8-KEarnings & ResultsFinancial EventsExhibits & Filings

FIRSTENERGY CORP 8-K Report, Financial Results (Jul 9, 2013)

Filed July 9, 2013For Securities:FE

Summary

FirstEnergy Corp. announced on July 9, 2013, its decision to deactivate two coal-fired generating plants, Hatfield's Ferry and Mitchell, by October 9, 2013. This strategic move, impacting approximately 10% of the company's total generating capacity, is driven by the increasing costs of environmental compliance, particularly in light of Mercury and Air Toxics Standards (MATS), coupled with persistently low electricity market prices. The deactivation is expected to reduce annual compliance costs related to MATS by an estimated $275 million. This decision will result in significant financial impacts recognized in the second quarter of 2013, including impairment charges totaling approximately $488 million ($321 million after-tax). Additionally, the company anticipates recognizing approximately $16 million ($10 million after-tax) in severance benefits for affected employees. These charges are projected to reduce FirstEnergy's basic earnings per share by $0.79 for the quarter ended June 30, 2013. While significant immediate costs are recognized, the company expects to avoid future capital expenditures for environmental upgrades at these facilities.

Key Highlights

  • 1FirstEnergy Corp. to deactivate Hatfield's Ferry and Mitchell coal-fired power plants by October 9, 2013.
  • 2Decision driven by high environmental compliance costs (MATS) and low electricity market prices.
  • 3Deactivation represents approximately 10% of FirstEnergy's total generating capacity.
  • 4Estimated impairment charges of $488 million ($321 million after-tax) to be recognized in Q2 2013.
  • 5Expected severance costs of $16 million ($10 million after-tax) for approximately 380 affected employees in Q2 2013.
  • 6Projected reduction in MATS compliance costs by $275 million annually.
  • 7Charges expected to reduce Q2 2013 basic EPS by $0.79.

Frequently Asked Questions

FirstEnergy is deactivating the Hatfield's Ferry and Mitchell plants due to the high cost of complying with current and future environmental regulations, such as the Mercury and Air Toxics Standards (MATS), combined with low market prices for electricity.

The company will recognize approximately $488 million in impairment charges ($321 million after-tax) and $16 million in severance benefits ($10 million after-tax) in the second quarter of 2013. These charges are expected to reduce Q2 2013 basic earnings per share by $0.79.

The deactivation of these two plants will remove approximately 2,080 megawatts of generating capacity, which represents about 10% of FirstEnergy's total generating capacity.

Yes, FirstEnergy expects the deactivation to reduce its annual compliance costs associated with MATS from approximately $925 million to $650 million, resulting in an estimated annual saving of $275 million.