EX-99.2 3 ex99-2.htm EXHIBIT 99.2 - CONSOLIDATED REPORT TO THE FINANCIAL COMMUNITY Exhibit 99.2 - Consolidated Report to the Financial Community
Exhibit 99.2
Consolidated Report to the Financial Community                    
First Quarter 2005
(Released April 27, 2005)
 
 

         
 
    Highlights
 
 After-Tax EPS Variance Analysis
1st Qtr.
  
 
   n  Normalized non-GAAP earnings for the
 
 
 1Q 2004 Basic EPS - GAAP Basis
 
$    0.53
  
 
       first quarter of 2005, excluding unusual
  
 
    Davis-Besse Incremental Expenses - 2004
 
      0.12
  
 
       items, were $0.47 per share, compared with
  
 
 1Q 2004 Normalized Earnings - Non-GAAP Basis
 
$    0.65
  
 
       first quarter 2004 normalized non-GAAP
  
 
    Electric Gross Margin:
 
    
  
         
       earnings of $0.65 per share. GAAP         - Nuclear Outage Replacement Power
     (0.12) 
  
         
       earnings were $0.49 per share compared         - Remaining Electric Gross Margin
      0.04 
  
 
       with GAAP earnings of $0.53 per share in
  
 
    Nuclear Operating Expenses
 
     (0.12)
  
 
       the first quarter of 2004, which included
  
 
    Fossil Operating Expenses
 
      0.02
  
 
       replacement power costs associated with
  
 
    Pension and Other Employee Benefits
 
      0.05
  
 
       the Davis-Besse extended outage.
  
 
    General Taxes & Non-Core Businesses
 
     (0.03)
  
 
       
  
 
    Investment Income from COLI
 
     (0.02)
  
 
       
  
 
    Interest Expense
 
      0.02
  
   
 
    Other
 
     (0.02)
 
   
 
 1Q 2005 Normalized Earnings - Non-GAAP Basis
 
$    0.47
  
   
 
    Unusual Items - 2005
 
      0.02
  
   
 
 1Q 2005 Basic EPS - GAAP Basis
 
$    0.49
  
         
 
 
 
 
1Q 2005 Results vs. 1Q 2004
 

 
n
 
Electric distribution deliveries increased 3%. Commercial and industrial deliveries increased 5% and 4% respectively, while residential deliveries were unchanged. Heating-degree-days were comparable to the same period last year, but 6% above normal. Total electric generation sales were flat, as the 1% increase in retail generation sales offset a 3% decrease in wholesale sales.
 
n
 
Electric gross margin decreased $42 million, or $0.08 per share, after adjusting for changes in regulatory deferrals and last year's Davis-Besse replacement power costs. Replacement power costs related to the three nuclear outages reduced electric gross margin by $0.12 per share. However, this was partially offset by a record first quarter output from our fossil fleet, which contributed an improvement of $0.04 per share in electric gross margin.
 
n
 
Nuclear operating expenses increased $67 million due to a refueling outage and a 26-day forced outage at Perry, as well as a 23-day planned mid-cycle outage at Davis-Besse.
 
n
 
Fossil operating expenses decreased $10 million as a result of fewer planned outages.
 
n
 
Pension and other employee benefit costs decreased approximately $28 million due to the voluntary $500-million contribution to the pension plan in September 2004, favorable market returns in 2004, and changes in health care benefits.
 
n
 
General taxes increased $6 million as a result of higher payroll and state gross receipts taxes. The net income contribution from non-core businesses declined by $7 million principally due to the divestiture of certain of these units.
 
n
 
Declines in investment income from corporate owned life insurance reduced net income by $5 million.
 
 
 
 
 
 
n
 
Interest costs, before capitalized interest and premiums associated with preferred stock redemptions, decreased $8 million. During the quarter, we redeemed debt and preferred securities totaling $133 million, which will reduce financing costs by $7 million in 2005.
 
n
 
During the quarter, we recognized after-tax gains on non-core asset sales totaling $22 million, which were partially offset by an after-tax expense of $14.4 million associated with the EPA New Source Review case settlement. We also recognized an additional $3.5 million expense for the proposed NRC fine at Davis-Besse, bringing the total liability accrued to $5.5 million. The net impact of these unusual items was to increase earnings by $0.02 per share.
 
 
2005 Earnings and Cash Generation Guidance*
 
 
n
 
Earnings guidance for 2005, excluding unusual charges, remains at $2.70 to $2.85 per share.
 
n
 
Total cash generation (Non-GAAP) guidance for 2005 remains at $560 million.
 
