Exhibit 99.2
Consolidated Report to
the Financial Community (Unaudited)
- --------------------------------------------------------------------------------------------------------
First Quarter 2004 Highlights
(Released May 7, 2004)
----------------------------------------------------------------
o Normalized non-GAAP earnings, | After Tax EPS Variance Analysis 1st Qtr.|
excluding costs associated | ------------------------------- --------|
with the Davis-Besse extended | 1st Quarter 2003 Basic EPS-GAAP Basis (Restated) $ 0.74 |
outage, were $0.65 per share, | Cumulative Effect of Accounting Change - 2003 (0.35) |
compared with first quarter | ----- |
2003 normalized non-GAAP | 1st Quarter 2003 Basic EPS - Non-GAAP Basis $ 0.39 |
earnings of $0.57 per share. | Davis-Besse Incremental Expenses - 2003 0.18 |
GAAP earnings for the first | ----- |
quarter of 2004 were $0.53 per | 1st Quarter 2003 Normalized Earnings - Non-GAAP $ 0.57 |
share compared with the GAAP | Electric Gross Margin (Excl. Davis-Besse 0.07 |
earnings of $0.74 per share in | JCP&L Rate Reduction (Aiugust 2003) (0.09) |
the same quarter of 2003, | Generation Operating Expenses (Excl. Davis-Besse) 0.09 |
which included income of $0.35 | Energy Delivery (0.02) |
per share from the cumulative | Pension and Other Employee Benefits 0.06 |
effect of an accounting change | Depreciation and Amortization (0.05) |
regarding the adoption of SFAS | Financing Costs 0.07 |
No.143. | Common Stock Dilution (0.06) |
| Other 0.01 |
| ----- |
| 1st Quarter 2004 Normalized Earnings - Non-GAAP $ 0.65 |
| Davis-Besse Incremental Expenses - 2004 (0.12) |
| ----- |
| 1st Quarter 2004 Basic EPS - GAAP Basis $ 0.53 |
| ----- |
----------------------------------------------------------------
1Q 2004 Results Compared With 1Q 2003
- -------------------------------------
o Electric distribution deliveries were flat as a 1% increase in industrial
deliveries was offset by lower residential deliveries due to milder weather
compared with the unusually cold temperatures in the first quarter of 2003.
Heating-degree-days were 4% lower than the same period last year, but 6%
above normal. Total electric generation sales rose 4% due to a 20% increase
in wholesale sales. Retail generation sales declined 2% largely as a result
of increased customer shopping.
o Electric gross margin increased $39 million after adjusting for changes in
regulatory deferrals, JCP&L's rate reduction in August 2003, and
Davis-Besse replacement power costs. The increase in electric gross margin
resulted from higher wholesale generation sales, driven by an 11% increase
in generation output, and lower prices for purchased power.
o Generation operating expenses, excluding incremental expenses associated
with the Davis-Besse outage, decreased $47 million. Nuclear operating
expenses decreased $37 million due to the absence of a refueling outage
this quarter, compared with the Beaver Valley Unit 1 outage last year.
Fossil operating expenses decreased $10 million, reflecting fewer
maintenance outages compared with the same period last year.
o Energy delivery expenses were $10 million higher as a result of increased
vegetation management activities and accelerated spending to enhance system
reliability.
1
o Pension and other employee benefit costs decreased approximately $30
million as a result of favorable market returns in 2003, changes to health
care benefits for retirees, and recent Medicare legislation regarding
prescription drugs.
o Total depreciation and amortization expenses, adjusted for the regulatory
deferrals and the JCP&L rate case impact, increased $25 million due to
higher Ohio transition cost amortization.
o Net interest charges decreased $34 million. Financing activities during the
quarter included $29 million in mandatory long-term debt redemptions, $50
million in optional debt redemptions, and $256 million of refinancing and
repricing transactions. These are expected to result in annualized savings
of $6 million. Additional shares outstanding from the issuance of 32.2
million shares of common stock in the third quarter of 2003 diluted
earnings by $0.06 per share.
