0001031296-17-000043.txt : 20170727 0001031296-17-000043.hdr.sgml : 20170727 20170727165319 ACCESSION NUMBER: 0001031296-17-000043 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20170727 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170727 DATE AS OF CHANGE: 20170727 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: 17986885 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 8-K 1 a8-kdated07272017.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 27, 2017



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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02 Results of Operations and Financial Condition

On July 27, 2017, FirstEnergy Corp. (FirstEnergy or Company) issued two public documents regarding, among other things, results for the three and six months ended June 30, 2017 and revised 2017 GAAP forecasted earnings, while reaffirming 2017 operating earnings (non-GAAP) guidance. FirstEnergy’s Press Release and Consolidated Report to the Financial Community, which are attached as Exhibits 99.1 and 99.2 hereto and incorporated herein by reference, contain non-GAAP financial measures. Pursuant to the requirements of Regulation G and Item 10(e)(i) of Regulation S-K, 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 financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). The information in the Press Release and the Consolidated Report to the Financial Community and the information contained in this Item 2.02 and in Item 9.01 below 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.

The Press Release and Consolidated Report to the Financial Community contain references to non-GAAP financial measures including, among others: Operating earnings (losses); Basic Earnings (Loss) Per Share-Operating, calculated on a segment basis; Adjusted Equity; Adjusted Debt; and Adjusted Capitalization. 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 GAAP. Operating earnings (losses) are not calculated in accordance with GAAP because they exclude the impact of “special items.” Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the Company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items are not necessarily non-recurring. Basic Earnings (Loss) Per Share-Operating for each segment is calculated by dividing segment Operating earnings (losses), which exclude special items as discussed above, by the basic weighted average shares outstanding for the period. Management uses non-GAAP financial measures such as Operating earnings (losses) to evaluate the Company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Basic Earnings (Loss) Per Share-Operating by segment to further evaluate FirstEnergy’s performance by segment and references this non-GAAP financial measure in its decision-making. Management believes that the non-GAAP financial measures of Operating earnings (losses) and Basic Earnings (Loss) Per Share-Operating by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the Company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the Company’s peer group. Management uses Adjusted Equity, Adjusted Debt, and Adjusted Capitalization to calculate and monitor its compliance with the debt to total capitalization financial covenants under the FirstEnergy credit facility and term loans. These financial measures, as calculated in accordance with the FirstEnergy credit facility and term loans, help shareholders understand FirstEnergy's compliance with, and provide a basis for understanding FirstEnergy's incremental debt capacity under, the debt to total capitalization financial covenants. The financial covenants require FirstEnergy to maintain a consolidated debt to total capitalization ratio, as defined in the facilities, of no more than 65%, measured at the end of each fiscal quarter. All of these non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the 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 July 27, 2017
99.2
 
Consolidated Report to the Financial Community, dated July 27, 2017


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 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 ability to experience growth in the Regulated Distribution and Regulated Transmission segments and the effectiveness of our strategy to transition to a fully regulated business profile; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, our planned transition to forward-looking formula rates; 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 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; success of legislative and regulatory solutions for generation assets that recognize their environmental or energy security benefits, including the United States Department of Energy study; the risks and uncertainties associated with the lack of viable alternative strategies regarding the Competitive Energy Services (CES) segment, thereby causing FirstEnergy Solutions Corp. (FES), and likely FirstEnergy Nuclear Operating Company (FENOC), to restructure its debt and other financial obligations with its creditors or seek protection under United States bankruptcy laws and the losses, liabilities and claims arising from such bankruptcy proceeding, including any obligations at FirstEnergy Corp.; the risks and uncertainties at the CES segment, including FES and its subsidiaries and FENOC, related to continued depressed wholesale energy and capacity markets, and the viability and/or success of strategic business alternatives, such as pending and potential CES generating unit asset sales, the potential conversion of the remaining generation fleet from competitive operations to a regulated or regulated-like construct or the potential need to deactivate additional generating units; the substantial uncertainty as to FES’ ability to continue as a going concern and substantial risk that it may be necessary for FES, and likely FENOC, to seek protection under United States bankruptcy laws; 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 uncertainties associated with the deactivation of older regulated and competitive 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; 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; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; replacement power costs being higher than anticipated or not fully hedged; 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; 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); 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; 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; 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 labor disruptions by our unionized workforce; 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; the impact of the regulatory process and resulting outcomes 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; 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; 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; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; other legislative and regulatory changes, including the new federal administration's required review and potential revision of 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; 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; 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 significant accounting policies; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; 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

3


affecting us and our subsidiaries; further 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, increase requirements to post additional collateral to support, or accelerate payments under outstanding commodity positions, letters of credit and other financial guarantees, and the impact of these events on the financial condition and liquidity of FirstEnergy Corp. and/or its subsidiaries, specifically FES and its subsidiaries; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; 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. These forward-looking statements are also qualified by, 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. The foregoing review of factors also should not be construed as exhaustive. 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. We expressly disclaim 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.




4


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 hereunto duly authorized.



July 27, 2017

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


5


Exhibit Index


Exhibit No.
 
Description
99.1
 
Press Release issued by FirstEnergy Corp., dated July 27, 2017
99.2
 
Consolidated Report to the Financial Community, dated July 27, 2017


6
 EX-99.1 2 ex991fe-06302017.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

FirstEnergy Corp.                    For Release: July 27, 2017
76 South Main Street
Akron, Ohio 44308
www.firstenergycorp.com    

News Media Contact:                Investor Contact:
Tricia Ingraham                    Irene Prezelj
(330) 384-5247                    (330) 384-3859



FirstEnergy Announces Second Quarter 2017 Results

Akron, Ohio - FirstEnergy Corp. (NYSE: FE) today reported second quarter 2017 GAAP earnings of $174 million or $0.39 per basic and diluted share of common stock, on revenue of $3.3 billion. Operating (non-GAAP) earnings* for the second quarter of 2017 were $0.61 per basic share of common stock.

These results compare to a GAAP loss of $1.1 billion, or $(2.56) per basic and diluted share of common stock, for the second quarter of 2016 on revenue of $3.4 billion. Operating (non-GAAP) earnings in the second quarter of 2016 were $0.56 per basic share of common stock.

“We are pleased with the continued solid performance of our regulated businesses in the second quarter, reflecting our customer-focused growth initiatives,” said Charles E. Jones, FirstEnergy president and chief executive officer. “We remain on track to achieve the operating earnings guidance we outlined earlier this year.”

The company revised its expected 2017 GAAP earnings range to $1.95 to $2.25 per basic share, and reaffirmed its operating (non-GAAP) earnings guidance of $2.70 to $3.00 per basic share. FirstEnergy also provided a third quarter 2017 GAAP earnings estimate of $0.73 to $0.88 per basic share, with operating (non-GAAP) earnings guidance of $0.75 to $0.90 per basic share. For the fourth quarter of 2017, the company expects GAAP earnings in the range of $0.36 to $0.51 per basic share, and provided operating (non-GAAP) earnings guidance of $0.55 to $0.70 per basic share.

In FirstEnergy’s Regulated Distribution business, second quarter 2017 earnings increased compared to the prior-year period as a result of new rates that went into effect in Ohio, Pennsylvania and New Jersey in January, which offset lower weather-related distribution deliveries and higher operating and maintenance and depreciation expenses.

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Total distribution deliveries decreased 0.7 percent compared to the second quarter of 2016, primarily due to the impact of milder weather on residential and commercial sales. Residential and commercial sales decreased 4.6 percent and 1.5 percent, respectively. In the industrial sector, deliveries increased 3.6 percent, primarily as a result of higher usage in the shale gas and steel sectors.

In the Regulated Transmission business, earnings increased compared to the second quarter of 2016 as a result of higher transmission revenues, which offset higher operating expenses.

In the Competitive Energy Services segment, results improved compared to the prior year period due to lower asset impairment and plant exit costs as compared to the second quarter of 2016. Second quarter 2017 earnings also benefited from lower depreciation expense related to impairments recognized in 2016, but this was more than offset by lower commodity margin resulting primarily from lower capacity revenue.

