Consolidated Report to Exhibit 99.2
the Financial Community (Unaudited)
- -----------------------------------------------------------------------------------------------------
---------------------------------------------------------
Third Quarter 2003 Highlights |After Tax EPS Variance Analysis 3rd Qtr.|
(Released October 23, 2003) |------------------------------- --------|
|3rd Quarter 2002 Basic EPS - GAAP Basis (Restated)$ 0.97 |
o Non-GAAP earnings for the third | Unusual Charges - 2002 (See Page 6) 0.02 |
quarter, before unusual charges, | ------ |
were $0.81 per share. Excluding |3rd Quarter 2002 Basic EPS - Non-GAAP Basis $ 0.99 |
costs associated with the | Davis-Besse Incremental Expenses - 2002 0.20 |
Davis-Besse extended outage, | ------ |
normalized non-GAAP earnings were |3rd Qarter 2002 Normalized Earnings - Non-GAAP $ 1.19 |
$0.95 per share, compared with | Electric Gross Margin (Excl. Davis-Besse) 0.05 |
restated third quarter 2002 | Nuclear Operating Expenses (Excl. Davis-Besse) (0.06)|
normalized non-GAAP earnings of | Storm Restoration Expense (0.04)|
$1.19 per share. GAAP earnings for | Distribution Reliability Spending - JCP&L (0.03)|
the third quarter 2003 were $0.51 | Pension and OPEB (0.10)|
per share compared with the restated | Depreciation and Amortization (0.03)|
GAAP earnings of $0.97 per share in | Financing Costs, net of Common Stock Dilution 0.02 |
the same quarter last year. Last | Other (0.05)|
year's results were restated to | ------ |
reflect the changes in the |3rd Quarter 2003 Normalized Earnings - Non-GAAP $ 0.95 |
amortization of transition costs and | Davis-Besse Incremental Expenses - 2003 (0.14)|
above-market lease costs for the | ------ |
Ohio distribution companies, as well |Subtotal - Non-GAAP $ 0.81 |
as a reallocation of the |Unusual Charges - 2003 (See Page 6) (0.30)|
Pennsylvania POLR disallowance. | ------ |
|3rd Quarter 2003 Basic EPS - GAAP Basis $ 0.51 |
---------------------------------------------------------
3Q 2003 Results Compared With 3Q 2002
- -------------------------------------
o Electric distribution deliveries decreased 5%, driven largely by a 7%
reduction in residential deliveries due to milder weather.
Cooling-degree-days during the quarter were 19% below the same period last
year. Commercial and industrial deliveries declined 4% and 3%, respectively.
Total electric generation sales increased slightly, as a 6% decline in
retail generation sales was more than offset by an 18% increase in wholesale
sales.
o Electric gross margin increased $25 million after adjusting for changes in
regulatory deferrals and Davis-Besse replacement power costs, despite the
negative impact from the JCP&L rate case decision. Adjusted electric sales
revenues increased by $107 million due primarily to higher wholesale spot
and contract sales. The increase in electric sales revenues was partially
offset by higher adjusted fuel and purchased power costs totaling $82
million. The net increase in fuel and purchased power expense resulted from
additional market purchases necessary to support the higher generation sales
and a 5% reduction in generation output.
o Nuclear operating expenses, excluding incremental expenses associated with
the Davis-Besse outage, increased $28 million. The increase was entirely
attributable to the 28-day refueling outage at Beaver Valley Unit 2, which
was completed on October 12.
1
o Storm-related restoration expenses primarily related to Hurricane Isabel,
increased energy delivery expenses by approximately $20 million during the
quarter. Additionally, the accelerated reliability improvement plan in
JCP&L's service territory increased expenses by $12 million during the
quarter.
o Pension and other post-employment benefit costs increased approximately $50
million, continuing to reflect reduced plan asset values at the measurement
date, reduced return assumptions on trust assets, and lower discount rates
used to value projected obligations.
o Total depreciation and amortization expenses, adjusted for the regulatory
deferrals related to electric gross margin and a $13 million disallowance
(unusual charge) related to the JCP&L rate case decision, increased $14
million. The increase was the net result of a $25 million increase in Ohio
transition costs amortization and $12 million of depreciation expense
associated with the Lake Plants, partially offset by $19 million of lower
nuclear decommissioning and depreciation expenses related to the
implementation of SFAS No. 143.
