Document

0001031296-16-000095.txt : 20160722 0001031296-16-000095.hdr.sgml : 20160722 20160722080931 ACCESSION NUMBER: 0001031296-16-000095 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20160719 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Cost Associated with Exit or Disposal Activities ITEM INFORMATION: Material Impairments ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160722 DATE AS OF CHANGE: 20160722 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: 161778531 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 330-761-7837 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FirstEnergy Solutions Corp. CENTRAL INDEX KEY: 0001407703 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 311560186 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-53742 FILM NUMBER: 161778532 BUSINESS ADDRESS: STREET 1: C/O FIRSTENERGY CORP. STREET 2: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 800-736-3402 MAIL ADDRESS: STREET 1: C/O FIRSTENERGY CORP. STREET 2: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 44308 8-K 1 a8-kdated07192016.htm 8-K Document

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): July 19, 2016



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

000-53742	FIRSTENERGY SOLUTIONS CORP.	31-1560186
	(An Ohio Corporation)
	c/o FirstEnergy Corp.
	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 July 22, 2016, FirstEnergy Corp. (FE and together with its consolidated subsidiaries, FirstEnergy) issued a letter to the investment community (Letter) described more fully in item 7.01 herein, which contained a summary of Asset Impairment/Plant Exit Costs that will be recognized in the second quarter of 2016. The Letter is attached as Exhibit 99.1 hereto and incorporated by reference herein. The information contained or incorporated by reference herein this Item 2.02, including Exhibit 99.1 shall not be deemed filed for purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibit 99.1 be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 2.05 Costs Associated with Exit or Disposal Activities

On July 19, 2016, officers of FE and FirstEnergy Solutions Corp. (FES and together with FE, the Registrants) committed to exit operations of the following generating units: (1) Bay Shore Unit 1 with a capacity of 136 Megawatts (MWs) through either a sale or deactivation by October 1, 2020; and (2) W.H. Sammis, Units 1-4 with an aggregate capacity of 720 MWs through deactivation by May 31, 2020.

As a result of this decision, FE will recognize pre-tax impairment charges of approximately $647 million in the second quarter of 2016, including approximately $517 million at FES. The decision to exit operations at these generating units was based on continued challenging market conditions. Deactivation of these generating units is subject to review for reliability impacts by PJM Interconnection, L.L.C. (PJM), the regional transmission organization that controls the area where these power plants are located as well as an economic analysis by PJM’s Market Monitor.

Item 2.06 Material Impairments

The information contained in Item 2.05 relating to the asset impairment associated with Bay Shore Unit 1 and W. H. Sammis, Units 1-4 is incorporated into this Item 2.06 by reference. The information contained in Item 8.01 relating to the impairment of goodwill and valuation allowances against state and local net operating loss carryforwards is incorporated into this Item 2.06 by reference.

Item 7.01 Regulation FD Disclosure

On July 22, 2016, FE issued the Letter regarding Asset Impairments and Plant Exit Costs at its Competitive Energy Services (CES) business segment, which are also described herein in items 2.05, 2.06 and 8.01. Also on the same day, FE issued a press release (Release) regarding FES exiting operations at Bay Shore Unit 1 and W. H. Sammis, Units 1-4. The Letter and Release are attached as Exhibits 99.1 and 99.2, respectively, hereto and incorporated by reference herein this Item 7.01. The information contained or incorporated by reference herein this Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed filed for purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibits 99.1 and 99.2 be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 8.01 Other Events

FE tests goodwill for impairment annually as of July 31 and considers more frequent testing if indicators of potential impairment arise. As a result of low capacity prices associated with the 2019/2020 PJM Base Residual Auction in May 2016, as well as its annual update to its fundamental long-term capacity and energy price forecast in the second quarter of 2016, FE determined that an interim impairment analysis of the goodwill at CES was necessary in connection with the preparation of its financial statements for the three-month period ended June 30, 2016. Based on such impairment analysis, FE’s second quarter 2016 results will include a pre-tax non-cash impairment charge of approximately $800 million, representing the total goodwill at the CES segment, including $23 million at FES. Approximately $433 million of the goodwill is non-deductible for tax purposes, including $23 million at FES. The CES segment through FES and Allegheny Energy Supply Company, LLC, controls 13,162 MWs of generating capacity, including the Bay Shore and W. H. Sammis capacity referenced in Item 2.05 above, and primarily supplies electricity to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and Maryland, and the provision of partial provider-of-last-resort and default service for some utilities in Ohio, Pennsylvania and Maryland, including the FirstEnergy utilities.