The company’s second quarter 2017 earnings were also impacted by higher interest expense and a higher effective income tax rate.

For the first six months of 2017, the company reported GAAP net income of $379 million, or $0.86 per basic share ($0.85 diluted), on revenue of $6.9 billion. This compares to a first-half 2016 GAAP loss of $761 million, or $(1.79) per basic and diluted share of common stock, on revenues of $7.3 billion.

Operating (non-GAAP) earnings in the first half of 2017 were $1.39 per basic share, compared to $1.35 per basic share of common stock in the first six months of 2016.

 
 
 
 
 
 
Consolidated GAAP EPS to Operating (Non-GAAP) EPS* Reconciliation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter
 
Year-To-Date
 
2017 Estimates
 
 
 
 
2017
2016
 
2017
2016
 
Full
Year
Third Quarter
Fourth
Quarter
 
Basic Earnings (Loss) Per Share (GAAP)
 
$0.39
$(2.56)
 
$0.86
$(1.79)
 
$1.95 - $2.25
$0.73 - $0.88
$0.36 - $0.51
 
Excluding Special Items*:
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.01
0.01
 
0.02
0.11
 
0.04
0.01
—
 
 
Mark-to-market adjustments
 
0.01
0.11
 
0.08
0.01
 
0.08
—
—
 
 
Asset impairment/Plant exit costs
 
0.19
2.99
 
0.42
2.99
 
0.42
—
—
 
 
Trust securities impairment
 
0.01
—
 
0.01
0.01
 
0.01
—
—
 
 
Merger Accounting - commodity contracts
 
—
0.01
 
—
0.02
 
—
—
—
 
 
Debt redemption costs
 
—
—
 
—
—
 
0.20
0.01
0.19
 
 
Total Special Items*
 
0.22
3.12
 
0.53
3.14
 
0.75
0.02
0.19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS - Operating (Non-GAAP)
 
$0.61
$0.56
 
$1.39
$1.35
 
$2.70 -$3.00
$0.75 - $0.90
$0.55 - $0.70
 
 


* Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017, of which ~$100 million relates to employee benefit and other plans. The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pretax amount. The income tax rates range from 35% to 42%.
 

2



Non-GAAP financial measures
*Operating (non-GAAP) earnings (losses) exclude “special items” as described herein, and is a non-GAAP financial measure. Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items are not necessarily non-recurring. Management uses operating (non-GAAP) earnings (losses) and operating (non-GAAP) earnings (losses) by segment to evaluate the company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Management believes that the non-GAAP financial measure of operating (non-GAAP) earnings (losses) provides a consistent and comparable measure of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the company’s peer group. 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 are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities.


Consolidated Report and Teleconference

FirstEnergy’s Consolidated Report to the Financial Community, which provides highlights on company developments and financial results for the second quarter and first half of the year, is posted on the company’s Investor Information website - www.firstenergycorp.com/ir. To access the report, click on Second Quarter 2017 Consolidated Report to the Financial Community.

The company invites investors, customers and other interested parties to listen to a live Internet webcast of its teleconference for financial analysts and view slides associated with the presentation at 10:00 a.m. EDT tomorrow. FirstEnergy management will present an overview of the company’s financial results, followed by a question-and-answer session. The teleconference and presentation can be accessed on the website by selecting the Second Quarter 2017 Earnings Conference Call link. The webcast and presentation will be archived on the website.

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. 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 ability

3


to experience growth in the Regulated Distribution and Regulated Transmission segments and the effectiveness of our strategy to transition to a fully regulated business profile; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, our planned transition to forward-looking formula rates; 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 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; success of legislative and regulatory solutions for generation assets that recognize their environmental or energy security benefits, including the United States Department of Energy study; the risks and uncertainties associated with the lack of viable alternative strategies regarding the Competitive Energy Services (CES) segment, thereby causing FirstEnergy Solutions Corp. (FES), and likely FirstEnergy Nuclear Operating Company (FENOC), to restructure its debt and other financial obligations with its creditors or seek protection under United States bankruptcy laws and the losses, liabilities and claims arising from such bankruptcy proceeding, including any obligations at FirstEnergy Corp.; the risks and uncertainties at the CES segment, including FES and its subsidiaries and FENOC, related to continued depressed wholesale energy and capacity markets, and the viability and/or success of strategic business alternatives, such as pending and potential CES generating unit asset sales, the potential conversion of the remaining generation fleet from competitive operations to a regulated or regulated-like construct or the potential need to deactivate additional generating units; the substantial uncertainty as to FES’ ability to continue as a going concern and substantial risk that it may be necessary for FES, and likely FENOC, to seek protection under United States bankruptcy laws; 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 uncertainties associated with the deactivation of older regulated and competitive 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; 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; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; replacement power costs being higher than anticipated or not fully hedged; 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; 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); 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; 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; 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 labor disruptions by our unionized workforce; 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; the impact of the regulatory process and resulting outcomes 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; 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; 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; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; other legislative and regulatory changes, including the new federal administration's required review and potential revision of 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; 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; 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 significant accounting policies; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; 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; further 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, increase requirements to post additional collateral to support, or accelerate payments under outstanding commodity positions, letters of credit and other financial guarantees, and the impact of these events on the financial condition and liquidity of FirstEnergy Corp. and/or its subsidiaries, specifically FES and its subsidiaries; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; 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. These forward-looking statements are also qualified by, 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. The foregoing review of factors also should not be construed as exhaustive. 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,

4


may cause results to differ materially from those contained in any forward-looking statements. We expressly disclaim 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..

(072717)


5
 EX-99.2 3 ex992fe-06302017.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2
felogo06302014a01a05.jpg
Consolidated Report to the Financial Community                                                                           
Second Quarter 2017
 
(Released July 27, 2017)          (Unaudited)
HIGHLIGHTS  
GAAP earnings for the second quarter of 2017 were $0.39 per basic share, compared with second quarter 2016 losses of $(2.56) per basic share. GAAP results include the impact of special items listed below, primarily reflecting asset impairment/plant exit costs, including a $0.19 per share impairment charge recognized in the second quarter of 2017 based on the status of ongoing negotiations regarding the AE Supply, AGC, and LS Power asset purchase agreement and reflecting the impact of prevailing market conditions as discussed in the Recent Developments section on page 39. Operating (non-GAAP) earnings*, excluding special items, were $0.61 per basic share for the second quarter of 2017, compared with second quarter 2016 Operating (non-GAAP) earnings of $0.56 per basic share.

 
 
 
 
 
 
 
Competitive
 
 
 
FirstEnergy
 
 
EPS Variance Analysis
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
Corp.
 
 
(in millions, except per share amounts)
 
Distribution**
 
Transmission**
 
Services
 
Other
 
Consolidated
 
 
2Q 2016 Net Income (Loss) - GAAP
 
$139
 
$78
 
$(1,259)
 
$(47)
 
$(1,089)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Earnings (Loss) Per Share* (avg. shares outstanding 425M)
 
$0.33
 
$0.19
 
$(2.96)
 
$(0.12)
 
$(2.56)
 
 
Special Items - 2016***
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Charges
 
0.01
 
—
 
—
 
—
 
0.01
 
 
Mark-to-market adjustments
 
—
 
—
 
0.11
 
—
 
0.11
 
 
Merger accounting - commodity contracts
 
—
 
—
 
0.01
 
—
 
0.01
 
 
Asset impairment/Plant exit costs
 
—
 
—
 
2.99
 
—
 
2.99
 
 
Total Special Items - 2Q 2016
 
0.01
 
—
 
3.11
 
—
 
3.12
 
 
2Q 2016 Basic Earnings (Loss) Per Share - Operating (Non-GAAP)*
 
$0.34
 
$0.19
 
$0.15
 
$(0.12)
 
$0.56
 
 
Distribution Deliveries - Weather
 
(0.02)
 
—
 
—
 
—
 
(0.02)
 
