10-QPeriod: Q3 FY2004

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 4, 2004For Securities:FE

Summary

FirstEnergy Corp. (FE) reported strong financial performance for the nine months ended September 30, 2004, with net income of $677 million, a significant increase from $313 million in the same period of 2003. This improvement was driven by lower energy delivery and nuclear production costs, reduced interest expenses, and the absence of a goodwill impairment charge recorded in the prior year. The company also made substantial progress in debt reduction, paying down $982 million and improving its financial flexibility. Operationally, FirstEnergy's generation fleet demonstrated improved performance, achieving record output. The company successfully managed commodity supplies and risks, while its regulated services segment, encompassing transmission and distribution, remained its primary revenue and earnings generator. Despite challenges such as milder weather impacting customer usage and ongoing environmental and legal matters, FirstEnergy is focused on safe operations, customer service, and optimizing its generation portfolio. The company's financial strategy remains stable, with a continued focus on execution and competing effectively in the evolving energy marketplace.

Key Highlights

  • 1Net income for the first nine months of 2004 increased to $677 million, up from $313 million in the prior year period.
  • 2Basic earnings per share for the nine months ended September 30, 2004, were $2.07, compared to $1.06 in the same period of 2003.
  • 3FirstEnergy reduced its debt by $982 million in the first nine months of 2004, contributing to annualized savings of approximately $79 million.
  • 4The company's pension and other post-employment benefits expenses decreased by $77 million for the nine months ended September 30, 2004, compared to 2003, due to higher trust asset values, benefit plan revisions, and the Medicare Act.
  • 5The Ohio Rate Stabilization Plan was accepted by the Ohio Companies, as modified by PUCO, providing enhanced customer benefits and addressing key issues for FirstEnergy.
  • 6FirstEnergy reached a settlement agreement to resolve various pending legal proceedings related to financial restatements, power outages, and the Davis-Besse Nuclear Power Station outage for a total payment of $89.9 million, largely covered by insurance carriers.

Frequently Asked Questions

FirstEnergy reported a net income of $677 million for the first nine months of 2004. Basic earnings per share were $2.07, and diluted earnings per share were $2.06 for the same period.

FirstEnergy reduced its debt by $982 million during the first nine months of 2004 and expects to achieve its goal of at least $1 billion in debt reduction for the year. The company also improved its financial flexibility by replacing $1 billion of its credit commitments, bringing the total capacity of its primary credit facilities to $2.3 billion.

On August 5, 2004, the Ohio Companies accepted the Ohio Rate Stabilization Plan as modified and approved by the Public Utilities Commission of Ohio (PUCO) on August 4, 2004. This plan provides enhanced customer benefits and addresses most of FirstEnergy's key issues, including the ability to seek recovery of increased fuel costs and terms for market support generation.

FirstEnergy reached an agreement on July 27, 2004, to resolve various legal proceedings related to financial restatements, the August 14, 2003 power outages, and the Davis-Besse Nuclear Power Station outage. The settlement totals $89.9 million, with FirstEnergy's portion being $17.98 million after insurance recoveries, resulting in an $11 million after-tax charge.