-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Peh6k3Jf17DFe89PS20gUsxrWtMHZqOrX3dfRzxytpQIVwij1PKzs+/W6eR0dxHn 3JVNvG+3UscxDEL8BfMfQg== 0001031296-06-000239.txt : 20061025 0001031296-06-000239.hdr.sgml : 20061025 20061025104540 ACCESSION NUMBER: 0001031296-06-000239 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061025 DATE AS OF CHANGE: 20061025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-21011 FILM NUMBER: 061161820 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 8-K 1 main8_k.htm FORM 8-K EARNINGS RELEASE Form 8-K Earnings Release
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) October 25, 2006


Commission
 
Registrant; State of Incorporation;
 
I.R.S. Employer
File Number
 
Address; and Telephone Number
 
Identification No.
 
 
 
 
 
333-21011
 
FIRSTENERGY CORP.
 
34-1843785
 
 
(An Ohio Corporation)
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 























Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02 Results of Operations and Financial Condition

On October 25, 2006, FirstEnergy Corp. issued two public announcements, which are attached as Exhibits 99.1 and 99.2 hereto and incorporated by reference. FirstEnergy's Press Release and Consolidated Report to the Financial Community contain non-GAAP* financial measures. Pursuant to the requirements of Regulation G, FirstEnergy has provided quantitative reconciliations within the Press Release and Consolidated Report to the Financial Community of the non-GAAP* financial measures to the most directly comparable GAAP financial measures.

The Press Release and Consolidated Report to the Financial Community include normalized earnings per share, which is not calculated in accordance with GAAP because it excludes the impact of "unusual items." Unusual items reflect the impact on earnings of events that are not routine, may be related to discontinued businesses or may be the cumulative effect of an accounting change. Management believes presenting normalized earnings calculated in this manner provides useful information to investors in evaluating the ongoing results of FirstEnergy's businesses and assists investors in comparing the company's operating performance to the operating performance of other companies in the energy sector. The Consolidated Report to the Financial Community also includes references to free cash flow and cash generation which are not defined under GAAP. Management believes presenting these non-GAAP* measures provides useful information to investors in assessing FirstEnergy's normalized operating performance from a cash perspective. FirstEnergy’s management frequently references these non-GAAP* financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons as well as comparisons to the performance of peer companies.

The non-GAAP* information presented in the Press Release and Consolidated Report to the Financial Community should be considered in addition to, and not as a substitute for, their most directly comparable financial measures prepared in accordance with GAAP. Also, these non-GAAP* financial measures may not be comparable to similarly titled measures used by other entities.


Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.
Description
 
 
99.1
Press Release issued by FirstEnergy Corp., dated October 25, 2006
99.2
Consolidated Report to the Financial Community, dated October 25, 2006

























*This Form 8-K contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts, or is subject to adjustment that have the effect of excluding or including amounts, that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP.


2

Forward-Looking Statements: This Form 8-K 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 to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the 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, the Nuclear Regulatory Commission and the various state public utility commissions as disclosed in the registrant’s 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 timing and outcome of various proceedings before the Public Utilities Commission of Ohio (including, but not limited to, the successful resolution of the issues remanded to the Public Utilities Commission of Ohio by the Ohio Supreme Court regarding the Rate Stabilization Plan) and the Pennsylvania Public Utility Commission, including the transition rate plan filings for Met-Ed and Penelec, the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outages, the successful completion of the share repurchase program announced August 10, 2006, the risks and other factors discussed from time to time in the registrant’s Securities and Exchange Commission filings, including the registrant’s annual report on Form 10-K for the year ended December 31, 2005, and other similar factors. The registrant expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 


























3
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



October 25, 2006


 
 FIRSTENERGY CORP.
 
 Registrant
     
     
     
  
  
  
 
By:  
              /s/ Harvey L. Wagner  
 
  Harvey L. Wagner
Vice President, Controller and
Chief Accounting Officer


4
 EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1
EXHIBIT 99.1
FirstEnergy Corp.    
76 South Main Street
Akron, Ohio 44308  
www.firstenergycorp.com
 For Release: October 25, 2006
   
News Media Contact:
Ellen Raines
(330) 384-5808
 Investor Contact:
Ron Seeholzer
(330) 384-5783

 
FIRSTENERGY REPORTS HIGHER QUARTERLY EARNINGS

Akron, Ohio - FirstEnergy Corp. (NYSE: FE) today reported third quarter 2006 normalized basic earnings per share of common stock on a non-GAAP(*) basis of $1.42 ($1.41 diluted).  These results exclude a $0.02 per share charge related to an adjustment to deferred non-utility generation (NUG) purchased power costs resulting from a Pennsylvania Public Utility Commission (PPUC) accounting order and a $0.01 per share net gain associated with the sale and impairment of non-core assets.
 
These results compare favorably with third quarter 2005 normalized non-GAAP basic and diluted earnings per share of common stock of $1.04, excluding a $0.03 per share charge from a labor arbitration decision in New Jersey associated with the company’s Jersey Central Power & Light subsidiary.
 
The company’s net income on a GAAP basis for the third quarter of 2006 was $454 million, or basic earnings of $1.41 per share of common stock ($1.40 diluted). That compares with net income on a GAAP basis of $332 million, or basic and diluted earnings of $1.01 per share of common stock in the third quarter of 2005.
 
      “I am pleased that we delivered solid financial results for our investors and have exceeded analysts’ expectations,” said President and Chief Executive Officer Anthony J. Alexander. “Despite the impact of milder weather compared to last year, we were able to produce strong earnings driven by the continued excellent performance of our generation fleet, which set a production record of approximately 62 million megawatt-hours through the first three quarters of the year.”
 
(more)



Third Quarter Non-GAAP Basic Earnings Per Share Reconciliation
            
   
 2006
  
2005
  
            
Before Unusual Items (Non-GAAP)
  
$
1.42
  
$
1.04
  
Non-Core Asset Sales/Impairments
PPUC NUG Accounting Adjustment
JCP&L Labor Arbitration Decision
    
0.01
(0.02)
--
    
--
--
(0.03
)
Basic Earnings Per Share (GAAP)
  
$
1.41
  
$
1.01
  

Electric generation sales were down slightly during the period, with sales increases in the retail sector of nearly 8 percent offset by reduced sales in the wholesale market. Milder weather in this year’s third quarter was primarily responsible for a 2.3 percent reduction in electricity delivered to customers, including electricity from third-party suppliers, through the company’s utility distribution system.
 
Earnings benefited from the company’s Ohio rate plans, as well as from the deferral of incremental transmission charges in Pennsylvania, which was approved by the PPUC on May 4, 2006. Consistent with the Met-Ed and Penelec petition, the order does not grant rate recovery of these costs, but allows an opportunity for the companies to seek recovery in the pending Rate Transition Plan filing.
 
Also during the quarter, the company repurchased 10.6 million shares - or approximately 3.2 percent - of its outstanding common stock through an accelerated repurchase program, which enhanced earnings per share by $0.02.
 
Total revenues for the third quarter of 2006 were $3.4 billion, compared with $3.5 billion in the third quarter of 2005. The decline in revenue is primarily attributable to FirstEnergy’s sale of 62 percent of its interest in MYR Group earlier in 2006.
 
For the first nine months of 2006, basic earnings per share of common stock on a non-GAAP basis were $3.04 ($3.03 diluted). In the corresponding period in 2005, non-GAAP basic earnings per share of common stock were $2.22 ($2.21 diluted).
 
