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FirstEnergy Annual Report, Year Ended Dec 31, 1999

Filing Date
Filed March 29, 2000
Period End
December 31, 1999
Security
FE
In the record · 2016–202610-K1310-Q338-K179

FE filed 13 annual reports (10-K), 33 quarterly reports (10-Q) and 179 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Sep ’17Sep ’17
  2. Material agreement8-K · Sep ’19Sep ’19
  3. Material agreement8-K · Nov ’21Nov ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed March 29, 2000. Cited figures are marked; the original filing is the authoritative source.

FirstEnergy Corp. (FE) reported a strong 1999 for its combined 10-K filing, with revenues of $6.32 billiona (up from $5.87 billion), net income of $568.3 million (up 38% from $410.9 million), and basic and diluted EPS of $2.50 versus $1.82 in 1998.

The 1998 comparison was depressed by a $30.5 millionb after-tax extraordinary charge tied to Pennsylvania Power's deregulation, so underlying earnings growth was smaller than the headline figure suggests. Results were supported by higher retail and wholesale kWh sales, the absence of unusually high 1998 purchased power costs, and lower interest expense, partly offset by higher depreciation (including $160.6 million of accelerated OE cost recovery) and higher other operating expenses. The balance sheet shows total assets of about $18.2 billion, with common equity of $4.56 billion, long-term debt reduced to $6.0 billion from $6.35 billion, and common equity rising to roughly 40% of capitalization from 34% at the end of 1997.

Management repurchased 4.6 million shares in 1999 at an average of $28.08c and entered a forward purchase of 1.4 million more shares. Cash requirements for 2000 are expected to be met without new securities issuance, and the company projects $3.0 billion of capital spending over 2000-2004. The main investor risks center on Ohio's electric restructuring.

Customer choice begins January 1, 2001, and the PUCO's transition plan order (expected by mid-2000) will determine whether recovery of about $1.8 billiond of generation-related transition costs and $1.5 billion of regulatory assets is adequate. Inadequate recovery of nuclear investments could produce a material earnings charge. The filing also discloses an EPA/DOJ Clean Air Act lawsuit over the Sammis Plant seeking up to $27,500 per day in penalties and installation of control technology, which the company considers without merit but cannot predict the outcome of.

02—Key points

Key Highlights

  1. Net income rose to $568.3 million ($2.50/share) from $410.9 million ($1.82/share) in 1998, though 1998 included a $30.5 million after-tax extraordinary charge.
  2. Total revenues increased 7.6% to $6.32 billion, driven by EUOC kWh sales growth of 6.6% (wholesale up 28.4%) and new acquired businesses such as FE Facilities.
  3. Long-term debt fell to $6.0 billion from $6.35 billion, with net redemptions of $528.9 million and average cost of long-term debt reduced to 7.65% from 8.02%.
  4. Common equity reached $4.56 billion, about 40% of capitalization, up from 34% at the end of 1997 after the Centerior merger.
  5. Ohio transition plan (refiled December 1999) faces a PUCO order expected by mid-2000; SFAS 71 will be discontinued for generation businesses at that time, with a potential material earnings charge if nuclear recovery is inadequate.
  6. Sammis Plant Clean Air Act litigation by the EPA/DOJ and state attorneys general seeks injunctive relief and penalties of up to $27,500 per day; management believes the claims are without merit.
  7. Capital spending forecast of $3.0 billion for 2000-2004, with the company stating 2000 cash needs can be met without issuing new securities.

03—Questions

Frequently Asked Questions

  1. Why did FirstEnergy's EPS growth look so strong in 1999?

    Part of the increase is a base effect. 1998 net income of $410.9 million included a $30.5 million after-tax extraordinary charge from discontinuing SFAS 71 for Pennsylvania Power's generation business. Excluding that charge, income before extraordinary items rose from $441.4 million to $568.3 million, about 29%, which is still a strong gain driven by higher sales and lower purchased power costs.

  2. What is the biggest regulatory risk to FirstEnergy's earnings?

    The PUCO's decision on the Ohio transition plan, expected by mid-2000, is the key item. If the approved plan does not adequately recover roughly $1.8 billion of generation-related transition costs and about $1.5 billion of regulatory assets, and nuclear generating unit investments, the company would take a charge to earnings that could be material. Ohio customer choice begins January 1, 2001.

  3. How exposed is FirstEnergy to the Sammis Plant lawsuit?

    The Department of Justice complaint, which also names Ohio Edison and Pennsylvania Power, seeks installation of best available control technology and civil penalties of up to $27,500 per day of violation. The company believes the plant is in full compliance and the claims are without merit, but it cannot predict the outcome. The company expects the plant to keep operating during the litigation. The filing does not quantify a potential liability.

  4. What did management do with capital and share count in 1999?

    The company repurchased and retired 4.6 million common shares at an average of $28.08, and shares outstanding fell to about 232.5 million at year-end from 237.1 million. It also entered a forward contract to buy 1.4 million additional shares at $24.22 in November 2000. Authorization covers up to 15 million shares over a three-year period beginning in 1999.

04—Continue

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