o Net interest charges decreased $19 million as a result of our continued
aggressive debt reduction program and refinancing activities. Financing
activities during the quarter included $241 million in mandatory long-term
debt redemptions, which will produce annual interest savings of
approximately $20 million. A total of 32.2 million shares of new common
stock were issued during the quarter, which diluted earnings by $0.02 per
share.
o Other items that lowered earnings for the quarter included reduced
contributions from our MYR and Facilities Services Group subsidiaries ($0.02
per share), reduced income from international operations ($0.01 per share)
and mark-to-market adjustments ($0.02 per share).
2Q 2003 Earnings Impact Associated with Davis-Besse
- ---------------------------------------------------
o Incremental expenses associated with the extended outage at Davis-Besse
during the quarter totaled $72 million, or $0.14 per share ($55 million of
replacement power costs and $17 million of O&M expenses).
Unusual Charges
- ---------------
o A non-cash, goodwill impairment charge of $122 million, or $0.27 per share,
was recorded to reduce the carrying value of FirstEnergy's electrical and
mechanical contracting companies. An unusual charge of $13 million, or $0.03
per share, was recorded to reflect additional cost disallowances resulting
from the New Jersey Board of Public Utilities' summary written order in the
JCP&L's base rate proceeding.
For additional information, please contact:
Kurt E. Turosky Terrance G. Howson Thomas C. Navin
Director, Vice President, Treasurer
Investor Relations Investor Relations (330) 384-5889
(330) 384-5500 (973) 401-8519
2
FIRSTENERGY CORP. Three Months Ended Nine Months Ended
CONSOLIDATED INCOME September 30, September 30,
----------------------------------- -----------------------------------
STATEMENTS (thousands): 2003 2002 Change 2003 2002 Change
--------------------------------------- ---------- ---------- --------- ---------- ---------- ---------
(1)REVENUES:
(2) Electric Sales $2,984,013 $2,931,824 $ 52,189 $8,003,821 $7,271,281 $ 732,540
(3) Natural Gas 112,304 102,646 9,658 491,556 470,081 21,475
(4) FE Facilities 89,128 146,560 (57,432) 251,109 402,444 (151,335)
(5) MYR 102,616 122,731 (20,115) 333,204 406,507 (73,303)
(6) International 13,684 11,407 2,277 58,143 299,210 (241,067)
(7) Other 141,640 136,016 5,624 402,454 353,512 48,942
---------- ---------- --------- ---------- ---------- ---------
(8) Total revenues 3,443,385 3,451,184 (7,799) 9,540,287 9,203,035 337,252
---------- ---------- --------- ---------- ---------- ---------
(9)
(10)EXPENSES:
(11) Fuel 206,505 215,114 (8,609) 545,644 576,355 (30,711)
(12) Purchased Power 1,117,792 1,059,565 58,227 3,097,292 2,128,652 968,640
(13) Purchased Gas 103,000 95,799 7,201 456,823 447,980 8,843
(14) Other operating expenses 719,427 631,939 87,488 2,102,418 1,893,734 208,684
(15) FE Facilities 82,743 137,205 (54,462) 245,041 388,761 (143,720)
(16) MYR 104,289 118,954 (14,665) 330,125 398,358 (68,233)
(17) International 4,177 (4,290) 8,467 35,373 130,720 (95,347)
(18) Mark-to-Market Adjustment (12,129) (17,535) 5,406 (7,550) (19,681) 12,131
(19) Provision for depreciation
and amortization 332,125 310,417 21,708 966,009 920,196 45,813
(20) Goodwill Impairment 121,523 - 121,523 121,523 - 121,523
(21) General taxes 177,499 176,850 649 518,823 493,944 24,879
---------- ---------- --------- ---------- ---------- ---------