On a GAAP basis, net income for the first nine months of 2006 was $979 million, or basic earnings of $2.99 per share of common stock ($2.97 diluted). During the same time frame in 2005, net income on a GAAP basis was $670 million, or basic earnings of $2.04 per share of common stock ($2.03 diluted).
 
(more)

2


First Nine Months Non-GAAP Basic Earnings Per Share Reconciliation
           
   
2006
  
2005
  
           
 Before Unusual Items (Non-GAAP)    $ 3.04    $ 2.22  
Non-Core Asset Sales/Impairments
    
(0.03
)
  
0.07
  
PPUC NUG Accounting Adjustment
JCP&L Labor Arbitration Decision
    
(0.02
--
 )   
--
(0.03
)
New Regulatory Assets - JCP&L
Rate Settlement
   
--
    
0.05
  
Ohio Tax Write-off
    
--
    
(0.22
)
Sammis Plant New Source Review Settlement
    
--
    
(0.04
)
Davis-Besse NRC Fine
    
--
    
(0.01
)
Basic Earnings Per Share (GAAP)
  
$
2.99
  
$
2.04
  

Revenues for the first nine months of 2006 were $9.0 billion, compared with $9.1 billion for the same period last year, with the reduction reflecting the MYR sale. The company’s generation fleet posted record output of 61.9 million MWH during the first nine months of this year, representing a 4-percent increase over the record established in the same time period last year.
 
Also today, FirstEnergy revised its earnings guidance (non-GAAP) for 2006 to a range of $3.75 to $3.85 per share of common stock. The tightening of the range toward the upper end of the prior guidance ($3.65 to $3.85 per share, excluding unusual items, set on August 1, 2006) reflects the strong performance during the third quarter.
 

Reconciliation of 2006 Estimated Earnings Per Share (GAAP)
To Revised Earnings Per Share Guidance (Non-GAAP)
  
         
Estimated 2006 Basic Earnings Per Share (GAAP)
  
$
3.70 - $3.80
  
         
Excluding Unusual Items:
        
Non-Core Asset Sales/Impairments
    
0.03
  
PPUC NUG Accounting Adjustment 
    
0.02
  
         
Estimated 2006 Basic Earnings Per Share (Non-GAAP)
  
$
3.75 - $3.85
  

(more)

 
3
 

        FirstEnergy’s Consolidated Report to the Financial Community - which provides highlights on company developments and financial results for the third quarter of 2006 - is posted on the company’s Web site - www.firstenergycorp.com/ir. To access the report, click on Q3 2006 Consolidated Report to the Financial Community.
 
        FirstEnergy is a diversified energy company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services. Its seven electric utility operating companies comprise the nation’s fifth largest investor-owned electric system based on serving 4.5 million customers in Ohio, Pennsylvania and New Jersey; and its generation subsidiaries control nearly 14,000 megawatts of capacity

(*) This news release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). These non-GAAP financial measures are intended to complement, and not considered as an alternative, to the most directly comparable GAAP financial measure. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities.

Forward-Looking Statements: This news release 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 or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the 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, the Nuclear Regulatory Commission and the various state public utility commissions 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 timing and outcome of various proceedings before the Public Utilities Commission of Ohio (including, but not limited to, the successful resolution of the issues remanded to the PUCO by the Ohio Supreme Court regarding the Rate Stabilization Plan) and the Pennsylvania Public Utility Commission, including the transition rate plan filings for Met-Ed and Penelec, the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful completion of the share repurchase program announced August 10, 2006, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, including our annual report on Form 10-K for the year ended December 31, 2005, 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.
(102506)
 
4
 EX-99.2 3 ex99_2.htm EXHIBIT 99.2 Exhibit 99.2
 

 
EXHIBIT 99.2

 
Consolidated Report to the Financial Community                            
Third Quarter 2006    
(Released October 25, 2006) (Unaudited)                        
 
           
   HIGHLIGHTS    After-Tax EPS Variance Analysis
 3rd Qtr.
  
      3Q 2005 Basic EPS - GAAP Basis
  $1.01 
 
 §  Normalized non-GAAP* earnings, excluding       Unusual Items - 2005 
 0.03
  
   unusual items, were $1.42 per share for the   3Q 2005 Normalized Earnings - Non-GAAP* Basis 
 $1.04 
 
   third quarter of 2006, compared with $1.04       Distribution Deliveries 
 (0.05)
  
   per share for the third quarter of 2005.       Generation Revenues 
  (0.09)
 
   GAAP earnings were $1.41 per share       Fuel & Purchased Power 
 0.04 
 
   compared with $1.01 per share in the        Postretirement Benefit Costs
 0.01 
 
   third quarter of 2005.       Ohio Regulatory Changes
 
  
               - Transition Cost Amortization 
 0.24 
  
   3Q 2006 Results vs. 3Q 2005            - Deferred Distribution Costs 
 0.07 
 
               - Deferred Fuel Costs                    0.08  
 §  Electric distribution deliveries declined 2%,            - Rate Stabilization Charge Discount 
   (0.09)
  
   primarily due to milder weather.      Deferred Transmission Costs - PA
             0.10
  
   Cooling-degree-days were 20% lower than       Net MISO / PJM Transmission Costs 
    0.07 
 
   the same period last year, but 4% above      Financing Costs         (0.04)  
   normal. Residential deliveries decreased      Investment Income - NDT and COLI
          (0.04)
  
   5%, while commercial and industrial       Income Tax Benefits  
      0.04  
  
   deliveries each declined 1%. Lower       Reduced Common Shares             0.02  
   distribution deliveries reduced earnings       Other 
  0.02  
 
   by $0.05 per share.    3Q 2006 Normalized Earnings - Non-GAAP Basis*             1.42  
        Unusual Items - 2006            (0.01)  
      3Q 2006 Basic EPS - GAAP Basis  
 $1.41  
 
           
 
 §
Total electric generation sales decreased 1%, as a 33% reduction in wholesale sales more than offset the 8% increase in retail sales. The change in generation sales mix resulted from returning Ohio shopping customers. Generation revenues, excluding JCP&L, reduced earnings $0.09 per share due to lower wholesale market prices and lower generation sales volume. Partially offsetting the reduction in generation revenues was a related decrease in fuel and purchased power costs. Fuel and related expense reductions increased earnings by $0.03 per share. Lower purchased power costs, excluding JCP&L, increased earnings by $0.01 per share, primarily due to a 2% decline in purchased volume and lower average wholesale prices compared to the same period last year. 
 
 §
Postretirement benefit costs other than pensions increased earnings by $0.01 per share largely due to program changes in health care benefits being phased in through 2008.
 
 §
The impact of several elements of the Ohio rate plans that became effective in 2006 increased earnings by $0.30 per share. The major driver of this improvement was a $0.24 per share reduction in transition cost amortization. Other changes included the deferral of $0.07 per share of costs related to distribution reliability spending and the deferral of $0.08 per share of incremental fuel expense, partially offset by a $0.09 per share earnings reduction related to the Rate Stabilization Charge discount provided to shopping customers.
 
 §
The deferral of incremental transmission charges at Metropolitan Edison (Met-Ed) and Pennsylvania Electric (Penelec) increased earnings by $0.10 per share during the third quarter. Consistent with the companies’ petition, the Pennsylvania Public Utility Commission (PPUC) order does not grant rate recovery of these costs, but allows Met-Ed and Penelec the opportunity to seek recovery in the pending Rate Transition Plan filing.
 
