costs | (0.11) | |||
due to the economic downturn and mild weather in the FirstEnergy companies' | Depreciation | (0.04) | ||||
service territories. Heating-degree-days were 2% lower than the same period last | General Taxes | (0.01) | ||||
year and 10% below normal, while cooling-degree-days were 23% lower than the | Investment Income - COLI | 0.01 | ||||
same period last year and 17% lower than normal. Industrial deliveries decreased | Other | (0.01) | ||||
1.9 million MWH, or 21% - primarily related to reduced usage by steel and automotive | 2Q 2009 Normalized Earnings - Non-GAAP Basis* | $0.87 | ||||
customers. Commercial deliveries declined 324,000 MWH, or 4%, while residential | Special Items - 2009 | 0.49 | ||||
deliveries decreased 237,000 MWH, or 3%. Distribution delivery revenues (excluding | 2Q 2009 Basic EPS - GAAP Basis | $1.36 | ||||
the impact of the Ohio rate increase not associated with the recovery of date certain | ||||||
distribution-related deferrals and the implementation of the delivery service | ||||||
improvement (DSI) rider) were comparable to the same period last year. The reductions in distribution delivery sales volume were offset by: (1) the recovery of date-certain | ||||||
distribution-related deferrals in Ohio; (2) an increase in rates resulting from the expiration of special contracts in Ohio at the end of 2008 with those customers moving to tariff | ||||||
rates this year; and (3) the implementation of demand-based distribution rates in 2009 for all commercial and industrial customers in Ohio. |
▪ | The distribution rate increase for the three Ohio utilities increased earnings by $0.04 per share in the second quarter while the implementation of the Ohio DSI rider, effective in April 2009, increased earnings by $0.05 per share. |
▪ | In accordance with the Ohio Rate Certainty Plan (RCP), recovery of transition revenues for Ohio Edison Company (OE) and The Toledo Edison Company (TE) ended in December 2008, while recovery for The Cleveland Electric Illuminating Company (CEI) will extend through December 2010. Lower transition revenues in the second quarter of 2009 reduced earnings by $0.30 per share. Correspondingly, lower transition cost amortization expense in the second quarter of 2009 increased earnings by $0.15 per share. |
▪ | Generation gross margin increased earnings by $0.08 per share. |
Consolidated electric generation sales decreased 3.8 million MWH, or 12%. Retail generation sales decreased 2.2 million MWH, or 9%, while wholesale sales were down 1.6 million MWH, or 28%, compared to the same period last year. (A Summary of Sources of Generation Sales and Power Purchases can be found on page 12.)
FirstEnergy Solutions Corp. (FES)-supplied generation sales decreased 3.9 million MWH, or 19%. Sales to the retail market declined 2.6 million MWH, or 15%, primarily due to reduced industrial usage and FES supplying approximately 84% of the Ohio retail load in the second quarter of 2009 compared to nearly 100% of the Ohio load in the same period last year. FES-supplied wholesale electricity sales decreased 1.3 million MWH, or 38%, due in part to lower available economic generation during the second quarter of 2009.
Lower generation margins at the Ohio utilities, Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) in the second quarter of 2009 reduced earnings by $0.08 per share due to the expiration in 2008 of below-market power supply agreements. FES-supplied retail generation sales increased revenues by $0.02 per share as higher unit prices more than offset lower volumes. The combination of the above items reduced retail generation revenues by $0.06 per share.
The Public Utilities Commission of Ohio (PUCO) granted CEI authority in 2009 to defer for future recovery the difference between the cost of purchased power incurred and generation revenues (including the Rate Stabilization Charge from CEI’s 2008 rate plan) from January 2009 through May 2009. Purchased power costs deferred in the second quarter of 2009 increased earnings by $0.09 per share.
Lower FES-supplied wholesale sales reduced earnings by $0.02 per share. Lower sales volume ($57 million) and energy prices ($15 million) in the second quarter of 2009 compared to the same period last year were partially offset by higher capacity revenues ($61 million) resulting from higher capacity prices associated with the PJM Reliability Pricing Model (RPM) auction.
Lower net fuel and purchased power expenses incurred by FES increased earnings by $0.07 per share. Generation output in the second quarter of 2009 was 14.6 million MWH, a reduction of 4.2 million MWH, or 22%, compared to the same period last year, primarily due to economic factors and lower wholesale prices in the second quarter of 2009. The decrease in generation output reduced fuel costs by $0.08 per share. Higher purchased power costs reduced earnings by $0.01 per share. Slightly fewer purchases and lower energy prices ($81 million) in the second quarter of 2009 were more than offset by higher capacity expenses ($85 million) resulting from higher capacity prices associated with the PJM RPM auction.
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 2 |
▪ | Implementation of O&M reduction measures totaled approximately $0.22 per share ($111 million) in the second quarter of 2009. The majority of the O&M reductions were realized from lower labor costs; reduced non-pension employee benefits; use of fewer contractors; and general company-wide cost control measures. O&M reductions (including allocated savings from Corporate Shared Services) at the distribution subsidiaries and the generation subsidiaries were approximately $0.12 per share ($60 million) and $0.10 per share ($51 million), respectively. On a year-to-date basis, O&M reductions totaled approximately $0.31 per share ($157 million) – distribution subsidiaries accounted for approximately $0.20 per share ($103 million) while the generation subsidiaries accounted for approximately $0.11 per share ($54 million). |
Nuclear outages in the second quarter of 2009 included a refueling outage at Beaver Valley 1, a 17-day maintenance outage at Davis-Besse and an extended refueling outage at Perry in the second quarter of 2009 compared to a Beaver Valley 2 refueling outage in the same period last year.
▪ | Under the Ohio RCP, the Ohio utilities were permitted to defer up to $150 million per year in distribution reliability expenses through December 2008. The absence of these deferrals in the second quarter of 2009 reduced earnings by $0.08 per share compared to the same period last year. |
▪ | Higher pension expense in the second quarter of 2009 reduced earnings by $0.11 per share. Reduced pension plan asset value, due to investment losses during 2008, resulted in a decrease in the plan’s funded status, leading to increased expense in 2009. In June 2009, FirstEnergy amended its health care benefits plan for all employees and retirees and triggered a remeasurement of FirstEnergy’s other postretirement benefit plans as of May 31, 2009. As a result of the remeasurement, net postretirement benefit costs for the remainder of 2009 will decrease by approximately $0.07 per share, including a $0.01 per share reduction that is applicable to the second quarter of 2009. |
▪ | Incremental property additions increased depreciation expense by $0.04 per share. |
▪ | Higher general taxes reduced earnings by $0.01 per share, primarily due to higher property taxes. |
▪ | Increased investment income from corporate-owned life insurance (COLI) contributed $0.01 per share to earnings. |
▪ | Financing costs were unchanged from the same period last year. Higher capitalized interest related to the construction program increased earnings by $0.04 per share. Higher interest expense reduced earnings by $0.04 per share primarily due to interest associated with the issuance of first mortgage bonds and senior notes at the distribution companies in the fourth quarter of 2008 and the first half of 2009. |
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 3 |
▪ | Four special items were recognized during the second quarter of 2009: (i) a $0.52 per share increase in earnings associated with the sale of FirstEnergy’s nine percent interest in the stock and output of Ohio Valley Electric Corporation; (ii) a $0.01 per share reduction in earnings from impairment of securities held in trust for future nuclear decommissioning activities; (iii) a $0.01 per share decrease in earnings associated with organizational restructuring charges; and (iv) a $0.01 per share reduction in earnings from a combined loss on reacquired debt and incremental costs related to the recently concluded strike by the International Brotherhood of Electrical Workers (IBEW) Local 459 at Penelec. |
2009 Earnings Guidance
Normalized non-GAAP* earnings guidance for 2009, excluding special items, remains at $3.70 to $3.85 per share. Year-to-date normalized non-GAAP earnings now stand at $1.89 per share.