 
OH DMR
 
0.07
 
—
 
—
 
—
 
0.07
 
 
OH DCR
 
0.03
 
—
 
—
 
—
 
0.03
 
 
PA Rate Case
 
0.07
 
—
 
—
 
—
 
0.07
 
 
NJ Rate Case
 
0.03
 
—
 
—
 
—
 
0.03
 
 
Transmission Revenues
 
—
 
0.07
 
—
 
—
 
0.07
 
 
Commodity Margin
 
—
 
—
 
(0.15)
 
—
 
(0.15)
 
 
O&M Expenses
 
(0.02)
 
(0.02)
 
(0.02)
 
—
 
(0.06)
 
 
Depreciation
 
(0.02)
 
(0.01)
 
0.11
 
—
 
0.08
 
 
General Taxes
 
—
 
(0.01)
 
—
 
—
 
(0.01)
 
 
Investment Income
 
—
 
—
 
(0.01)
 
—
 
(0.01)
 
 
Net Financing Costs
 
0.01
 
—
 
—
 
(0.02)
 
(0.01)
 
 
Effective Income Tax Rate
 
—
 
—
 
—
 
(0.01)
 
(0.01)
 
 
Share Dilution
 
(0.02)
 
(0.01)
 
—
 
—
 
(0.03)
 
 
2Q 2017 Basic Earnings (Loss) Per Share - Operating (Non-GAAP)*
 
$0.47
 
$0.21
 
$0.08
 
$(0.15)
 
$0.61
 
 
Special Items - 2017***
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
(0.01)
 
—
 
—
 
—
 
(0.01)
 
 
Mark-to-market adjustments
 
—
 
—
 
(0.01)
 
—
 
(0.01)
 
 
Asset impairment/Plant exit costs
 
—
 
—
 
(0.19)
 
—
 
(0.19)
 
 
Trust Securities Impairment
 
—
 
—
 
(0.01)
 
—
 
(0.01)
 
 
Total Special Items - 2Q 2017
 
(0.01)
 
—
 
(0.21)
 
—
 
(0.22)
 
 
2Q 2017 Basic Earnings (Loss) Per Share* (avg. shares outstanding 444M)
 
$0.46
 
$0.21
 
$(0.13)
 
$(0.15)
 
$0.39
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2017 Net Income (Loss) - GAAP
 
$205
 
$92
 
$(56)
 
$(67)
 
$174
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the weighted average basic shares outstanding for the period. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount. The income tax rates range from 35% to 38%.
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    1


*Operating earnings (losses) exclude “special items” as described below, and is a non-GAAP financial measure. Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items are not necessarily non-recurring. Management uses Operating earnings (losses) and Operating earnings (losses) by segment to evaluate the company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Basic Earnings (Loss) Per Share - Operating, by segment, to further evaluate the company's performance by segment and references this non-GAAP financial measure in its decision making. Basic Earnings (Loss) Per Share - Operating for each segment, a non-GAAP financial measure, is calculated by dividing segment Operating earnings (losses), which exclude specials items as discussed herein, by the basic weighted average shares outstanding for the period. Management believes that the non-GAAP financial measures of Operating earnings (losses) and Basic Earnings (Loss) Per Share - Operating by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the company’s peer group. 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 are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. The 2016 and 2017 GAAP to non-GAAP earnings per share reconciliations can be found on page 34-35 of this report and all GAAP to non-GAAP earnings (losses) reconciliations are available on the company’s Investor Information website at www.firstenergycorp.com/ir.
**Disclosures for FirstEnergy Corp.'s (FE) reportable operating segments for 2016 have been adjusted to include the activity of the transmission assets at Jersey Central Power & Light Company (JCP&L) and the former transmission assets of Metropolitan Edison Company (ME) and Pennsylvania Electric Company (PN) from the Regulated Distribution segment to the Regulated Transmission segment, to conform to the current presentation.
***See pages 24-37 for additional details regarding special items.


































_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    2


2017 Earnings Guidance
GAAP earnings for 2017 are forecasted at $1.95 - $2.25 per basic share with 2017 Operating (non-GAAP) earnings guidance re-affirmed at $2.70 - $3.00 per basic share. GAAP earnings forecasted for the third quarter of 2017 are $0.73 - $0.88 per basic share with Operating (non-GAAP) earnings guidance of $0.75 - $0.90 per basic share. GAAP earnings forecasted for the fourth quarter of 2017 are $0.36 - $0.51 per basic share with Operating (non-GAAP) earnings guidance of $0.55 - $0.70 per basic share.

 
 
 
Estimate for Year 2017*
 
 
(In millions, except per share amounts)
 
Regulated Distribution
 
Regulated Transmission
 
Competitive Energy Services
 
Corporate / Other
 
FirstEnergy Corp. Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017F Net Income (Loss) - GAAP
 
$980 - $1,025
 
$360 - $380
 
$(225) - $(170)
 
$(250) - $(235)
 
$865 - $1,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017F Basic Earnings (Loss) Per Share (avg. shares outstanding 445M)
 
$2.20 - $2.30
 
$0.81 - $0.85
 
$(0.50) - $(0.38)
 
$(0.56) - $(0.52)
 
$1.95 - $2.25
 
Excluding Special Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.04
 
—
 
—
 
—
 
0.04
 
 
Mark-to-market adjustments
 
—
 
—
 
0.08
 
—
 
0.08
 
 
Asset impairment/Plant exit costs
 
—
 
—
 
0.42
 
—
 
0.42
 
 
Trust securities impairment
 
—
 
—
 
0.01
 
—
 
0.01
 
 
Debt redemption costs
 
—
 
—
 
0.19
 
0.01
 
0.20
 
 
Total Special Items**
 
0.04
 
—
 
0.70
 
0.01
 
0.75
 
2017F Basic Earnings (Loss) Per Share - Operating (Non-GAAP) (avg. shares outstanding 445M)
 
$2.24 - $2.34
 
$0.81 - $0.85
 
$0.20 - $0.32
 
$(0.55) - $(0.51)
 
$2.70 - $3.00
 
 
 
 

 
 
 
Q3 of 2017*
 
Q4 of 2017*
 
 
(In millions, except per share amounts)
 
FirstEnergy Corp. Consolidated
 
FirstEnergy Corp. Consolidated
 
 
 
 
 
 
 
 
 
2017F Net Income (Loss) - GAAP
 
$325 - $390
 
$161 - $231
 
 
 
 
 
 
 
 
2017F Basic Earnings (Loss) Per Share
 
$0.73 - $0.88
 
$0.36 - $0.51
 
Excluding Special Items:
 
 
 
 
 
 
Regulatory charges
 
0.01
 
—
 
 
Mark-to-market adjustments
 
—
 
—
 
 
Asset impairment/Plant exit costs
 
—
 
—
 
 
Trust securities impairment
 
—
 
—
 
 
Debt redemption costs
 
0.01
 
0.19
 
 
Total Special Items**
 
0.02
 
0.19
 
2017F Basic Earnings (Loss) Per Share - Operating (Non-GAAP)
 
$0.75 - $0.90
 
$0.55 - $0.70
 
 
 
 



* Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017, of which ~$100 million relates to employee benefit and other plans. The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pre-tax amount. The income tax rates range from 35% to 42%.

** See pages 36-37 for additional details regarding special items.

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    3


2Q 2017 Results vs 2Q 2016 - By Segment
Regulated Distribution
Regulated Distribution - GAAP earnings for the second quarter of 2017 were $205 million, or $0.46 per basic share, compared with second quarter 2016 GAAP earnings of $139 million, or $0.33 per basic share. Operating (non-GAAP) earnings, excluding special items, were $0.47 per basic share for the second quarter of 2017 compared with $0.34 per basic share for the second quarter of 2016.
 