1Q 2004 Earnings Impact Associated with Davis-Besse
- ---------------------------------------------------
o Incremental expenses associated with the extended outage at Davis-Besse
totaled $65 million, or $0.12 per share ($64 million of replacement power
costs and $1 million of O&M expenses).
2004 Earnings and Free Cash Flow Guidance*
- -----------------------------------------
o Earnings guidance for 2004 remains at $2.70 to $2.85 per share, excluding
incremental expenses associated with the Davis-Besse outage and unusual
charges.
o Free cash flow guidance for 2004 remains at $825 million, but now includes
the incremental expenses associated with the Davis-Besse outage.
* The GAAP to Non-GAAP reconciliation statements are available on FirstEnergy
Corp.'s website at www.firstenergycorp.com/ir.
--------------------------
For additional information, please contact:
Kurt E. Turosky Terrance G. Howson Thomas C. Navin
Director, Vice President, Treasurer
Investor Relations Investor Relations (330) 384-5889
(330) 384-5500 (973) 401-8519
2
FIRSTENERGY CORP. CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31,
------------------------------------
2004 2003 Change
----------- ----------- -----------
(1)REVENUES: (In thousands)
(2) Electric Sales $2,655,612 $2,624,216 $ 31,396
(3) Natural Gas 164,687 244,866 (80,179)
(4) FE Facilities 86,500 74,212 12,288
(5) MYR 91,237 112,294 (21,057)
(6) International 6 7,662 (7,656)
(7) Other 184,532 157,487 27,045
---------- ---------- --------
(8) Total revenues 3,182,574 3,220,737 (38,163)
---------- ---------- --------
(9)
(10)EXPENSES:
(11) Fuel 198,359 172,758 25,601
(12) Purchased Power 935,967 927,878 8,089
(13) Purchased Gas 153,528 224,797 (71,269)
(14) Other operating expenses 663,123 728,114 (64,991)
(15) FE Facilities 86,920 74,759 12,161
(16) MYR 90,782 109,633 (18,851)
(17) International 262 10,389 (10,127)
(18) Mark-to-Market Adjustment 528 3,690 (3,162)
(19) Provision for depreciation 146,037 161,557 (15,520)
(20) Amortization of regulatory assets 266,195 214,806 51,389
(21) General taxes 179,085 178,067 1,018
---------- ---------- --------
(22) Total expenses 2,720,786 2,806,448 (85,662)
---------- ---------- --------
(23)INCOME BEFORE INTEREST
(24) AND INCOME TAXES 461,788 414,289 47,499
---------- ---------- --------
(25) Net interest charges:
(26) Interest expense 172,864 200,261 (27,397)
(27) Capitalized interest (6,470) (9,152) 2,682
(28) Subsidiaries' preferred stock dividends 5,281 14,542 (9,261)
---------- ---------- --------
(29) Net interest charges 171,675 205,651 (33,976)
---------- ---------- --------
(30) Income taxes 116,114 94,258 21,856
---------- ---------- --------
(31) Income before discontinued operations
(32) and accounting change 173,999 114,380 59,619
(33) Discontinued Operations - 1,975 (1,975)
(34) Cumulative effect of accounting change - 102,147 (102,147)
---------- ---------- --------
(35)NET INCOME $ 173,999 $ 218,502 $(44,503)
========== ========== ========
(36)
(37) Basic earnings per common share:
(38) Before discontinued operations and
(39) accounting change $ 0.53 $ 0.39 $ 0.14
(40) Discontinued operations - - -
(41) Cumulative effect of accounting change - 0.35 (0.35)
----------- ---------- ---------
(42) $ 0.53 $ 0.74 $ (0.21)
========== ========== ========
(43) Weighted average number of basic
(44) shares outstanding 327,057 293,886 33,171
========== ========== ========
(45)
(46) Diluted earnings per common share:
(47) Before discontinued operations and
(48) accounting change $ 0.53 $ 0.39 $ 0.14
(49) Discontinued operations - - -
(50) Cumulative effect of accounting change - 0.35 (0.35)