FE also expects that its second quarter 2016 results will reflect a valuation allowance against state and local net operating loss carryforwards of $159 million that FE management believes, more likely than not, will not be realized, including $65 million at FES.

In addition, FE and FES expect that their second quarter 2016 results will reflect a charge of $58 million from settlement and termination costs on coal contracts associated with retired generating units.

The impact of the goodwill impairment, valuation allowances, and coal contract settlement and termination costs discussed above, together with the asset impairment discussed in Item 2.05, will not cause FE or FES to be in default under any of their respective credit facilities or other debt covenants.

Item 9.01 Financial Statements and Exhibits



(d)	Exhibits



Exhibit No.		Description
99.1		Letter to the Investment Community, dated July 22, 2016
99.2		Press Release, dated July 22, 2016

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 include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the speed and nature of increased competition in the electric utility industry, in general, and the retail sales market in particular; the ability to experience growth in the Regulated Distribution and Regulated Transmission segments; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, the proposed transmission asset transfer to Mid-Atlantic Interstate Transmission, LLC, and the effectiveness of our strategy to reflect a more regulated business profile; changes in assumptions regarding economic conditions within our territories, assessment of the reliability of our transmission system, or the availability of capital or other resources supporting identified transmission investment opportunities; the impact of the regulatory process on the matters at the federal level and in the various states in which we do business including, but not limited to, matters related to rates and the Electric Security Plan IV in Ohio; the impact of the federal regulatory process on Federal Energy Regulatory Commission (FERC)-regulated entities and transactions, in particular FERC regulation of wholesale energy and capacity markets, including PJM Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional wholesale transactions; FERC regulation of cost-of-service rates, including FERC Opinion No. 531's revised Return on Equity methodology for FERC-jurisdictional wholesale generation and transmission utility service; and FERC’s compliance and enforcement activity, including compliance and enforcement activity related to North American Electric Reliability Corporation’s mandatory reliability standards; the uncertainties of various cost recovery and cost allocation issues resulting from American Transmission Systems, Incorporated's realignment into PJM; economic or weather conditions affecting future sales and margins such as a polar vortex or other significant weather events, and all associated regulatory events or actions; changing energy, capacity and commodity market prices including, but not limited to, coal, natural gas and oil prices, and their availability and impact on margins and asset valuations, including without limitation impairments thereon; the continued ability of our regulated utilities to recover their costs; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; other legislative and regulatory changes, and revised environmental requirements, including, but not limited to, the effects of the United States Environmental Protection Agency’s Clean Power Plan, Coal Combustion Residuals regulations, Cross-State Air Pollution Rule and Mercury and Air Toxics Standards programs, including our estimated costs of compliance, Clean Water Act (CWA) waste water effluent limitations for power plants, and CWA 316(b) water intake regulation; the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including New Source Review litigation, or potential regulatory initiatives or rulemakings (including that such initiatives or rulemakings could result in our decision to deactivate or idle certain generating units); the uncertainties associated with the deactivation of certain older regulated and competitive fossil units, including the impact on vendor commitments, such as long-term fuel and transportation agreements, and as it relates to the reliability of the transmission grid, the timing thereof; the impact of other future changes to the operational status or availability of our generating units and any capacity performance charges associated with unit unavailability; adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to, the revocation or non-renewal of necessary licenses, approvals or operating permits by the Nuclear Regulatory Commission or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant); issues arising from the indications of cracking in the shield building at Davis-Besse; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings, including, but not limited to, any such proceedings related to vendor commitments, such as long-term fuel and transportation agreements; the impact of labor disruptions by our unionized workforce; replacement power costs being higher than anticipated or not fully hedged; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; changes in customers' demand for power, including, but not limited to, changes resulting from the implementation of state and federal energy efficiency and peak demand reduction mandates; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, the ability to continue to reduce costs and to successfully execute our financial plans designed to improve our credit metrics and strengthen our balance sheet through, among other actions, our cash flow improvement plan and other proposed capital raising initiatives; our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins; changing market conditions that could affect the measurement of certain liabilities and the value of assets held in our Nuclear Decommissioning Trusts, pension trusts and other trust funds, and cause us and/or our subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated; the impact of changes to material accounting policies; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries; actions that may be taken by credit rating agencies that could negatively affect us and/or our subsidiaries' access to financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees; changes in national and regional economic conditions affecting us, our subsidiaries and/or our major industrial and commercial customers, and other counterparties with which we do business, including fuel suppliers; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system that may compromise our generation, transmission and/or distribution services and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information regarding our business, employees, shareholders, customers, suppliers, business partners and other individuals in our data centers and on our networks; and the risks and other factors discussed from time to time in our United States Securities and Exchange Commission (SEC) filings, and other similar factors. Dividends declared from time to time on FirstEnergy Corp.'s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.'s Board of Directors at the time of the actual declarations. A security ra