 
 
 
 
 
 
 
EPS Variance Analysis
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
2Q 2016 Net Income - GAAP
 
$139
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Earnings Per Share (avg. shares outstanding 425M)
 
$0.33
 
 
 
Special Items - 2016*
 
0.01
 
 
 
2Q 2016 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.34
 
 
 
Distribution Deliveries - Weather
 
(0.02)
 
 
 
OH DMR
 
0.07
 
 
 
OH DCR
 
0.03
 
 
 
PA Rate Case
 
0.07
 
 
 
NJ Rate Case
 
0.03
 
 
 
O&M Expenses
 
(0.02)
 
 
 
Depreciation
 
(0.02)
 
 
 
Net Financing Costs
 
0.01
 
 
 
Share Dilution
 
(0.02)
 
 
 
2Q 2017 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.47
 
 
 
Special Items - 2017*
 
(0.01)
 
 
 
2Q 2017 Basic Earnings Per Share (avg. shares outstanding 444M)
 
$0.46
 
 
 
 
 
 
 
 
 
2Q 2017 Net Income - GAAP
 
$205
 
 
 
*See pages 24-37 for additional details on special items.
 
2Q 2017 vs 2Q 2016 Earnings Drivers
•
Distribution Deliveries - Total distribution deliveries decreased earnings $0.02 per share as a result of mild temperatures during the second quarter of 2017. Total deliveries decreased 258,000 megawatt-hours (MWH), or 0.7%. Sales to residential customers decreased 541,000 MWH, or 4.6%, and sales to commercial customers decreased 159,000 MWH, or 1.5%. Heating-degree-days were 30% below the same period last year and 24% below normal. Sales to industrial customers increased 449,000 MWH, or 3.6%.
•
Ohio Distribution Modernization Rider (DMR) - Higher revenues increased earnings $0.07 per share due to the implementation of the DMR effective January 1, 2017.
•
Ohio Delivery Capital Recovery (DCR) Rider - Higher revenues increased earnings $0.03 per share due to the change in DCR rates associated with the annual revenue cap increases.
•
Pennsylvania Rate Case - Earnings increased $0.07 per share due to approved distribution rate increases, net of incremental operating expenses, effective January 27, 2017.
•
New Jersey Rate Case - Earnings increased $0.03 per share due to an approved distribution rate increase, effective January 1, 2017.
•
O&M Expenses - Higher O&M expenses reduced earnings $0.02 per share.

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    4


•
Depreciation - Higher depreciation expense reduced earnings $0.02 per share primarily due to a higher asset base.
•
Net Financing Costs - Lower net financing costs increased earnings $0.01 per share primarily reflecting lower interest costs as a result of various debt redemptions.
•
Share Dilution - Higher average shares outstanding decreased earnings $0.02 per share.
•
Special Items - In the second quarter of 2017 and 2016, Regulated Distribution special items included regulatory charges of $0.01 per share, reflecting the impact of regulatory orders requiring certain commitments and/or disallowing the recoverability of costs. Descriptions of special items can be found on page 37.

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    5


Regulated Transmission
Regulated Transmission - GAAP and Operating (non-GAAP) earnings for the second quarter of 2017 were $92 million, or $0.21 per basic share, compared with second quarter 2016 GAAP and Operating (non-GAAP) earnings of $78 million, or $0.19 per basic share.
 
 
 
 
 
 
 
 
EPS Variance Analysis
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
2Q 2016 Net Income - GAAP
 
$78
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Earnings Per Share (avg. shares outstanding 425M)
 
$0.19
 
 
 
Special Items - 2016*
 
—
 
 
 
2Q 2016 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.19
 
 
 
Transmission Revenues
 
0.07
 
 
 
O&M Expenses
 
(0.02)
 
 
 
Depreciation
 
(0.01)
 
 
 
General Taxes
 
(0.01)
 
 
 
Share Dilution
 
(0.01)
 
 
 
2Q 2017 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.21
 
 
 
Special Items - 2017*
 
—
 
 
 
2Q 2017 Basic Earnings Per Share (avg. shares outstanding 444M)
 
$0.21
 
 
 
 
 
 
 
 
 
2Q 2017 Net Income - GAAP
 
$92
 
 
 
*See pages 24-37 for additional details on special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2017 vs 2Q 2016 Earnings Drivers
•
Transmission Revenues - Higher transmission revenues increased earnings $0.07 per share, primarily due to recovery of incremental operating expenses and a higher rate base at American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL) as well as the absence of adjustments recognized in 2016 that lowered revenue associated with ATSI and TrAIL's annual rate filings.
•
O&M Expenses, Depreciation, and General Taxes - Higher depreciation, O&M expenses, and general taxes decreased earnings $0.04 per share. The majority of these expenses are recovered through formula rates.
•
Share Dilution - Higher average shares outstanding decreased earnings $0.01 per share.











_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    6


Competitive Energy Services
Competitive Energy Services (CES) - GAAP losses for the second quarter of 2017 were $(56) million, or $(0.13) per basic share, compared with second quarter 2016 GAAP losses of $(1,259) million, or $(2.96) per basic share. Operating (non-GAAP) earnings, excluding special items, for the second quarter of 2017 were $0.08 per basic share, compared with second quarter 2016 Operating (non-GAAP) earnings of $0.15 per basic share.
 
 
 
 
 
 
 
 
EPS Variance Analysis
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
2Q 2016 Net Loss - GAAP
 
$(1,259)
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Loss Per Share (avg. shares outstanding 425M)
 
$(2.96)
 
 
 
Special Items - 2016*
 
3.11
 
 
 
2Q 2016 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.15
 
 
 
Commodity Margin
 
(0.15)
 
 
 
O&M Expenses
 
(0.02)
 
 
 
Depreciation
 
0.11
 
 
 
Investment Income
 
(0.01)
 
 
 
2Q 2017 Basic Earnings Per Share - Operating (Non-GAAP)
 
$0.08
 
 
 
Special Items - 2017*
 
(0.21)
 
 
 
2Q 2017 Basic Loss Per Share (avg. shares outstanding 444M)
 
$(0.13)
 
 
 
 
 
 
 
 
 
2Q 2017 Net Loss - GAAP
 
$(56)
 
 
 
*See pages 24-37 for additional details on special items.
 
 
 
 
 
 
 
 
 
2Q 2017 vs 2Q 2016 Earnings Drivers
•
Commodity Margin - CES commodity margin decreased earnings $0.15 per share primarily due to lower capacity revenues and lower contract sales, partially offset by increased wholesale sales and lower capacity expense.

A summary by key component of commodity margin follows:
 
 
 
 
 
 
 
 
 
 
Commodity Margin EPS - 2Q17 vs 2Q16
 
Rate
 
Volume
 
Total
 
 
(a) Contract Sales
 
 
 
 
 
 
 
 
   - Direct Sales (LCI & MCI)
 
$
(0.03
)
 
$
0.02

 
$
(0.01
)
 
 
   - Governmental Aggregation Sales
 
(0.03
)
 
(0.12
)
 
(0.15
)
 
 
   - Mass Market Sales
 
—

 
(0.01
)
 
(0.01
)
 
 
   - POLR Sales
 
(0.02
)
 
—

 
(0.02
)
 
 
   - Structured Sales
 
—

 
(0.05
)
 
(0.05
)
 
 
        Subtotal - Contract Sales
 
$
(0.08
)
 
$
(0.16
)
 
$
(0.24
)
 
 
(b) Wholesale Sales
 
0.03

 
0.08

 
0.11

 
 
(c) PJM Capacity, BR and CP Revenues
 
(0.15
)
 
0.01

 
(0.14
)
 
 
(d) Fuel Expense
 
(0.01
)
 
0.02

 
0.01

 
 
(e) Purchased Power (net of financials)
 
(0.01
)
 
(0.02
)
 
(0.03
)
 
 
(f) Capacity Expense
 
0.05

 
0.08

 
0.13

 
 
(g) Net MISO - PJM Transmission Cost
 
—

 
0.01

 
0.01

 
 
       Net Change
 
$
(0.17
)
 
$
0.02

 
$
(0.15
)
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    7


(a)
Contract Sales - CES' contract sales decreased 2.2 million MWH, or 18%, and reduced earnings $0.24 per share. Retail contract sales decreased 1.3 million MWH primarily in the governmental aggregation class. Non-retail contract sales decreased 0.9 million MWH due primarily to lower structured sales. As of June 30, 2017, the total number of retail customers was approximately 850,000, a decrease of approximately 660,000 customers since June 30, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CES Contract Sales - 2Q17 vs 2Q16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(thousand MWH)
 
Retail
 
Non-Retail
 
 
 
 
 
 
Direct
 
Aggr.
 