---------- ---------- --------
(51) $ 0.53 $ 0.74 $ (0.21)
========== ========== ========
(52) Weighted average number of diluted
(53) shares outstanding 329,034 294,877 34,157
========== ========== ========
3
FirstEnergy Consolidated Income Segments
(Unaudited)
Three Months Ended March 31, 2004
-----------------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
-------------------------------------- ----------- ----------- -------- ------------ ------------
(1)REVENUES:
(2) Electric Sales $ 1,159,022 $ 1,496,590 $ - $ - $ 2,655,612
(3) Natural Gas - 164,687 - - 164,687
(4) FE Facilities - 86,500 - - 86,500
(5) MYR - 91,237 - - 91,237
(6) International - - 6 - 6
(7) Other 136,090 34,342 6,578 7,522 (a) 184,532
(8) Internal revenues - - 119,875 (119,875)(b) -
----------- ----------- -------- --------- -----------
(9) Total revenues 1,295,112 1,873,356 126,459 (112,353) 3,182,574
----------- ----------- -------- --------- -----------
(10)
(11)EXPENSES:
(12) Fuel - 198,359 - - 198,359
(13) Purchased Power - 935,967 - - 935,967
(14) Purchased Gas - 153,528 - - 153,528
(15) Other operating expenses 272,585 374,531 113,445 (97,438)(a)(b) 663,123
(16) FE Facilities - 86,920 - - 86,920
(17) MYR - 90,782 - - 90,782
(18) International - - 262 - 262
(19) Mark-to-Market Adjustment - 456 72 - 528
(20) Provision for depreciation 127,245 8,643 10,149 - 146,037
(21) Amortization of regulatory assets 266,195 - - - 266,195
(22) General taxes 161,015 11,290 6,780 - 179,085
----------- ----------- ---------- --------- -----------
(23) Total expenses 827,040 1,860,476 130,708 (97,438) 2,720,786
----------- ----------- ---------- --------- -----------
(24)Claim Settlement - - - - -
(25)INCOME BEFORE INTEREST
(26) AND INCOME TAXES 468,072 12,880 (4,249) (14,915) 461,788
----------- ----------- ---------- --------- -----------
(27)Net interest charges:
(28) Interest expense 105,222 13,507 69,050 (14,915)(b) 172,864
(29) Capitalized interest (5,112) (1,305) (53) - (6,470)
(30) Subsidiaries' preferred stock dividends 5,281 - - - 5,281
----------- ----------- ---------- --------- -----------
(31) Net interest charges 105,391 12,202 68,997 (14,915) 171,675
----------- ----------- ---------- -------- -----------
(32)Income taxes 146,942 278 (31,106) - 116,114
----------- ----------- ---------- --------- -----------
(33)Income before discontinued operations
(34) and an accounting change 215,739 400 (42,140) - 173,999
(35)Discontinued operations - - - - -
(36)Cumulative effect of an accounting change - - - - -
----------- ----------- ---------- --------- -----------
(37)NET INCOME $ 215,739 $ 400 $ (42,140) $ - $ 173,999
=========== =========== ========== ========= ===========
(Unaudited)
Three Months Ended March 31, 2003
----------------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
------------------------------------- ----------- ----------- ---------- ----------- ------------
(1)REVENUES:
(2) Electric Sales $ 1,213,467 $ 1,410,749 $ - $ - $ 2,624,216
(3) Natural Gas - 244,866 - - 244,866
(4) FE Facilities - 74,212 - - 74,212
(5) MYR - 112,294 - - 112,294
(6) International - - 7,662 - 7,662
(7) Other 95,477 32,149 26,533 3,328 (a) 157,487
(8) Internal revenues - - 123,794 (123,794)(b) -
----------- ----------- -------- --------- ------------
(9) Total revenues 1,308,944 1,874,270 157,989 (120,466) 3,220,737
----------- ----------- -------- --------- ------------
(10)
(11)EXPENSES:
(12) Fuel - 172,758 - - 172,758
(13) Purchased Power - 927,878 - - 927,878
(14) Purchased Gas - 224,797 - - 224,797
(15) Other operating expenses 219,480 484,739 109,654 (85,759)(a)(b) 728,114