 §
Net MISO/PJM transmission costs increased earnings by $0.07 per share, primarily due to lower congestion costs in the PJM market and higher MISO revenues.
 
 
 
 
 §
Total financing costs increased by $0.04 per share, primarily attributable to higher short-term borrowings to fund the accelerated share repurchase program, higher variable interest rates, and the absence of gains on reacquired debt that were realized in the third quarter of 2005.
 
 §
Lower nuclear decommissioning trust income of $0.05 per share was partially offset by higher income from corporate-owned life insurance which increased earnings by $0.01 per share.
 
 §
 A change in estimated taxes payable related to the recently filed 2005 income tax return and the continuing phase-out of the Ohio income tax increased earnings by $0.04 per share.
 
 §
The reduction in shares outstanding, resulting from the accelerated share repurchase of 10.6 million shares in August, enhanced earnings per share by $0.02.
 
 §
Other included lower energy delivery expenses and non-electric commodity transactions.
 
 §
During the quarter, we recognized two unusual items. The first resulted from a PPUC order requiring Met-Ed and Penelec to discontinue an accounting methodology modification implemented in January 2006 (and effective for 2005) relating to deferred NUG purchased power costs. The pre-tax charge relating to costs deferred in 2005 under the revised methodology was $10 million, or $0.02 per share. The PPUC indicated that its order does not limit the companies' ability to petition for such an accounting modification and the companies have already filed such a petition. The second unusual item is related to a $0.01 per share benefit from the sale and impairment of non-core assets.
 
Revised 2006 Earnings Guidance*
 
 §
Normalized non-GAAP earnings guidance for 2006, excluding unusual items, has been revised to $3.75 to $3.85 per share from our previous normalized non-GAAP guidance of $3.65 to $3.85 per share. The increase toward the top half of the prior guidance reflects the strong performance during the third quarter.  With year-to-date normalized non-GAAP earnings now at $3.04 per share, our normalized non-GAAP earnings guidance for the fourth quarter is $0.71 to $0.81 per share.
 
 §
Total cash generation (non-GAAP) guidance for 2006 remains at $460 million, after capital expenditures and common dividends.
 
* The 2006 GAAP to non-GAAP reconciliation statements can be found on pages 10 and 11 of this report and are available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir. The 2005 GAAP to non-GAAP reconciliation statements are also available on FirstEnergy Corp.'s website.
 

For additional information, please contact:
 

Ronald E. Seeholzer
Kurt E. Turosky
Rey Y. Jimenez
Vice President, Investor Relations
Director, Investor Relations
Principal, Investor Relations
(330) 384-5783
(330) 384-5500
(330) 761-4239
 
 
Consolidated Report to the Financial Community - 3rd Quarter 2006                                      2
 
                       
              
 
FirstEnergy Corp.
Consolidated Statements of Income
(Unaudited)
(In millions, except for per share amounts)

 
 
  
Three Months Ended September 30,
        Nine Months Ended September 30,
 
 
 
2006
 
2005
 
Change
 
2006
 
2005
 
Change
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Electric sales
 
$
3,115
 
$
3,117
 
$
(2
)
$
8,179
 
$
8,032
 
$
147
 
(2)
FE Facilities
 
 
47
 
 
59
 
 
(12
)
 
150
 
 
162
 
 
(12
)
(3)
MYR
 
 
-
 
 
132
 
 
(132
)
 
108
 
 
354
 
 
(246
)
(4)
Other
 
 
239
 
 
196
 
 
43
 
 
594
 
 
549
 
 
45
 
(5)
Total Revenues
 
 
3,401
 
 
3,504
 
 
(103
)
 
9,031
 
 
9,097
 
 
(66
)
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Expenses 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(6)
Fuel
 
 
344
 
 
336
 
 
8
 
 
929
 
 
849
 
 
80
 
(7)
Purchased power
 
 
973
 
 
951
 
 
22
 
 
2,377
 
 
2,266
 
 
111
 
(8)
Other operating expenses
 
 
748
 
 
806
 
 
(58
)
 
2,182
 
 
2,239
 
 
(57
)
(9)
FE Facilities
 
 
46
 
 
59
 
 
(13
)
 
159
 
 
163
 
 
(4
)
(10)
MYR
 
 
-
 
 
128
 
 
(128
)
 
105
 
 
348
 
 
(243
)
(11)
Provision for depreciation
 
 
153
 
 
152
 
 
1
 
 
445
 
 
444
 
 
1
 
(12)
Amortization of regulatory assets
 
 
243
 
 
366
 
 
(123
)
 
665
 
 
983
 
 
(318
)
(13)
Deferral of new regulatory assets 
 
 
(153
)
 
(125
)
 
(28
)
 
(379
)
 
(305
)
 
(74
)
(14)
General taxes
 
 
187
 
 
188
 
 
(1
)
 
553
 
 
541
 
 
12
 
(15)
Total Expenses
 
 
2,541
 
 
2,861
 
 
(320
)
 
7,036
 
 
7,528
 
 
(492
)
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(16)
Operating Income
 
 
860
 
 
643
 
 
217
 
 
1,995
 
 
1,569
 
 
426
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Other Income (Expense) 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(17)
Investment income
 
 
46
 
 
83
 
 
(37
)
 
120
 
 
171
 
 
(51
)
(18)
Interest expense
 
 
(185
)
 
(161
)
 
(24
)
 
(528
)
 
(488
)
 
(40
)
(19)
Capitalized interest
 
 
7
 
 
7
 
 
-
 
 
21
 
 
12
 
 
9
 
(20)
Subsidiaries' preferred stock dividends
 
 
(2
)
 
(3
)
 
1
 
 
(6
)
 
(13
)
 
7
 
(21)
Total Other Income (Expense)
 
 
(134
)
 
(74
)
 
(60
)
 
(393
)
 
(318
)
 
(75
)
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(22)
Income Before Income Taxes and
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 Discontinued Operations
 
 
726
 
 
569
 
 
157
 
 
1,602
 
 
1,251
 
 
351
 
(23)
Income taxes
 
 
272
 
 
237
 
 
35
 
 
623
 
 
599
 
 
24
 
(24)
Income Before Discontinued Operations
 
 
454
 
 
332
 
 
122
 
 
979
 
 
652
 
 
327
 
(25)
Discontinued operations
 
 
-
 
 
-
 
 
-
 
 
-
 
 
18
 
 
(18
)
(26)
Net Income
 
$
454
 
$
332
 
$
122
 
$
979
 
$
670
 
$
309
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Basic Earnings Per Common Share: 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(27)
Before discontinued operations
 
$
1.41
 
$
1.01
 
$
0.40
 
$
2.99
 
$
1.99
 
$
1.00
 
(28)
Discontinued operations
 
 
-
 
 
-
 
 
-
 
 
-
 
 
0.05
 
 
(0.05
)
(29)
Basic Earnings Per Common Share
 
$
1.41
 
$
1.01
 
$
0.40
 
$
2.99
 
$
2.04
 
$
0.95
 
(30)
Weighted Average Number of
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Basic Shares Outstanding 
 
 
322
 
 
328
 
 
(6
)
 
326
 
 
328
 
 
(2
)
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
Diluted Earnings Per Common Share: 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
(31)
Before discontinued operations
 