ting is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

July 22, 2016



	FIRSTENERGY CORP.
	Registrant

	FIRSTENERGY SOLUTIONS CORP.
	Registrant

By:	/s/ K. Jon Taylor
	K. Jon Taylor Vice President, Controller and Chief Accounting Officer

Exhibit Index



Exhibit No.		Description
99.1		Letter to the Investment Community, dated July 22, 2016
99.2		Press Release, dated July 22, 2016

EX-99.1 2 ex991lettertoinvestmentcom.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

Irene M. Prezelj

Vice President

Investor Relations

FirstEnergy Corp.

76 S. Main Street

Akron, Ohio 44308

Tel 330-384-3859

July 22, 2016

TO THE INVESTMENT COMMUNITY:¹

On July 22, 2016, FirstEnergy Corp. (FE) made several announcements related to its Competitive Energy Services (CES) business, resulting in asset impairments and plant exit costs that will be recognized in the second quarter of 2016:


•	The sale or deactivation of Bay Shore Unit 1, 136 Megawatts (MW), by October 1, 2020, resulting in impairment charges of $150 million;


•	The deactivation of Units 1-4, 720 MW, of Sammis’ 2,210 MW by May 31, 2020, resulting in impairment charges of $497 million;


•	Termination and settlement costs on fuel contracts of approximately $58 million resulting from plant retirements and deactivations;


•	A goodwill impairment charge of $800 million, representing the total amount of goodwill at CES, resulting from capacity prices in the 2019/2020 PJM Base Residual Auction as well as an update to CES’ long-term fundamental capacity and energy price forecast; and

•

Valuation allowances against state and local net operating loss (NOL) carryforwards of $159 million that management believes, more likely than not, will not be realized primarily due to projected taxable income reflecting CES’ long term fundamental pricing model and limitations on the utilization of NOLs at the state and local level. No valuation allowances were necessary for FE’s federal NOLs.

____________________________

¹Please see the Forward-looking Statements at the end of this Letter.

The following table summarizes these charges and effect on GAAP earnings for the quarter ended June 30, 2016:



Asset Impairment/Plant Exit Costs	Pre-tax Charge ($M)	After-tax Charge* ($M)	GAAP EPS Impact
Bay Shore Unit 1 - Impairment (Non-Cash)	$150	$95	$0.22
Sammis Units 1-4 - Impairment (Non-Cash)	$497	$310	$0.73
Coal Contract Termination and Settlement Costs ($20 million Non-Cash)	$58	$36	$0.09
Impairment of Goodwill (Non-Cash)	$800	$669	$1.57
State and local NOL Valuation Allowances (Non-Cash)		$159	$0.38
Total	$1,505	$1,269	$2.99

*The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pre-tax charge with the exception of goodwill of which a portion was non-deductible for tax purposes. With the exception of the impairment of goodwill, the income tax rates range from 37% to 38%.

While FirstEnergy has made the decision to sell or deactivate the unit at Bay Shore and deactivate Sammis Units 1-4, deactivation is subject to review by PJM Interconnection, LLC.