 
 
 
 *  The GAAP to Non-GAAP reconciliation statements are attached and available on FirstEnergy Corp.'s website at www.firstenergycorp.com/ir
 
 

 
 



 












For additional information, please contact:
 
  
Kurt E. Turosky
Terrance G. Howson
Thomas C. Navin
Director, Investor Relations
Vice President, Investor Relations
Treasurer
(330) 384-5500
(973) 401-8519
(330) 384-5889


2
                                                                                                                                                      

 
FirstEnergy Corp.
Consolidated Statements of Income
(In thousands except for per share amounts)

 
                     
 Consolidated Statements of Income
         
Three Months Ended March 31,
  
         
2005
  
2004
  
Change
  
     Revenues  
 
              
 (1)
Electric sales 
        
$
2,437,189
  
$
2,655,612
  
$
(218,423
)
 (2)
FE Facilities 
          
55,704
   
58,054
   
(2,350
)
 (3)
MYR 
          
92,381
   
88,875
   
3,506
 
 (4)
Other 
          
227,438
   
193,997
   
33,441
 
 (5)
Total Revenues
          
2,812,712
   
2,996,538
   
(183,826
)
                             
 
Expenses
                          
 (6)
Fuel 
          
232,889
   
198,359
   
34,530
 
 (7)
Purchased power 
          
662,443
   
935,967
   
(273,524
)
 (8)
Other operating expenses 
          
752,894
   
664,443
   
88,451
 
 (9)
FE Facilities 
          
60,085
   
59,776
   
309
 
 (10)
MYR 
          
92,409
   
88,423
   
3,986
 
 (11)
Provision for depreciation 
          
142,632
   
145,850
   
(3,218
)
 (12)
Amortization of regulatory assets 
          
310,841
   
310,202
   
639
 
 (13)
Deferral of new regulatory assets 
          
(59,507
)
  
(44,405
)
  
(15,102
)
 (14)
General taxes 
          
185,179
   
178,990
   
6,189
 
 (15)
Total Expenses
          
2,379,865
   
2,537,605
   
(157,740
)
                             
 (16)
Income Before Interest and Income Taxes
          
432,847
   
458,933
   
(26,086
)
 
Net interest charges: 
                          
 (17)
       Interest expense
          
164,657
   
172,510
   
(7,853
)
 (18)
       Capitalized interest
          
(255
)
  
(6,470
)
  
6,215
 
 (19)
       Subsidiaries' preferred stock dividends
          
6,553
   
5,281
   
1,272
 
 (20)
Net interest charges 
          
170,955
   
171,321
   
(366
)
 (21)
Income Taxes 
          
121,104
   
115,086
   
6,018
 
 (22)
Income before discontinued operations 
          
140,788
   
172,526
   
(31,738
)
 (23)
Discontinued operations 
          
18,938
   
1,473
   
17,465
 
 (24)
Net Income
        
$
159,726
  
$
173,999
  
$
(14,273
)
                             
 
Basic Earnings Per Common Share:
                          
 (25)
Before discontinued operations 
        
$
0.43
  
$
0.53
  
$
(0.10
)
 (26)
Discontinued operations 
          
0.06
   
-
   
0.06
 
 (27)
Basic Earnings Per Common Share
        
$
0.49
  
$
0.53
  
$
(0.04
)
 
Weighted Average Number of
                         
 (28)
Basic Shares Outstanding
          
327,908
   
327,057
   
851
 
                             
 
Diluted Earnings Per Common Share:
                          
 (29)
Before discontinued operations 
        
$
0.42
  
$
0.53
  
$
(0.11
)
 (30)
Discontinued operations 
          
0.06
   
-
 
$
0.06
  
 (31)
Diluted Earnings Per Common Share
        
$
0.48
  
$
0.53
  
$
(0.05
)
 
Weighted Average Number of
                         
 (32)
Diluted Shares Outstanding
          
329,427
   
329,034
   
393
 
 
 
3
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)

                                 
         
Three Months Ended March 31, 2005
             
Power 
                  
         
Regulated
 
Supply
  
Facilities
 
Other (a)
  
Reconciling
 
Consolidated
  
         
Services
  
Management
Services
  
Services
 
      
Adjustments (b)
      
             
 
                  
   Revenues  
 
                          
 (1)
Electric sales 
        
$
1,161,824
  
$
1,275,365
  
$
-
  
$
-
  
$
-
  
$
2,437,189
  
 (2)
FE Facilities 
          
-
   
-
   
55,704
   
-
   
-
   
55,704
 
 (3)
MYR 
          
-
   
-
   
-
   
92,381
   
-
   
92,381
 
 (4)
Other 
          
176,974
   
19,350
   
-
   
19,970
   
11,144
   
227,438
 
 (5)
Internal Revenues 
          
78,365
   
-
   
-
   
-
   
(78,365
)
  