(22) Total expenses 2,956,951 2,724,018 232,933 8,411,521 7,359,019 1,052,502
---------- ---------- --------- ---------- ---------- ---------
(23)INCOME BEFORE INTEREST
(24) AND INCOME TAXES 486,434 727,166 (240,732) 1,128,766 1,844,016 (715,250)
---------- ---------- --------- ---------- ---------- ---------
(25)Net interest charges:
(26) Interest expense 199,418 212,477 (13,059) 599,738 704,724 (104,986)
(27) Capitalized interest (6,513) (6,303) (210) (23,287) (18,722) (4,565)
(28) Subsidiaries' preferred stock
dividends 8,021 14,223 (6,202) 36,423 63,399 (26,976)
---------- ---------- --------- ---------- ---------- ---------
(29) Net interest charges 200,926 220,397 (19,471) 612,874 749,401 (136,527)
---------- ---------- --------- ---------- ---------- ---------
(30)Income taxes 132,789 221,924 (89,135) 244,211 483,604 (239,393)
---------- ---------- --------- ---------- ---------- ---------
(31)Income before discontinued operations
(32) and accounting change 152,719 284,845 (132,126) 271,681 611,011 (339,330)
(33)Discontinued Operations - - - (60,495) - (60,495)
(34)Cumulative effect of accounting change - - - 102,147 - 102,147
---------- ---------- --------- ---------- ---------- ---------
(35)NET INCOME $ 152,719 $ 284,845 $(132,126) $ 313,333 $ 611,011 $(297,678)
========== ========== ========= ========== ========== =========
(36)
(37)Basic earnings per common share:
(38) Before discontinued operations and
(39) accounting change $ 0.51 $ 0.97 $ (0.46) $ 0.92 $ 2.08 $ (1.16)
(40) Discontinued operations - - - (0.21) - (0.21)
(41) Cumulative effect of accounting change - - - 0.35 - 0.35
---------- ---------- --------- ---------- ---------- ---------
(42) $ 0.51 $ 0.97 $ (0.46) $ 1.06 $ 2.08 $ (1.02)
========== ========== ========= ========== ========== =========
(43)Weighted average number of basic
(44) shares outstanding 299,422 293,328 6,094 295,825 293,066 2,759
========== ========== ========= ========== ========== =========
(45)
(46)Diluted earnings per common share:
(47) Before discontinued operations and
(48) accounting change $ 0.51 $ 0.97 $ (0.46) $ 0.91 $ 2.08 $ (1.17)
(49) Discontinued operations - - - (0.21) - (0.21)
(50) Cumulative effect of accounting change - - - 0.35 - 0.35
---------- ---------- --------- ---------- ---------- ---------
(51) $ 0.51 $ 0.97 $ (0.46) $ 1.05 $ 2.08 $ (1.03)
========== ========== ========= ========== ========== =========
(52)Weighted average number of diluted
(53) shares outstanding 300,751 294,277 6,474 297,153 294,385 2,768
========== ========== ========= ========== ========== =========
3
FirstEnergy Consolidated Income Segments
Three Months Ended September 30, 2003
--------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
-------------------------------------- ---------- ----------- --------- ----------- ------------
(1)REVENUES:
(2) Electric Sales $2,412,449 $ 571,564 $ - $ - $2,984,013
(3) Natural Gas - 112,304 - - 112,304
(4) FE Facilities - 89,128 - - 89,128
(5) MYR - 102,616 - - 102,616
(6) International - - 13,684 - 13,684
(7) Other 119,190 13,969 9,989 (1,508)(a) 141,640
(8) Internal revenues 296,101 577,568 135,648 (1,009,317)(b) -
---------- ---------- --------- ---------- ----------
(9) Total revenues 2,827,740 1,467,149 159,321 (1,010,825) 3,443,385
---------- ---------- --------- ---------- ----------
(10)
(11)EXPENSES:
(12) Fuel - 205,173 5,608 - 210,781
(13) Purchased Power 1,105,086 590,274 - (577,568)(b) 1,117,792
(14) Purchased Gas - 98,724 - - 98,724
