10-QPeriod: Q1 FY2001

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 15, 2001For Securities:FE

Summary

FirstEnergy Corp. reported a net income of $97.7 million for the first quarter of 2001, a decrease from $140.9 million in the same period of 2000. This decline was attributed, in part, to changes in depreciation and amortization patterns following the adoption of Ohio's electric utility restructuring plan and the implementation of SFAS 133. The company saw a significant increase in total revenues, largely driven by its competitive services segment, particularly in gas sales and wholesale electricity. However, operating expenses also rose, notably in fuel and purchased power costs, influenced by increased demand and higher spot market prices for natural gas. The adoption of SFAS 133 for derivatives accounting resulted in a one-time charge of $8.5 million. Looking ahead, FirstEnergy is progressing towards its merger with GPU, Inc., with expected completion in mid-summer 2001, pending remaining regulatory approvals. Overall, the company is navigating a transitional period marked by regulatory changes in Ohio, the ongoing integration of competitive services, and significant corporate restructuring, all while managing capital expenditures for future growth and potential merger-related financing.

Key Highlights

  • 1Net income for Q1 2001 was $97.7 million ($0.45/share), down from $140.9 million ($0.63/share) in Q1 2000.
  • 2Total revenues increased by $377.8 million, primarily driven by a $347.4 million increase in the unregulated (competitive services) segment, especially gas sales.
  • 3Fuel and purchased power costs increased by $79.9 million, due to higher purchased power needs and spot prices, alongside increased gas supply costs.
  • 4FirstEnergy adopted SFAS 133 for derivative accounting on January 1, 2001, resulting in a $8.5 million after-tax charge ($.04/share).
  • 5The company is on track to complete its merger with GPU, Inc. by mid-summer 2001, pending remaining regulatory approvals from SEC, NJ, and PA.
  • 6Capital expenditures for property additions and improvements are forecasted at approximately $679 million for 2001.
  • 7Ohio's electric utility restructuring plan, implemented in 2001, has led to revenue shifts and changes in cost recovery mechanisms.

Frequently Asked Questions

The primary reasons for the decrease in net income in the first quarter of 2001 compared to the same period in 2000 include changes in depreciation and amortization patterns related to Ohio's electric utility restructuring plan, increased fuel and purchased power costs, and a one-time charge resulting from the adoption of SFAS 133 for derivative accounting.

FirstEnergy's total revenues increased significantly, with the unregulated (competitive services) segment showing the most substantial growth, primarily driven by expanded gas sales and increased wholesale electricity sales. This reflects a strategic shift towards more competitive markets.

The merger with GPU, Inc. is progressing as planned, with an expected completion by mid-summer 2001. Key regulatory approvals have been received, and the company is awaiting final approvals from the New Jersey Board of Public Utilities, the Pennsylvania Public Utility Commission, and the Securities and Exchange Commission.

The company is subject to various environmental regulations, including those related to sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions. It is also involved in legal proceedings concerning the W. H. Sammis Plant for alleged Clean Air Act violations, though FirstEnergy believes these allegations are without merit. The company is also evaluating potential future costs related to mercury regulations and hazardous air pollutants.