$
1.40
 
$
1.01
 
$
0.39
 
$
2.97
 
$
1.98
 
$
0.99
 
(32)
Discontinued operations
 
 
-
 
 
-
 
 
-
 
 
-
 
 
0.05
 
 
(0.05
)
(33)
Diluted Earnings Per Common Share
 
$
1.40
 
$
1.01
 
$
0.39
 
$
2.97
 
$
2.03
 
$
0.94
 
 
Weighted Average Number of  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
(34)
Diluted Shares Outstanding
 
 
325
 
 
330
 
 
(5
)
 
329
 
 
330
 
 
(1
)
 
  
 
 
 
 

 
Consolidated Report to the Financial Community - 3rd Quarter 2006                                     


3

 
 
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)
 
          
Three Months Ended September 30, 2006
              
Power
               
              
Supply
               
          
Regulated
  
Management
  
Facilities
     
Reconciling
   
          
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
   
Revenues
                           
 
(1
)
   Electric sales
      
$
1,124
  
$
1,991
  
$
-
  
$
-
  
$
-
  
$
3,115
  
 
(2
)
    FE Facilities 
        
-
   
-
   
47
   
-
   
-
   
47
 
 
(3
)
    MYR 
        
-
   
-
   
-
   
- 
    
-
   
- 
  
 
(4
)
    Other 
        
166
   
75 
    
-
   
14
    
(16
)
  
239
 
 
(5
)
    Internal revenues 
        
- 
    
-
   
-
   
-
   
-
 
  
-
 
 
(6
)
Total Revenues
        
1,290
   
2,066
   
47
   
14 
    
(16
)
  
3,401
 
                                                 
     
Expenses
                                          
 
(7
)
    Fuel
        
-
   
344 
    
-
   
-
   
-
   
344 
  
 
(8
)
   Purchased power
        
-
   
973 
    
-
   
-
   
-
   
973 
  
 
(9
)
    Other operating expenses 
        
338 
    
414 
    
-
   
- 
    
(4
)
  
748
  
 
(10
)
    FE Facilities 
        
-
   
-
   
46
    
-
   
-
   
46
  
 
(11
)
    MYR
        
-
   
-
   
-
   
-
    
-
   
-
  
 
(12
)
    Provision for depreciation 
        
96
   
50
    
-
   
1
   
6
    
153
  
 
(13
)
    Amortization of regulatory assets 
        
238
    
5
   
-
   
-
   
-
   
243
  
 
(14
)
    Deferral of new regulatory assets 
        
(54
)
  
(99
)
  
-
   
-
   
-
   
(153
)
 
(15
)
    General taxes 
        
140
   
43
   
-
   
- 
    
4
    
187
  
 
(16
)
Total Expenses
        
758
    
1,730
    
46
    
1
   
6
    
2,541
  
                                                 
 
(17
)
Operating Income
        
532
    
336
    
1
 
  
13
    
(22
)
  
860
  
                                                 
     
Other Income (Expense)
                                          
 
(18
)
   Investment income
        
67
    
19
    
-
   
-
   
              (40
  )  
46
  
 
(19
)
    Interest expense 
        
(104
)
  
(58
)
  
-
   
(2
)
  
(21
)
  
(185
)
 
(20
)
   Capitalized interest
        
4
    
2
    
-
   
1
    
-
   
7
 
 
(21
)
    Subsidiaries' preferred stock dividends
        
(2
)
  
-
   
-
   
-
   
-
   
(2
)
 
(22
)
Total Other Income (Expense)
 
      
(35
)
  
(37
)
  
-
   
(1
)
  
(61
)
  
(134
)
                                                 
 
(23
)
Income Before Income Taxes and
       
 
    
 
    
 
    
 
 
  
 
 
  
 
  
     
Discontinued Operations
         497     299     1     12     (83 )   726  
                                               
 
(24
)
 Income taxes
        
200
    
119
    
-
 
  
(15
  )  
(32
)
  
272
  
 
(25
)
 Income Before Discontinued Operations
        
   297
    
180
    
1
    
27
    
(51
  )  
454
  
 
(26
)
Discontinued Operations
      
 
-
  
 
-
  
 
-
 
 
-
  
 
-
 
 
-
  
  (27 ) 
Net Income
        $ 297     $ 180     $ 1     $ 27     $ (51  )  $ 454   
                                                 
 
(a)  Primarily consists of telecommunications services.             0;           
  
 
(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.                         
 
 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                   60;                               4

FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)


        
Three Months Ended September 30, 2005
            
Power
                 
            
Supply
                 
        
Regulated
  
Management
  
Facilities
     
Reconciling
     
        
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
     Revenues                           
 
(1
)
  
Electric sales
  
$
1,340
  
$
1,777
  
$
-
  
$
-
  
$
-
  
$
3,117
  
 
(2
)
  
FE Facilities
    
-
   
-
   
59 
    
-
   
-
   
59 
  
 
(3
)
  
MYR
    
-
   
-
   
-
   
132 
    
-
   
132 
  
 
(4
)
  
Other
    
141
   
47 
    
-
   
6 
    
2 
    
196
 
 
(5
)
  
Internal revenues
    
79
   
-
   
-
   
-
   
(79
)
  
-
 
 
(6
)
  
Total Revenues
    
1,560
   
1,824
   
59 
    
138 
    
(77
)
  
3,504 
  
                                               
          Expenses                                       
 
(7
)
  
Fuel
    
-
   
336 
    
-
   
-
   
-
   
336 
  
 
(8
)
  
Purchased power
    
-
   
951 
    
-
   
-
   
-
   
951 
  
 
(9
)
  
Other operating expenses
    
337
   
537
   
-
   
(2
 )  
(66
)
  
806 
  
 
(10
)
  
FE Facilities
    
-
   
-
   
59 
    
-
   
-
   
59 
  
 
(11
)
  
MYR
    
-
   
-
   
-
   
128 
    
-
   
128 
  
 
(12
)
  
Provision for depreciation
    
137
   
9
    
-
   
1
   
5 
    
152
 
 
(13
)
  
Amortization of regulatory assets
    
366
   
- 
    
-
   
-
   
-
   
366
 
 
(14
)
  
Deferral of new regulatory assets
    
(94
)
  
(31
  )  
-
   
-
   
-
   
(125
)
 
(15
)
  
General taxes
    
150
   
33
   
-
   
1
   
4 
    
188
 
 
(16
)
  Total Expenses    
896
   
1,835
   
59 
    
128 
    
(57
)
  
2,861 
  
                                               
 
(17
)
  Operating Income    
664 
    
(11
)
  
-
 
  
10
   
(20
)
  
643 
  
                                               
       Other Income (Expense)                                         
 
(18
)
  
Investment income
    
83 
    
-
   
-
   
-
   
-
   
83 
  
 
(19
)
  
Interest expense
    
(91
)
  
(12
)
  
-
   
(1
)
  
(57
)
  
(161
)
 
(20
)
  
Capitalized interest
    
6 
    
1
 
  
-
   
-
   
-
   
7 
  
 
(21
)
  
Subsidiaries' preferred stock dividends
    
(3
)
  
-
   
-
   
-
   
-
   
(3
)
 
(22
)
  Total Other Income (Expense)    
(5
)
  
(11
)
  
-
   
(1
)
  
(57
)
  
(74
)
                                               
  (23)  
 Income Before Income Taxes andDiscontinued Operations 
     659      (22 )   -      9      (77  )    569   
 
(24
)
  
Income taxes
    
264 
    
(9
)
  
-
 
  
3 
    
(21
)
  
237 
  
                                               
 
(25
)
  Income before discontinued operations    
395 
    
(13
)
  
-
 
  
6 
    
(56
)
  
332 
  
 
(26
)
  
Discontinued operations
    
-
   
-
   
- 
    
- 
    
-
   
- 
  
 
(27
)     Net Income
  
$
395
  
$
(13
)
$
-
  
$
6
  
$
(56
)
$
332
  
                                               
                                               
      (a)       Other consists of MYR (a construction service company) 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.                    