(15) Other operating expenses 644,423 360,588 166,781 (451,363)(a)(b) 720,429
(16) FE Facilities - 82,743 - - 82,743
(17) MYR - 103,287 - - 103,287
(18) International - - 4,177 - 4,177
(19) Mark-to-Market Adjustment - (12,129) - - (12,129)
(20) Provision for depreciation and amortization 311,286 8,777 12,062 - 332,125
(21) Goodwill Impairment - 121,523 - - 121,523
(22) General taxes 161,355 10,686 5,458 - 177,499
---------- ---------- --------- ---------- ----------
(23) Total expenses 2,222,150 1,569,646 194,086 (1,028,931) 2,956,951
---------- ---------- --------- ---------- ----------
(24)INCOME BEFORE INTEREST
(25) AND INCOME TAXES 605,590 (102,497) (34,765) 18,106 486,434
---------- ---------- --------- ---------- ----------
(26)Net interest charges:
(27) Interest expense 110,883 12,976 57,453 18,106 (b) 199,418
(28) Capitalized interest (2,378) (982) (3,153) - (6,513)
(29) Subsidiaries' preferred stock dividends 8,021 - - - 8,021
---------- ---------- --------- ---------- ----------
(30) Net interest charges 116,526 11,994 54,300 18,106 200,926
---------- ---------- --------- ---------- ----------
(31)Income taxes 205,610 (37,516) (35,305) - 132,789
---------- ---------- --------- ---------- ----------
(32)Income before discontinued operations
(33) and an accounting change 283,454 (76,975) (53,760) - 152,719
(34)Discontinued operations - - - - -
(35)Cumulative effect of an accounting change - - - - -
---------- ---------- --------- ---------- ----------
(36)NET INCOME $ 283,454 $ (76,975) $ (53,760) $ - $ 152,719
========== ========== ========= ========== ==========
Three Months Ended September 30, 2002
-------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
---------------------------------------- ---------- ----------- --------- ----------- ------------
(1)REVENUES:
(2) Electric Sales $2,605,140 $ 326,684 $ - $ - $2,931,824
(3) Natural Gas - 102,646 - - 102,646
(4) FE Facilities - 146,560 - - 146,560
(5) MYR - 122,731 - - 122,731
(6) International - - 11,407 - 11,407
(7) Other 112,326 13,346 8,731 1,613 (a) 136,016
(8) Internal revenues 261,373 661,536 116,089 (1,038,998)(b) -
---------- ---------- --------- ---------- ----------
(9) Total revenues 2,978,839 1,373,503 136,227 (1,037,385) 3,451,184
---------- ---------- --------- ---------- ----------
(10)
(11)EXPENSES:
(12) Fuel 1,873 210,603 2,638 - 215,114
(13) Purchased Power 1,162,320 558,781 - (661,536)(b) 1,059,565
(14) Purchased Gas - 95,799 - - 95,799
(15) Other operating expenses 585,906 264,754 143,185 (361,906)(a)(b) 631,939
(16) FE Facilities - 137,205 - - 137,205
(17) MYR - 118,954 - - 118,954
(18) International - - (4,290) - (4,290)
(19) Mark-to-Market Adjustment - (17,571) 36 - (17,535)
(20) Provision for depreciation and amortization 294,049 8,371 7,997 - 310,417
(21) Goodwill Impairment - - - - -
(22) General taxes 171,057 3,793 2,000 - 176,850
---------- ---------- --------- ---------- ----------
(23) Total expenses 2,215,205 1,380,689 151,566 (1,023,442) 2,724,018
---------- ---------- --------- ---------- ----------
(24)INCOME BEFORE INTEREST
(25) AND INCOME TAXES 763,634 (7,186) (15,339) (13,943) 727,166
---------- ---------- --------- ---------- ----------
(26)Net interest charges:
(27) Interest expense 130,062 18,657 77,701 (13,943)(b) 212,477
(28) Capitalized interest (3,750) (1,460) (1,093) - (6,303)
(29) Subsidiaries' preferred stock dividends 14,223 - - - 14,223
---------- ---------- --------- ---------- ----------