Mass Market
 
POLR
 
Structured
 
Total
 
 
Contract Sales Increase / (Decrease)
 
236
 
(1,375)
 
(132)
 
(32)
 
(886)
 
(2,189)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b) Wholesale Sales - Wholesale sales increased 2.4 million MWH and increased earnings $0.11 per share.
(c) PJM Capacity Revenues (Base Residual (BR) and Capacity Performance (CP) Auctions) - Lower capacity revenues decreased earnings $0.14 per share primarily resulting from lower capacity prices on average in the ATSI, RTO and MAAC zones. Capacity prices by zone for the applicable planning periods are summarized below.
 
Planning Period
 
RTO
 
ATSI
 
MAAC
 
RTO/ATSI/MAAC
 
 
Price Per Megawatt-Day
 
BR
 
BR
 
BR
 
CP
 
 
June 2015 - May 2016
 
$136.00
 
$357.00
 
$167.46
 
NA
 
 
June 2016 - May 2017
 
$59.37
 
$114.23
 
$119.13
 
$134.00
 
 
June 2017 - May 2018
 
$120.00
 
$120.00
 
$120.00
 
$151.50
 
 
 
 
 
 
 
 
 
 
 
 
(d)
Fuel Expense - Lower fuel expense increased earnings $0.01 per share primarily due to lower fossil generation output.
(e) Purchased Power (net of financials) - Higher purchased power volumes of 0.5 million MWH resulting from lower fossil generation output decreased earnings $0.03 per share.
(f) Capacity Expense - Lower capacity expense associated with contract sales increased earnings $0.13 per share primarily due to lower sales volumes and lower average capacity prices in the ATSI and RTO zones.
(g) Net MISO-PJM Transmission Cost - Lower transmission expenses and PJM ancillary charges increased earnings $0.01 per share primarily due to lower contract sales.
•
O&M Expenses - Higher O&M expenses decreased earnings $0.02 per share, primarily due to higher nuclear outage costs.

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    8


•
Depreciation Expense - Lower depreciation expense increased earnings $0.11 per share primarily due to the impact of asset impairments recognized in 2016.
•
Investment Income - Lower investment income decreased earnings $0.01 per share, primarily due to lower investment income on nuclear decommissioning trust securities.
•
Special Items - In the second quarter of 2017, CES special items included impacts from asset impairment/plant exit costs of $0.19 per share, mark-to-market adjustments of $0.01 per share, and trust securities impairment of $0.01 per share. In the second quarter of 2016, CES special items included asset impairment/plant exit costs of $2.99 per share, merger accounting-commodity contracts of $0.01 per share, and mark-to-market adjustments of $0.11 per share. Descriptions of special items can be found on page 37.




_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    9


Corporate / Other
Corporate / Other - GAAP and Operating (non-GAAP) losses for the second quarter of 2017 were $(67) million, or $(0.15) per basic share, compared with second quarter 2016 GAAP and Operating (non-GAAP) losses of $(47) million, or $(0.12) per basic share.
 
 
 
 
 
 
 
 
EPS Variance Analysis
 
 
 
 
 
(In millions, except per share amounts)
 
 
 
 
 
2Q 2016 Net Loss - GAAP
 
$(47)
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Loss Per Share (avg. shares outstanding 425M)
 
$(0.12)
 
 
 
Special Items - 2016*
 
—
 
 
 
2Q 2016 Basic Loss Per Share - Operating (Non-GAAP)
 
$(0.12)
 
 
 
Net Financing Costs
 
(0.02)
 
 
 
Effective Income Tax Rate
 
(0.01)
 
 
 
2Q 2017 Basic Loss Per Share - Operating (Non-GAAP)
 
$(0.15)
 
 
 
Special Items - 2017
 
—
 
 
 
2Q 2017 Basic Loss Per Share (avg. shares outstanding 444M)
 
$(0.15)
 
 
 
 
 
 
 
 
 
2Q 2017 Net Loss - GAAP
 
$(67)
 
 
 
*See pages 24-37 for additional details on special items.
 
2Q 2017 vs 2Q 2016 Earnings Drivers

•
Net Financing Costs - Higher net financing costs primarily due to increased average borrowings and higher average rates on variable rate debt decreased results $0.02 per share.
•
Effective Income Tax Rate - A higher consolidated effective income tax rate decreased results $0.01 per share. The consolidated effective tax rate for the second quarter of 2017 was 38.4% compared to 37.3% for the same period of 2016.






For additional information, please contact:
Irene M. Prezelj
 
Meghan G. Beringer    
 
Jake M. Mackin
Vice President, Investor Relations
 
Director, Investor Relations
 
Manager, Investor Relations
(330) 384-3859
 
(330) 384-5832
 
(330) 384-4829

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    10


FirstEnergy Corp.
Consolidated Statements of Income (Loss) (GAAP)
(In millions)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
 
 
 
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1
)
 
Regulated distribution
 
$
2,262

 
$
2,189

 
$
73

 
$
4,752

 
$
4,699

 
$
53

 
 
(2
)
 
Regulated transmission
 
327

 
275

 
52

 
640

 
561

 
79

 
 
(3
)
 
Competitive energy services
 
864

 
1,116

 
(252
)
 
1,795

 
2,420

 
(625
)
 
 
(4
)
 
Corporate / Other
 
(144
)
 
(179
)
 
35

 
(326
)
 
(410
)
 
84

 
 
(5
)
Total Revenues
 
3,309

 
3,401

 
(92
)
 
6,861

 
7,270

 
(409
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6
)
 
Fuel
 
343

 
438

 
(95
)
 
711

 
819

 
(108
)
 
 
(7
)
 
Purchased power
 
735

 
889

 
(154
)
 
1,598

 
2,013

 
(415
)
 
 
(8
)
 
Other operating expenses
 
957

 
964

 
(7
)
 
2,099

 
1,882

 
217

 
 
(9
)
 
Provision for depreciation
 
281

 
334

 
(53
)
 
556

 
663

 
(107
)
 
 
(10
)
 
Amortization of regulatory assets, net
 
65

 
63

 
2

 
124

 
124

 
—

 
 
(11
)
 
General taxes
 
253

 
241

 
12

 
524

 
521

 
3

 
 
(12
)
 
Impairment of assets
 
131

 
1,447

 
(1,316
)
 
131

 
1,447

 
(1,316
)
 
 
(13
)
Total Operating Expenses
 
2,765

 
4,376

 
(1,611
)
 
5,743

 
7,469

 
(1,726
)
 
 
(14
)
Operating Income (Loss)
 
544

 
(975
)
 
1,519

 
1,118

 
(199
)
 
1,317

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
 
Investment income
 
17

 
19

 
(2
)
 
41

 
47

 
(6
)
 
 
(16
)
 
Interest expense
 
(290
)
 
(289
)
 
(1
)
 
(577
)
 
(577
)
 
—

 
 
(17
)
 
Capitalized financing costs
 
20

 
26

 
(6
)
 
40

 
51

 
(11
)
 
 
(18
)
Total Other Expense
 
(253
)
 
(244
)
 
(9
)
 
(496
)
 
(479
)
 
(17
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(19
)
Income (Loss) Before Income Taxes (Benefits)
 
291

 
(1,219
)
 
1,510

 
622

 
(678
)
 
1,300

 
 
(20
)
 
Income taxes (benefits)
 
117

 
(130
)
 
247

 
243

 
83

 
160

 
 
(21
)
Net Income (Loss)
 
$
174

 
$
(1,089
)
 
$
1,263

 
$
379

 
$
(761
)
 
$
1,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Earnings (Loss) Per Share of Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(22
)
 
Basic
 
$
0.39

 
$
(2.56
)
 
$
2.95

 
$
0.86

 
$
(1.79
)
 
$
2.65

 
 
(23
)
 
Diluted
 
$
0.39

 
$
(2.56
)
 
$
2.95

 
$
0.85

 
$
(1.79
)
 