(16) FE Facilities - 74,759 - - 74,759
(17) MYR - 109,633 - - 109,633
(18) International - - 10,389 - 10,389
(19) Mark-to-Market Adjustment - 3,841 (151) - 3,690
(20) Provision for depreciation 140,572 11,698 9,287 - 161,557
(21) Amortization of regulatory assets 214,806 - - - 214,806
(22) General taxes 163,758 10,337 3,972 - 178,067
----------- ----------- -------- --------- -----------
(23) Total expenses 738,616 2,020,440 133,151 (85,759) 2,806,448
----------- ----------- -------- --------- -----------
(24)INCOME BEFORE INTEREST
(25) AND INCOME TAXES 570,328 (146,170) 24,838 (34,707) 414,289
----------- ----------- -------- --------- -----------
(26)Net interest charges:
(27) Interest expense 116,752 13,844 104,372 (34,707)(b) 200,261
(28) Capitalized interest (7,050) (2,102) - - (9,152)
(29) Subsidiaries' preferred stock dividends 14,542 - - - 14,542
----------- ----------- -------- --------- -----------
(30) Net interest charges 124,244 11,742 104,372 (34,707) 205,651
----------- ----------- -------- --------- -----------
(31)Income taxes 189,465 (66,093) (29,114) - 94,258
----------- ----------- -------- --------- -----------
(32)Income before discontinued operations
(33) and an accounting change 256,619 (91,819) (50,420) - 114,380
(34)Discontinued operations - (4,478) 6,453 - 1,975
(35)Cumulative effect of a change in
accounting 100,960 1,187 - - 102,147
----------- ----------- -------- --------- -----------
(36)NET INCOME $ 357,579 $ (95,110) $(43,967) $ - $ 218,502
============ =========== ======== ========= ===========
4
FIrstEnergy Consolidated Income Segments
(Unaudited)
Three Months Ended March 31, 2004 VS 2003
-----------------------------------------------------------------------------
Regulated Competitive Other Reconciling
(In thousands): Services Services (c) Adjustments Consolidated
---------------------------------------- ---------- --------- --------- ---------- ------------
(1)REVENUES:
(2) Electric Sales $ (54,445) $ 85,841 $ $ - $ - $ 31,396
(3) Natural Gas - (80,179) - - (80,179)
(4) FE Facilities - 12,288 - - 12,288
(5) MYR - (21,057) - - (21,057)
(6) International - - (7,656) - (7,656)
(7) Other 40,613 2,193 (19,955) 4,194 (a) 27,045
(8) Internal revenues - - (3,919) 3,919 (b) -
--------- --------- -------- -------- ---------
(9) Total revenues (13,832) (914) (31,530) 8,113 (38,163)
--------- --------- -------- -------- ---------
(10)
(11)EXPENSES:
(12) Fuel - 25,601 - - 25,601
(13) Purchased Power - 8,089 - - 8,089
(14) Purchased Gas - (71,269) - - (71,269)
(15) Other operating expenses 53,105 (110,208) 3,791 (11,679)(a)(b) (64,991)
(16) FE Facilities - 12,161 - - 12,161
(17) MYR - (18,851) - - (18,851)
(18) International - - (10,127) - (10,127)
(19) Mark-to-Market Adjustment - (3,385) 223 - (3,162)
(20) Provision for depreciation (13,327) (3,055) 862 - (15,520)
(21) Amortization of regulatory assets 51,389 - - - 51,389
(22) General taxes (2,743) 953 2,808 - 1,018
--------- --------- -------- -------- ---------
(23) Total expenses 88,424 (159,964) (2,443) (11,679) (85,662)
--------- --------- -------- -------- ---------
(24)INCOME BEFORE INTEREST
(25) AND INCOME TAXES (102,256) 159,050 (29,087) 19,792 47,499
--------- --------- -------- -------- ---------
(26) Net interest charges:
(27) Interest expense (11,530) (337) (35,322) 19,792 (27,397)
(28) Capitalized interest 1,938 797 (53) - 2,682
(29) Subsidiaries' preferred stock dividends (9,261) - - - (9,261)
--------- --------- -------- -------- ---------
(30) Net interest charges (18,853) 460 (35,375) 19,792 (33,976)
--------- --------- -------- -------- ---------