Consolidated Report to the Financial Community - 3rd Quarter 2006 
                                                   &# 160;                                          5
FirstEnergy Corp.
Consolidated Income Segments
(Unaudited)
(In millions)


       
 Three Months Ended Sept. 30, 2006 vs. Three Months Ended Sept. 30, 2005          
  
            
Power
                 
            
Supply
                 
       
 Regulated
  
Management
  
Facilities
     
Reconciling
     
       
 Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
   
Revenues 
                          
 
(1
)
  
Electric sales
  
$
 (216
)
$
214
  
$
-
  
$
-
  
$
-
  
$
(2
 ) 
 
(2
)
  
FE Facilities
    
-
   
-
   
(12
 )   
-
   
-
   
(12 
 ) 
 
(3
)
 
MYR
    
-
   
-
   
-
   
(132 
 )   
-
   
(132 
 ) 
 
(4
)
  
Other
    
25 
    
28 
    
-
   
8
 
  
(18
)
  
43 
  
 
(5
)
  
Internal revenues
    
(79
)
  
-
   
-
   
-
   
79 
    
-
 
 
(6
)
  Total Revenues  
(270
)
  
242
   
(12 
 )   
(124 
 )   
61 
    
(103 
 ) 
                                               
       Expenses                                      
 
(7
)
  
Fuel
    
-
   
8 
    
-
   
-
   
-
   
8 
  
 
(8
)
  
Purchased power
    
-
   
22 
    
-
   
-
   
-
   
22
 
 
(9
)
  
Other operating expenses
    
1
 
  
(123
)
  
-
   
2
   
62 
    
(58
)
 
(10
)
  
FE Facilities
    
-
   
-
   
(13
)
  
-
   
-
   
(13
)
 
(11
)
  
MYR
    
-
   
-
   
-
   
(128 
 )   
-
   
(128 
 )
 
(12
)
  
Provision for depreciation
    
(41
)
  
41 
    
-
   
-
   
1
 
  
1 
  
 
(13
)
  
Amortization of regulatory assets
    
(128
)
  
5 
    
-
   
-
   
-
   
(123
)
 
(14
)
  
Deferral of new regulatory assets
    
40 
    
(68
)
  
-
   
-
   
-
   
(28
 )
 
(15
)
  
General taxes
    
(10
)
  
10 
    
-
   
(1 
 )   
- 
    
(1 
 ) 
 
(16
)
  Total Expenses    
(138
)
  
(105 
 )   
(13
)
  
(127 
 )   
63
   
(320 
 ) 
                                               
 
(17
)
Operating Income
    
(132
)
  
347 
    
1 
    
3
 
  
(2
)
  
217 
  
                                               
      Other Income (Expense)                                    
 
(18
)
  
Investment income
    
(16
)
  
19
   
-
   
-
   
(40 
 )   
(37 
 ) 
 
(19
)
  
Interest expense
    
(13 
 )   
(46
)
  
-
   
(1 
 )   
36 
    
(24
)
 
(20
)
  
Capitalized interest
    
(2 
 )   
1 
    
-
   
1 
    
-
   
- 
  
 
(21
)
  
Subsidiaries' preferred stock dividends
    
1 
    
-
   
-
   
-
   
-
   
1 
  
 
(22
)
  Total Other Income (Expense)
 
  
(30
)
  
(26
)
  
-
   
-
   
(4 
 )   
(60 
 ) 
                                               
  (23 )
Income Before Income Taxes and Discontinued Operations 
     (162  )    321      1      3      (6  )    157   
 
(24
)
  
Income taxes
    
(64
)
  
128 
    
- 
    
(18
)
  
(11
)
  
35 
  
                                               
 
(25
)
  
Income before discontinued operations
    
(98
)
  
193 
    
1
   
21 
    
5 
    
122 
  
 
(26
)
  
Discontinued operations
    
-
   
-
   
-
 
  
-
 
  
-
   
-
 
 
(27
)
 Net Income
  
$
(98
)
$
193
  
$
1
 
$
21
  
$
5
  
$
122
  
                                               
                                               
  (a )
Other consists of MYR (a construction service company) 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. 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                          60;                          6
 
FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)

Condensed Consolidated Balance Sheet
  
 
  
 
  
 
  
 
  
 
  
 
  
As of
Sept.30, 2006
  
As of
Dec. 31, 2005
  
Assets
  
 
  
 
  
Current Assets:
  
 
  
 
  
Cash and cash equivalents
  
$
41
  
$
64
  
Receivables
    
1,420
   
1,498
 
Other
    
753
   
755
 
Total Current Assets
    
2,214
   
2,317
 
 
          
Property, Plant, and Equipment
    
14,510
   
13,998
 
Investments
    
3,474
   
3,351
 
Deferred Charges and Other Assets
    
11,964
   
12,175
 
Total Assets
  
$
32,162
  
$
31,841
  
 
          
Liabilities and Capitalization
          
Current Liabilities:
          
Currently payable long-term debt
  
$
1,668
  
$
2,043
  
Short-term borrowings
    
1,213
   
731
 
Accounts payable
    
611
   
727
 
Other
    
1,773
   
1,952
 
Total Current Liabilities
    
5,265
   
5,453
 
 
          
Capitalization:
          
Common stockholders' equity
    
9,208
   
9,188
 
Preferred stock
    
80
   
184
 
Long-term debt and other long-term obligations
    
8,760
   
8,155
 
Total Capitalization
    
18,048
   
17,527
 
Noncurrent Liabilities
    
8,849
   
8,861
 
Total Liabilities and Capitalization
  
$
32,162
  
$
31,841
  
 
 

Adjusted Capitalization (Including Off-Balance Sheet Items) - Rating Agency View
  
 
  
As of September 30,
  
 
  
2006
  
% Total
  
2005
  
% Total
  
Total common equity
  
$
9,208
    
42
%
$
8,828
    
43
%
Preferred stock
   
80
   
0
%
  
184
   
1
%
Long-term debt*
    
9,994
   
46
%
  
10,133
   
49
%
Short-term debt
    
1,213
   
6
%
  
247
   
1
%
Off-balance sheet debt equivalents:
                  
Sale-leaseback net debt equivalents
    
1,255
   
6
%
  
1,321
   
6
%
Total
 
$
21,750
    
100
%
$
20,713
    
100
%
 
 

GENERAL INFORMATION
  
Three Months Ended Sept. 30,
 
Nine Months Ended Sept.30,
 
 
  
2006
  
2005
  
2006
  
2005
  
Long-term debt; and common and
  
 
  
 
  
 
  
 
  
preferred stock redemptions
  
$
(1,185
)
$
(193
)
$
(1,700
)
$
(1,022
)
New long-term debt issues
  
$
182
  
$
89
  
$
1,235
  
$
334
  
Short-term debt increase (decrease)
  