* The 2009 GAAP to non-GAAP reconciliation statements can be found on page 14 of this report and all GAAP to non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s Web site at www.firstenergycorp.com/ir.
For additional information, please contact:
Ronald E. Seeholzer | Rey Y. Jimenez | Irene M. Prezelj |
Vice President, Investor Relations | Manager, Investor Relations | Manager, Investor Relations |
(330) 384-5415 | (330) 761-4239 | (330) 384-3859 |
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 4 |
FirstEnergy Corp.
Consolidated Statements of Income
(Unaudited)
(In millions, except for per share amounts)
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
(1 | ) | Electric utilities | $ | 2,791 | $ | 2,865 | $ | (74 | ) | $ | 5,811 | $ | 5,778 | $ | 33 | ||||||||||
(2 | ) | Unregulated businesses | 480 | 380 | 100 | 794 | 744 | 50 | |||||||||||||||||
(3 | ) | Total Revenues | 3,271 | 3,245 | 26 | 6,605 | 6,522 | 83 | |||||||||||||||||
Expenses | |||||||||||||||||||||||||
(4 | ) | Fuel | 276 | 316 | (40 | ) | 588 | 644 | (56 | ) | |||||||||||||||
(5 | ) | Purchased power | 1,024 | 1,070 | (46 | ) | 2,167 | 2,070 | 97 | ||||||||||||||||
(6 | ) | Other operating expenses | 612 | 781 | (169 | ) | 1,439 | 1,580 | (141 | ) | |||||||||||||||
(7 | ) | Provision for depreciation | 185 | 168 | 17 | 362 | 332 | 30 | |||||||||||||||||
(8 | ) | Amortization of regulatory assets | 233 | 246 | (13 | ) | 642 | 504 | 138 | ||||||||||||||||
(8 | ) | Deferral of new regulatory assets | (45 | ) | (98 | ) | 53 | (136 | ) | (203 | ) | 67 | |||||||||||||
(9 | ) | General taxes | 184 | 180 | 4 | 395 | 395 | - | |||||||||||||||||
(10 | ) | Total Expenses | 2,469 | 2,663 | (194 | ) | 5,457 | 5,322 | 135 | ||||||||||||||||
(11 | ) | Operating Income | 802 | 582 | 220 | 1,148 | 1,200 | (52 | ) | ||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||
(12 | ) | Investment income | 27 | 16 | 11 | 16 | 33 | (17 | ) | ||||||||||||||||
(13 | ) | Interest expense | (206 | ) | (188 | ) | (18 | ) | (400 | ) | (367 | ) | (33 | ) | |||||||||||
(14 | ) | Capitalized interest | 33 | 13 | 20 | 61 | 21 | 40 | |||||||||||||||||
(15 | ) | Total Other Expense | (146 | ) | (159 | ) | 13 | (323 | ) | (313 | ) | (10 | ) | ||||||||||||
(16 | ) | Income Before Income Taxes | 656 | 423 | 233 | 825 | 887 | (62 | ) | ||||||||||||||||
(17 | ) | Income taxes | 248 | 160 | 88 | 302 | 347 | (45 | ) | ||||||||||||||||
(18 | ) | Net Income | 408 | 263 | 145 | 523 | 540 | (17 | ) | ||||||||||||||||
(19 | ) | Less: Noncontrolling interest income (loss) | (6 | ) | - | (6 | ) | (10 | ) | 1 | (11 | ) | |||||||||||||
(20 | ) | Earnings Available to FirstEnergy Corp. | $ | 414 | $ | 263 | $ | 151 | $ | 533 | $ | 539 | $ | (6 | ) | ||||||||||
(21 | ) | Earnings Per Share of Common Stock | |||||||||||||||||||||||
(22 | ) | Basic | $ | 1.36 | $ | 0.86 | $ | 0.50 | $ | 1.75 | $ | 1.77 | $ | (0.02 | ) | ||||||||||
(23 | ) | Diluted | $ | 1.36 | $ | 0.85 | $ | 0.51 | $ | 1.75 | $ | 1.75 | $ | - | |||||||||||
(24 | ) | Weighted Average Number of | |||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||
(25 | ) | Basic | 304 | 304 | - | 304 | 304 | - | |||||||||||||||||
(26 | ) | Diluted | 305 | 307 | (2 | ) | 306 | 307 | (1 | ) | |||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 5 |
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
Three Months Ended June 30, 2009 | ||||||||||||||||||||||
Ohio | ||||||||||||||||||||||
Energy | Competitive | Transitional | Other & | |||||||||||||||||||
Delivery | Energy | Generation | Reconciling | |||||||||||||||||||
Services (a) | Services (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||
Revenues | ||||||||||||||||||||||
(1 | ) | Electric sales | $ | 1,797 | $ | 205 | $ | 860 | $ | - | $ | 2,862 | ||||||||||
(2 | ) | Other | 127 | 299 | 8 | (25 | ) | 409 | ||||||||||||||
(3 | ) | Internal revenues | - | 839 | - | (839 | ) | - | ||||||||||||||
(4 | ) | Total Revenues | 1,924 | 1,343 | 868 | (864 | ) | 3,271 | ||||||||||||||
Expenses | ||||||||||||||||||||||
(5 | ) | Fuel | - | 276 | - | - | 276 | |||||||||||||||
(6 | ) | Purchased power | 864 | 186 | 813 | (839 | ) | 1,024 | ||||||||||||||
(7 | ) | Other operating expenses | 314 | 315 | 14 | (31 | ) | 612 | ||||||||||||||
(8 | ) | Provision for depreciation | 110 | 68 | - | 7 | 185 | |||||||||||||||
(9 | ) | Amortization of regulatory assets | 184 | - | 49 | - | 233 | |||||||||||||||
(10 | ) | Deferral of new regulatory assets | - | - | (45 | ) | - | (45 | ) | |||||||||||||
(11 | ) | General taxes | 152 | 25 | 2 | 5 | 184 | |||||||||||||||
(12 | ) | Total Expenses | 1,624 | 870 | 833 | (858 | ) | 2,469 | ||||||||||||||
(13 | ) | Operating Income | 300 | 473 | 35 | (6 | ) | 802 | ||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(14 | ) | Investment income | 35 | 6 | - | (14 | ) | 27 | ||||||||||||||
(15 | ) | Interest expense | (114 | ) | (32 | ) | - | (60 | ) | (206 | ) | |||||||||||
(16 | ) | Capitalized interest | 1 | 14 | - | 18 | 33 | |||||||||||||||
(17 | ) | Total Other Expense | (78 | ) | (12 | ) | - | (56 | ) | (146 | ) | |||||||||||
(18 | ) | Income Before Income Taxes | 222 | 461 | 35 | (62 | ) | 656 | ||||||||||||||
(19 | ) | Income taxes | 89 | 185 | 14 | (40 | ) | 248 | ||||||||||||||
(20 | ) | Net Income | 133 | 276 | 21 | (22 | ) | 408 | ||||||||||||||
(21 | ) | Less: Noncontrolling interest income (loss) | - | - | - | (6 | ) | (6 | ) | |||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 133 | $ | 276 | $ | 21 | $ | (16 | ) | $ | 414 | |||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | |||||||||||||||||||||
generation service for FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries. | ||||||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | |||||||||||||||||||||
affiliated electric utilities. | ||||||||||||||||||||||
(c) | Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries and MISO transmission | |||||||||||||||||||||
revenues and expenses related to the delivery of generation load. | ||||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, | |||||||||||||||||||||