(31)Income taxes (42,523) 66,371 (1,992) - 21,856
(32)Income before discontinued operations
(33) and an accounting change (40,880) 92,219 8,280 - 59,619
(34)Discontinued operations - 4,478 (6,453) - (1,975)
(35)Cumulative effect of a change
in accounting (100,960) (1,187) - - (102,147)
---------- --------- -------- -------- ---------
(36)NET INCOME $(141,840) $ 95,510 $ 1,827 $ - $ (44,503)
========= ========= ======== ======== =========
<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 Corp. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
As of As of
March 31, 2004 December 31, 2003
-------------- -----------------
(In thousands)
Assets
-------------------------------------
Current Assets:
Cash and cash equivalents $ 280,269 $ 113,975
Receivables 1,232,754 1,505,500
Other 958,719 623,836
------------ ------------
2,471,742 2,243,311
Property, Plant and Equipment 13,259,146 13,268,922
Investments 3,307,212 3,497,691
Deferred Charges 13,546,436 13,900,024
------------ ------------
$ 32,584,536 $ 32,909,948
===========- ============
Liabilities and Capitalization
----------------------------------------------
Current Liabilities
Currently payable long-term debt and preferred stock $ 1,736,737 $ 1,754,197
Short-term borrowings 133,999 521,540
Accounts payable 548,221 725,239
Other 1,546,914 1,471,191
------------- ------------
3,965,871 4,472,167
Capitalization
Common stockholders' equity 8,344,723 8,289,341
Preferred stock not subject to mandatory redemption 335,123 335,123
Long-term debt and other long-term obligations 10,150,067 9,789,066
------------- ------------
18,829,913 18,413,530
Noncurrent Liabilities 9,788,752 10,024,251
------------ ------------
$ 32,584,536 $ 32,909,948
============ ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
-----------------------------
2004 2003
----------- ---------
(In thousands)
Cash flows from operating activities
Net income $ 173,999 $ 218,502
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization of
regulatory assets, nuclear fuel and leases 434,106 391,281
Deferred costs recoverable as regululatory assets (83,907) (94,311)
Deferred income taxes and investment tax credits 5,923 21,882
Cumulative effect of accounting change - (174,663)
Income from discontinued operations - (1,975)
Change in working capital and other 119,502 101,546
--------- ---------
649,623 462,262
Cash flows from financing activities (240,024) (236,375)
Cash flows from investing activities (243,305) (117,708)
--------- ---------
Net increase in cash and cash equivalents 166,294 108,179
Cash and cash equivalents at beginning of period 113,975 225,932
--------- ---------
Cash and cash equivalents at end of period $ 280,269 $ 334,111
========= =========
6
FirstEnergy Statistical Summary
Adjusted Capitalization (Including Off-Balance Sheet Items)
As of March 31,
---------------------------------------------------------------------
2004 % Total 2003 % Total
-------------------- -----------------------------------------------
(Dollars in thousands)
Total common equity $ 8,344,723 37% $ 7,163,301 31%
Preferred stock * 335,123 2% 335,123 1%
Long-term debt - all other* 11,886,804 53% 13,097,207 57%
Short-term debt * 133,999 1% 855,327 4%
Off-balance sheet debt equivalents:
- Sale-leaseback arrangements 1,408,416 6% 1,496,580 6%
-Accounts receivable factoring 200,000 1% 145,000 1%
----------- --- ---------- ---
Total $22,309,065 100% $23,092,538 100%
=========== === =========== ===
<FN>
* Includes amounts due to be paid within one year, JCP&L securitization of $293 million and $310 million in 2004 and 2003,
respectively.