-
 
 (6)
Total Revenues
          
1,417,163
   
1,294,715
   
55,704
   
112,351
   
(67,221
)
  
2,812,712
 
                                               
 
Expenses
                                            
 (7)
Fuel 
          
-
   
232,889
   
-
   
-
   
-
   
232,889
 
 (8)
Purchased power 
          
-
   
662,443
   
-
   
-
   
-
   
662,443
 
 (9)
Other operating expenses 
          
417,784
   
408,526
   
-
   
3,561
   
(76,977
)
  
752,894
 
 (10)
FE Facilities 
          
-
   
-
   
60,085
   
-
   
-
   
60,085
 
 (11)
MYR 
          
-
   
-
   
-
   
92,409
   
-
   
92,409
 
 (12)
Provision for depreciation 
          
125,665
   
10,057
   
-
   
585
   
6,325
   
142,632
 
 (13)
Amortization of regulatory assets 
          
310,841
   
-
   
-
   
-
   
-
   
310,841
 
 (14)
Deferral of new regulatory assets 
          
(59,507
)
  
-
   
-
   
-
   
-
   
(59,507
)
 (15)
General taxes 
          
146,418
   
31,055
   
-
   
946
   
6,760
   
185,179
 
 (16)
Total Expenses
          
941,201
   
1,344,970
   
60,085
   
97,501
   
(63,892
)
  
2,379,865
 
                                               
 (17)
Income Before Interest and Income Taxes
          
475,962
   
(50,255
)
  
(4,381
)
  
14,850
   
(3,329
)
  
432,847
 
 
Net interest charges: 
                                            
 (18)
      Interest expense
          
94,496
   
7,394
   
209
   
739
   
61,819
   
164,657
 
 (19)
      Capitalized interest
          
(2,827
)
  
2,548
   
-
   
2
   
22
   
(255
)
 (20)
      Subsidiaries' preferred stock dividends
          
6,553
   
-
   
-
   
-
   
-
   
6,553
 
 (21)
Net interest charges 
          
98,222
   
9,942
   
209
   
741
   
61,841
   
170,955
 
 (22)
Income taxes 
          
154,873
   
(24,681
)
  
(3,051
)
  
9,549
   
(15,586
)
  
121,104
 
 (23)
Income before discontinued operations 
          
222,867
   
(35,516
)
  
(1,539
)
  
4,560
   
(49,584
)
  
140,788
 
 (24)
Discontinued operations 
          
-
   
-
   
12,848
   
6,090
   
-
   
18,938
 
 (25)
Net Income
        
$
222,867
  
$
(35,516
)
$
11,309
  
$
10,650
  
$
(49,584
)
$
159,726
  


(a)
Other consists of MYR (a construction service company); natural gas operations and telecommunications services.
(b)
Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions.

 
 
 
4
 
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
 

                                 
         
Three Months Ended March 31, 2004
         
 
 
Power 
 
                
         
Regulated
 
Supply
  
Facilities
 
Other (a)
  
Reconciling
 
Consolidated
  
         
Services
  
Management
Services
  
Services
      
Adjustments (b)
 
    
      Revenues                            
 (1)
Electric sales 
        
$
1,153,819
  
$
1,501,793
  
$
-
  
$
-
  
$
-
  
$
2,655,612
  
 (2)
FE Facilities 
          
-
   
-
   
58,054
   
-
   
-
   
58,054
 
 (3)
MYR 
          
-
   
-
   
-
   
88,875
   
-
   
88,875
 
 (4)
Other 
          
136,089
   
19,902
   
-
   
26,866
   
11,140
   
193,997
 
 (5)
Internal Revenues 
          
79,598
   
-
   
-
   
-
   
(79,598
)
  
-
 
 (6)
Total Revenues
          
1,369,506
   
1,521,695
   
58,054
   
115,741
   
(68,458
)
  
2,996,538
 
                                               
 
Expenses
                                            
 (7)
Fuel 
          
-
   
198,359
   
-
   
-
   
-
   
198,359
 
 (8)
Purchased power 
          
-
   
935,967
   
-
   
-
   
-
   
935,967
 
 (9)
Other operating expenses 
          
366,096
   
346,068
   
-
   
17,745
   
(65,466
)
  
664,443
 
 (10)
FE Facilities 
          
-
   
-
   
59,776
   
-
   
-
   
59,776
 
 (11)
MYR 
          
-
   
-
   
-
   
88,423
   
-
   
88,423
 
 (12)
Provision for depreciation 
          
127,643
   
8,530
   
602
   
(621
)
  