noncontrolling interests and the elimination of intersegment transactions. | ||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 6 |
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
Three Months Ended June 30, 2008 | ||||||||||||||||||||||
Ohio | ||||||||||||||||||||||
Energy | Competitive | Transitional | Other & | |||||||||||||||||||
Delivery | Energy | Generation | Reconciling | |||||||||||||||||||
Services (a) | Services (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||
Revenues | ||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,030 | $ | 324 | $ | 670 | $ | - | $ | 3,024 | ||||||||||
(2 | ) | Other | 152 | 51 | 13 | 5 | 221 | |||||||||||||||
(3 | ) | Internal revenues | - | 704 | - | (704 | ) | - | ||||||||||||||
(4 | ) | Total Revenues | 2,182 | 1,079 | 683 | (699 | ) | 3,245 | ||||||||||||||
Expenses | ||||||||||||||||||||||
(5 | ) | Fuel | - | 316 | - | - | 316 | |||||||||||||||
(6 | ) | Purchased power | 998 | 221 | 555 | (704 | ) | 1,070 | ||||||||||||||
(7 | ) | Other operating expenses | 413 | 312 | 81 | (25 | ) | 781 | ||||||||||||||
(8 | ) | Provision for depreciation | 104 | 59 | - | 5 | 168 | |||||||||||||||
(9 | ) | Amortization of regulatory assets | 235 | - | 11 | - | 246 | |||||||||||||||
(10 | ) | Deferral of new regulatory assets | (98 | ) | - | - | - | (98 | ) | |||||||||||||
(11 | ) | General taxes | 149 | 24 | 2 | 5 | 180 | |||||||||||||||
(12 | ) | Total Expenses | 1,801 | 932 | 649 | (719 | ) | 2,663 | ||||||||||||||
(13 | ) | Operating Income | 381 | 147 | 34 | 20 | 582 | |||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(14 | ) | Investment income (loss) | 40 | (8 | ) | (1 | ) | (15 | ) | 16 | ||||||||||||
(15 | ) | Interest expense | (100 | ) | (38 | ) | - | (50 | ) | (188 | ) | |||||||||||
(16 | ) | Capitalized interest | 1 | 10 | - | 2 | 13 | |||||||||||||||
(17 | ) | Total Other Expense | (59 | ) | (36 | ) | (1 | ) | (63 | ) | (159 | ) | ||||||||||
(18 | ) | Income Before Income Taxes | 322 | 111 | 33 | (43 | ) | 423 | ||||||||||||||
(19 | ) | Income taxes | 129 | 45 | 13 | (27 | ) | 160 | ||||||||||||||
(20 | ) | Net Income | 193 | 66 | 20 | (16 | ) | 263 | ||||||||||||||
(21 | ) | Less: Noncontrolling interest income | - | - | - | - | - | |||||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | 193 | $ | 66 | $ | 20 | $ | (16 | ) | $ | 263 | |||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | |||||||||||||||||||||
generation service for FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries. | ||||||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | |||||||||||||||||||||
affiliated electric utilities. | ||||||||||||||||||||||
(c) | Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries and MISO transmission | |||||||||||||||||||||
revenues and expenses related to the delivery of generation load. | ||||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, | |||||||||||||||||||||
noncontrolling interests and the elimination of intersegment transactions. | ||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 7 |
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
Three Months Ended June 30, 2009 vs. Three Months Ended June 30, 2008 | ||||||||||||||||||||||
Ohio | ||||||||||||||||||||||
Energy | Competitive | Transitional | Other & | |||||||||||||||||||
Delivery | Energy | Generation | Reconciling | |||||||||||||||||||
Services (a) | Services (b) | Services (c) | Adjustments (d) | Consolidated | ||||||||||||||||||
Revenues | ||||||||||||||||||||||
(1 | ) | Electric sales | $ | (233 | ) | $ | (119 | ) | $ | 190 | $ | - | $ | (162 | ) | |||||||
(2 | ) | Other | (25 | ) | 248 | (5 | ) | (30 | ) | 188 | ||||||||||||
(3 | ) | Internal revenues | - | 135 | - | (135 | ) | - | ||||||||||||||
(4 | ) | Total Revenues | (258 | ) | 264 | 185 | (165 | ) | 26 | |||||||||||||
Expenses | ||||||||||||||||||||||
(5 | ) | Fuel | - | (40 | ) | - | - | (40 | ) | |||||||||||||
(6 | ) | Purchased power | (134 | ) | (35 | ) | 258 | (135 | ) | (46 | ) | |||||||||||
(7 | ) | Other operating expenses | (99 | ) | 3 | (67 | ) | (6 | ) | (169 | ) | |||||||||||
(8 | ) | Provision for depreciation | 6 | 9 | - | 2 | 17 | |||||||||||||||
(9 | ) | Amortization of regulatory assets | (51 | ) | - | 38 | - | (13 | ) | |||||||||||||
(10 | ) | Deferral of new regulatory assets | 98 | - | (45 | ) | - | 53 | ||||||||||||||
(11 | ) | General taxes | 3 | 1 | - | - | 4 | |||||||||||||||
(12 | ) | Total Expenses | (177 | ) | (62 | ) | 184 | (139 | ) | (194 | ) | |||||||||||
(13 | ) | Operating Income | (81 | ) | 326 | 1 | (26 | ) | 220 | |||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(14 | ) | Investment income (loss) | (5 | ) | 14 | 1 | 1 | 11 | ||||||||||||||
(15 | ) | Interest expense | (14 | ) | 6 | - | (10 | ) | (18 | ) | ||||||||||||
(16 | ) | Capitalized interest | - | 4 | - | 16 | 20 | |||||||||||||||
(17 | ) | Total Other Expense | (19 | ) | 24 | 1 | 7 | 13 | ||||||||||||||
(18 | ) | Income Before Income Taxes | (100 | ) | 350 | 2 | (19 | ) | 233 | |||||||||||||
(19 | ) | Income taxes | (40 | ) | 140 | 1 | (13 | ) | 88 | |||||||||||||
(20 | ) | Net Income | (60 | ) | 210 | 1 | (6 | ) | 145 | |||||||||||||
(21 | ) | Less: Noncontrolling interest income | - | - | - | (6 | ) | (6 | ) | |||||||||||||
(22 | ) | Earnings Available to FirstEnergy Corp. | $ | (60 | ) | $ | 210 | $ | 1 | $ | - | $ | 151 | |||||||||
(a) | Consists of regulated transmission and distribution operations, including transition cost recovery, and provider of last resort | |||||||||||||||||||||
generation service for FirstEnergy's Pennsylvania and New Jersey electric utility subsidiaries. | ||||||||||||||||||||||
(b) | Consists of unregulated generation and commodity operations, including competitive electric sales, and generation sales to | |||||||||||||||||||||
affiliated electric utilities. | ||||||||||||||||||||||
(c) | Represents provider of last resort generation service by FirstEnergy's Ohio electric utility subsidiaries and MISO transmission | |||||||||||||||||||||
