8-KEarnings & ResultsFinancial EventsExhibits & Filings

FIRSTENERGY CORP 8-K Report, Financial Results (Feb 8, 2012)

Filed February 8, 2012For Securities:FE

Summary

FirstEnergy Corp. (FE) announced in an 8-K filing on February 8, 2012, its decision to retire three fossil generating units by September 1, 2012. These units, located in West Virginia, will be decommissioned due to new U.S. Environmental Protection Agency (EPA) Mercury and Air Toxics Standards (MATS) and other environmental regulations. This strategic move is expected to result in impairment charges of approximately $87 million ($52 million after-tax) and will affect 105 employees, with severance costs estimated at $5 million. The company also updated its full-year 2011 GAAP earnings per share estimate to a range of $2.31 to $2.33, reflecting the impact of these impairment charges. While specific future costs related to other obligations of the retired plants are currently unquantifiable, FirstEnergy anticipates avoiding future capital expenditures necessary for environmental compliance for these specific units.

Key Highlights

  • 1FirstEnergy is retiring three fossil generating units (Albright, Willow Island, and Rivesville) by September 1, 2012, due to new EPA environmental regulations, specifically MATS.
  • 2The company expects to incur impairment charges of approximately $87 million ($52 million after-tax) related to the retirement of these assets.
  • 3The retirement of these units will impact approximately 105 employees, with estimated severance costs of $5 million.
  • 4FirstEnergy has updated its 2011 GAAP earnings per share guidance to a range of $2.31 to $2.33.
  • 5The decision to retire the units is subject to reliability impact review by PJM Interconnection LLC.
  • 6Additional costs of approximately $2 million are expected in 2012 to prepare the plants for closure.

Frequently Asked Questions

FirstEnergy is retiring the Albright, Willow Island, and Rivesville fossil generating units primarily due to the finalization of new U.S. Environmental Protection Agency (EPA) Mercury and Air Toxics Standards (MATS) and other evolving environmental regulations. These regulations necessitate significant upgrades that FirstEnergy deemed uneconomical for these older units.

The company expects to recognize impairment charges totaling approximately $87 million ($52 million after-tax). Additionally, an estimated $5 million in severance costs and $2 million in plant preparation costs are anticipated in 2012.

The impairment charges associated with these retirements are expected to reduce FirstEnergy's 2011 earnings per basic share by approximately $0.13. The company has updated its full-year 2011 GAAP earnings per share estimate to a range of $2.31 to $2.33 to reflect this impact.

FirstEnergy has stated that while they anticipate avoiding future capital expenditures for environmental compliance at these specific plants, they are currently unable to reasonably estimate potential costs related to other obligations that could be affected by the plant closings.