</FN>
Financial Statistics
--------------------------------------------------------
Three Months Ended March 31,
--------------------------------------------------------
2004 2003 Change
--------------- ------------- -----------
(in thousands)
L-T Debt and Preferred Stock Redemptions $ 268,920 $ 200,866 $ 68,054
Short-term Debt Increase (Decrease) $(387,541) $(237,490) $(150,051)
Capital Expenditures $ 138,406 $ 224,419 $ (86,013)
Three Months Ended March 31,
-------------------------------------------------------
2004 2003 Change
--------- --------- ---------
Regulatory Deferrals
-----------------------------------------
Ohio Transition Plan
--------------------
Beginning Balance $ 453,005 $ 259,353
Deferral of Shopping Incentives 41,561 45,426 $ (3,865)
Deferral of New Regulatory Assets 2,544 4,590 (2,046)
--------- --------- ---------
Current period deferrals 44,105 50,016 $ (5,911)
=========
--------- ---------
Ending Balance-Ohio Deferrals $ 497,110 $ 309,369
========= =========
Deferred Energy Costs
-----------------------------------------
New Jersey
----------
Beginning Balance $ 440,900 $ 548,641
Deferral (recovery) of energy costs (15,500) (18,313) $ 2,813
--------- --------- ========
Ending Balance $ 425,400 $ 530,328
========= -========
Mark-to-Market Adjustment
-----------------------------------------
Expenses - Pre-Tax Income Effect:
Increase (Decrease) $ 528 $ 3,690 $ (3,162)
EPS Effect $ 0.00 ($0.01) $0.01
7
FirstEnergy Statistical Summary
Three Months Ended March 31,
-------------------------------------------
ELECTRIC SALES STATISTICS 2004 2003 Change
---- ---- ------
(KWH In Millions)
Electric Generation Sales
Retail -
Regulated 20,742 22,118 -6.2%
Unregulated 4,016 3,229 24.4%
----- ------ ----
Total Retail 24,758 25,347 -2.3%
Wholesale 12,463 10,426 19.5%
------ ------ ----
Total Electric Generation Sales 37,221 35,773 4.0%
====== ====== ====
Electric Distribution Deliveries
Residential 10,107 10,127 -0.2%
Commercial 8,296 8,292 0.0%
Industrial 8,798 8,724 0.8%
Other 133 140 -5.0%
------ ------ ----
Total Distribution Deliveries 27,334 27,283 0.2%
====== ====== ====
Electric Sales Shopped
Residential 2,173 1,647 31.9%
Commercial 2,336 1,626 43.7%
Industrial 2,083 1,892 10.1%
------ ------ ----
Total Electric Sales Shopped 6,592 5,165 27.6%
====== ====== ====
Three Months Ended March 31,
-----------------------------------------------
2004 2003 Change
------- ------- ------
NATURAL GAS SALES STATISTICS (Decatherms in thousands)
Retail 18,102 29,577 -38.8%
Wholesale 8,099 10,037 -19.3%
------ ------ -----
Total Natural Gas Sales 26,201 39,614 -33.9%
====== ====== =====
As of March 31,
------------------------------
Operating Statistics (12 mos. Ending) 2004 2003
------------------------------------- ---- ----
System Load Factor 64.9% 61.3%
Capacity Factors:
Fossil 59.4% 59.3%
Nuclear 66.6% 70.8%
Generation Output:
Fossil 68% 67%
Nuclear 32% 33%
Weather
Composite Heating Days Year-to-Date 2,988 3,116
(Normal - 2828)
8
RECENT DEVELOPMENTS
- --------------------------------------------------------------------------------
Davis-Besse Nuclear Plant
- ------------------------
On March 8, the Davis-Besse Nuclear Plant received authorization to restart from
the Nuclear Regulatory Commission (NRC) following a two-year extended outage to
replace the reactor head and make other equipment and performance improvements.