revenues and expenses related to the delivery of generation load. | ||||||||||||||||||||||
(d) | Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, | |||||||||||||||||||||
noncontrolling interests and the elimination of intersegment transactions. | ||||||||||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 8 |
FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)
Condensed Consolidated Balance Sheets | |||||||
As of | As of | ||||||
Assets | June 30, 2009 | Dec. 31, 2008 | |||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 900 | $ | 545 | |||
Receivables | 1,440 | 1,471 | |||||
Other | 1,310 | 1,037 | |||||
Total Current Assets | 3,650 | 3,053 | |||||
Property, Plant and Equipment | 18,509 | 17,723 | |||||
Investments | 2,982 | 3,017 | |||||
Deferred Charges and Other Assets | 9,165 | 9,728 | |||||
Total Assets | $ | 34,306 | $ | 33,521 | |||
Liabilities and Capitalization | |||||||
Current Liabilities: | |||||||
Currently payable long-term debt | $ | 1,984 | $ | 2,476 | |||
Short-term borrowings | 2,397 | 2,397 | |||||
Accounts payable | 806 | 794 | |||||
Other | 1,041 | 1,431 | |||||
Total Current Liabilities | 6,228 | 7,098 | |||||
Capitalization: | |||||||
Total equity | 9,001 | 8,315 | |||||
Long-term debt and other long-term obligations | 10,399 | 9,100 | |||||
Total Capitalization | 19,400 | 17,415 | |||||
Noncurrent Liabilities | 8,678 | 9,008 | |||||
Total Liabilities and Capitalization | $ | 34,306 | $ | 33,521 | |||
General Information | |||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Debt redemptions | $ | (437 | ) | $ | (351 | ) | $ | (881 | ) | $ | (719 | ) | |||
New long-term debt issues | $ | 979 | $ | 549 | $ | 1,679 | $ | 549 | |||||||
Short-term borrowings increase | $ | - | $ | 959 | $ | - | $ | 1,705 | |||||||
Property additions | $ | 489 | $ | 906 | $ | 1,143 | $ | 1,617 | |||||||
Adjusted Capitalization | ||||||||||||||
As of June 30 | ||||||||||||||
2009 | % Total | 2008 | % Total | |||||||||||
Total equity | $ | 9,001 | 38 | % | $ | 9,221 | 39 | % | ||||||
Long-term debt and other long-term obligations | 10,399 | 43 | % | 8,603 | 36 | % | ||||||||
Currently payable long-term debt | 1,984 | 8 | % | 2,508 | 10 | % | ||||||||
Short-term borrowings | 2,397 | 10 | % | 2,608 | 11 | % | ||||||||
Adjustments: | ||||||||||||||
Sale-leaseback net debt equivalents | 1,395 | 6 | % | 1,417 | 6 | % | ||||||||
JCP&L securitization debt and cash | (1,182 | ) | -5 | % | (385 | ) | -2 | % | ||||||
Total | $ | 23,994 | 100 | % | $ | 23,972 | 100 | % | ||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 9 |
FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)
Condensed Consolidated Statements of Cash Flows | |||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 408 | $ | 263 | $ | 523 | $ | 540 | |||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||
Depreciation and net amortization of regulatory assets | 373 | 316 | 868 | 633 | |||||||||||
Deferred purchased power and other costs | (73 | ) | (52 | ) | (135 | ) | (95 | ) | |||||||
Deferred income taxes and investment tax credits, net | 97 | 40 | 69 | 129 | |||||||||||
Deferred rents and lease market valuation liability | (45 | ) | (105 | ) | (59 | ) | (101 | ) | |||||||
Cash collateral, net | 63 | 59 | 48 | 67 | |||||||||||
Electric service prepayment programs | (2 | ) | (20 | ) | (10 | ) | (39 | ) | |||||||
Change in working capital and other | (181 | ) | (541 | ) | (202 | ) | (815 | ) | |||||||
Cash flows provided from (used for) operating activities | 640 | (40 | ) | 1,102 | 319 | ||||||||||
Cash flows provided from financing activities | 356 | 1,003 | 426 | 1,227 | |||||||||||
Cash flows used for investing activities | (495 | ) | (963 | ) | (1,173 | ) | (1,605 | ) | |||||||
Net change in cash and cash equivalents | $ | 501 | $ | - | $ | 355 | $ | (59 | ) | ||||||
Deferrals and Amortizations | |||||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||||
2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
Ohio Rate Plans and Transmission Deferrals | |||||||||||||||||||||||
Regulatory Assets - Beginning | $ | 1,336 | $ | 1,799 | $ | 1,536 | $ | 1,847 | |||||||||||||||
Interest on shopping incentives | 7 | 8 | $ | (1 | ) | 14 | 16 | $ | (2 | ) | |||||||||||||
Net deferral (recovery) of MISO costs | (22 | ) | - | (22 | ) | (70 | ) | 2 | (72 | ) | |||||||||||||
RCP distribution reliability costs and interest | 6 | 44 | (38 | ) | 11 | 84 | (73 | ) | |||||||||||||||
Fuel costs and interest | 50 | 1 | 49 | 151 | 8 | 143 | |||||||||||||||||
Ohio reconcilable riders | (20 | ) | - | (20 | ) | (20 | ) | - | (20 | ) | |||||||||||||
Other | - | 8 | (8 | ) | 4 | 15 | (11 | ) | |||||||||||||||
Current period deferrals, net | $ | 21 | $ | 61 | $ | (40 | ) | $ | 90 | $ | 125 | $ | (35 | ) | |||||||||
Amortization | |||||||||||||||||||||||
Ohio transition costs | $ | (26 | ) | $ | (73 | ) | $ | 47 | $ | (65 | ) | $ | (145 | ) | $ | 80 | |||||||
Shopping incentives | - | (29 | ) | 29 | (216 | ) | (59 | ) | (157 | ) | |||||||||||||
2005 & 2006 MISO costs | (10 | ) | (9 | ) | (1 | ) | (16 | ) | (18 | ) | 2 | ||||||||||||
Other | (10 | ) | (3 | ) | (7 | ) | (18 | ) | (4 | ) | (14 | ) | |||||||||||
Current period amortization | $ | (46 | ) | $ | (114 | ) | $ | 68 | $ | (315 | ) | $ | (226 | ) | $ | (89 | ) | ||||||
Regulatory Assets - Ending | $ | 1,311 | $ | 1,746 | $ | 1,311 | $ | 1,746 | |||||||||||||||
Pennsylvania Deferred PJM Costs | |||||||||||||||||||||||
Beginning balance | $ | 339 | $ | 293 | $ | 326 | $ | 254 | |||||||||||||||
Net deferral (recovery) of PJM costs | (44 | ) | 30 | $ | (74 | ) | (31 | ) | 69 | $ | (100 | ) | |||||||||||
Ending balance | $ | 295 | $ | 323 | $ | 295 | $ | 323 | |||||||||||||||
New Jersey Deferred Energy Costs | |||||||||||||||||||||||
Beginning balance | $ | 165 | $ | 264 | $ | 220 | $ | 322 | |||||||||||||||
Net deferral (recovery) of energy costs | (16 | ) | 29 | $ | (45 | ) | (71 | ) | (29 | ) | $ | (42 | ) | ||||||||||
Ending balance | $ | 149 | $ | 293 | $ | 149 | $ | 293 | |||||||||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 10 |
FirstEnergy Corp.