9,696
   
145,850
 
 (13)
Amortization of regulatory assets 
          
310,202
   
-
   
-
   
-
   
-
   
310,202
 
 (14)
Deferral of new regulatory assets 
          
(44,405
)
  
-
   
-
   
-
   
-
   
(44,405
)
 (15)
General taxes 
          
147,103
   
24,389
   
-
   
932
   
6,566
   
178,990
 
 (16)
Total Expenses
          
906,639
   
1,513,313
   
60,378
   
106,479
   
(49,204
)
  
2,537,605
 
                                               
 (17)
Income Before Interest and Income Taxes
          
462,867
   
8,382
   
(2,324
)
  
9,262
   
(19,254
)
  
458,933
 
 
Net interest charges: 
                                            
 (18)
      Interest expense
          
105,222
   
12,492
   
190
   
642
   
53,964
   
172,510
 
 (19)
      Capitalized interest
          
(5,112
)
  
(1,305
)
  
-
   
(53
)
  
-
   
(6,470
)
 (20)
      Subsidiaries' preferred stock dividends
          
5,281
   
-
   
-
   
-
   
-
   
5,281
 
 (21)
Net interest charges 
          
105,391
   
11,187
   
190
   
589
   
53,964
   
171,321
 
 (22)
Income taxes 
          
144,808
   
(1,150
)
  
(1,041
)
  
3,547
   
(31,078
)
  
115,086
 
 (23)
Income before discontinued operations 
          
212,668
   
(1,655
)
  
(1,473
)
  
5,126
   
(42,140
)
  
172,526
 
 (24)
Discontinued operations 
          
-
   
-
   
402
   
1,071
   
-
   
1,473
 
 (25)
Net Income
        
$
212,668
  
$
(1,655
)
$
(1,071
)
$
6,197
  
$
(42,140
)
$
173,999
  

(a)
Other consists of MYR (a construction service company); natural gas operations and telecommunications services.
(b)
Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions.
 
5
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
 


         
Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004
  
             
Power 
                  
         
Regulated
 
Supply
  
Facilities
 
Other (a)
  
Reconciling
 
Consolidated
  
         
Services
  
Management
  
Services
      
Adjustments  (b)
      
             
Services
                  
      Revenues                            
 (1)
Electric sales 
        
$
8,005
  
$
(226,428
)
$
-
  
$
-
  
$
-
  
$
(218,423
)
 (2)
FE Facilities 
          
-
   
-
   
(2,350
)
  
-
   
-
   
(2,350
)
 (3)
MYR 
          
-
   
-
   
-
   
3,506
   
-
   
3,506
 
 (4)
Other 
          
40,885
   
(552
)
  
-
   
(6,896
)
  
4
   
33,441
 
 (5)
Internal Revenues 
          
(1,233
)
  
-
   
-
   
-
   
1,233
   
-
 
 (6)
Total Revenues
          
47,657
   
(226,980
)
  
(2,350
)
  
(3,390
)
  
1,237
   
(183,826
)
                                               
 
Expenses
                                            
 (7)
Fuel 
          
-
   
34,530
   
-
   
-
   
-
   
34,530
 
 (8)
Purchased power 
          
-
   
(273,524
)
  
-
   
-
   
-
   
(273,524
)
 (9)
Other operating expenses 
          
51,688
   
62,458
   
-
   
(14,184
)
  
(11,511
)
  
88,451
 
 (10)
FE Facilities 
          
-
   
-
   
309
   
-
   
-
   
309
 
 (11)
MYR 
          
-
   
-
   
-
   
3,986
   
-
   
3,986
 
 (12)
Provision for depreciation 
          
(1,978
)
  
1,527
   
(602
)
  
1,206
   
(3,371
)
  
(3,218
)
 (13)
Amortization of regulatory assets 
          
639
   
-
   
-
   
-
   
-
   
639
 
 (14)
Deferral of new regulatory assets 
          
(15,102
)
  
-
   
-
   
-
   
-
   
(15,102
)
 (15)
General taxes 
          
(685
)
  
6,666
   
-
   
14
   
194
   
6,189
 
 (16)
Total Expenses
          
34,562
   
(168,343
)
  
(293
)
  
(8,978
)
  
(14,688
)
  
(157,740
)
                                               
 (17)
Income Before Interest and Income Taxes
          
13,095
   
(58,637
)
  
(2,057
)
  
5,588
   
15,925
   
(26,086
)
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
(10,726
)
  
(5,098
)
  
19
   
97
   
7,855
   
(7,853
)
 (19)
 Capitalized interest
          
2,285
   
3,853
   
-
   
55
   
22
   
6,215
 
 (20)
 Subsidiaries' preferred stock dividends
          
1,272
   
-
   
-
   
-
   
-
   
1,272
 
 (21)
Net interest charges 
          
(7,169
)
  