FirstEnergy continues to recognize value in maintaining its generation assets. However, the business environment for the CES segment continues to be challenged by the current market conditions. Members of senior management plan to discuss in further detail both the items outlined in this Letter and the role of the generation business on the Second Quarter Earnings call scheduled for July 29, 2016 at 10:00 a.m. EDT. FirstEnergy plans to release second quarter results, as well as 2016 annual operating earnings guidance, after market close on July 28, 2016.

Upcoming FirstEnergy Investor Events

Barclays Capital CEO Energy & Power Conference

September 7-8, 2016

New York, NY

Bank of America Merrill Lynch Power & Gas Leaders Conference

September 13-14, 2016

Boston, MA

Wolfe Research Power & Gas Leaders Conference

September 26-27, 2016

New York, NY

EEI Annual Financial Conference

November 6-8, 2016

Phoenix, AZ

If you have any questions, please contact me at (330) 384-3859, Meghan Beringer, director of Investor Relations at (330) 384-5832, or Gina Caskey, manager of Investor Relations at (330) 384-3841.

Sincerely,

/s/ Irene M. Prezelj

Irene M. Prezelj

Vice President Investor Relations

Forward-looking Statements

This Letter includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the speed and nature of increased competition in the electric utility industry, in general, and the retail sales market in particular; the ability to experience growth in the Regulated Distribution and Regulated Transmission segments; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, the proposed transmission asset transfer to Mid-Atlantic Interstate Transmission, LLC, and the effectiveness of our strategy to reflect a more regulated business profile; changes in assumptions regarding economic conditions within our territories, assessment of the reliability of our transmission system, or the availability of capital or other resources supporting identified transmission investment opportunities; the impact of the regulatory process on the matters at the federal level and in the various states in which we do business including, but not limited to, matters related to rates and the Electric Security Plan IV in Ohio; the impact of the federal regulatory process on Federal Energy Regulatory Commission (FERC)-regulated entities and transactions, in particular FERC regulation of wholesale energy and capacity markets, including PJM Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional wholesale transactions; FERC regulation of cost-of-service rates, including FERC Opinion No. 531's revised Return on Equity methodology for FERC-jurisdictional wholesale generation and transmission utility service; and FERC’s compliance and enforcement activity, including compliance and enforcement activity related to North American Electric Reliability Corporation’s mandatory reliability standards; the uncertainties of various cost recovery and cost allocation issues resulting from American Transmission Systems, Incorporated's realignment into PJM; economic or weather conditions affecting future sales and margins such as a polar vortex or other significant weather events, and all associated regulatory events or actions; changing energy, capacity and commodity market prices including, but not limited to, coal, natural gas and oil prices, and their availability and impact on margins and asset valuations, including without limitation impairments thereon; the continued ability of our regulated utilities to recover their costs; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; other legislative and regulatory changes, and revised environmental requirements, including, but not limited to, the effects of the United States Environmental Protection Agency’s Clean Power Plan, Coal Combustion Residuals regulations, Cross-State Air Pollution Rule and Mercury and Air Toxics Standards programs, including our estimated costs of compliance, Clean Water Act (CWA) waste water effluent limitations for power plants, and CWA 316(b) water intake regulation; the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including New Source Review litigation, or potential regulatory initiatives or rulemakings (including that such initiatives or rulemakings could result in our decision to deactivate or idle certain generating units); the uncertainties associated with the deactivation of certain older regulated and competitive fossil units, including the impact on vendor commitments, such as long-term fuel and transportation agreements, and as it relates to the reliability of the transmission grid, the timing thereof; the impact of other future changes to the operational status or availability of our generating units and any capacity performance charges associated with unit unavailability; adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to, the revocation or non-renewal of necessary licenses, approvals or operating permits by the Nuclear Regulatory Commission or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant); issues arising from the indications of cracking in the shield building at Davis-Besse; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings, including, but not limited to, any such proceedings related to vendor commitments, such as long-term fuel and transportation agreements; the impact of labor disruptions by our unionized workforce; replacement power costs being higher than anticipated or not fully hedged; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; changes in customers' demand for power, including, but not limited to, changes resulting from the implementation of state and federal energy efficiency and peak demand reduction mandates; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, the ability to continue to reduce costs and to successfully execute our financial plans designed to improve our credit metrics and strengthen our balance sheet through, among other actions, our cash flow improvement plan and other proposed capital raising initiatives; our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins; changing market conditions that could affect the measurement of certain liabilities and the value of assets held in our Nuclear Decommissioning Trusts, pension trusts and other trust funds, and cause us and/or our subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated; the impact of changes to material accounting policies; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries; actions that may be taken by credit rating agencies that could negatively affect us and/or our subsidiaries' access to financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees; changes in national and regional economic conditions affecting us, our subsidiaries and/or our major industrial and commercial customers, and other counterparties with which we do business, including fuel suppliers; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system that may compromise our generation, transmission and/or distribution services and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information regarding our business, employees, shareholders, customers, suppliers, business partners and other individuals in our data centers and on our networks; and the risks and other factors discussed from time to time in our United States Securities and Exchange Commission (SEC) filings, and other similar factors. Dividends declared from time to time on FirstEnergy Corp.'s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.'s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.