$
2.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Weighted Average Number of Common
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Shares Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(24
)
 
Basic
 
444

 
425

 
19

 
443

 
424

 
19

 
 
(25
)
 
Diluted
 
445

 
425

 
20

 
444

 
424

 
20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    11


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
2,215

 
$
327

 
$
750

 
$
(42
)
 
$
3,250

 
(2
)
 
Other
47

 
—

 
28

 
(16
)
 
59

 
(3
)
 
Internal
—

 
—

 
86

 
(86
)
 
—

 
(4
)
Total Revenues
2,262

 
327

 
864

 
(144
)
 
3,309

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
121

 
—

 
222

 
—

 
343

 
(6
)
 
Purchased power
657

 
—

 
164

 
(86
)
 
735

 
(7
)
 
Other operating expenses
627

 
50

 
349

 
(69
)
 
957

 
(8
)
 
Provision for depreciation
179

 
54

 
29

 
19

 
281

 
(9
)
 
Amortization of regulatory assets, net
62

 
3

 
—

 
—

 
65

 
(10
)
 
General taxes
175

 
43

 
27

 
8

 
253

 
(11
)
 
Impairment of assets
—

 
—

 
131

 
—

 
131

 
(12
)
Total Operating Expenses
1,821

 
150

 
922

 
(128
)
 
2,765

 
(13
)
Operating Income (Loss)
441

 
177

 
(58
)
 
(16
)
 
544

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
14

 
—

 
12

 
(9
)
 
17

 
(15
)
 
Interest expense
(134
)
 
(39
)
 
(47
)
 
(70
)
 
(290
)
 
(16
)
 
Capitalized financing costs
5

 
7

 
7

 
1

 
20

 
(17
)
Total Other Expense
(115
)
 
(32
)
 
(28
)
 
(78
)
 
(253
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) Before Income Taxes (Benefits)
326

 
145

 
(86
)
 
(94
)
 
291

 
(19
)
 
Income taxes (benefits)
121

 
53

 
(30
)
 
(27
)
 
117

 
(20
)
Net Income (Loss)
$
205

 
$
92

 
$
(56
)
 
$
(67
)
 
$
174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    12


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
2,136

 
$
275

 
$
963

 
$
(43
)
 
$
3,331

 
 
(2
)
 
Other
53

 
—

 
45

 
(28
)
 
70

 
 
(3
)
 
Internal
—

 
—

 
108

 
(108
)
 
—

 
 
(4
)
Total Revenues
2,189

 
275


1,116

 
(179
)
 
3,401

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
141

 
—

 
297

 
—

 
438

 
 
(6
)
 
Purchased power
721

 
—

 
276

 
(108
)
 
889

 
 
(7
)
 
Other operating expenses
579

 
37

 
432

 
(84
)
 
964

 
 
(8
)
 
Provision for depreciation
168

 
46

 
103

 
17

 
334

 
 
(9
)
 
Amortization of regulatory assets, net
61

 
2

 
—

 
—

 
63

 
 
(10
)
 
General taxes
170

 
36

 
29

 
6

 
241

 
 
(11
)
 
Impairment of assets
—

 
—

 
1,447

 
—

 
1,447

 
 
(12
)
Total Operating Expenses
1,840

 
121


2,584

 
(169
)
 
4,376

 
 
(13
)
Operating Income (Loss)
349

 
154


(1,468
)
 
(10
)
 
(975
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
13

 
—

 
18

 
(12
)
 
19

 
 
(15
)
 
Interest expense
(148
)
 
(39
)
 
(48
)
 
(54
)
 
(289
)
 
 
(16
)
 
Capitalized financing costs
5

 
9

 
9

 
3

 
26

 
 
(17
)
Total Other Expense
(130
)
 
(30
)

(21
)
 
(63
)
 
(244
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) Before Income Taxes (Benefits)
219

 
124


(1,489
)
 
(73
)
 
(1,219
)
 
 
(19
)
 
Income taxes (benefits)
80

 
46

 
(230
)
 
(26
)
 
(130
)
 
 
(20
)
Net Income (Loss)
$
139

 
$
78


$
(1,259
)
 
$
(47
)
 
$
(1,089
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    13


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes Between the Three Months Ended June 30, 2017 and the Three Months Ended June 30, 2016
Increase (Decrease)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
79

 
$
52

 
$
(213
)
 
$
1

 
$
(81
)
 
 
(2
)
 
Other
(6
)
 
—

 
(17
)
 
12

 
(11
)
 
 
(3
)
 
Internal revenues
—

 
—

 
(22
)
 
22

 
—

 
 
(4
)
Total Revenues
73

 
52


(252
)
 
35

 
(92
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
(20
)
 
—

 
(75
)
 
—

 
(95
)
 
 
(6
)
 
Purchased power
(64
)
 
—

 
(112
)
 
22

 
(154
)
 
 
(7
)
 
Other operating expenses
48

 
13

 
(83
)
 
15

 
(7
)
 
 
(8
)
 
Provision for depreciation
11

 
8

 
(74
)
 
2

 
(53
)
 
 
(9
)
 
Amortization of regulatory assets, net
1

 
1

 
—

 
—

 
2

 
 
(10
)
 
General taxes
5

 
7

 
(2
)
 
2

 
12

 
 
(11
)
 
Impairment of assets
—

 
—

 
(1,316
)
 
—

 
(1,316
)
 
 
(12
)
Total Operating Expenses
(19
)
 
29


(1,662
)
 
41

 
(1,611
)
 
 
(13
)
Operating Income (Loss)
92

 
23


1,410

 
(6
)
 
1,519

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
1

 
—

 
(6
)
 
3

 
(2
)
 
 
(15
)
 
Interest expense
14

 
—

 
1

 
(16
)
 
(1
)
 
 
(16
)
 
Capitalized financing costs
—

 
(2
)
 
(2
)
 
(2
)
 
(6
)
 
 
(17
)
Total Other Expense
15

 
(2
)

(7
)
 
(15
)
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) Before Income Taxes (Benefits)
107

 
21


1,403

 
(21
)
 
1,510

 
 
(19
)
 
Income taxes (benefits)
41

 
7

 
200

 
(1
)
 
247

 
 
(20
)
Net Income (Loss)
$
66

 
$
14


$
1,203

 
$
(20
)
 
$
1,263

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    14


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
4,659

 
$
640

 
$
1,523

 
$
(84
)
 
$
6,738

 
(2
)
 
Other
93

 
—

 
69

 
(39
)
 
123

 
(3
)
 
Internal
—

 
—

 
203

 
(203
)
 
—

 
(4
)
Total Revenues
4,752

 
640

 
1,795

 
(326
)
 
6,861

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
262

 
—

 
449

 
—

 
711

 
(6
)
 
Purchased power
1,470

 
—

 
331

 
(203
)
 
1,598

 
(7
)
 
Other operating expenses
1,251

 
95

 
913

 
(160
)
 
2,099

 
(8
)
 
Provision for depreciation
357

 
105

 
57

 
37

 
556

 
(9
)
 
Amortization of regulatory assets, net
119

 
5

 
—

 
—

 
124

 
(10
)
 
General taxes
359

 
85

 
57

 
23

 
524

 
(11
)
 
Impairment of assets
—

 
—

 
131

 
—

 
131

 
(12
)
Total Operating Expenses
3,818

 
290

 
1,938

 
(303
)
 
5,743

 
(13
)
Operating Income (Loss)
934

 
350

 
(143
)
 
(23
)
 
1,118

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
28

 
—

 
32

 
(19
)
 
41

 
(15
)
 
Interest expense
(272
)
 
(78
)
 
(92
)
 
(135
)
 
(577
)
 
(16
)
 
Capitalized financing costs
11

 
13

 
15

 
1

 
40

 
(17
)
Total Other Expense
(233
)
 
(65
)
 
(45
)
 
(153
)
 
(496
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) Before Income Taxes (Benefits)
701

 
285

 
(188
)
 
(176
)
 
622

 
(19
)
 
Income taxes (benefits)
259

 
105

 
(65
)
 
