10-KPeriod: FY2013

FIRSTENERGY CORP Annual Report, Year Ended Dec 31, 2013

Filed February 27, 2014For Securities:FE

Summary

FirstEnergy Corp.'s 2013 10-K filing details a year of strategic repositioning, focusing on regulated operations, particularly transmission, to achieve over 80% of earnings from these segments. The company faced challenges from weak economic conditions and depressed energy prices, leading to a dividend reduction and a focus on cost control and balance sheet strengthening. Key developments include significant capital expenditure plans for transmission infrastructure and ongoing efforts to navigate complex regulatory environments across multiple states, including rate cases and environmental compliance. The company also reported a net income of $392 million, a decrease from the previous year, impacted by various segment results, regulatory charges, and asset impairments, signaling a shift towards a more regulated, stable business model.

Financial Highlights

47 data points
Beta

Revenue

$14.89B

Net Income

$392.00M

2.6% Net Margin

EPS (Diluted)

$0.94

Total Assets

$50.42B

Cash & Equivalents

$218.00M

Free Cash Flow

$2.66B

Financial Statements
Beta
Revenue$14.89B
Operating Expenses$13.31B
Operating Income$1.58B
Interest Expense$1.02B
Net Income$392.00M
EPS (Basic)$0.94
EPS (Diluted)$0.94
Shares Outstanding (Basic)418.00M
Shares Outstanding (Diluted)419.00M

Key Highlights

  • 1FirstEnergy is executing a strategy to shift its asset mix towards regulated operations, aiming for over 80% of earnings from regulated distribution and transmission segments.
  • 2The company experienced a significant decrease in net income for 2013 ($392 million) compared to 2012 ($770 million), largely impacted by lower earnings from its Competitive Energy Services segment and regulatory charges.
  • 3Capital expenditures for 2014 are projected to be approximately $3.3 billion, a substantial increase from 2013, primarily driven by investments in transmission infrastructure.
  • 4FirstEnergy reduced its quarterly dividend to $0.36 per share (annualized $1.44), down from $0.55 per share quarterly ($2.20 annually), to support its financial repositioning strategy and strengthen its balance sheet.
  • 5The company is actively managing various regulatory matters across multiple states, including pending rate cases (e.g., JCP&L) and compliance with new environmental regulations (e.g., MATS).
  • 6Significant asset impairments were recorded, including $322 million for the Harrison Power Station and $473 million related to the deactivation of Hatfield's Ferry and Mitchell coal-fired plants, reflecting strategic adjustments in the generation fleet.
  • 7FirstEnergy's regulated transmission segment is a key growth area, with substantial planned investments to enhance system reliability and capacity.

Frequently Asked Questions

FirstEnergy is strategically repositioning its business to focus on regulated operations, specifically growing its regulated distribution and transmission segments. The company aims to derive over 80% of its earnings from these regulated segments, de-emphasizing its competitive generation assets.

FirstEnergy's net income decreased significantly in 2013 to $392 million from $770 million in 2012. This decline was primarily driven by lower performance in its Competitive Energy Services segment and substantial regulatory charges and asset impairments, which impacted overall profitability.

FirstEnergy plans significant capital expenditures of approximately $3.3 billion for 2014, a notable increase from 2013, with a primary focus on expanding and modernizing its regulated transmission infrastructure to improve reliability and capacity.

The reduction in the quarterly dividend, from $0.55 to $0.36 per share, was a strategic move to preserve approximately $320 million annually. These retained funds are intended to support capital expenditures, strengthen the company's balance sheet, and improve its financial flexibility during this period of strategic repositioning.

FirstEnergy is navigating a complex regulatory landscape, including active participation in rate cases for its utility subsidiaries (such as JCP&L in New Jersey) and managing compliance with evolving environmental regulations. The company is estimating significant costs for compliance with regulations like the Mercury and Air Toxics Standards (MATS) and potential future greenhouse gas emission standards.