Statistical Summary
(Unaudited)
Electric Sales Statistics (kWh in millions) | |||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||
Electric Distribution Deliveries | 2009 | 2008 | Change | 2009 | 2008 | Change | |||||||||||||
Ohio | - Residential | 3,629 | 3,658 | -0.8 | % | 8,517 | 8,606 | -1.0 | % | ||||||||||
- Commercial | 3,433 | 3,560 | -3.6 | % | 7,047 | 7,409 | -4.9 | % | |||||||||||
- Industrial | 4,513 | 5,781 | -21.9 | % | 9,037 | 11,412 | -20.8 | % | |||||||||||
- Other | 90 | 93 | -3.2 | % | 180 | 184 | -2.2 | % | |||||||||||
Total Ohio | 11,665 | 13,092 | -10.9 | % | 24,781 | 27,611 | -10.2 | % | |||||||||||
Pennsylvania | - Residential | 2,444 | 2,493 | -2.0 | % | 5,934 | 5,930 | 0.1 | % | ||||||||||
- Commercial | 2,653 | 2,755 | -3.7 | % | 5,433 | 5,615 | -3.2 | % | |||||||||||
- Industrial | 2,126 | 2,666 | -20.3 | % | 4,279 | 5,174 | -17.3 | % | |||||||||||
- Other | 20 | 20 | - | 40 | 41 | -2.4 | % | ||||||||||||
Total Pennsylvania | 7,243 | 7,934 | -8.7 | % | 15,686 | 16,760 | -6.4 | % | |||||||||||
New Jersey | - Residential | 2,039 | 2,198 | -7.2 | % | 4,396 | 4,553 | -3.4 | % | ||||||||||
- Commercial | 2,224 | 2,319 | -4.1 | % | 4,493 | 4,644 | -3.3 | % | |||||||||||
- Industrial | 624 | 722 | -13.6 | % | 1,238 | 1,416 | -12.6 | % | |||||||||||
- Other | 22 | 21 | 4.8 | % | 43 | 43 | - | ||||||||||||
Total New Jersey | 4,909 | 5,260 | -6.7 | % | 10,170 | 10,656 | -4.6 | % | |||||||||||
Total Residential | 8,112 | 8,349 | -2.8 | % | 18,847 | 19,089 | -1.3 | % | |||||||||||
Total Commercial | 8,310 | 8,634 | -3.8 | % | 16,973 | 17,668 | -3.9 | % | |||||||||||
Total Industrial | 7,263 | 9,169 | -20.8 | % | 14,554 | 18,002 | -19.2 | % | |||||||||||
Total Other | 132 | 136 | -2.9 | % | 263 | 268 | -1.9 | % | |||||||||||
Total Distribution Deliveries | 23,817 | 26,288 | -9.4 | % | 50,637 | 55,027 | -8.0 | % | |||||||||||
Electric Sales Shopped | |||||||||||||||||||
Ohio | - Residential | - | 466 | -100.0 | % | - | 1,020 | -100.0 | % | ||||||||||
- Commercial | - | 798 | -100.0 | % | - | 1,643 | -100.0 | % | |||||||||||
- Industrial | - | 659 | -100.0 | % | - | 1,289 | -100.0 | % | |||||||||||
Total Ohio | - | 1,923 | -100.0 | % | - | 3,952 | -100.0 | % | |||||||||||
Pennsylvania | - Residential | 39 | 26 | 50.0 | % | 82 | 60 | 36.7 | % | ||||||||||
- Commercial | 202 | 183 | 10.4 | % | 407 | 381 | 6.8 | % | |||||||||||
- Industrial | 401 | 585 | -31.5 | % | 805 | 1,077 | -25.3 | % | |||||||||||
Total Pennsylvania | 642 | 794 | -19.1 | % | 1,294 | 1,518 | -14.8 | % | |||||||||||
New Jersey | - Commercial | 861 | 608 | 41.6 | % | 1,496 | 1,175 | 27.3 | % | ||||||||||
- Industrial | 488 | 559 | -12.7 | % | 937 | 1,095 | -14.4 | % | |||||||||||
Total New Jersey | 1,349 | 1,167 | 15.6 | % | 2,433 | 2,270 | 7.2 | % | |||||||||||
Total Electric Sales Shopped | 1,991 | 3,884 | -48.7 | % | 3,727 | 7,740 | -51.8 | % | |||||||||||
Electric Generation Sales | |||||||||||||||||||
Retail - Regulated | 21,825 | 22,402 | -2.6 | % | 46,909 | 47,287 | -0.8 | % | |||||||||||
Retail - Competitive | 1,134 | 2,746 | -58.7 | % | 2,388 | 5,662 | -57.8 | % | |||||||||||
Total Retail | 22,959 | 25,148 | -8.7 | % | 49,297 | 52,949 | -6.9 | % | |||||||||||
Wholesale | 4,232 | 5,846 | -27.6 | % | 10,188 | 11,263 | -9.5 | % | |||||||||||
Total Electric Generation Sales | 27,191 | 30,994 | -12.3 | % | 59,485 | 64,212 | -7.4 | % | |||||||||||
Operating Statistics | |||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Capacity Factors: | |||||||||||||||
Nuclear | 67% | 85% | 77% | 86% | |||||||||||
Fossil - Baseload | 71% | 76% | 75% | 80% | |||||||||||
Fossil - Load Following | 25% | 60% | 35% | 65% | |||||||||||
Generation Output: | |||||||||||||||
Nuclear | 40% | 39% | 41% | 38% | |||||||||||
Fossil - Baseload | 47% | 39% | 44% | 39% | |||||||||||
Fossil - Load Following | 11% | 21% | 14% | 21% | |||||||||||
Peaking | 2% | 1% | 1% | 2% | |||||||||||
Weather | Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||
2009 | 2008 | Normal | 2009 | 2008 | Normal | ||||||||||
Composite Heating-Degree-Days | 600 | 615 | 664 | 3,560 | 3,480 | 3,535 | |||||||||
Composite Cooling-Degree-Days | 196 | 254 | 236 | 196 | 254 | 237 | |||||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 11 |
FirstEnergy Corp.