The plant reached the 100 percent power level on April 4. As part of the NRC's
restart authorization, independent assessments of the site's operational
performance; safety culture and safety conscious work environment; and
corrective action and engineering programs will be conducted annually for the
next five years. Additionally, a visual inspection of the reactor head and lower
vessel will be conducted during the plant's mid-cycle outage.
Ohio Rate Stabilization Plan
- ----------------------------
On February 23, following the completion of the cross-examination in the direct
case, FirstEnergy's Ohio electric utility operating companies filed the rebuttal
testimony of President and CEO Anthony J. Alexander in our regulatory proceeding
for establishing generation service rates beginning January 1, 2006. In the
testimony, the Companies made certain modifications to the Rate Stabilization
Plan (RSP) initially filed on October 21, 2003 to address the comments and
testimony of the Commission Staff witnesses, as well as those provided by some
of the intervening parties. Initial and reply briefs were filed on March 17 and
31, respectively.
On April 21, in response to certain intervenors' request, the Commission allowed
for oral arguments before the Commissioners on the merits of the RSP proposal.
Certain intervenors, including The Ohio Consumers' Counsel, The City of
Cleveland, and several power marketers, argued against adoption of the RSP,
while Mr. Alexander provided rebuttal arguments outlining the Plan's benefits.
We anticipate a Commission Order in the proceeding within the next few weeks.
Corporate Governance Enhancements
- ---------------------------------
On February 18, FirstEnergy's Board of Directors elected, subject to SEC
approval, to accelerate termination of its Shareholder Rights Plan to March
2004. The plan was originally set to expire in November 2007. The Board also
submitted two other proposals for consideration at the May 18 Annual
Shareowners' Meeting. The first proposal would phase out the classified
structure of the Board, whereby all directors would now be elected annually as
opposed to having staggered three-year terms. The second proposal would reduce
the percentage of affirmative votes from 80 percent to two-thirds for making
certain amendments to governing documents. All three initiatives were in
response to the support shown on similar shareholder proposals at the 2003
Annual Meeting and furthered the Board's goal of insuring sound corporate
governance policies. On May 5, the SEC issued approval of the changes to the
Articles and Code of Regulations and termination of the Shareholder Rights Plan.
Forward-Looking Statements: This Consolidated Report to the Financial Community
includes forward-looking statements based on information currently available to
management. Such statements are subject to certain risks and uncertainties.
These statements typically contain, but are not limited to, the terms
"anticipate," "potential," "expect," "believe," "estimate," and similar words.
Actual results may differ materially due to the speed and nature of increased
competition and deregulation in the electric utility industry, economic or
weather conditions affecting future sales and margins, changes in markets for
energy services, changing energy and commodity market prices, replacement power
costs being higher than anticipated or inadequately hedged, maintenance costs
being higher than anticipated, legislative and regulatory changes (including
revised environmental requirements), adverse regulatory or legal decisions and
the outcome of governmental investigations, availability and cost of capital,
the continuing availability and operation of generating units, the inability to
accomplish or realize anticipated benefits of strategic goals, the ability to
improve electric commodity margins and to experience growth in the distribution
business, 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 for
the year ended December 31, 2003, and other similar factors. FirstEnergy
expressly disclaims any current intention to update any forward-looking
statements contained in this document as a result of new information, future
events, or otherwise.
9