(30) Net interest charges 140,535 17,197 76,608 (13,943) 220,397
---------- ---------- --------- ---------- ----------
(31)Income taxes 265,604 (10,335) (33,345) - 221,924
---------- ---------- --------- ---------- ----------
(32)Income before discontinued operations
(33) and an accounting change 357,495 (14,048) (58,602) - 284,845
(34)Discontinued operations - - - - -
(35)Cumulative effect of a change in accounting - - - - -
---------- ---------- --------- ---------- ----------
(36)NET INCOME $ 357,495 $ (14,048) $ (58,602) $ - $ 284,845
========== ========== ========= ========== ==========
4
FirstEnergy Consolidated Income Segments
Three Months Ended September 30, 2003 VS 2002
--------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
----------------------------------------- ---------- ---------- --------- ---------- ------------
(1)REVENUES:
(2) Electric Sales $ (192,691) $ 244,880 $ - $ - $ 52,189
(3) Natural Gas - 9,658 - - 9,658
(4) FE Facilities - (57,432) - - (57,432)
(5) MYR - (20,115) - - (20,115)
(6) International - - 2,277 - 2,277
(7) Other 6,864 623 1,258 (3,121)(a) 5,624
(8) Internal revenues 34,728 (83,968) 19,559 29,681 (b) -
---------- ---------- --------- ---------- ----------
(9) Total revenues (151,099) 93,646 23,094 26,560 (7,799)
---------- ---------- --------- ---------- ----------
(10)
(11)EXPENSES:
(12) Fuel (1,873) (5,430) 2,970 - (4,333)
(13) Purchased Power (57,234) 31,493 - 83,968 (b) 58,227
(14) Purchased Gas - 2,925 - - 2,925
(15) Other operating expenses 58,517 95,834 23,596 (89,457)(a)(b) 88,490
(16) FE Facilities - (54,462) - - (54,462)
(17) MYR - (15,667) - - (15,667)
(18) International - - 8,467 - 8,467
(19) Mark-to-Market Adjustment - 5,442 (36) - 5,406
(20) Provision for depreciation and amortization 17,237 406 4,065 - 21,708
(21) Goodwill Impairment - 121,523 - - 121,523
(22) General taxes (9,702) 6,893 3,458 - 649
---------- ---------- --------- ---------- ----------
(23) Total expenses 6,945 188,957 42,520 (5,489) 232,933
---------- ---------- --------- ---------- ----------
(24)INCOME BEFORE INTEREST
(25) AND INCOME TAXES (158,044) (95,311) (19,426) 32,049 (240,732)
---------- ---------- --------- ---------- ----------
(26)Net interest charges:
(27) Interest expense (19,179) (5,681) (20,248) 32,049 (b) (13,059)
(28) Capitalized interest 1,372 478 (2,060) - (210)
(29) Subsidiaries' preferred stock dividends (6,202) - - - (6,202)
---------- ---------- --------- ---------- ----------
(30) Net interest charges (24,009) (5,203) (22,308) 32,049 (19,471)
---------- ---------- --------- ---------- ----------
(31)Income taxes (59,994) (27,181) (1,960) - (89,135)
---------- ---------- --------- ---------- ----------
(32)Income before discontinued operations
(33) and an accounting change (74,041) (62,927) 4,842 - (132,126)
(34)Discontinued operations - - - - -
(35)Cumulative effect of a change in accounting - - - - -
---------- ---------- --------- ---------- ----------
(36)NET INCOME $ (74,041) $ (62,927) $ 4,842 $ - $ (132,126)
========== ========== ========= ========== ==========
<FN>
Reconciling adjustments to segment operating results from internal management reporting
to consolidated external financial reporting.
(a) Principally fuel marketing revenues which are reflected as reductions to
expenses for internal management reporting purposes.
(b) Elimination of intersegment transactions.
(c) "Other" segment primarily consists of corporate support services and international businesses.