$
111
  
$
(309
)
$
482
  
$
77
  
Capital expenditures
  
$
251
  
$
294
  
$
990
  
$
756
  
            
             * Includes amounts due to be paid within one year and excludes JCP&L securitization debt of $434 million and $269 million in 2006 and 2005 respectively.
 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                    7
 
FirstEnergy Corp.
Financial Statements
(Unaudited)
(In millions)
 
Condensed Consolidated Statements of Cash Flows
  
 
  
 
  
 
  
 
  
 
  
Three Months Ended Sept. 30,
  
Nine Months Ended Sept.30,
  
 
  
2006
  
2005
  
2006
  
2005
  
Cash flows from operating activities:
  
 
  
 
  
 
  
 
  
Net income
  
$
454
  
$
332
  
$
979
  
$
670
  
Adjustments to reconcile net income to net cash from operating activities:
            
Depreciation, amortization, and deferral of regulatory assets
    
244
    
393
    
731
    
1,122
  
Deferred purchased power and other costs
    
(84
)
  
(48
)
  
(323
)
  
(258
)
Deferred income taxes and investment tax credits
    
21
   
(38
)
  
53
   
24
 
Deferred rents and lease market valuation liability
    
51
   
30
   
(54
)
  
(71
)
Prepayment for electric service-education programs
    
-
 
  
-
 
  
-
 
  
242
 
Cash collateral
    
(43
)
  
27
   
(98
)
  
49
 
Change in working capital and other
    
106
   
299 
    
(45
)
  
138
 
Cash flows provided from operating activities
    
749
   
995
   
1,243
   
1,916
 
 
                  
Cash flows used for financing activities
    
(1,062
)
  
(581
)
  
(444
)
  
(1,049
)
 
                  
Cash flows used for investing activities
    
(229
)
  
(324
)
  
(822
)
  
(780
)
Net increase (decrease) in cash and cash equivalents
  
$
(542
)
$
90
  
$
(23
)
$
87
  
 
                  
 

 
  
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
 
  
2006
  
2005
  
Change
  
2006
  
2005
  
Change
  
Ohio Regulatory Assets
                      
 
  
 
                      
 
  
Beginning balance
  
$
1,882
  
$
2,167
        
$
1,924
  
$
2,450
      
 
                                    
Deferral of shopping incentives
    
-
   
77
 
$
(77
)
  
3
   
180
 
$
(177
)
Interest on shopping incentives
    
11
   
12
   
(1
)
  
32
   
34
   
(2
)
Deferral of MISO costs and interest
    
4
   
31
   
(27
)
  
11
   
52
   
(41
)
Deferral of RCP distribution reliability costs
    
40
   
-
   
40
   
121
   
-
   
121
 
Deferral of RCP fuel costs
    
43
   
-
   
43
   
94
   
-
   
94
 
Deferral of other regulatory assets
    
1
   
4
   
(3
)
  
7
   
10
   
(3
)
Current period deferrals
  
$
99
  
$
124
  
$
(25
)
$
268
  
$
276
  
$
(8
)
 
                                    
Ohio transition costs amortization
  
$
(77
)
$
(239
)
$
162
  
$
(211
)
$
(641
)
$
430
  
Shopping incentives amortization
    
(34
)
  
-
   
(34
)
  
(93
)
  
-
   
(93
)
MISO costs amortization
    
(5
)
  
-
   
(5
)
  
(15
)
  
-
   
(15
)
Other
    
(8
)
  
(8
)
  
-
   
(16
)
  
(41
)
  
25
 
Current period amortization
  
$
(124
)
$
(247
)
$
123
  
$
(335
)
$
(682
)
$
347
  
 
                                    
Ending Balance
 
$
1,857
  
$
2,044
        
$
1,857
  
$
2,044
      
 
                                    
Deferred PJM Costs - Pennsylvania
                                    
Beginning balance
  
$
57
  
$
-
        
$
-
  
$
-
      
Deferral of PJM transmission costs
    
54
   
-
 
$
54
    
111
   
-
 
$
111
  
Ending Balance
  
$
111
  
$
-
        
$
111
  
$
-
      
 
                                    
Deferred Energy Costs - New Jersey
                                    
Beginning balance
  
$
638
  
$
518
        
$
541
  
$
446
      
Deferral (recovery) of energy costs
    
(298
)
  
(10
)
$
(288
)
  
(201
)
  
62
 
$
(263
)
Ending Balance
  
$
340
  
$
508
        
$
340
  
$
508
      
 
 

 
Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                     8
 
 

UNUSUAL ITEMS
  
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
 
  
2006
  
2005
  
Change
  
2006
  
2005
  
Change
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Gain (Loss) on Non-Core Asset Sales of:
 
 
  
 
  
 
  
 
  
 
  
 
  
Amounts included in discontinued operations (a)(b)
  
$
-
  
$
-
  
$
-
  
$
-
  
$
8
  
$
(8
)
All Other, net (c)(d)
    
-
   
-
   
-
   
1
   
9
   
(8
)
Total Gain (Loss) on Non-Core Asset Sales
    
-
   
-
   
-
   
1
   
17
   
(16
)
PPUC NUG cost reserve for prior year (e)
    
(10
)
  
-
   
(10
)
  
(10
)
  
-
   
(10
)
FE Facilities sales/impairment (c)(f)
    
(1
)
  
-
   
(1
)
  
(13
)
  
-
   
(13
)
EPA settlement (c)
    
-
   
-
   
-
   
-
   
(19
)
  
19
 
NRC fine (c) (g)
    
-
   
-
   
-
   
-
   
(3
)
  
3
 
JCP&L Rate Settlement (h)
    
-
   
-
   
-
   
-
   
28
   
(28
)
JCP&L Arbitration Decision (c)
    
-
   
(16
)
  
16
   
-
   
(16
)
  
16
 
Total-Pretax Items
    
(11
)
  
(16
)
  
5
   
(22
)
  
7
   
(29
)
 
                          
Ohio Tax Write-off (i)
    
-
   
-
   
-
   
-
   
(71
)
  
71
 
 
                          
EPS Effect
  
$
(0.01
)
$
(0.03
)
$
0.02
  
$
(0.05
)
$
(0.18
)
$
0.13
  
 
(a) Primarily FE Facilities subs and retail gas operations
  
(d) Before 1st qtr 2006 tax benefit of $2.5 million
 
(g) Non-tax deductible
 
(b) Before income tax benefit of $12.2 million
 
(e) Included in "Purchased power expenses"
(h) Included in "Deferral of New Regulatory Assets"
(c) Included in "Other operating expenses"
 
(f)   Before 3rd qtr 2006 tax benefit of $1.6 million
(i)   Included in "Income taxes"
 

 
FirstEnergy Corp.
Statistical Summary
(Unaudited)
 
ELECTRIC SALES STATISTICS
  
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
(in millions of kWhs)
  
2006
  
2005
  
Change
  
2006
  
2005
  
Change
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Electric Generation Sales
                          
