8-KOther Events

FIRSTENERGY CORP 8-K Report (Dec 20, 2002)

Filed December 20, 2002For Securities:FE

Summary

FirstEnergy Corp. announced on December 20, 2002, its decision to retain ownership of its four coal-fired power plants located in Ohio, including the Ashtabula, Bay Shore, Eastlake, and Lake Shore plants. This decision followed a review of bids received from interested parties, which fell short of expectations and the prior agreement value with NRG Energy, Inc. The company will record a one-time aggregate charge of $43 million, net of tax ($0.15 per share), in the fourth quarter of 2002. This charge comprises $33 million in non-cash depreciation and $10 million in transaction fees. FirstEnergy believes retaining the plants offers greater value for its customers at this time, given a softened market for generating plants since the original sale agreement with NRG was terminated earlier in the year due to NRG's breach of contract. The company also reaffirmed that its recently updated 2003 earnings guidance remains unaffected by this decision. FirstEnergy anticipates significant debt reduction in 2003, with approximately $1.2 billion in debt retirements, including mandatory redemptions. This deleveraging effort is expected to bring its consolidated debt-to-capitalization ratio to around 60% by the end of 2003, reflecting a strategic focus on financial health.

Key Highlights

  • 1FirstEnergy Corp. will retain ownership of four Ohio-based coal-fired power plants.
  • 2The company will record a $43 million after-tax charge in Q4 2002, amounting to $0.15 per share.
  • 3The charge includes $33 million in non-cash depreciation and $10 million in transaction fees.
  • 4Bids received for the plants were not considered sufficient to warrant a sale, with retaining them deemed more valuable.
  • 5The decision to retain ownership is not expected to impact FirstEnergy's previously issued 2003 earnings guidance.
  • 6FirstEnergy plans to retire approximately $1.2 billion in debt during 2003, aiming for a debt-to-capitalization ratio of ~60% by year-end.

Frequently Asked Questions

FirstEnergy decided to retain ownership because the bids received for the plants did not meet the company's valuation expectations. Management determined that keeping the plants to serve their customers offered greater value to FirstEnergy at this time, especially given a softened market for generating plants since their initial sale agreement was terminated.

FirstEnergy will record an aggregate charge of $43 million, net of tax, in the fourth quarter of 2002. This charge, equivalent to $0.15 per share, consists of $33 million in non-cash depreciation charges (previously not recorded while sale was pending) and $10 million in transaction-related fees.

No, FirstEnergy confirmed that its recently updated 2003 earnings guidance remains unaffected by the decision to retain ownership of the power plants. The company is still focused on its deleveraging plans.

FirstEnergy plans to retire approximately $1.2 billion in debt during 2003. This includes $0.7 billion in mandatory redemption obligations, and it is expected to result in a consolidated debt-to-capitalization ratio of approximately 60% by the end of 2003.