</FN>
5
FirstEnergy Statistical Summary
- -------------------------------------------------------------------------------------------------------------------------------
FirstEnergy Combined Electric Sales Statistics
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- ------------------------------------
2003 2002 Change 2003 2002 Change
------- ------- ------ --------------------- ------
(In Millions) (In Millions)
ELECTRIC GENERATION SALES (KWHs):
Retail -
Regulated 21,481 24,256 -11.4% 62,985 67,656 -6.9%
Unregulated 4,037 2,934 37.6% 10,601 6,385 66.0%
------- ------- ------ ------- ------- ------
Total Retail 25,518 27,190 -6.1% 73,586 74,041 -0.6%
Wholesale 12,221 10,368 17.9% 32,384 18,920 71.2%
------- ------- ----- ------- ------- ------
Total Electric Generation Sales 37,739 37,558 0.5% 105,970 92,961 14.0%
======= ======= ====== ======= ======= ======
ELECTRIC DISTRIBUTION DELIVERIES (KWHs):
Residential 9,978 10,741 -7.1% 27,362 27,199 0.6%
Commercial 8,920 9,298 -4.1% 25,065 24,601 1.9%
Industrial 8,891 9,139 -2.7% 27,037 27,424 -1.4%
Other 145 125 16.0% 425 397 7.1%
------- ------- ------ ------- ------- ------
Total Distribution Deliveries 27,934 29,303 -4.7% 79,889 79,621 0.3%
======= ======= ====== ======= ======= ======
ELECTRIC SALES SHOPPED (KWHs):
Residential 2,074 1,859 11.6% 5,120 4,161 23.0%
Commercial 2,109 1,122 88.0% 5,454 2,626 107.7%
Industrial 2,270 2,066 9.9% 6,330 5,178 22.2%
------- ------- ------ ------- ------- ------
Total Electric Sales Shopped 6,453 5,047 27.9% 16,904 11,965 41.3%
======= ======= ====== ======= ======= ======
- --------------------------------------------------------------------------------------------------------------------------------
At September 30,
------------------------------------------------------
2003 % Total 2002 % Total
---------- ------- ----------- --------
Capitalization ( in thousands):
-------------------------------
Total common equity $ 8,111,432 36% $ 7,743,727 32%
Preferred stock * 335,123 2% 782,945 3%
Long-term debt - mandatory preferred 302,455 1% - 0%
Long-term debt - all other* 11,973,394 53% 12,551,483 53%
Short-term debt * 246,083 1% 1,253,413 5%
Off-balance sheet debt equivalents: .
- Sale-leaseback arrangements 1,434,682 6% 1,473,073 6%
- Accounts receivable factoring 200,000 1% 200,000 1%
----------- ------ ----------- ------
Total Capitalization $22,603,169 100% $24,004,641 100%
=========== ====== =========== ======
<FN>
* Includes amounts due to be paid within one year, debt related to pending divestitures in 2002
and JCP&L securitization of $301 million and $320 million in 2003 and 2002, respectively.
</FN>
- -------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------------- ---------------------------------------
2003 2002 Change 2003 2002 Change
--------- ----------- ----------- --------- ----------- -------------
(in thousands) (in thousands)
Financial Statistics ( in thousands):
-------------------------------------
L-T Debt and Preferred Stock Redemptions $ 241,838 $1,185,125 $ (943,287) $ 656,365 $ 1,754,067 $ (1,097,702)
Short-term Debt Increase (Decrease) $(798,983) $ 508,720 $(1,307,703) $(846,733) $ 539,271 $ (1,386,004)
Capital Investments $ 145,083 $ 274,923 $ (129,840) $ 512,566 $ 694,614 $ (182,048)
-------------------------------------------------------------------------------- ------------------------------------------
Unusual Charges: 2003 vs 2002 Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------- --------------------------------------
2003 2002 Change 2003 2002 Change
--------- --------- ---------- --------- --------- ---------
Goodwill Impairment $ 121,523 $ - $ 121,523 $ 121,523 $ - $ 121,523
JCP&L Rate Case Disallowance (13,085) - (13,085) (171,606) - (171,606)
SSAI Severance Costs - 2002 - (11,325) 11,325 - (11,325) 11,325
Note Receivable Impairment - - - (12,563) - (12,563)
Loss on sale of natural gas operations unit - - - (6,200) - (6,200)
Long-term Derivative Contract Adjustment - - - - (18,091) 18,091
Equity Investment - Bankruptcy - - - - (30,371) 30,371
Telecommunications Investment Writedown - - - - (12,610) 12,610
Generation Project Cancellation - - - - (17,102) 17,102
--------- --------- --------- --------- --------- ---------
Total - Pre-tax Expenses $ 108,438 $ (11,325) $ 119,763 $ (68,846) $ (89,499) $ 20,653
========= ========= ========= ========= ========= =========