(56
)
 
243

 
(20
)
Net Income (Loss)
$
442

 
$
180

 
$
(123
)
 
$
(120
)
 
$
379

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    15


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
4,567

 
$
561

 
$
2,064

 
$
(89
)
 
$
7,103

 
 
(2
)
 
Other
132

 
—

 
96

 
(61
)
 
167

 
 
(3
)
 
Internal
—

 
—

 
260

 
(260
)
 
—

 
 
(4
)
Total Revenues
4,699

 
561

 
2,420

 
(410
)
 
7,270

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
280

 
—

 
539

 
—

 
819

 
 
(6
)
 
Purchased power
1,647

 
—

 
626

 
(260
)
 
2,013

 
 
(7
)
 
Other operating expenses
1,226

 
74

 
753

 
(171
)
 
1,882

 
 
(8
)
 
Provision for depreciation
335

 
91

 
205

 
32

 
663

 
 
(9
)
 
Amortization of regulatory assets, net
120

 
4

 
—

 
—

 
124

 
 
(10
)
 
General taxes
355

 
77

 
68

 
21

 
521

 
 
(11
)
 
Impairment of assets
—

 
—

 
1,447

 
—

 
1,447

 
 
(12
)
Total Operating Expenses
3,963

 
246

 
3,638

 
(378
)
 
7,469

 
 
(13
)
Operating Income (Loss)
736

 
315

 
(1,218
)
 
(32
)
 
(199
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
24

 
—

 
33

 
(10
)
 
47

 
 
(15
)
 
Interest expense
(298
)
 
(79
)
 
(95
)
 
(105
)
 
(577
)
 
 
(16
)
 
Capitalized financing costs
9

 
16

 
20

 
6

 
51

 
 
(17
)
Total Other Expense
(265
)
 
(63
)
 
(42
)
 
(109
)
 
(479
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) Before Income Taxes (Benefits)
471

 
252

 
(1,260
)
 
(141
)
 
(678
)
 
 
(19
)
 
Income taxes (benefits)
174

 
93

 
(145
)
 
(39
)
 
83

 
 
(20
)
Net Income (Loss)
$
297

 
$
159

 
$
(1,115
)
 
$
(102
)
 
$
(761
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    16


FirstEnergy Corp.
Statements of Income (Loss) - By Segment (GAAP)
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes Between the First Six Months of 2017 and the First Six Months of 2016
Increase (Decrease)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive
 
 
 
 
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
FirstEnergy
 
 
 
 
 
Distribution (a)
 
Transmission (b)
 
Services (c)
 
Other (d)
 
Consolidated
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
(1
)
 
Electric sales
$
92

 
$
79

 
$
(541
)
 
$
5

 
$
(365
)
 
 
(2
)
 
Other
(39
)
 
—

 
(27
)
 
22

 
(44
)
 
 
(3
)
 
Internal revenues
—

 
—

 
(57
)
 
57

 
—

 
 
(4
)
Total Revenues
53

 
79

 
(625
)
 
84

 
(409
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(5
)
 
Fuel
(18
)
 
—

 
(90
)
 
—

 
(108
)
 
 
(6
)
 
Purchased power
(177
)
 
—

 
(295
)
 
57

 
(415
)
 
 
(7
)
 
Other operating expenses
25

 
21

 
160

 
11

 
217

 
 
(8
)
 
Provision for depreciation
22

 
14

 
(148
)
 
5

 
(107
)
 
 
(9
)
 
Amortization of regulatory assets, net
(1
)
 
1

 
—

 
—

 
—

 
 
(10
)
 
General taxes
4

 
8

 
(11
)
 
2

 
3

 
 
(11
)
 
Impairment of assets
—

 
—

 
(1,316
)
 
—

 
(1,316
)
 
 
(12
)
Total Operating Expenses
(145
)
 
44

 
(1,700
)
 
75

 
(1,726
)
 
 
(13
)
Operating Income (Loss)
198

 
35

 
1,075

 
9

 
1,317

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(14
)
 
Investment income (loss)
4

 
—

 
(1
)
 
(9
)
 
(6
)
 
 
(15
)
 
Interest expense
26

 
1

 
3

 
(30
)
 
—

 
 
(16
)
 
Capitalized financing costs
2

 
(3
)
 
(5
)
 
(5
)
 
(11
)
 
 
(17
)
Total Other Expense
32

 
(2
)
 
(3
)
 
(44
)
 
(17
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(18
)
Income (Loss) From Before Income Taxes (Benefits)
230

 
33

 
1,072

 
(35
)
 
1,300

 
 
(19
)
 
Income taxes (benefits)
85

 
12

 
80

 
(17
)
 
160

 
 
(20
)
Net Income (Loss)
$
145

 
$
21

 
$
992

 
$
(18
)
 
$
1,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs.
 
 
(b)

Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities.
 
 
(c)

Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland.
 
 
(d)

Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    17


FirstEnergy Corp.
Financial Information
(In millions)
 
 
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets (GAAP)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
As of
 
 
Assets
 
Jun. 30, 2017
 
Dec. 31, 2016
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
114

 
$
199

 
 
 
Receivables
 
1,536

 
1,615

 
 
 
Other
 
1,105

 
1,136

 
 
Total Current Assets
 
2,755

 
2,950

 
 
 
 
 
 
 
 
 
 
Property, Plant and Equipment
 
29,179

 
29,387

 
 
Investments
 
3,095

 
3,026

 
 
Assets Held for Sale
 
815

 
—

 
 
Deferred Charges and Other Assets
 
7,483

 
7,785

 
 
Total Assets
 
$
43,327

 
$
43,148

 
 
 
 
 
 
 
 
 
 
Liabilities and Capitalization
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
Currently payable long-term debt
 
$
2,015

 
$
1,685

 
 
 
Short-term borrowings
 
225

 
2,675

 
 
 
Accounts payable
 
932

 
1,043

 
 
 
Other
 
1,475

 
1,723

 
 
Total Current Liabilities
 
4,647

 
7,126

 
 
 
 
 
 
 
 
 
 
Capitalization:
 
 
 
 
 
 
 
Total equity
 
6,320

 
6,241

 
 
 
Long-term debt and other long-term obligations
 
20,582

 
18,192

 
 
Total Capitalization
 
26,902

 
24,433

 
 
Noncurrent Liabilities
 
11,778

 
11,589

 
 
Total Liabilities and Capitalization
 
$
43,327

 
$
43,148

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
General Information
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
Debt redemptions
 
$
(524
)
 
$
(550
)
 
$
(735
)
 
$
(581
)
 
 
New long-term debt issues
 
$
3,250

 
$
—

 
$
3,500

 
$
—

 
 
Short-term borrowings increase (decrease)
 
$
(2,525
)
 
$
800

 
$
(2,450
)
 
$
1,225

 
 
Property additions
 
$
666

 
$
794

 
$
1,254

 
$
1,492

 
 
 
 
 
 
 
 
 
 
 
 
























_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    18


FirstEnergy Corp.
Financial Information
(In millions)

 
 
 
 
 
 
 
 
 
 
 
 
Debt to Total Capitalization Ratio as Defined Under the FE Credit Facility
 
 
 
 
 
 
 
As of June 30
 
As of December 31
 
 
 
 
2017
 
% Total
 
2016
 
% Total
 
 
Total Equity (GAAP)
 
$
6,320

 
17
 %
 
$
6,241

 
17
 %
 
 
Non-cash Charges / Non-cash Write Downs*
 
8,264

 
22
 %
 
8,264

 
23
 %
 
 
Accumulated Other Comprehensive Income
 
(163
)
 
—
 %
 
(174
)
 
(1
)%
 
 
Adjusted Equity (Non-GAAP)**
 
14,421

 
39
 %
 
14,331

 
39
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt and Other Long-term Obligations (GAAP)
 
20,582

 
56
 %
 
18,192

 
50
 %
 
 
Currently Payable Long-term Debt (GAAP)
 
2,015

 
5
 %
 
1,685

 
5
 %
 
 
Short-term Borrowings (GAAP)
 
225

 
1
 %
 
2,675

 
7
 %
 
 
Reimbursement Obligations
 
10

 
—
 %
 
54

 
—
 %
 
 
Guarantees of Indebtedness
 
321

 
1
 %
 
325

 
1
 %
 
 
Less Securitization Debt
 
(780
)
 
(2
)%
 
(887
)
 
(2
)%
 
 
Adjusted Debt (Non-GAAP)**
 
22,373

 
61
 %
 
22,044

 
61
 %
 
 
 
 
 
 


 
 
 


 
 
Adjusted Capitalization (Non-GAAP)**
 
$
36,794

 
100
 %
 
$
36,375

 
100
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
*Includes after-tax non-cash charges and non-cash write downs, primarily associated with the impairment of assets at CES, pension and OPEB mark-to-market adjustments and regulatory asset charges through June 30, 2017, as permitted by FE's current syndicated revolving credit facility (FE Credit Facility).
 