Statistical Summary
(Unaudited)
Summary of Generation Sales and Power Purchases
Generation Sales | 2Q 2009 | 2Q 2008 | Change | ||||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | ||
Retail Sales | |||||||||||
FES Retail - | |||||||||||
OH Franchise | - | - | 1,678 | 1,678 | (1,678) | (1,678) | |||||
PA Franchise | 387 | 387 | 485 | 485 | (98) | (98) | |||||
Non-Franchise | 747 | 747 | 583 | 583 | 164 | 164 | |||||
Total FES Retail | 1,134 | 1,134 | 2,746 | 2,746 | (1,612) | (1,612) | |||||
Ohio Edison | 4,413 | 846 | 5,259 | 4,884 | 3 | 4,887 | (471) | 843 | 372 | ||
CEI | 3,486 | 656 | 4,142 | 4,043 | 1 | 4,044 | (557) | 655 | 98 | ||
Toledo Edison | 1,906 | 350 | 2,256 | 2,235 | 1 | 2,236 | (329) | 349 | 20 | ||
Subtotal - OH | 9,805 | 1,852 | 11,657 | 11,162 | 5 | 11,167 | (1,357) | 1,847 | 490 | ||
Penn Power | 85 | 367 | 452 | 204 | 272 | 476 | (119) | 95 | (24) | ||
Penelec | 1,688 | 1,356 | 3,044 | 1,410 | 1,877 | 3,287 | 278 | (521) | (243) | ||
MetEd | 1,745 | 1,364 | 3,109 | 1,502 | 1,875 | 3,377 | 243 | (511) | (268) | ||
Subtotal - PA | 3,518 | 3,087 | 6,605 | 3,116 | 4,024 | 7,140 | 402 | (937) | (535) | ||
JCPL | - | 3,563 | 3,563 | - | 4,095 | 4,095 | - | (532) | (532) | ||
Total Retail Sales | 14,457 | 8,502 | 22,959 | 17,024 | 8,124 | 25,148 | (2,567) | 378 | (2,189) | ||
Wholesale Sales | |||||||||||
FES - | |||||||||||
MISO | 1,653 | 1,653 | 2,155 | 2,155 | (502) | (502) | |||||
PJM | 482 | 482 | 1,191 | 1,191 | (709) | (709) | |||||
Total FES | 2,135 | 2,135 | 3,346 | 3,346 | (1,211) | (1,211) | |||||
MetEd | 540 | 540 | 592 | 592 | (52) | (52) | |||||
Penelec | 736 | 736 | 720 | 720 | 16 | 16 | |||||
JCPL | 821 | 821 | 1,090 | 1,090 | (269) | (269) | |||||
Other | - | - | - | 98 | - | 98 | (98) | - | (98) | ||
Total Wholesale Sales | 2,135 | 2,097 | 4,232 | 3,444 | 2,402 | 5,846 | (1,309) | (305) | (1,614) | ||
Total Generation Sales | 16,592 | 10,599 | 27,191 | 20,468 | 10,526 | 30,994 | (3,876) | 73 | (3,803) |
Power Purchases | 2Q 2009 | 2Q 2008 | Change | ||||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | ||
FES - | |||||||||||
MISO | 1,339 | 1,339 | 1,380 | 1,380 | (41) | (41) | |||||
PJM | 1,482 | 1,482 | 1,450 | 1,450 | 32 | 32 | |||||
Total FES | 2,821 | 2,821 | 2,830 | 2,830 | (9) | (9) | |||||
Ohio Edison | 888 | 888 | 3 | 3 | 885 | 885 | |||||
CEI | 689 | 689 | 1 | 1 | 688 | 688 | |||||
Toledo Edison | 367 | 367 | 1 | 1 | 366 | 366 | |||||
Subtotal - OH | 1,944 | 1,944 | 5 | 5 | 1,939 | 1,939 | |||||
Penn Power | 385 | 385 | 285 | 285 | 100 | 100 | |||||
Penelec | 2,160 | 2,160 | 2,690 | 2,690 | (530) | (530) | |||||
MetEd | 1,962 | 1,962 | 2,561 | 2,561 | (599) | (599) | |||||
Subtotal - PA | 4,507 | 4,507 | 5,536 | 5,536 | (1,029) | (1,029) | |||||
JCPL | 4,640 | 4,640 | 5,681 | 5,681 | (1,041) | (1,041) | |||||
Total | 2,821 | 11,091 | 13,912 | 2,830 | 11,222 | 14,052 | (9) | (131) | (140) |
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 12 |
FirstEnergy Corp.
Statistical Summary
(Unaudited)
Summary of Generation Sales and Power Purchases
Generation Sales | YTD 2009 | YTD 2008 | Change | ||||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | ||
Retail Sales | |||||||||||
FES Retail - | |||||||||||
OH Franchise | - | - | 3,483 | 3,483 | (3,483) | (3,483) | |||||
PA Franchise | 782 | 782 | 953 | 953 | (171) | (171) | |||||
Non-Franchise | 1,605 | 1,605 | 1,226 | 1,226 | 379 | 379 | |||||
Total FES Retail | 2,387 | 2,387 | 5,662 | 5,662 | (3,275) | (3,275) | |||||
Ohio Edison | 8,831 | 2,540 | 11,371 | 10,516 | 6 | 10,522 | (1,685) | 2,534 | 849 | ||
CEI | 6,825 | 1,923 | 8,748 | 8,586 | 2 | 8,588 | (1,761) | 1,921 | 160 | ||
Toledo Edison | 3,637 | 1,013 | 4,650 | 4,533 | 6 | 4,539 | (896) | 1,007 | 111 | ||
Subtotal - OH | 19,293 | 5,476 | 24,769 | 23,635 | 14 | 23,649 | (4,342) | 5,462 | 1,120 | ||
Penn Power | 244 | 847 | 1,091 | 564 | 574 | 1,138 | (320) | 273 | (47) | ||
Penelec | 3,868 | 2,696 | 6,564 | 3,229 | 3,759 | 6,988 | 639 | (1,063) | (424) | ||
MetEd | 4,035 | 2,709 | 6,744 | 3,368 | 3,751 | 7,119 | 667 | (1,042) | (375) | ||
Subtotal - PA | 8,147 | 6,252 | 14,399 | 7,161 | 8,084 | 15,245 | 986 | (1,832) | (846) | ||
JCPL | - | 7,742 | 7,742 | - | 8,393 | 8,393 | - | (651) | (651) | ||
Total Retail Sales | 29,827 | 19,470 | 49,297 | 36,458 | 16,491 | 52,949 | (6,631) | 2,979 | (3,652) | ||
Wholesale Sales | |||||||||||
FES - | |||||||||||
MISO | 4,984 | 4,984 | 3,806 | 3,806 | 1,178 | 1,178 | |||||
PJM | 942 | 942 | 2,371 | 2,371 | (1,429) | (1,429) | |||||
Total FES | 5,926 | 5,926 | 6,177 | 6,177 | (251) | (251) | |||||
MetEd | 1,092 | 1,092 | 1,166 | 1,166 | (74) | (74) | |||||
Penelec | 1,505 | 1,505 | 1,475 | 1,475 | 30 | 30 | |||||
JCPL | 1,664 | 1,664 | 2,211 | 2,211 | (547) | (547) | |||||
Other | 1 | - | 1 | 234 | - | 234 | (233) | - | (233) | ||
Total Wholesale Sales | 5,927 | 4,261 | 10,188 | 6,411 | 4,852 | 11,263 | (484) | (591) | (1,075) | ||
Total Generation Sales | 35,754 | 23,731 | 59,485 | 42,869 | 21,343 | 64,212 | (7,115) | 2,388 | (4,727) |
Power Purchases | YTD 2009 | YTD 2008 | Change | ||||||||
(In thousands of MWH) | FES | 3rd Party | Total | FES | 3rd Party | Total | FES | 3rd Party | Total | ||
FES - | |||||||||||
MISO | 1,407 | 1,407 | 3,179 | 3,179 | (1,772) | (1,772) | |||||
PJM | 3,274 | 3,274 | 2,984 | 2,984 | 290 | 290 | |||||
Total FES | 4,681 | 4,681 | 6,163 | 6,163 | (1,482) | (1,482) | |||||
Ohio Edison | 2,667 | 2,667 | 6 | 6 | 2,661 | 2,661 | |||||
CEI | 2,019 | 2,019 | 2 | 2 | 2,017 | 2,017 | |||||
Toledo Edison | 1,063 | 1,063 | 6 | 6 | 1,057 | 1,057 | |||||
Subtotal - OH | 5,749 | 5,749 | 14 | 14 | 5,735 | 5,735 | |||||
Penn Power | 888 | 888 | 602 | 602 | 286 | 286 | |||||
Penelec | 4,336 | 4,336 | 5,425 | 5,425 | (1,089) | (1,089) | |||||
MetEd | 3,920 | 3,920 | 5,104 | 5,104 | (1,184) | (1,184) | |||||
Subtotal - PA | 9,144 | 9,144 | 11,131 | 11,131 | (1,987) | (1,987) | |||||
JCPL | 9,940 | 9,940 | 11,435 | 11,435 | (1,495) | (1,495) | |||||
Total | 4,681 | 24,833 | 29,514 | 6,163 | 22,580 | 28,743 | (1,482) | 2,253 | 771 |
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 13 |
FirstEnergy Corp.