(1,245
)
  
19
   
152
   
7,877
   
(366
)
 (22)
Income taxes 
          
10,065
   
(23,531
)
  
(2,010
)
  
6,002
   
15,492
   
6,018
 
 (23)
Income before discontinued operations 
          
10,199
   
(33,861
)
  
(66
)
  
(566
)
  
(7,444
)
  
(31,738
)
 (24)
Discontinued operations 
          
-
   
-
   
12,446
   
5,019
   
-
   
17,465
 
 (25)
Net Income
        
$
10,199
  
$
(33,861
)
$
12,380
  
$
4,453
  
$
(7,444
)
$
(14,273
)
 

(a)
Other consists of MYR (a construction service company); natural gas operations and telecommunications services.
(b)
Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues, which are reflected as reductions to expenses for internal management reporting purposes and elimination of intersegment transactions.
 
 
6
 

FirstEnergy Corp.
Financial Statements
(In thousands)

                
 Condensed Consolidated Balance Sheet 
        
As of
  
As of
  
        
March 31, 2005
  
December 31, 2004
   Assets             
   Current Assets:             
    Cash and cash equivalents
        
$
81,191
  
$
52,941
  
    Receivables
          
1,258,843
   
1,356,437
 
    Other
          
726,256
   
602,969
 
Total Current Assets 
          
2,066,290
   
2,012,347
 
                     
Property, Plant, and Equipment 
          
13,550,063
   
13,478,356
 
Investments 
          
3,257,113
   
3,273,966
 
Deferred charges 
          
12,387,097
   
12,303,275
 
Total Assets 
        
$
31,260,563
  
$
31,067,944
  
                     
Liabilities and Capitalization 
                    
Current Liabilities: 
                    
    Currently payable long-term debt
        
$
957,168
  
$
940,944
  
    Short-term borrowings
          
310,125
   
170,489
 
    Accounts payable
          
663,018
   
610,589
 
    Other
          
1,709,643
   
1,586,413
 
Total Current Liabilities 
          
3,639,954
   
3,308,435
 
                     
Capitalization: 
                    
    Common stockholders' equity
          
8,621,022
   
8,589,294
 
    Preferred stock
          
238,719
   
335,123
 
    Long-term debt and other long-term obligations
          
9,722,893
   
10,013,349
 
Total Capitalization 
          
18,582,634
    
18,937,766
 
                     
Noncurrent Liabilities 
          
9,037,975
   
8,821,743
 
                     
Total Liabilities and Capitalization 
        
$
31,260,563
  
$
31,067,944
  

 
 


 Adjusted Capitalization (Including Off-Balance Sheet Items)   
        
              As of March 31, 
        
2005
  
% Total
  
2004
  
% Total
Total common equity 
        
$
8,621,022
    
40
%
$
8,344,723
    
37
%
Preferred stock  
          
238,719
   
1
%
  
335,123
   
2
%
Long-term debt 
          
10,680,061
   
50
%
  
11,886,804
   
53
%
Short-term debt 
          
310,125
   
2
%
  
133,999
   
1
%
Off-balance sheet debt equivalents: 
                                
     Sale-leaseback net debt equivalents
          
1,353,000
   
6
%
  
1,408,416
   
6
%
     Accounts receivable factoring
          
142,000
   
1
%
  
200,000
   
1
%
Total  
        
$
21,344,927
    
100
%
$
22,309,065
    
100
%
                                 
 
*
Includes amounts due to be paid within one year, JCP&L securitization of $277 million and $293 million in 2005 and 2004, respectively.



           
GENERAL INFORMATION
  
Three Months Ended March 31,
 
   
2005
  
2004
  
           
L-t debt and preferred stock redemptions
  
$
333,788
  
$
268,920
  
New L-t debt issues
  
$
-
  
$
581,558
  
Short-term debt increase (decrease)
  
$
139,811
  
$
(387,541
)
Capital expenditures
  
$
228,884
  
$
138,406
  
               
 
 
7
                                                                                                                                                                         
 

FirstEnergy Corp.
Financial Statements
(In thousands)
 

                
 Condensed Consolidated Statements of Cash Flows   
        
Three Months Ended March 31,
  
        
2005
  
2004
  
    Cash flows from operating activities:             
Net income 
        
$
159,726
  
$
173,999
  
Adjustments to reconcile net income to net cash from operating activities: 
                    
     Depreciation and amortization of regulatory assets, nuclear fuel, and leases
          
412,614
   
433,521
 
     Deferred purchased power and other costs
          
(109,233
)
  
(83,907
)
     Deferred income taxes and investment tax credits
          
(14,156
)
  
