10-QPeriod: Q1 FY2015

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 1, 2015For Securities:FE

Summary

FirstEnergy Corp. reported solid financial results for the first quarter of 2015, demonstrating a recovery and strategic shift. Net income increased by 6.7% to $222 million, or $0.53 per share, compared to the prior year's $208 million ($0.50 per share), driven by a significant improvement in the Competitive Energy Services (CES) segment due to favorable market conditions and a revised sales strategy. This segment's performance was bolstered by reduced exposure to weather-sensitive loads and more effective hedging, offsetting challenging weather events in the first quarter. The Regulated Transmission segment also saw growth, primarily due to ATSI's transition to a forward-looking rate calculation. The company continues to execute its "Energizing the Future" transmission investment plan, with substantial capital expenditures aimed at modernizing infrastructure and preparing for load growth. Simultaneously, FirstEnergy is implementing a cash flow improvement plan targeting significant savings by 2017 through operating expense and capital expenditure reductions. These strategic moves, alongside successful regulatory initiatives across various states, position FirstEnergy for stability and growth in its core regulated businesses while navigating the complexities of the competitive energy market.

Financial Highlights

45 data points
Beta

Revenue

$3.90B

Net Income

$222.00M

5.7% Net Margin

EPS (Diluted)

$0.53

Total Assets

$51.88B

Cash & Equivalents

$90.00M

Free Cash Flow

$193.00M

Financial Statements
Beta
Revenue$3.90B
Operating Expenses$3.30B
Operating Income$594.00M
Interest Expense$279.00M
Net Income$222.00M
EPS (Basic)$0.53
EPS (Diluted)$0.53
Shares Outstanding (Basic)421.00M
Shares Outstanding (Diluted)423.00M

Key Highlights

  • 1Net income increased by 6.7% to $222 million ($0.53/share) in Q1 2015, up from $208 million ($0.50/share) in Q1 2014.
  • 2Income from continuing operations grew significantly by 82%, primarily driven by the Competitive Energy Services (CES) segment's improved performance.
  • 3Total revenues decreased by 6.8% to $3.9 billion, largely due to the CES segment's strategic reduction in sales volumes and exit from certain market channels.
  • 4Operating expenses decreased by 12.9%, mainly from lower fuel, purchased power, and transmission costs in the CES segment.
  • 5The Regulated Transmission segment saw increased revenues driven by ATSI's "forward looking" rate transition.
  • 6FirstEnergy continues to invest in its "Energizing the Future" transmission plan, with capital expenditures expected to be around $2.9 billion for 2015.
  • 7A cash flow improvement plan has been launched to achieve targeted savings of $50 million in 2015, $150 million in 2016, and $200 million annually by 2017.

Frequently Asked Questions

The primary driver for the increase in net income was the significant improvement in the Competitive Energy Services (CES) segment, benefiting from a strategic repositioning to reduce exposure to weather-sensitive loads and more effectively hedge generation. Favorable market conditions and the absence of extreme market conditions experienced in the prior year's first quarter also contributed.

Total revenues decreased by 6.8% primarily due to a deliberate strategic decision by the CES segment to reduce sales volumes and exit certain market channels. This strategy aims to lower exposure to weather-sensitive loads and eliminate load obligations that do not adequately cover risk premiums, thereby improving profitability and reducing risk.

FirstEnergy's core investment strategy is focused on its regulated operations, particularly the transmission and distribution segments. The centerpiece is the "Energizing the Future" transmission expansion plan, a multi-year initiative involving billions of dollars to modernize and strengthen the transmission infrastructure, enhance system performance, and prepare for future load growth, including from shale gas development.

FirstEnergy has launched a cash flow improvement plan focused on achieving significant cost savings. This plan targets reductions in operating expenses, capital expenditures, inventory purchases, and supply chain costs, with a goal of $200 million in annual savings by 2017. These savings are expected to be split evenly between operating and maintenance expenditures and capital expenditures.