Retail - Regulated
    
26,281
   
23,459
   
12.0
%
  
72,878
   
65,178
   
11.8
%
Retail - Competitive
    
3,442
   
4,130
   
-16.7
%
  
8,901
   
10,988
   
-19.0
%
Total Retail
    
29,723
   
27,589
   
7.7
%
  
81,779
   
76,166
   
7.4
%
Wholesale
    
5,296
   
7,889
   
-32.9
%
  
17,279
   
21,484
   
-19.6
%
Total Electric Generation Sales
    
35,019
   
35,478
   
-1.3
%
  
99,058
   
97,650
   
1.4
%
 
                          
Electric Distribution Deliveries
                          
Ohio               - Residential
    
4,642
   
4,909
   
-5.4
%
  
12,666
   
13,241
   
-4.3
%
        - Commercial
    
3,985
   
4,099
   
-2.8
%
  
11,145
   
11,476
   
-2.9
%
        - Industrial
    
6,111
   
6,094
   
0.3
%
  
17,673
   
17,750
   
-0.4
%
        - Other
    
95
   
97
   
-2.1
%
  
280
   
290
   
-3.4
%
        Total Ohio
    
14,833
   
15,199
   
-2.4
%
  
41,764
   
42,757
   
-2.3
%
 
                          
Pennsylvania       -  Residential
    
2,987
   
3,055
   
-2.2
%
  
8,444
   
8,656
   
-2.4
%
        - Commercial
    
2,930
   
2,949
   
-0.6
%
  
8,182
   
8,236
   
-0.7
%
        - Industrial
    
2,671
   
2,677
   
-0.2
%
  
7,845
   
7,882
   
-0.5
%
        - Other
    
20
   
20
   
0.0
%
  
62
   
62
   
0.0
%
        Total Pennsylvania
    
8,608
   
8,701
   
-1.1
%
  
24,533
   
24,836
   
-1.2
%
 
                          
New Jersey          -  Residential
    
3,092
   
3,312
   
-6.6
%
  
7,447
   
7,883
   
-5.5
%
        - Commercial
    
2,708
   
2,670
   
1.4
%
  
7,204
   
7,196
   
0.1
%
        - Industrial
    
749
   
821
   
-8.8
%
  
2,142
   
2,316
   
-7.5
%
        - Other
    
22
   
22
   
0.0
%
  
65
   
65
   
0.0
%
        Total New Jersey
    
6,571
   
6,825
   
-3.7
%
  
16,858
   
17,460
   
-3.4
%
 
                          
Total Residential
    
10,721
   
11,276
   
-4.9
%
  
28,557
   
29,780
   
-4.1
%
Total Commercial
    
9,623
   
9,718
   
-1.0
%
  
26,531
   
26,908
   
-1.4
%
Total Industrial
    
9,531
   
9,592
   
-0.6
%
  
27,660
   
27,948
   
-1.0
%
Total Other
    
137
   
139
   
-1.4
%
  
407
   
417
   
-2.4
%
Total Distribution Deliveries
    
30,012
   
30,725
   
-2.3
%
  
83,155
   
85,053
   
-2.2
%
 
                          
Electric Sales Shopped
                          
Ohio                       - Residential
    
672
   
2,363
   
-71.6
%
  
1,766
   
5,971
   
-70.4
%
        - Commercial
    
1,045
   
2,068
   
-49.5
%
  
2,910
   
5,634
   
-48.3
%
        - Industrial
    
761
   
1,318
   
-42.3
%
  
2,204
   
3,718
   
-40.7
%
        Total Ohio
    
2,478
   
5,749
   
-56.9
%
  
6,880
   
15,323
   
-55.1
%
 
                          
Pennsylvania       - Residential
    
-
   
6
   
-100.0
%
  
1
   
16
   
-93.8
%
        - Commercial
    
143
   
18
   
694.4
%
  
1
   
64
   
-98.4
%
        - Industrial
    
-
   
333
   
-100.0
%
  
368
   
1,164
   
-68.4
%
        Total Pennsylvania
    
143
   
357
   
-59.9
%
  
370
   
1,244
   
-70.3
%
 
                          
New Jersey           - Residential
    
-
   
1
   
-100.0
%
  
-
   
3
   
-100.0
%
        - Commercial
    
555
   
526
   
5.5
%
  
1,449
   
1,558
   
-7.0
%
        - Industrial
    
555
   
633
   
-12.3
%
  
1,578
   
1,747
   
-9.7
%
        Total New Jersey
    
1,110
   
1,160
   
-4.3
%
  
3,027
   
3,308
   
-8.5
%
 
                          
Total Electric Sales Shopped
    
3,731
   
7,266
   
-48.7
%
  
10,277
   
19,875
   
-48.3
%


Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                  9
 
 
 

Operating Statistics
  
Three Months Ended September 30,
  
 
  
Nine Months Ended September 30,
  
 
  
 
  
2006
  
2005
  
 
  
2006
  
2005
  
 
  
Capacity Factors:
                           
Fossil - Baseload
    
86
%
  
90
%
        
90
%
  
89
%
      
Fossil - Load Following
    
72
%
  
65
%
        
69
%
  
66
%
      
Peaking
    
4
%
  
4
%
        
1
%
  
3
%
      
Nuclear
    
97
%
  
99
%
        
88
%
  
82
%
      
Generation Output:
                                      
Fossil - Baseload
    
39
%
  
40
%
        
42
%
  
43
%
      
Fossil - Load Following
    
22
%
  
20
%
        
22
%
  
21
%
      
Peaking
    
1
%
  
1
%
        
0
%
  
1
%
      
Nuclear
    
38
%
  
39
%
        
36
%
  
35
%
      
 
                                      
 
  
Three Months Ended September 30, 
Nine Months Ended September 30,
WEATHER
    
2006
 
 
2005
 
 
Normal
 
 
2006
 
 
2005
 
 
Normal
  
Composite Heating-Degree-Days
    
92
   
23
   
89
   
3,185
   
3,686
   
3,571
 
Composite Cooling-Degree-Days
    
679
   
843
   
656
   
887
   
1,118
   
908
 
 

 
FirstEnergy Corp.
2006 EPS and Cash Flow
(Unaudited)
 
2006 Earnings Per Share (EPS)
  
(Reconciliation of GAAP to Non-GAAP)
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Three Months
 
Nine Months
 
Revised
  
 
  
Ended Sept. 30
  
Ended Sept. 30
  
Guidance
  
 
  
 
  
 
  
 
  
Basic EPS (GAAP basis)
  
$
1.41
  
$
2.99
  
$
3.70 - $3.80
  
Excluding Unusual Items:
                
Non-Core Asset Sales/Impairments
    
(0.01
)
  
0.03
   
0.03
 
PPUC NUG cost reserve for prior year
   
0.02
   
0.02
   
0.02
 
Basic EPS (Non-GAAP basis)
  
$
1.42
  
$
3.04
  
$
3.75 - $3.85
  

 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                  10
 

Reconciliation of September 2006 Year-to-Date 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
  
$
979
  
   Adjustments:
    
 
  
                        Depreciation
    
445
 
        Amortization of regulatory assets
    
665
 
        Deferral of new regulatory assets
    
(268
)
        Deferral of PJM transmission costs
    
(111
)
        Deferred purchased power and other costs
    
(323
)
        Deferred income taxes and ITC, net
    
53
 
        Deferred rents and lease market valuation liability
    
(54
)
        Cash collateral
    
(98
)
        Other, including changes in working capital
    
(45
)
            Net Cash from Operating Activities (GAAP)
  
$
1,243
  
 
    
 
  
Other Items:
    
 
  
 Capital expenditures
    
(870
)
 Nuclear fuel fabrication
    
(120
)
 Contributions to nuclear decommissioning trusts
    
(11
)
 Common stock dividends
    
(439
)
 Other, net
    
(4 
 ) 
        Free Cash Flow (Non-GAAP)
  