EX-99.2 3 ex992pressrelease-7222016.htm EXHIBIT 99.2 Exhibit

Exhibit 99.2

FirstEnergy Corp. For Release: July 22, 2016

76 South Main Street

Akron, Ohio 44308

www.firstenergycorp.com

News Media Contact: Investor Contact:

Jennifer Young Irene Prezelj

(330) 761-4362 (330) 384-3859

FirstEnergy to Deactivate Units at Two Ohio Power Plants

Akron, Ohio - FirstEnergy Corp. (NYSE: FE) announced today that its FirstEnergy Solutions subsidiary will make operational changes to coal-fired units at two of its Ohio plants in response to challenging market conditions.

The company plans to sell or deactivate the 136-megawatt (MW) Bay Shore Unit 1 in Oregon, Ohio, by October 2020. In addition, Units 1-4 of the company’s seven-unit W.H. Sammis Plant in Stratton, Ohio - collectively representing 720 MW of capacity - will be retired in May 2020. Units 5-7 will continue to provide 1,490 MW of reliable baseload generation.

In 2015, Bay Shore Unit 1 and Sammis Units 1-4 contributed about four percent of the electricity produced by the company’s generating plants. FirstEnergy does not intend to offer these units into the PJM capacity auction for the 2020-2021 timeframe.

“We have taken a number of steps in recent years to reduce operating costs of our generation fleet,” said FirstEnergy Generation President Jim Lash. “However, continued challenging market conditions have made it increasingly difficult for smaller units like Bay Shore and Sammis Units 1-4 to be competitive. It’s no longer economically viable to operate these facilities.”

No job reductions are expected at either plant. FirstEnergy will work with any potential buyer to discuss continued employment for the 78 employees at Bay Shore, or if the plant is deactivated, provide employees with job opportunities at other FirstEnergy facilities. There are 368 employees at Sammis.

Plant deactivations are subject to review for reliability impacts, if any, by PJM Interconnection, the regional transmission organization that controls the area where they are located.

About Bay Shore

FirstEnergy and British Petroleum collaborated on a project to install a fluidized-bed combustion boiler at Bay Shore Unit 1, the largest of its kind in the world when it came online in 2000. The boiler is fueled by petroleum coke, a byproduct of the refining process, and Bay Shore provides steam to the refinery for its operations. Bay Shore will be deactivated when this agreement with the refinery ends if a buyer for Unit 1 is not identified.

Bay Shore Units 2-4 were deactivated in 2012 based on the impact of environmental rules.

About Sammis

W.H. Sammis is FirstEnergy’s largest coal-fired power plant in Ohio. The remaining units include Unit 5, which came online in 1967 and generates 300 MW, and Units 6 and 7, which came online in 1969 and 1971 respectively and generate 600 MW each. In 2010, FirstEnergy completed a $1.8 billion emissions control project at Sammis to help improve air quality and comply with current environmental regulations.

Sammis Units 1-4, each with 180 MW capacity, came online between 1959-1962.

FirstEnergy is dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company’s transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions, while its generation subsidiaries control nearly 17,000 megawatts of capacity from a diversified mix of scrubbed coal, non-emitting nuclear, natural gas, hydro and other renewables. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.

