EXHIBIT 99.2
Terrance G. Howson
Vice President
Investor Relations
FirstEnergy Corp.
76 S. Main Street
Akron, Ohio 44308
Tel 973-401-8519
September 14, 2004
TO THE INVESTMENT COMMUNITY: 1
As detailed in today's attached news release, FirstEnergy Corp. announced that
its subsidiaries will make a voluntary $500-million contribution to their
pension plan. This letter will provide you with additional details concerning
this action.
Voluntary Pension Plan Contribution
The Internal Revenue Service establishes minimum cash funding requirements for
the corporation's pension plan. Our current projections indicate that cash
contributions of approximately $600 million would be required during the 2006
through 2007 time period. Our election to pre-fund the plan is expected to
eliminate that funding requirement. Since the contribution is deductible for tax
purposes, the after-tax cash impact of the funding is approximately $300
million. We will fund this payment by drawing on our short-term credit
facilities.
We believe that the pre-funding should be viewed positively from a credit
perspective. Due to the tax deductibility of the contribution, we will
effectively eliminate a $500 million liability through a net borrowing of $300
million. Additionally, common shareholders' equity will also be enhanced at the
end of the year since the contribution will significantly reduce, and may
eliminate, the minimum pension liability that currently reduces accumulated
other comprehensive income by approximately $300 million.
We estimate that our pre-funding election should be accretive to earnings by
about $0.06 per share during each of the next three years. These earnings arise
primarily from the spread between our borrowing costs to fund the pre-payment
and our assumed earnings rate on our pension plan assets. Additionally, the
pre-funding will reduce the level of insurance premiums that the plan pays to
the Pension Benefit Guaranty Corporation.
Given our current financial position and available borrowing capacity, we
decided that it was sound liability management to make a cash contribution to
the pension plan now rather than wait several years and be subject to a series
of mandatory funding requirements. In addition to the favorable
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1
Please see the forward-looking statements at the end of this letter.
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earnings impact, the pre-funding will provide additional pension plan security
for our employees and retirees and will result in the plan being essentially
fully funded on an Accumulated Benefit Obligation (ABO) basis.
Upcoming FirstEnergy Investor Events
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Merrill Lynch Global Power Conference
September 29, 2004
New York City, NY
3rd Quarter, 2004 Earnings Release
October 21, 2004 (Tentative)
Edison Electric Institute (EEI) Financial Conference
October 24-27, 2004
San Diego, CA
Banc of America Securities Energy & Power Conference
November 15-17, 2004
Las Vegas, NV
Annual FirstEnergy Analyst Meeting
December 1, 2004
New York City, NY
If you have any questions concerning information in this update, please call
Kurt Turosky, Director of Investor Relations, at (330) 384-5500, or me at (973)
401-8519
Very truly yours,
Terrance G. Howson
Vice President - Investor Relations
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Forward-Looking Statements
This investor letter 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 (including
revocation of necessary licenses or operating permits), 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, the final
outcome in the proceeding related to the Company's Application for a Rate
Stabilization Plan, the risks and other factors discussed from time to time in
the Company's Securities and Exchange Commission filings, including its annual
report on Form 10-K (as amended) for the year ended December 31, 2003, and its
Form 10-Q for the quarter ended June 30, 2004, and other similar factors. The
Company expressly disclaims any current intention to update any forward-looking
statements contained in this letter as a result of new information, future
events, or otherwise.
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