10-QPeriod: Q2 FY2005

FIRSTENERGY CORP Quarterly Report for Q2 Ended Jun 30, 2005

Filed August 1, 2005For Securities:FE

Summary

FirstEnergy Corp. (FE) reported a decrease in net income for the second quarter of 2005 to $178 million ($0.54 per share) from $204 million ($0.62 per share) in the same period of 2004. For the first six months of 2005, net income was $338 million ($1.03 per share) compared to $378 million ($1.16 per share) in the first six months of 2004. The company experienced higher operating revenues driven by warmer weather and increased customer usage, but this was offset by increased expenses, including higher fuel and purchased power costs, and significant one-time items. These items include a $72 million write-off of deferred tax benefits in Ohio due to new tax legislation and a $16 million net gain from the settlement of rate cases by JCP&L. Operationally, the company conducted nuclear refueling outages at its Beaver Valley and Perry stations during the quarter. The company is also addressing regulatory oversight and potential fines related to the Davis-Besse Nuclear Power Station reactor head degradation. The company's strategic initiatives include ongoing intra-system generation asset transfers aimed at separating generation assets from the regulated delivery business, expected to be completed in the second half of 2005.

Key Highlights

  • 1Net income for Q2 2005 decreased to $178 million ($0.54/share) from $204 million ($0.62/share) in Q2 2004, while YTD net income decreased to $338 million ($1.03/share) from $378 million ($1.16/share).
  • 2The company incurred a $72 million ($0.22/share) after-tax charge in Q2 2005 due to new Ohio tax legislation leading to a write-off of deferred tax benefits.
  • 3JCP&L's rate case settlements resulted in a one-time net gain of $16 million ($0.05/share) in Q2 2005.
  • 4Nuclear refueling outages occurred at Beaver Valley Unit 2 and Perry stations during the quarter.
  • 5FENOC received a notice of violation and proposed $5.45 million fine from the NRC related to reactor head degradation at the Davis-Besse Nuclear Power Station.
  • 6FirstEnergy is proceeding with intra-system generation asset transfers, expected to be completed in the second half of 2005, separating generation assets from the regulated delivery business.
  • 7S&P and Moody's revised their outlook on FirstEnergy and its subsidiaries to 'positive' from 'stable', citing successful nuclear unit restarts and steady financial improvement.

Frequently Asked Questions

FirstEnergy's net income decreased to $178 million ($0.54 per share) in Q2 2005 from $204 million ($0.62 per share) in Q2 2004. This decline was primarily due to higher operating expenses, including fuel and purchased power costs, and a significant $72 million tax charge related to new Ohio tax legislation. Partially offsetting these negatives was a $16 million gain from JCP&L's rate case settlements.

The company experienced nuclear refueling outages at its Beaver Valley Unit 2 and Perry stations. Additionally, FirstEnergy is addressing regulatory issues at the Davis-Besse Nuclear Power Station, including a notice of violation and proposed fine from the NRC related to reactor head degradation.

Yes, FirstEnergy is actively pursuing intra-system generation asset transfers, which are aimed at separating its generation assets from its regulated delivery business. These transfers are expected to be completed in the latter half of 2005. Furthermore, rating agencies S&P and Moody's have revised their outlooks for FirstEnergy to 'positive' from 'stable,' citing operational improvements and financial performance.