01—Abstract
Summary
Summary of the 10-K filed February 16, 2011. Cited figures are marked; the original filing is the authoritative source.
FirstEnergy Corp. (FE) and its subsidiaries are reporting on their fiscal year ending December 31, 2010.
A significant development during the year was the announcement of a proposed merger with Allegheny Energy, Inc., which was expected to close in the first quarter of 2011. This merger would create a larger entity with a substantial customer base and generation capacity across multiple states. The company's financial performance in 2010 saw a decrease in earnings per share compared to 2009, attributed to various factors including impairments on long-lived assets, regulatory charges, and merger-related transaction costs.
Despite these challenges, FirstEnergy maintained a strong liquidity position and focused on operational efficiencies and strategic integration for future growth. The company's diversified generation portfolio, including nuclear, coal, and renewable sources, positions it to navigate evolving environmental regulations.
02—Key points
Key Highlights
- Proposed merger with Allegheny Energy, Inc. expected to create a larger, more diversified utility company.
- 2010 earnings per share decreased compared to 2009 due to asset impairments, regulatory charges, and merger costs.
- Strong liquidity position maintained with access to over $3.2 billion in credit facilities.
- Completion of a significant $1.8 billion environmental retrofit at the W.H. Sammis Plant.
- Operational changes implemented at several smaller coal-fired units in response to economic conditions and environmental regulatory uncertainty.
- Continued investment in smart grid technologies through DOE grants, totaling $57.4 million.
- Focus on integrating ATSI's transmission assets into the PJM RTO by June 1, 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 16, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $13.34B$12.97B | +2.9% |
| Operating Expenses | $11.60B$11.29B | +2.7% |
| Operating Income | $1.74B$1.68B | +3.6% |
| Net Income | $742.00M$872.00M | −14.9% |
| EPS (Basic) | $2.44$2.87 | −15.0% |
| EPS (Diluted) | $2.42$2.85 | −15.1% |
| Shares Outstanding (Basic) | 304.00M304.00M | 0.0% |
| Shares Outstanding (Diluted) | 305.00M306.00M | −0.3% |
05—Questions
Frequently Asked Questions
What is the status of the proposed merger with Allegheny Energy?
As of the filing date (February 16, 2011), FirstEnergy and Allegheny anticipated completing the merger in the first quarter of 2011. Several key regulatory approvals had been received, including from the SEC, FERC, and state commissions in West Virginia, Maryland, and New Jersey. The final pending approval was from the Pennsylvania Public Utility Commission (PPUC). Despite the anticipation, the company noted that there could be no assurance of the timing or ultimate ability to obtain all necessary approvals on satisfactory terms.
What were the primary drivers for the decrease in earnings per share in 2010?
The decrease in earnings per share in 2010 compared to 2009 was primarily driven by several factors: $384 million in impairment charges related to operational changes at smaller coal-fired units due to economic conditions and environmental regulatory uncertainty, a $167 million reduction in net income from the sale of an OVEC participation interest, lower investment income from nuclear decommissioning trusts, and $47 million in merger transaction costs. These were partially offset by an increase in sales margins and other operational efficiencies.
How is FirstEnergy managing its exposure to environmental regulations?
FirstEnergy is actively managing its environmental exposures through significant investments in pollution control equipment, such as the $1.8 billion environmental retrofit at the W.H. Sammis Plant to reduce SO2 and NOx emissions. The company is also focusing on improving its generation fleet's environmental profile, with a goal of 70% of its generation being non-emitting or low-emitting by the end of 2011. Furthermore, FirstEnergy is monitoring and assessing the potential impact of evolving federal and state environmental regulations, including those related to greenhouse gas emissions and coal combustion residuals, and is engaging with policymakers to develop reasonable requirements.
What are the company's capital expenditure plans for the coming years?
For 2011, FirstEnergy projected capital expenditures of approximately $1.4 billion (excluding nuclear fuel). For 2012 and 2013, the company anticipated average annual baseline capital expenditures of approximately $1.2 billion. These expenditures are primarily directed towards maintaining reliability, improving operations, and supporting current environmental and energy efficiency directives, including investments in transmission expansion and advanced metering initiatives.
06—Continue