EPS Effect ($0.30) ($0.02) ($0.28) ($0.65) ($0.18) ($0.47)
========= ========= ========= ========== ========= =========
- ---------------------------------------------------------------------------------------------------------------------------------
6
FirstEnergy Statistical Summary
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ----------------------------------
2003 2002 Change 2003 2002 Change
--------- ---------- --------- --------- --------- --------
NATURAL GAS SALES (Decatherms): (in thousands) (in thousands)
Retail 12,228 15,572 -21.5% 55,951 75,310 -25.7%
Wholesale 7,224 10,874 -33.6% 26,938 40,703 -33.8%
--------- --------- -------- --------- --------- --------
Total Natural Gas Sales 19,452 26,446 -26.4% 82,889 116,013 -28.6%
========= ========= ======== ========= ========= ========
- ----------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
--------- --------- --------- --------- --------- --------
2003 2002 Change 2003 2002 Change
--------- --------- --------- --------- --------- --------
Regulatory Asset Amortization (in thousands) (in thousands)
----------------------------------
Depreciation and Amortization $ 256,313 $ 219,442 $ 36,871 $ 679,644 $ 597,895 $ 81,749
Income Tax Amortization 16,150 13,855 2,295 47,094 41,701 5,393
--------- --------- -------- --------- --------- --------
Total $ 272,463 $ 233,297 $ 39,166 $ 726,738 $ 639,596 $ 87,142
========= ========= ======== ========= ========= ========
Regulatory Deferrals
----------------------------------
Ohio Transition Plan
--------------------
Beginning Balance $ 354,689 $ 160,867 $ 259,353 $ 75,406
Deferral of Shopping Incentives 53,136 46,267 $ 6,869 140,785 109,082 $ 31,703
Deferral of New Regulatory Assets 1,921 14,148 (12,227) 9,608 36,794 (27,186)
--------- --------- -------- --------- --------- --------
Current period deferrals 55,057 60,415 $ (5,358) 150,393 145,876 $ 4,517
======== ========
--------- --------- --------- ---------
Ending Balance-Ohio Deferrals $ 409,746 $ 221,282 $ 409,746 $ 221,282
========= ========= ========= =========
Deferred Energy Costs
----------------------------------
New Jersey
----------
Beginning Balance $ 438,722 $ 413,858 $ 548,641 $ 301,204
Deferral (recovery) of energy costs 18,480 67,777 $(49,297) 61,061 180,431 $(119,370)
Rate case disallowance (13,085) - (13,085) (165,585) - (165,585)
---------- ---------- --------- ---------- --------- ---------
Current period charge 5,395 67,777 $(62,382) (104,524) 180,431 $(284,955)
---------- --------- ========= --------- --------- =========
Ending Balance $ 444,117 $ 481,635 $ 444,117 $ 481,635
========= ========= ========= =========
Mark-to-Market Adjustment
-------------------------------------
Expenses - Pre-Tax Income Effect:
Increase (Decrease) $ (12,129) $ (17,535) $ 5,406 $ (7,550) $ (19,681) $ 12,131
EPS Effect $0.02 $0.04 ($0.02) $0.01 $0.04 ($0.03)
- ----------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At September 30,
----------------------------------
Operating Statistics (12 mos. Ending) 2003 2002
------------------------------------- ------- -------
System Load Factor 64.9% 59.8%
Capacity Factors:
Fossil 58.4% 57.9%
Nuclear 64.0% 79.6%
Generation Output:
Fossil 69% 63%
Nuclear 31% 37%
Weather
Composite Heating Days Year-to-Date 3,883 3,246
(Normal - 3579)
Composite Cooling Days Year-to-Date 803 1,069
(Normal - 873)
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7
RECENT DEVELOPMENTS
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Ohio Rate Plan Proposal
On October 21, FirstEnergy filed, on behalf of its Ohio electric operating
companies, an application with the Public Utilities Commission of Ohio to
establish generation rates beginning January 1, 2006. In the application, the
Companies propose to either establish a competitive bidding process to determine
standard offer generation service rates as of January 1, 2006, or implement a
comprehensive Rate Stabilization Plan. The Plan is designed to provide stable
long-term competitive pricing of energy services, help ensure supplies of
electricity and enhance economic development. If approved, the Plan would
stabilize the price customers will pay for electricity by essentially
maintaining current prices through 2008, subject to limited adjustments. The
Company has requested Commission action on the proposal by December 31, 2003.
