10-QPeriod: Q3 FY2007

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2007

Filed October 31, 2007For Securities:FE

Summary

FirstEnergy Corp. (FE) filed its 10-Q quarterly report for the period ended September 30, 2007. The company reported a decrease in net income for the third quarter of 2007 compared to the same period in 2006, primarily driven by higher fuel and purchased power costs, as well as increased depreciation and amortization. However, for the first nine months of 2007, net income saw an increase compared to the prior year period, largely due to higher electric sales revenues. The company is actively managing its financial performance amidst regulatory changes and market dynamics in the energy sector, with significant attention paid to its core business segments: energy delivery services, competitive energy services, and Ohio transitional generation services. Key financial highlights include a net income of $413 million ($1.36 per basic share) for Q3 2007, down from $454 million ($1.41 per basic share) in Q3 2006. For the nine-month period, net income was $1.04 billion ($3.39 per basic share), an increase from $979 million ($2.99 per basic share) in the comparable period of 2006. FirstEnergy also completed a significant sale and leaseback transaction for its Bruce Mansfield Plant Unit 1, generating approximately $1.2 billion in net proceeds which were used to repay short-term debt and fund its pension contribution. The company continues to navigate complex regulatory environments in Ohio, Pennsylvania, and New Jersey, with ongoing proceedings and filings impacting its operations and financial outlook.

Key Highlights

  • 1Third-quarter net income decreased to $413 million ($1.36 per basic share) from $454 million ($1.41 per basic share) in the prior year quarter, mainly due to higher fuel and purchased power costs.
  • 2Nine-month net income increased to $1.04 billion ($3.39 per basic share) from $979 million ($2.99 per basic share) in the prior year period, driven by higher electric sales revenues.
  • 3FirstEnergy completed a $1.3 billion sale and leaseback transaction for its Bruce Mansfield Plant Unit 1, generating $1.2 billion in net proceeds used to repay debt and fund pension contributions.
  • 4The company continues to manage regulatory proceedings in Ohio, Pennsylvania, and New Jersey, including rate case filings and generation supply plans.
  • 5Significant capital expenditures are planned for 2007-2011, totaling approximately $8.0 billion for property additions.
  • 6FirstEnergy's credit ratings show mixed outlooks, with S&P rating all securities as negative and Moody's having a stable outlook for FES and positive for other entities.
  • 7The company has a substantial amount of regulatory assets, totaling $4.05 billion as of September 30, 2007, primarily related to transition costs.

Frequently Asked Questions

The decrease in net income for the third quarter of 2007 compared to the same period in 2006 was primarily due to higher fuel and purchased power costs, as well as increased depreciation and amortization expenses. These factors were partially offset by higher electric sales revenues.

The sale and leaseback transaction generated approximately $1.2 billion in net after-tax proceeds. These funds were used to repay short-term debt previously used for a share repurchase program and to fund a significant pension contribution. The transaction also resulted in a deferred gain that will be amortized over the lease term.

FirstEnergy is actively involved in various regulatory matters across Ohio, Pennsylvania, and New Jersey. These include navigating rate case filings, developing competitive generation supply plans, addressing environmental compliance related to air and water quality regulations, and managing the impact of new reliability standards.

FirstEnergy anticipates capital expenditures of approximately $8.0 billion for the period 2007-2011. The company expects to fund these requirements through a combination of cash from operations and access to capital markets, including ongoing use of its revolving credit facilities and potential future debt and equity issuances.