10-QPeriod: Q3 FY2001

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 13, 2001For Securities:FE

Summary

FirstEnergy Corp. (FE) reported its financial results for the quarter and nine months ended September 30, 2001. A significant development during this period was the pending merger with GPU Inc., which was subsequently completed on November 7, 2001. The report details the financial performance of FE and its subsidiaries, highlighting revenue changes and operational expenses across its regulated and competitive services segments. Key financial metrics show an increase in net income for the third quarter of 2001 compared to the prior year, driven largely by the competitive services segment, particularly wholesale electric sales and expanded gas sales. The regulated segment experienced a decrease in electric utility revenues due to customer choice in Ohio and a mandated price reduction for residential customers. The company also addressed various regulatory matters, environmental compliance, and strategic divestitures related to the GPU acquisition.

Key Highlights

  • 1Net income increased by 18% to $234.1 million in Q3 2001 compared to Q3 2000, with basic EPS at $1.07.
  • 2Total revenues increased by $60.0 million in Q3 2001 and $539.9 million year-to-date, primarily driven by growth in the competitive services segment (wholesale electric and gas sales).
  • 3Regulated electric utility revenues decreased due to Ohio's customer choice program and a 5% residential generation charge reduction.
  • 4The merger with GPU Inc. was completed on November 7, 2001, significantly expanding the company's operational footprint and assets.
  • 5FirstEnergy adopted SFAS 133 (Accounting for Derivative Instruments and Hedging Activities) on January 1, 2001, resulting in an $8.5 million after-tax charge.
  • 6Capital expenditures forecast for 2001-2005 are approximately $2.55 billion, with $633 million allocated for 2001.
  • 7The company is undertaking divestitures of former GPU subsidiaries, including Avon Energy Partners Holdings (Midlands Electricity plc) and GasNet Pty Ltd., as part of post-merger integration.

Frequently Asked Questions

Ohio's electric utility restructuring led to a decrease in regulated electric utility revenues for FirstEnergy due to customers choosing alternative generation suppliers and a mandated 5% reduction in generation charges for residential customers. However, the competitive services segment benefited from increased wholesale electric and gas sales.

The merger with GPU Inc., completed on November 7, 2001, was a transformative event for FirstEnergy. It significantly expanded the company's service territory into New Jersey and Pennsylvania, adding new operating companies and approximately $7 billion in debt and preferred securities. The transaction was accounted for using the purchase method.

The increase in net income for Q3 2001 was primarily driven by the strong performance of FirstEnergy's competitive services segment, particularly higher wholesale electric sales and expanded gas sales. These gains helped offset a slight decline in revenues from the regulated electric utility segment.

FirstEnergy employs a variety of derivative instruments, including forward contracts, options, futures contracts, and swaps, to manage volatility from fluctuating interest rates and commodity prices (electricity, natural gas, coal). These derivatives are used primarily for hedging purposes, overseen by a Risk Policy Committee.