Common Stock Issuance
On September 17, FirstEnergy issued 32.2 million shares of new common stock at
$30.00 per share. Net proceeds of $935 million were used to reduce bank debt,
significantly improving FirstEnergy's credit quality and financial flexibility.
Anticipated earnings dilution for the year is $0.07 per share.
Davis-Besse Nuclear Power Station Pressure Test
On October 14, FirstEnergy announced that the recent pressure test at the
Davis-Besse Nuclear Power Station had fully met all of its objectives, including
validation of the integrity of the bottom of the plant's Reactor Vessel and of
the Reactor Coolant System. The overall leak rate for the 90,000-gallon Reactor
Coolant System was .006 gallons per minute, well within the federal limit of one
gallon per minute. Using a robotic camera to closely examine the bottom of the
reactor vessel and 52 instrumentation tubes, plant officials confirmed that
there is no indication of leakage in the bottom of the reactor vessel.
Remaining work to be completed prior to restart includes modifying the High
Pressure Injection Pumps, which already have been shipped to the vendor;
modification of the Electrical Distribution System; work on the Containment Air
Coolers; additional training for employees regarding performance issues,
regulatory compliance and safety culture; and enhancements to the Corrective
Action Program.
Beaver Valley Unit 2 Refueling Outage
On October 12, Beaver Valley Unit #2 returned to service, following a 28-day
scheduled refueling outage. Significant activities included the replacement of
60 fuel assemblies and 48 control rods in the reactor core, as well as other
modifications and improvements to ensure continued safe and reliable operation.
The reactor vessel head and under-vessel were found to be in good condition
following a thorough inspection. Unit 2 had operated for 474 consecutive days
since its last refueling and had posted an availability factor of 99.6 percent.
Agreement to Sell Avon Energy Partners Holdings
On October 21, an agreement was reached to sell our 20.1% interest in Avon
Energy Partners Holdings to a subsidiary of Powergen UK for $8 million. This
transaction also includes Aquila's 79.9% ownership interest. The sale is
contingent upon: (1) reaching an agreement with Avon Energy bondholders to sell
their bonds for 95.8% of their nominal value; (2) approval from the European
merger commission; and (3) approval of Aquila's participation in the
transaction by the State Corporation Commission of Kansas. The holders of
approximately half of the outstanding bonds already have given their consent.
This Consolidated Report to the Financial Community includes forward-looking
statements based on information currently available to management. Such
statements are subject to certain risks and uncertainties. These statements
typically contain, but are not limited to, the terms "anticipate," "expect,"
"believe," "estimate," and similar words. Actual results may differ materially
due to the speed and nature of increased competition and deregulation in the
electric utility industry, economic or weather conditions affecting future sales
and margins, changes in markets for energy services, changing energy and
commodity market prices, replacement power costs being higher than anticipated
or inadequately hedged, maintenance costs being higher than anticipated,
legislative and regulatory changes (including revised environmental
requirements), adverse regulatory or legal decisions, availability and cost of
capital, inability of the Davis-Besse Nuclear Power Station to restart
(including because of any inability to obtain a favorable final determination
from the Nuclear Regulatory Commission) in the fall of 2003, inability to
accomplish or realize anticipated benefits of strategic goals, the ability to
access the public securities markets, further investigation into the causes of
the August 14, 2003 regional power outage and the outcome, cost and other
effects of present and potential legal and administrative proceedings and claims
related to that outage, a denial of or material change to the Company's
Application related to its Rate Stabilization Plan, and other factors discussed
from time to time in FirstEnergy's Securities and Exchange Commission filings,
including its annual report on Form 10-K (as amended) for the year ended
December 31, 2002, its Form 10-Q for the quarter ended June 30, 2003 and under
"Risk Factors" in the Prospectus Supplement dated September 12, 2003 to the
Prospectus dated August 29, 2003 (which was part of the Registration
Statement-SEC File No. 333-103865) and other similar factors.
8