5,923
 
     Income from discontinued operations
          
(18,938
)
  
(1,473
)
     Change in working capital and other
          
109,784
   
91,454
 
                     
Cash flows from operating activities 
        
$
539,797
  
$
619,517
  
                     
Cash flows from financing activities 
          
(359,220
)
  
(240,024
)
                     
Cash flows from investing activities 
          
(152,327
)
  
(213,199
)
                     
Net increase in cash and cash equivalents 
          
28,250
   
166,294
 
Cash and cash equivalents at beginning of period 
          
52,941
   
113,975
 
Cash and cash equivalents at end of period 
        
$
81,191
  
$
280,269
  
 

 REGULATORY DEFERRALS     
Three Months Ended March 31,
  
        
2005
  
2004
  
Change
  
 Ohio Transition Plan                 
    Beginning balance
        
$
710,019
  
$
453,615
        
    Deferral of shopping incentives
          
55,846
   
41,696
 
$
14,150
  
    Deferral of new regulatory assets
          
3,661
   
2,709
   
952
 
    Current period deferrals
        
$
59,507
  
$
44,405
  
$
15,102
  
                           
Ending Balance  
        
$
769,526
  
$
498,020
        
                           
Deferred Energy Costs - New Jersey 
                          
    Beginning balance
        
$
445,600
  
$
440,900
        
    Deferral (recovery) of energy costs
          
26,800
   
(15,500
)
$
42,300
  
Ending Balance 
        
$
472,400
  
$
425,400
        

 
 
 UNUSUAL ITEMS         
Three Months Ended March 31,
  
            
2005
      
2004
      
Change
  
 Gain (Loss) on Non-Core Asset Sales:                              
 FES Natural Gas Business (a)
          
 
  
$
8,229
      
$
-
    
 
  
$
8,229
  
 First Communications
          
 
    
6,800
       
-
       
6,800
 
 FSG Subsidiary - Elliott-Lewis (a) (b)
          
 
    
51
       
-
   
 
    
51
 
 Venture Capital Funds
              
2,015
       
-
   
 
    
2,015
 
 MYR subsidiary (a)
          
 
    
(524
)
  
 
    
-
   
 
    
(524
)
               
16,571
       
-
   
 
    
16,571
 
EPA Settlement - Environmental Projects 
                
(10,000
)
  
 
    
-
   
 
    
(10,000
)
EPA Penalty (c) 
                
(8,500
)
  
 
    
-
   
 
    
(8,500
)
NRC Fine (c) 
          
 
    
(3,450
)
      
-
       
(3,450
)
Total - pre-tax amounts 
          
 
  
$
(5,379
)
  
 
  
$
-
    
 
  
$
(5,379
)
                                             
EPS Effect 
              
$
0.02
        
$
-
        
$
0.02
  
                                             
 
(a)
Included in Discontinued operations
(b)
Before $12.2 million income tax benefit
(c)
No income tax benefit
 
 
8
                                                                                                                                                                    
 

FirstEnergy Corp.
Statistical Summary


                        
 ELECTRIC SALES STATISTICS         
Three Months Ended March 31,
  
 (kWh in millions)         
2005
  
2004
  
Change
  
 Electric Generation Sales                     
Retail - Regulated 
                
21,645
   
20,742
   
4.4
%
Retail - Competitive 
                
3,414
   
4,016
   
-15.0
%
        Total Retail
                
25,059
   
24,758
   
1.2
%
Wholesale * 
                
6,432
   
6,607
   
-2.6
%
Total Electric Generation Sales 
                
31,491
    
31,365
   
0.4
%
                                 
Electric Distribution Deliveries 
                                
Ohio                      - Residential
          
 
    
4,523
   
4,601
   
-1.7
%
                                  - Commercial
                
3,761
   
3,600
   
4.5
%
                                  - Industrial
                
5,815
   
5,664
   
2.7
%
                                  - Other
                
98
   
93
   
5.4
%
                                  Total Ohio
                
14,197
   
13,958
   
1.7
%
                                 
Pennsylvania              - Residential
          
 
    
3,174
   
3,140
   
1.1
%
                                  - Commercial
                
2,694
   
2,550
   
5.6
%
                                  - Industrial
                
2,620
   
2,390
   
9.6
%
                                  - Other
                
21
   
20
   
5.0
%
                                 Total Pennsylvania
                
8,509
   
8,100
   
5.0
%
                                 
New Jersey                - Residential
          
 
    
