10-QPeriod: Q2 FY2009

FIRSTENERGY CORP Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 3, 2009For Securities:FE

Summary

FIRSTENERGY CORP. (FE) reported strong financial performance for the second quarter and first six months of 2009, driven significantly by a $252 million gain from the sale of its 9% participation interest in OVEC. Net income for Q2 2009 was $408 million, or $1.36 per diluted share, a substantial increase from $263 million ($0.85 per diluted share) in Q2 2008. For the first six months of 2009, net income was $523 million ($1.75 per diluted share), a slight decrease from $540 million ($1.75 per diluted share) in the prior year period, primarily due to significant regulatory charges in the Energy Delivery Services segment. The company's financial health remains stable with positive operating cash flows and adequate liquidity, supported by credit rating affirmations from Moody's and S&P.

Financial Highlights

45 data points
Beta

Revenue

$3.27B

Net Income

$414.00M

12.7% Net Margin

EPS (Diluted)

$1.36

Total Assets

$34.31B

Cash & Equivalents

$900.00M

Free Cash Flow

$640.00M

Financial Statements
Beta
Revenue$3.27B
Operating Expenses$2.47B
Operating Income$802.00M
Net Income$414.00M
EPS (Basic)$1.36
EPS (Diluted)$1.36
Shares Outstanding (Basic)304.00M
Shares Outstanding (Diluted)305.00M

Key Highlights

  • 1Net income for the second quarter of 2009 was $408 million, or $1.36 per diluted share, up from $263 million ($0.85 per diluted share) in the same quarter of 2008, largely due to a significant gain from the sale of an OVEC participation interest.
  • 2The Competitive Energy Services segment saw a substantial increase in net income to $276 million in Q2 2009 from $66 million in Q2 2008, primarily driven by the aforementioned OVEC gain and improved sales margins.
  • 3Energy Delivery Services segment net income decreased to $133 million in Q2 2009 from $193 million in Q2 2008, attributed to lower revenues and increased amortization of regulatory assets, despite cost-saving measures.
  • 4FirstEnergy's financial position remains robust, with credit ratings affirmed by Moody's and S&P, both maintaining a 'stable' outlook.
  • 5The company is actively managing its capital structure, issuing new debt and demonstrating ample liquidity with $1.965 billion in total liquidity as of July 30, 2009.
  • 6Regulatory matters in Ohio and Pennsylvania are ongoing, with FirstEnergy actively participating in the PUCO and PPUC proceedings concerning rate adjustments, energy efficiency programs, and smart meter deployment.
  • 7The company reported effective cost management initiatives, including employee severances, wage reductions, and benefit adjustments, to mitigate the impact of recessionary economic conditions and mild weather.

Frequently Asked Questions

The primary driver was a $252 million pre-tax gain ($158 million after tax) from the sale of FirstEnergy's 9% participation interest in OVEC, which boosted the Competitive Energy Services segment's performance and overall company net income.

The recessionary economic conditions, particularly affecting the automotive and steel industries, led to decreased electricity demand and lower revenues, especially in the Energy Delivery Services segment, as evidenced by a 9.4% drop in total distribution KWH deliveries. The company implemented cost control measures to mitigate these effects.

FirstEnergy is actively involved in regulatory proceedings in Ohio and Pennsylvania. These include the PUCO's review of amended ESP applications and deferred distribution cost recovery in Ohio, and the PPUC's approval of Transmission Service Charge (TSC) rider updates and Act 129 compliance plans in Pennsylvania.

As of July 30, 2009, FirstEnergy reported total liquidity of $1.965 billion, comprising $1.044 billion in committed credit facilities and $921 million in cash and cash equivalents, indicating sufficient resources to meet its obligations.