10-QPeriod: Q3 FY2005

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 2, 2005For Securities:FE

Summary

FirstEnergy Corp. and its subsidiaries reported solid financial performance for the third quarter and the first nine months of 2005. Net income for the third quarter of 2005 was $332 million, or $1.01 per diluted share, a notable increase from the $299 million, or $0.91 per diluted share, reported in the same period of 2004. This improvement was primarily driven by increased customer demand and favorable weather conditions boosting electricity usage across their regulated service territories. The company also highlighted operational stability, with S&P upgrading its corporate credit rating on FirstEnergy and its EUOCs to 'BBB' from 'BBB-', citing a good operating track record, particularly within the nuclear fleet, and supportive regulatory environments. Dividend payments saw an increase, with the quarterly dividend raised to $0.43 per share, reflecting the company's commitment to returning value to shareholders. While the company faces ongoing regulatory matters and environmental compliance costs, the overall financial health appears robust, supported by strong regulated utility operations.

Key Highlights

  • 1Third-quarter 2005 net income reached $332 million ($1.01 per diluted share), up from $299 million ($0.91 per diluted share) in Q3 2004.
  • 2FirstEnergy's corporate credit rating was upgraded by S&P to 'BBB' from 'BBB-', citing operational performance and regulatory support.
  • 3The quarterly dividend per share was increased to $0.43, a 4.2% rise from the previous quarter.
  • 4Net income for the first nine months of 2005 was $670 million ($2.03 diluted EPS), a slight decrease from $677 million ($2.06 diluted EPS) in the same period of 2004.
  • 5The company is actively managing its capital structure, with a focus on debt reduction and a dividend policy targeting sustainable annual increases.
  • 6Regulatory matters in Ohio, Pennsylvania, and New Jersey are ongoing, with significant filings related to rate stabilization plans and cost recovery mechanisms.
  • 7FirstEnergy is investing in environmental compliance, including estimated expenditures of $670 million for compliance from 2005 through 2007.

Frequently Asked Questions

FirstEnergy reported a net income of $332 million, or $1.01 per diluted share, for the third quarter of 2005. This represents an increase compared to the $299 million, or $0.91 per diluted share, reported in the same period of 2004.

S&P upgraded FirstEnergy's corporate credit rating to 'BBB' from 'BBB-' and its senior unsecured ratings to 'BBB-' from 'BB+'. S&P cited the company's good operating track record, particularly its nuclear fleet, and supportive regulatory environments as key factors for the upgrade.

FirstEnergy raised its quarterly dividend to $0.43 per share, a 4.2% increase from the previous quarter. The company's dividend policy targets sustainable annual increases of 4% to 5% after 2005, with an earnings payout ratio generally between 50% and 60%.

The company is actively engaged in significant regulatory proceedings in Ohio, Pennsylvania, and New Jersey. These include managing rate stabilization plans, seeking recovery for fuel costs, and addressing environmental compliance. The company also noted its belief in compliance with current reliability standards but acknowledged potential future impacts from stricter standards under the Energy Policy Act of 2005.