2,354
   
2,366
   
-0.5
%
                                 - Commercial
                
2,229
   
2,146
   
3.9
%
                                 - Industrial
                
743
   
744
   
-0.1
%
                                 - Other
                
22
   
20
   
10.0
%
                                Total New Jersey
                
5,348
   
5,276
   
1.4
%
                                 
Total Residential 
                
10,051
   
10,107
   
-0.6
%
Total Commercial 
                
8,684
   
8,296
   
4.7
%
Total Industrial 
                
9,178
   
8,798
   
4.3
%
Total Other 
                
141
   
133
   
6.0
%
Total Distribution Deliveries 
                
28,054
   
27,334
   
2.6
%
                                 
Electric Sales Shopped 
                                
Ohio                           - Residential
          
 
    
1,884
   
1,880
   
0.2
%
                                - Commercial
                
1,776
   
1,698
   
4.6
%
                                - Industrial
                
1,164
   
1,076
   
8.2
%
                               Total Ohio
                
4,824
   
4,654
   
3.7
%
                                 
Pennsylvania           - Residential
          
 
    
6
   
7
   
-14.3
%
                                - Commercial
                
25
   
36
   
-30.6
%
                                - Industrial
                
447
   
533
   
-16.1
%
                               Total Pennsylvania
                
478
   
576
   
-17.0
%
                                 
New Jersey          - Residential
          
 
    
1
   
286
   
-99.7
%
                              - Commercial
                
542
   
602
   
-10.0
%
                              - Industrial
                
564
   
474
   
19.0
%
                              Total New Jersey
                
1,107
   
1,362
   
-18.7
%
                                 
Total Electric Sales Shopped 
                
6,409
   
6,592
   
-2.8
%
 
*
2004 excludes the reporting of PJM sales and purchases on a gross basis.

                    
    OPERATING STATISTICS     
As of March 31,
  
    For 12 Months Ended     
2005
      
2004
  
                    
System Load Factor 
          
66.7
%
        
65.1
%
Capacity Factors: 
                          
      Fossil
         
59.1
%
        
59.4
%
      Nuclear
          
88.5
%
        
66.6
%
Generation Output: 
                          
      Fossil
         
61
%
        
68
%
      Nuclear
          
39
%
        
32
%
                           
WEATHER 
        
 2005
 
Normal
 
2004
  
Composite Heating-Degree-Days 
                          
      1st Quarter
          
2,979
   
2,823
   
2,988
 
Composite Cooling-Degree-Days 
                          
      1st Quarter
          
0
    
1
    
0
  
                           
 
 
9
 

FirstEnergy Corp.
2005 EPS and Cash Flow

 


                
 2005 Earnings Per Share (EPS)   
 (Reconciliation of GAAP to Non-GAAP)   
        
Three Months
 Ended March 31
  
Annual Guidance
  
                
Basic EPS (GAAP basis) 
        
$
0.49
  
$
2.72 - $2.87
  
Excluding Unusual Items: 
                    
     Gain on non-core asset sales
          
(0.07
)
  
(0.07
)
     EPA Settlement
          
0.04
   
0.04
 
     NRC Fine
          
0.01
   
0.01
 
Basic EPS (non-GAAP basis) 
        
$
0.47
  
$
2.70 - $2.85
  
                     
 
 
 

           
 Reconciliation of First Quarter 2005 Cash From Operating Activities (GAAP) to  
 Free Cash Flow (Non-GAAP) and Cash Generation (Non-GAAP)  
 (in millions)  
           
Net Cash from Operating Activities:
        
 
  
               
Net Income
          $ 160   
Adjustments:
              
 Depreciation 
          
143
 
 Amortization and deferral of regulatory assets 
          
251
 
 Deferred purchased power costs 
          
(109
)
 Deferred income taxes and ITC, net 
          
(14
)
 Other, including changes in working capital 
          
109
 
               
Net Cash from Operating Activities (GAAP)
        
$
540
  
               
Other Items:
              
Capital expenditures
          
(196
)
Nuclear fuel fabrication
          
(33
)
Decommissioning
          
(25
)
Common stock dividends
          
(135
)
Miscellaneous
          
(48 
 ) 
Free Cash Flow (Non-GAAP)
        
$
103
  
               
      Miscellaneous asset sales/other           53   
         Cash generation (Non-GAAP)          $ 156   
 
 

 
10
 
 

FirstEnergy Corp.
2005 Cash Flow Guidance

           
 Reconciliation of 2005 Estimated Cash from Operating Activities (GAAP) to  
 Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)  
 (in millions)  
   Net Cash from Operating Activities:  
 
      
           
Earnings Guidance
        
$
887 - $937
  
  Adjustments:
              
    Depreciation 
          
608
 
    Amortization and deferral of regulatory assets
          
1,061
 
    Deferred purchased power costs
          
(425
)
    Deferred income taxes and ITC, net 
          
(170
)
    Other, including changes in working capital 
          
104
 
       Net Cash from Operating Activities (GAAP)
        
