10-QPeriod: Q2 FY2004

FIRSTENERGY CORP Quarterly Report for Q2 Ended Jun 30, 2004

Filed August 6, 2004For Securities:FE

Summary

FirstEnergy Corp. (FE) reported a significant turnaround in its financial performance for the second quarter and the first half of 2004 compared to the same periods in 2003. Net income for Q2 2004 was $204 million, or $0.62 per share, a substantial improvement from the net loss of $58 million, or ($0.20) per share, in Q2 2003. The first half of 2004 saw net income of $378 million, or $1.16 per share, up from $161 million, or $0.55 per share, in the first half of 2003. This improved performance was driven by higher sales in the regulated segment, stronger generation portfolio performance, and the restart of the Davis-Besse Nuclear Power Station. Financially, FirstEnergy continued its debt reduction strategy, lowering total debt by approximately $600 million in the first half of 2004 and remaining on track to achieve its goal of reducing debt by at least $1 billion for the year. The company also enhanced its financial flexibility by replacing $1 billion of credit commitments, bringing its total credit facility capacity to $2.3 billion. Additionally, FirstEnergy completed the divestiture of its interest in GLEP and substantially completed the divestiture of all international operations, aligning with its strategy to focus on its core electric business. The company also announced a settlement agreement to resolve various pending legal proceedings related to financial restatements and power outages, which resulted in a charge of $0.03 per share in Q2 2004.

Key Highlights

  • 1FirstEnergy reported a net income of $204 million ($0.62/share) for Q2 2004, a significant improvement from a net loss of $58 million ($0.20/share) in Q2 2003.
  • 2First half of 2004 net income was $378 million ($1.16/share), up from $161 million ($0.55/share) in the first half of 2003.
  • 3The company reduced total debt by approximately $600 million in the first half of 2004 and is on track to reduce debt by at least $1 billion for the year.
  • 4FirstEnergy completed the sale of its interest in GLEP and has substantially divested its international operations.
  • 5The restart of the Davis-Besse Nuclear Power Station and improved generation fleet performance positively impacted earnings.
  • 6A settlement agreement was reached to resolve various securities and derivative lawsuits, resulting in a $0.03/share charge in Q2 2004.

Frequently Asked Questions

The improved financial performance was primarily driven by higher sales in the regulated segment, stronger performance from the generation portfolio, and the restart of the Davis-Besse Nuclear Power Station. These factors, combined with a reduction in certain expenses and the resolution of legal matters, led to a significant increase in net income.

FirstEnergy made significant progress on its debt reduction strategy, lowering total debt by approximately $600 million in the first half of 2004. The company remains on track to achieve its goal of reducing debt by at least $1 billion for the full year.

FirstEnergy is actively divesting non-core assets to focus on its core electric business. This strategy is demonstrated by the completion of the sale of its interest in GLEP and the substantial divestiture of its international operations.

FirstEnergy announced a settlement agreement to resolve various pending legal proceedings related to financial restatements and power outages. This settlement, while not an admission of wrongdoing, resulted in a charge of $0.03 per share against second quarter 2004 earnings.