$
(201
)
 
        
 Non-core asset sales and other
    
76
 
 JCP&L securitization
    
180
 
        Cash Generation (Non-GAAP)
  
$
55
  
 
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                  11
 

FirstEnergy Corp.
2006 Cash Generation Guidance
(Unaudited)
 

Reconciliation of 2006 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:
  
 
  
 
  
 
  
GAAP Earnings Guidance
  
$
1,200 - $1,240
  
Adjustments:
    
 
  
Depreciation
    
605
 
Amortization of regulatory assets
    
910
 
Deferral of new regulatory assets
    
(105
)
RCP reliability deferrals
    
(150
)
Deferral of PJM transmission costs
    
(168
)
Deferred purchased power costs
    
(360
)
Deferred income taxes and ITC, net
    
75
 
Deferred rents and lease market valuation liability
    
(103
)
Cash collateral
    
60
 
Other, including changes in working capital
    
96
 
    Net Cash from Operating Activities (GAAP)
  
$
2,080
  
 
    
 
  
Other Items:
    
 
  
 
    
 
  
Capital expenditures
    
(1,156
)
Nuclear fuel fabrication
    
(165
)
Common stock dividends
    
(587
)
Other, net
    
26
 
    Free Cash Flow (Non-GAAP)
  
$
198
  
 
    
 
  
Non-core asset sales
   
82
 
JCP&L securitization
    
180
 
    Cash Generation (Non-GAAP)
  
$
460
  
 
    
 
  
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
 

Consolidated Report to the Financial Community - 3rd Quarter 2006                                                                                                                                                12
 

                                                     
RECENT DEVELOPMENTS
 
Record Generation Output
FirstEnergy set a new year-to-date generation output record of 61.9 million megawatt-hours. The year-to-date output represented a 4.0% increase over the record established in the same period last year.

Beaver Valley Power Station Uprates
In August, Beaver Valley Unit 1 increased its net output capability from 821 megawatts to 846 megawatts. This three percent increase in output is the first phase of its overall eight percent power uprate recently approved by the NRC. The uprate was made possible by improvements to plant equipment and systems completed during its spring refueling outage. The remainder of the eight-percent power uprate is expected to be implemented by early 2007. Similar work is planned for Beaver Valley Unit 2. During its current refueling outage, which began October 2, several modifications will be completed to prepare Beaver Valley Unit 2 for its eight percent increase in generating capacity. After Beaver Valley Unit 2 returns to service, three percent of its uprate is expected to take effect. The balance of the eight percent power output increase is anticipated to be implemented during the next refueling in 2008. Beaver Valley Unit 2 is expected to return to service from its current refueling outage in early to mid-November, 2006.
 
Met-Ed and Penelec Rate Transition Plan Update
Evidentiary hearings in the Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) Rate Transition Plan cases were held from August 24 through August 30. Parties to the proceedings filed their Main Briefs on September 22 and Reply Briefs on October 6. Met-Ed and Penelec anticipate an Administrative Law Judge Recommended Decision in these proceedings by November 8 and an Order from the Pennsylvania Public Utility Commission (PPUC) by January 12, 2007. As part of the transition of customers’ generation service toward market-based supply, Met-Ed and Penelec secured approximately 950 MW of Provider of Last Resort (POLR) supply under a competitive request for proposal (RFP) for the period December 1, 2006 through December 31, 2008. Recovery of the incremental costs of this supply is one of the components of the transition plan cases.
 
Competitive Electricity Supply for Penn Power  
On October 19, the PPUC certified the RFP results for all customer classes reflecting the successful completion of the competitive RFP bidding process. The RFP was conducted to secure the POLR supply for the period January 1, 2007 through May 31, 2008 for those customers that do not choose alternative suppliers.
 
Ohio Competitive Bid Process Proposal
On September 29, FirstEnergy’s Ohio electric utility companies filed their proposal to establish a competitive bid process for market-based generation supply under which suppliers could submit prices to serve a portion of each Ohio Company’s customer load. This proposal was in response to a July 26 Public Utilities Commission of Ohio (PUCO) directive to file plans for a competitive retail electric service option. The PUCO directive resulted from a May 3 Ohio Supreme Court remand finding that Ohio restructuring law requires FirstEnergy to provide an alternative market-based offering to customers, even if the alternative is at a higher price than that offered through FirstEnergy’s Rate Stabilization Plan. If adopted, customers would have the opportunity to switch to alternative generation suppliers at prices established through the RFP program during 2007 and 2008.
 
JCP&L Non-Utility Generation Cost Request Case
An evidentiary hearing was held on September 20, and settlement conferences were held in October in the proceeding involving JCP&L’s request to recover $165 million of actual above-market NUG costs incurred from August 1, 2003 through December 31, 2005. If approved, this request would increase cash flow, but would be earnings neutral. Main briefs are scheduled to be filed on October 30, with reply briefs due on November 20. An order by the New Jersey Board of Public Utilities is expected in 2007.
 

 
Consolidated Report to the Financial Community - 3rd Quarter 2006                                                              13

 
Share Repurchase Program
On August 10, FirstEnergy repurchased 10.6 million shares, or approximately 3.2%, of its outstanding common stock through an accelerated repurchase program with an affiliate of J.P. Morgan Securities. The initial purchase price was $56.44 per share, or a total initial purchase price of $600 million. The final purchase price will be adjusted to reflect J.P. Morgan's ultimate cost to acquire the shares over a period of up to seven months. The share repurchase was funded with short-term debt. The share repurchase was completed under a June 20 Board of Directors’ authorization to repurchase up to 12 million shares of common stock.
 
Renewed and Upsized Credit Facility
On August 24, FirstEnergy and certain of its subsidiaries, including all of its operating utility subsidiaries, entered into a new five-year syndicated credit facility totaling $2.75 billion. The new facility replaces FirstEnergy’s prior $2 billion credit facility and provides a 10 basis point annual savings on facility related borrowing costs. Borrowings from the new facility were used to pay off the outstanding borrowings under the old facility. FirstEnergy may request an increase in the total commitments available under the new facility to a maximum of $3.25 billion. Commitments under the new facility will be available until August 24, 2011, unless the lenders agree, at the request of the Borrowers, to two additional one-year extensions. Generally, borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sublimit as well as applicable regulatory and other limitations.


Forward-looking Statements. This Consolidated Report to the Financial Community 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 or to recover increased transmission costs, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), and the legal and regulatory changes resulting from the implementation of the Energy Policy Act of 2005 (including, but not limited to, the repeal of the Public Utility Holding Company Act of 1935), the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the 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, the Nuclear Regulatory Commission and the various state public utility commissions 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 timing and outcome of various proceedings before the Public Utilities Commission of Ohio (including, but not limited to, the successful resolution of the issues remanded to the PUCO by the Ohio Supreme Court regarding the RSP) and the Pennsylvania Public Utility Commission, including the transition rate plan filings for Met-Ed and Penelec, the continuing availability and operation of generating units, the ability of generating units to continue to operate at, or near full capacity, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the anticipated benefits from voluntary pension plan contributions, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the successful completion of the share repurchase program announced August 10, 2006, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, including our annual report on Form 10-K for the year ended December 31, 2005, 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.


 
 
 
 
Consolidated Report to the Financial Community - 3rd Quarter 2006                                                              14
 
 
 
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