Special Items, EPS Reconciliations and Liquidity
(Unaudited)
(In millions, except for per share amounts)
Special Items | ||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||
Pre-tax Items - Income Increase (Decrease) | ||||||||||||||||||
Regulatory charges (a) | $ | - | $ | - | $ | (261 | ) | $ | - | |||||||||
Trust securities impairment (b) | (3 | ) | (21 | ) | (39 | ) | (38 | ) | ||||||||||
Organizational restructuring (c) | (7 | ) | - | (28 | ) | - | ||||||||||||
Gain on sale of non-core assets (d) | 254 | - | 254 | 32 | ||||||||||||||
Litigation settlement (d) | - | 15 | - | 15 | ||||||||||||||
Debt call premium/hedge write-off (e) | (3 | ) | - | (3 | ) | - | ||||||||||||
Penelec incremental strike costs(c) | (2 | ) | - | (2 | ) | - | ||||||||||||
Total-Pretax Items | $ | 239 | $ | (6 | ) | $ | (79 | ) | $ | 9 | ||||||||
Income tax resolution | $ | - | $ | - | $ | 13 | $ | - | ||||||||||
EPS Effect | $ | 0.49 | $ | (0.01 | ) | $ | (0.14 | ) | $ | 0.02 | ||||||||
(a) | $216 million included in "Amortizaton of regulatory assets"; $10 million included in "Purchased power"; | |||||||||||||||||
$35 million included in "Other operating expenses" | ||||||||||||||||||
(b) | Included in "Investment income" | |||||||||||||||||
(c) | Included in "Other operating expenses" | |||||||||||||||||
(d) | Included in "Revenues-Other" | |||||||||||||||||
(e) | Included in "Interest expense" |
2009 Earnings Per Share (EPS) | |||||||||||||
(Reconciliation of GAAP to Non-GAAP) | |||||||||||||
ACTUAL | ACTUAL | ||||||||||||
Three Months | Six Months | Guidance for | |||||||||||
Ended June 30 | Ended June 30 | Year 2009 | |||||||||||
Basic EPS (GAAP basis) | $ | 1.36 | $ | 1.75 | $ | 3.56 - $3.71 | |||||||
Excluding Special Items: | |||||||||||||
Regulatory charges | - | 0.55 | 0.55 | ||||||||||
Trust securities impairment | 0.01 | 0.08 | 0.08 | ||||||||||
Organizational restructuring | 0.01 | 0.06 | 0.06 | ||||||||||
Debt redemption premiums/ | |||||||||||||
incremental strike costs | 0.01 | 0.01 | 0.01 | ||||||||||
Income tax resolution | - | (0.04 | ) | (0.04 | ) | ||||||||
Gain on sale of non-core assets | (0.52 | ) | (0.52 | ) | (0.52 | ) | |||||||
Basic EPS (Non-GAAP basis) | $ | 0.87 | $ | 1.89 | $ | 3.70 - 3.85 | |||||||
Liquidity position as of July 31, 2009 | |||||||
Company | Type | Maturity | Amount (M) | Available (M) | |||
FirstEnergy(1) | Revolving | Aug. 2012 | $2,750 | $273 | |||
FirstEnergy & FirstEnergy Solutions | Bank Lines | Various(2) | 120 | 20 | |||
FirstEnergy Generation Corp. | Term Loan | Oct. 2009(3) | 300 | 300 | |||
OH & PA Utilities | Receivables Financing | Various(4) | 550 | 451 | |||
(1) FirstEnergy Corp. and subsidiary borrowers. | Subtotal: | $3,720 | $1044 | ||||
(2) $100M matures March 31, 2011; $20M uncommitted | Cash: | - | 921 | ||||
line of credit with no maturity date. | Total: | $3,720 | $1,965 | ||||
(3) Drawn amounts are payable within 30 days and may not | |||||||
be reborrowed. | |||||||
(4) $180M matures December 18, 2009; $370 matures February 22, 2010. | |||||||
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 14 |
Recent Developments
Financial Matters
2009 Non-GAAP Earnings Guidance
On June 2, 2009, FirstEnergy issued 2009 non-GAAP earnings guidance of $3.70 to $3.85 per share, with more than $250 million in non-GAAP positive cash flow – cash flow from operating activities and assets sales after capital expenditures and dividend payments.
Rating Agency Updates
On June 17, 2009, Moody’s Investor Service issued a report affirming FirstEnergy’s ‘Baa3’ and FES’ ‘Baa2’ credit ratings and maintained the stable outlook. On July 9, 2009, Standard & Poor’s Ratings Services reaffirmed ratings on FirstEnergy and its subsidiaries, including its ‘BBB’ corporate credit rating, and maintained the stable outlook.
Financing Activities
On June 30, 2009, Pennsylvania Power Company (Penn) privately placed $100 million of first mortgage bonds at 6.09%, due 2022. The proceeds were used to repurchase Penn equity from OE and for capital expenditures.
In June 2009, FirstEnergy Nuclear Generation Corp. (NGC) and FirstEnergy Generation Corp. (FGCO) refinanced $519 million Pollution Control Revenue Bonds with $355 million converted from a variable to a fixed-rate mode. Details of these transactions may be seen in the table below.
Obligor | Principal | Rate | Interest Rate |
(in millions) | Mode | ||
NGC | $164.0 | - | Variable |
NGC | $107.5 | 5.88% | Fixed |
FGCO | $100.0 | 4.75% | Fixed |
FGCO | $141.3 | 5.63% | Fixed |
FGCO | $6.5 | 4.75% | Fixed |
Regulatory Matters
Ohio Regulatory Update
On May 14, 2009, FirstEnergy announced that an auction to secure generation supply and pricing for the period June 1, 2009, through May 31, 2011, for its Ohio utility companies - OE, CEI and TE (collectively, the Ohio Companies) was completed and the results were approved by the PUCO. The auction resulted in an average weighted wholesale price for generation and transmission of 6.15 cents per kilowatt-hour (KWH). FES was a successful bidder for 51 percent of the Ohio Companies’ Provider of Last Resort (POLR) generation requirements. A total of 12 bidders qualified to participate in the auction with 9 successful bidders each securing a portion of the Ohio utility companies’ load. Subsequent to the auction FES purchased tranches totaling an additional 11 percent of the load from other winning bidders. Effective August 1, 2009, FES is supplying 62 percent of the Ohio Companies’ POLR generation requirements.
On June 17, 2009, the PUCO modified rules that implement the alternative energy portfolio standards created by Senate Bill 221, incorporating energy efficiency requirements, long-term forecasting and planning for greenhouse gas reporting and carbon dioxide control. The PUCO filed the rules with the Joint Committee on Agency Rule Review on July 7, 2009, which begins a 65-day review period. The Ohio Companies and one other party filed applications for rehearing on the rules with the PUCO.