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 include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the speed and nature of increased competition in the electric utility industry, in general, and the retail sales market in particular; the ability to experience growth in the Regulated Distribution and Regulated Transmission segments; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, the proposed transmission asset transfer to Mid-Atlantic Interstate Transmission, LLC, and the effectiveness of our strategy to reflect a more regulated business profile; changes in assumptions regarding economic conditions within our territories, assessment of the reliability of our transmission system, or the availability of capital or other resources supporting identified transmission investment opportunities; the impact of the regulatory process on the matters at the federal level and in the various states in which we do business including, but not limited to, matters related to rates and the Electric Security Plan IV in Ohio; the impact of the federal regulatory process on Federal Energy Regulatory Commission (FERC)-regulated entities and transactions, in particular FERC regulation of wholesale energy and capacity markets, including PJM Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional wholesale transactions; FERC regulation of cost-of-service rates, including FERC Opinion No. 531's revised

Return on Equity methodology for FERC-jurisdictional wholesale generation and transmission utility service; and FERC’s compliance and enforcement activity, including compliance and enforcement activity related to North American Electric Reliability Corporation’s mandatory reliability standards; the uncertainties of various cost recovery and cost allocation issues resulting from American Transmission Systems, Incorporated's realignment into PJM; economic or weather conditions affecting future sales and margins such as a polar vortex or other significant weather events, and all associated regulatory events or actions; changing energy, capacity and commodity market prices including, but not limited to, coal, natural gas and oil prices, and their availability and impact on margins and asset valuations, including without limitation impairments thereon; the continued ability of our regulated utilities to recover their costs; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; other legislative and regulatory changes, and revised environmental requirements, including, but not limited to, the effects of the United States Environmental Protection Agency’s Clean Power Plan, Coal Combustion Residuals regulations, Cross-State Air Pollution Rule and Mercury and Air Toxics Standards programs, including our estimated costs of compliance, Clean Water Act (CWA) waste water effluent limitations for power plants, and CWA 316(b) water intake regulation; the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including New Source Review litigation, or potential regulatory initiatives or rulemakings (including that such initiatives or rulemakings could result in our decision to deactivate or idle certain generating units); the uncertainties associated with the deactivation of certain older regulated and competitive fossil units, including the impact on vendor commitments, such as long-term fuel and transportation agreements, and as it relates to the reliability of the transmission grid, the timing thereof; the impact of other future changes to the operational status or availability of our generating units and any capacity performance charges associated with unit unavailability; adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to, the revocation or non-renewal of necessary licenses, approvals or operating permits by the Nuclear Regulatory Commission or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant); issues arising from the indications of cracking in the shield building at Davis-Besse; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings, including, but not limited to, any such proceedings related to vendor commitments, such as long-term fuel and transportation agreements; the impact of labor disruptions by our unionized workforce; replacement power costs being higher than anticipated or not fully hedged; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; changes in customers' demand for power, including, but not limited to, changes resulting from the implementation of state and federal energy efficiency and peak demand reduction mandates; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, the ability to continue to reduce costs and to successfully execute our financial plans designed to improve our credit metrics and strengthen our balance sheet through, among other actions, our cash flow improvement plan and other proposed capital raising initiatives; our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins; changing market conditions that could affect the measurement of certain liabilities and the value of assets held in our Nuclear Decommissioning Trusts, pension trusts and other trust funds, and cause us and/or our subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated; the impact of changes to material accounting policies; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries; actions that may be taken by credit rating agencies that could negatively affect us and/or our subsidiaries' access to financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees; changes in national and regional economic conditions affecting us, our subsidiaries and/or our major industrial and commercial customers, and other counterparties with which we do business, including fuel suppliers; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system that may compromise our generation, transmission and/or distribution services and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information regarding our business, employees, shareholders, customers, suppliers, business partners and other individuals in our data centers and on our networks; and the risks and other factors discussed from time to time in our United States Securities and Exchange Commission (SEC) filings, and other similar factors. Dividends declared from time to time on FirstEnergy Corp.'s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.'s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.

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