10-QPeriod: Q1 FY2005

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 5, 2005For Securities:FE

Summary

FirstEnergy Corp. reported a decrease in net income for the first quarter of 2005 to $160 million, or $0.49 per basic share, compared to $174 million, or $0.53 per basic share, in the same period of 2004. This decline was attributed to increased nuclear operating costs, scheduled outages at their nuclear power plants, and costs associated with the W. H. Sammis New Source Review case settlement and a proposed NRC fine related to the Davis-Besse nuclear plant. The company continued its strategy of divesting non-core assets, notably its natural gas business, which contributed positively to earnings with a net gain of $0.07 per share. Despite these headwinds, FirstEnergy maintained its focus on its core regulated services and power supply management businesses, with ongoing efforts to manage costs and enhance operational reliability.

Key Highlights

  • 1FirstEnergy Corp. reported a net income of $160 million ($0.49/share) for Q1 2005, a decrease from $174 million ($0.53/share) in Q1 2004.
  • 2The company continued to divest non-core assets, including its natural gas business, recognizing a net gain of $0.07 per share.
  • 3Increased nuclear operating costs and plant outages negatively impacted earnings by $0.12 per share compared to the prior year.
  • 4Costs related to the W. H. Sammis settlement and a proposed NRC fine for Davis-Besse reduced earnings by $0.05 per share.
  • 5Employee benefit expenses decreased due to prior year pension contributions and increased market value of plan assets, providing a cost benefit.
  • 6FirstEnergy's core businesses remain regulated services and power supply management.
  • 7The company is actively managing its capital resources and liquidity, with ample unused borrowing capacity.

Frequently Asked Questions

FirstEnergy reported a net income of $160 million, or $0.49 per basic share, for the first quarter of 2005, which is a decrease compared to $174 million, or $0.53 per basic share, reported in the first quarter of 2004. The company attributed this decline to higher nuclear operating costs, plant outages, and significant legal/regulatory settlement costs.

The main factors impacting earnings in Q1 2005 were increased nuclear operating and maintenance costs due to scheduled and unplanned outages, costs associated with environmental settlements (W.H. Sammis plant), and a proposed regulatory fine (Davis-Besse nuclear plant). On the positive side, the divestiture of non-core assets contributed positively to earnings.

FirstEnergy is managing its capital and liquidity through cash generated from operations and its access to credit facilities. As of March 31, 2005, the company had significant unused borrowing capability under its revolving credit facilities, totaling $1.6 billion, indicating a strong liquidity position.

FirstEnergy reached a settlement in March 2005 with the EPA, DOJ, and three states to resolve New Source Review litigation concerning the W. H. Sammis Plant. This settlement involves significant capital expenditures for environmental controls, estimated at $1.1 billion, and civil penalties totaling $8.5 million.