$
2,090
  
               
Other Items:
              
               
Capital expenditures
          
(979
)
Nuclear fuel fabrication
          
(90
)
Decommissioning
          
(100
)
Common stock dividends
          
(542
)
NUG trust contributions
          
20
 
Miscellaneous
          
26
 
      Free Cash Flow (Non-GAAP)
        
$
425
  
               
Miscellaneous asset sales / other
          
135
 
      Cash Generation (Non-GAAP)
        
$
560
  
               
 
 
 
 
11
 
 

RECENT DEVELOPMENTS

New Source Review Settlement
On March 18, 2005 a settlement was reached with the EPA, the U.S. Department of Justice, and the states of Connecticut, New Jersey, and New York that will result in significant reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from current levels at FirstEnergy's generating plants. The agreement, upon final approval by the U.S. District Court, Southern District of Ohio, will resolve all issues related to various parties' actions against the company's W. H. Sammis Plant in the pending New Source Review case.

Under the agreement, FirstEnergy will install environmental controls on all 7 units of the Sammis Plant, upgrade the existing scrubber systems at its Bruce Mansfield Plant, and achieve additional reductions at other power plants. Although the precise level and timing of capital expenditures required cannot yet be predicted, FirstEnergy's  estimate is $1.1 billion over the 2005-2011 period, with 75% of the expenditures occurring between 2008-2011. Additionally, FirstEnergy will pay an $8.5 million civil penalty to the Department of Justice and contribute up to $25 million over five years to support environmentally beneficial projects.
 
Nuclear Regulatory Commission Fine
On April 21, FirstEnergy Nuclear Operating Company (FENOC) received a notice of violation from the Nuclear Regulatory Commission (NRC) and a proposed $5.45 million fine related to the corrosion issue at the Davis-Besse Nuclear Power Plant. The NRC said in a letter to FENOC that this action does not reflect the current performance of Davis-Besse and no further civil enforcement action is expected, absent any new information from the Department of Justice.
 
Planned Nuclear Outages
On February 9, Davis-Besse returned to service following the completion of its mid-cycle outage. During the outage, plant personnel completed inspections of the reactor vessel head and under vessel area. The inspections showed no indications of leakage.

As of April 27, Beaver Valley Unit 2 is finishing up its 11th refueling outage and in the process of reactor start-up. Major work activities included replacing 61 of 157 fuel assemblies, conducting a thorough inspection of the reactor vessel head and under-vessel area with no issues identified, and implementing other modifications and improvements. The unit operated safely and reliably for a record 537 consecutive days at a 100% availability factor since the plant was last refueled in the fall of 2003.

The Perry Plant is currently in process of completing its 10th refueling outage and we expect the Unit will commence restart within the next several days. During the outage, 288 of the reactor's 748 fuel rod assemblies were replaced. The scope and duration of the outage were expanded to address additional equipment repairs to the main electrical generator and emergency service water pumps, as well as to implement several improvements including:  digital controls for the feedwater system, rebuilding various pumps and valves with upgraded materials, and implementing numerous enhancements to improve fuel reliability.
 
Sale of Non-Core Assets
During the first quarter, the Company divested several non-core assets including its remaining natural gas business, Elliot-Lewis and Spectrum (Facilities Services Group subsidiaries), Power Piping (an MYR subsidiary), and 51% of its ownership interest in First Communications. These divestitures are consistent with FirstEnergy's strategy to focus on its core electric business.

Regulatory Filings Update
On March 2, FERC approved FirstEnergy's request, on behalf of American Transmission System Inc., to defer an estimated $54 million of extraordinary vegetation management project costs expected to be incurred over the 2004-2007 period. In 2005, the expenditures are estimated at $19 million, the deferral of which is already reflected in the 2005 earnings guidance.
 
Record Generation Output
During the first quarter, FirstEnergy set a new generation output record of 18.5 million megawatt-hours, a 1.1% increase over the prior record of 18.3 million megawatt-hours established during the first quarter 2004. The output record was attributable to a 0.9 million megawatt-hour or 7.8% increase in fossil generation.
 

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Forward-Looking Statements: This discussion includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), the receipt of approval from and entry of a final order by the U.S. District Court, Southern District of Ohio on the pending settlement agreement resolving the New Source Review litigation and the uncertainty of the timing and amounts of the capital expenditures (including that such amounts could be higher than anticipated) or levels of emission reductions related to this settlement, adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage and heightened scrutiny at the Perry Nuclear Power Plant in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital markets, further investigation into the causes of the August 14, 2003 regional power outage and the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
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