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 15 |
On July 27, 2009, the Ohio Companies filed applications with the PUCO to recover three different categories of deferred distribution costs on an accelerated basis. In the Ohio Companies' Amended ESP, the PUCO approved the recovery of these deferrals, with collection originally set to begin in January 2011 and to continue over a 5-or 25-year period. The principal amount plus carrying charges through August 31, 2009, for these deferrals is a total of $298.4 million. If the applications are approved, recovery of this amount, together with carrying charges calculated as approved in the Amended ESP, will be collected in the 18 non-summer months from September 2009 through May 2011, subject to reconciliation until fully collected, with $165 million of the above amount being recovered from residential customers, and $133.4 million being recovered from non-residential customers. Pursuant to the applications, customers would pay significantly less over the life of the recovery of the deferral through the reduction in carrying charges as compared to the expected recovery under the previously approved recovery mechanism.
Met-Ed and Penelec Procurement Plan
On February 20, 2009, Met-Ed and Penelec filed with the Pennsylvania Public Utility Commission (PPUC) a generation procurement plan covering the period January 1, 2011, through May 31, 2013. The companies’ plan was designed to provide adequate and reliable service as required by Pennsylvania law through a prudent mix of long-term, short-term and spot-market generation supply as required by Act 129. The plan proposed a staggered procurement schedule, which varies by customer class. On March 30, 2009, Met-Ed and Penelec filed direct testimony pursuant to the March 5, 2009, case schedule issued by the Administrative Law Judge. The PPUC is expected to issue a final decision in November 2009.
PPUC Establishes Smart Meter Standards
On June 18, 2009, the PPUC issued standards for the smart meter technology procurement and installation plans required by Act 129 to be filed by the state’s large electric distribution companies by August 14, 2009. The PPUC also provided guidance on the procedures to be followed for submittal, review and approval of all aspects of the smart meter plans. On June 18, 2009, the PPUC also adopted a total resource cost test to analyze the costs and benefits of energy efficiency and conservation plans filed under Act 129.
On July 1, 2009, Met-Ed, Penelec and Penn filed energy efficiency and conservation plans in compliance with the requirements of Act 129.
Operational Matters
PJM Consolidation
On July 31, 2009, FirstEnergy announced that it plans to consolidate all of its transmission assets into PJM. FirstEnergy believes that consolidation will enhance operating efficiency, better support retail choice in Ohio and Pennsylvania, and provide customers with greater access to long-term supplies of generation capacity. Most of FirstEnergy’s transmission assets in Pennsylvania, and those in New Jersey, already operate within PJM. The company’s transmission assets in Ohio and Penn, which are a part of American Transmission Systems, Incorporated (ATSI), currently operate within the Midwest Independent Transmission System Operator. Virtually all of FirstEnergy’s generation is connected to the ATSI transmission system. FirstEnergy will request integration into PJM on June 1, 2011, in a filing to be made with the Federal Energy Regulatory Commission.
Nuclear Outages
On April 21, 2009, the Davis-Besse Nuclear Power Station in Oak Harbor, Ohio, returned to service following a maintenance outage that began on April 5, 2009, to repair condenser and steam valves.
On May 13, 2009, the Perry Nuclear Power Plant in Perry, Ohio, returned to service after completing its twelfth refueling and maintenance outage which began on February 23, 2009. On June 21, 2009, the plant was taken offline due to a main turbine trip and returned to service on June 26, 2009.
On May 21, 2009, the Beaver Valley Power Station Unit 1 in Shippingport, Pennsylvania, returned to service after completing its nineteenth refueling outage, which began on April 20, 2009.
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 16 |
Safety Record Set by Employees at Davis-Besse
A new FirstEnergy Nuclear Operating Company safety record was set in June by Davis-Besse Nuclear Power Station employees, who worked more than 10.2 million hours -- approximately six years -- without an injury that resulted in a missed day of work. The previous record was set in 2005 by employees of the Perry Nuclear Power Plant, who worked 10.1 million hours without an injury resulting in a missed day of work.
FES Retail Activities
As of August 1, 2009, FES has signed 50 government aggregation contracts that will provide discounted generation prices to approximately 600,000 residential and small commercial customers. The governmental aggregator may choose between a graduated or flat percentage discount. For residential customers, the graduated discount plan offers savings of 10 percent, 6 percent, 5 percent, and 4 percent in the years 2009-2012, respectively. The flat percentage contract offers a 6 percent discount through the end of the contract. Discounts will be based on the generation price customers would have been charged if they purchased electric generation service from their electric utility and will be effective beginning in late summer or early fall.
FirstEnergy Earns Edison Electric Institute (EEI) Award
On May 27, 2009, FirstEnergy was presented EEI’s 2009 Supplier Diversity Excellence Award in Phoenix, Arizona. The award recognizes EEI member companies for their excellence and outstanding achievements in advancing purchasing opportunities for small businesses and businesses with diverse ownership.
Union Contracts Update
On May 21, 2009, 517 Penelec employees, represented by the IBEW Local 459, elected to strike. In response, on May 22, 2009, Penelec implemented its work-continuation plan to use nearly 400 non-represented employees with previous line experience and training drawn from Penelec, other FirstEnergy operations and contractors to perform service reliability and priority maintenance work in the Penelec area for the duration of the strike. IBEW Local 459 employees of Penelec ratified a three-year contract agreement on July 17, 2009, and returned to work on Monday, July 20, 2009.
On June 26, 2009, FirstEnergy announced that seven of its union locals -- representing about 2,600 employees -- have ratified contract extensions. These unions include employees from Penelec, Penn, CEI, OE and TE, along with some power plant employees.
On July 8, 2009, FirstEnergy announced that employees of Met-Ed represented by IBEW Local 777 ratified a two-year contract. Union members had been working without a contract since the previous agreement expired April 30, 2009.
Voluntary Early Retirement Program
In June, FirstEnergy offered a Voluntary Enhanced Retirement Option (VERO), which provides additional benefits for qualified employees who elect to retire. The VERO was accepted by 382 non-represented employees. The VERO has also been extended to several unions, and, to date, 225 represented employees have accepted.
Consolidated Report to the Financial Community - 2nd Quarter 2009 | 17 |
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 our 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 and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania, the impact of the PUCO’s regulatory process on the Ohio Companies associated with the distribution rate case or implementing the recently-approved ESP, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices and availability, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, other legislative and regulatory changes, revised environmental requirements, including possible greenhouse gas emission regulations, the potential impacts of the U.S. Court of Appeals' July 11, 2008 decision requiring revisions to the CAIR rules and the scope of any laws, rules or regulations that may ultimately take their place, the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the AQC Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR litigation or other potential regulatory initiatives, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the NRC, Met-Ed's and Penelec's transmission service charge filings with the PPUC, the continuing availability of generating units and their ability to operate at or near full capacity, the ability to comply with applicable state and federal reliability standards, the ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the ability to improve electric commodity margins and to experience growth in the distribution business, the changing market conditions that could affect the value of assets held in our nuclear decommissioning trusts, pension trusts and other trust funds, and cause us to make additional contributions sooner, or in an amount that is larger than currently anticipated, the ability to access the public securities and other capital and credit markets in accordance with our financing plan and the cost of such capital, changes in general economic conditions affecting us, the state of the capital and credit markets affecting us, interest rates and any actions taken by credit rating agencies that could negatively affect our access to financing or its costs and increase our requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees, the continuing decline of the national and regional economy and its impact on our major industrial and commercial customers, issues concerning the soundness of financial institutions and counterparties with which we do business, and the risks and other factors discussed from time to time in our SEC filings, and other similar factors. A credit rating is not a recommendation to buy, sell or hold debt and it may be subject to revision or withdrawal at any time. Each rating should be evaluated independently of any other rating that may be assigned to our securities. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for our management to predict all such factors, nor assess the impact of any such factor on our 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. We expressly disclaim 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 2009 | 18 |