 
**Management uses Adjusted Equity, Adjusted Debt, and Adjusted Capitalization, each of which is a non-GAAP financial measure, to calculate and monitor its compliance with the debt to total capitalization financial covenant under the FE Credit Facility and term loans. These financial measures, as calculated in accordance with the FE Credit Facility and term loans, help shareholders understand FE's compliance with, and provide a basis for understanding FE's incremental debt capacity under the debt to total capitalization financial covenant. The financial covenants under the FE Credit Facility and term loans require FE to maintain a consolidated debt to total capitalization ratio of no more than 65%, measured at the end of each fiscal quarter.
 
 
Additionally under the FE Credit Facility, FE is also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 until December 31, 2017, 2.00 to 1.00 beginning January 1, 2018 until December 31, 2018, 2.25 to 1.00 beginning January 1, 2019 until December 31, 2019, and 2.50 to 1.00 beginning January 1, 2020 until December 31, 2021. As of June 30, 2017 FE's interest coverage ratio was 4.78.
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    19


FirstEnergy Corp.
Statements of Cash Flows and Liquidity
(In millions)

 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (GAAP)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
 
June 30
 
June 30
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
174

 
$
(1,089
)
 
$
379

 
$
(761
)
 
 
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (1)
 
400

 
489

 
792

 
950

 
 
Deferred purchased power and other costs
 
11

 
(23
)
 
34

 
(33
)
 
 
Deferred income taxes and investment tax credits, net
 
110

 
(134
)
 
224

 
72

 
 
Impairments of assets
 
131

 
1,447

 
131

 
1,447

 
 
Investments impairments
 
4

 
1

 
7

 
10

 
 
Deferred costs on sale leaseback transaction, net
 
12

 
12

 
24

 
24

 
 
Retirement benefits, net of payments
 
7

 
15

 
17

 
31

 
 
Pension trust contributions
 
—

 
—

 
—

 
(160
)
 
 
Unrealized loss on derivative transactions
 
6

 
69

 
53

 
5

 
 
Lease payment on sale leaseback transaction, net
 
(47
)
 
(94
)
 
(47
)
 
(94
)
 
 
Changes in working capital and other
 
(111
)
 
129

 
(132
)
 
(19
)
 
 
Cash flows provided from operating activities
 
697

 
822

 
1,482

 
1,472

 
 
Cash flows provided from (used for) financing activities
 
2

 
133

 
(56
)
 
363

 
 
Cash flows used for investing activities
 
(749
)
 
(902
)
 
(1,511
)
 
(1,767
)
 
 
Net change in cash and cash equivalents
 
$
(50
)
 
$
53

 
$
(85
)
 
$
68

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes amortization of Regulatory Assets, net, nuclear fuel, intangible assets, and deferred debt related costs.
 
 
 
 
 
 
 
 
 
 
 
 

 
Liquidity position as of June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company
Type
Maturity
Amount
Available*
 
 
FirstEnergy(1)
Revolving
December 2021
$4,000
$3,840
 
 
FET / ATSI / TrAIL / MAIT
Revolving
December 2021
1,000
925

 
 
  (1) FirstEnergy Corp. and FEU subsidiary borrowers
Subtotal:
$5,000
$4,765
 
 
 
Cash:
—

114

 
 
 
Total:
$5,000
$4,879
 
 
 
 
 
 
 
 
 
 

*As of June 30, 2017, FE and its subsidiaries could issue additional debt of approximately $4.4 billion and remain within the limitations of the financial covenants required by the FE Credit Facility.


_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    20


FirstEnergy Corp.
Statistical Summary

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electric Distribution Deliveries
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
(MWH in thousand)
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ohio
 - Residential
 
3,613

 
3,814

 
-5.3
 %
 
7,951

 
8,271

 
-3.9
 %
 
 
 
 - Commercial
 
3,564

 
3,707

 
-3.9
 %
 
7,190

 
7,417

 
-3.1
 %
 
 
 
 - Industrial
 
5,100

 
4,975

 
2.5
 %
 
10,152

 
9,986

 
1.7
 %
 
 
 
 - Other
 
80

 
83

 
-3.6
 %
 
164

 
168

 
-2.4
 %
 
 
 
Total Ohio
 
12,357

 
12,579

 
-1.8
 %
 
25,457

 
25,842

 
-1.5
 %
 
 
Pennsylvania
 - Residential
 
3,770

 
3,984

 
-5.4
 %
 
8,744

 
9,071

 
-3.6
 %
 
 
 
 - Commercial
 
3,066

 
3,104

 
-1.2
 %
 
6,203

 
6,346

 
-2.3
 %
 
 
 
 - Industrial
 
5,174

 
5,011

 
3.3
 %
 
10,357

 
10,021

 
3.4
 %
 
 
 
 - Other
 
25

 
30

 
-16.7
 %
 
52

 
59

 
-11.9
 %
 
 
 
Total Pennsylvania
 
12,035

 
12,129

 
-0.8
 %
 
25,356

 
25,497

 
-0.6
 %
 
 
New Jersey
 - Residential
 
2,046

 
2,107

 
-2.9
 %
 
4,194

 
4,261

 
-1.6
 %
 
 
 
 - Commercial
 
2,184

 
2,160

 
1.1
 %
 
4,304

 
4,322

 
-0.4
 %
 
 
 
 - Industrial
 
578

 
537

 
7.6
 %
 
1,098

 
1,084

 
1.3
 %
 
 
 
 - Other
 
22

 
22

 
0.0
 %
 
43

 
44

 
-2.3
 %
 
 
 
Total New Jersey
 
4,830

 
4,826

 
0.1
 %
 
9,639

 
9,711

 
-0.7
 %
 
 
Maryland
 - Residential
 
624

 
645

 
-3.3
 %
 
1,532

 
1,615

 
-5.1
 %
 
 
 
 - Commercial
 
504

 
498

 
1.2
 %
 
1,009

 
1,017

 
-0.8
 %
 
 
 
 - Industrial
 
413

 
394

 
4.8
 %
 
785

 
780

 
0.6
 %
 
 
 
 - Other
 
4

 
4

 
0.0
 %
 
8

 
8

 
0.0
 %
 
 
 
Total Maryland
 
1,545

 
1,541

 
0.3
 %
 
3,334

 
3,420

 
-2.5
 %
 
 
West Virginia
 - Residential
 
1,062

 
1,106

 
-4.0
 %
 
2,562

 
2,774

 
-7.6
 %
 
 
 
 - Commercial
 
872

 
880

 
-0.9
 %
 
1,759

 
1,806

 
-2.6
 %
 
 
 
 - Industrial
 
1,530

 
1,429

 
7.1
 %
 
3,007

 
2,853

 
5.4
 %
 
 
 
 - Other
 
7

 
6

 
16.7
 %
 
14

 
13

 
7.7
 %
 
 
 
Total West Virginia
 
3,471

 
3,421

 
1.5
 %
 
7,342

 
7,446

 
-1.4
 %
 
 
Total Residential
 
 
11,115

 
11,656

 
-4.6
 %
 
24,983

 
25,992

 
-3.9
 %
 
 
Total Commercial
 
 
10,190

 
10,349

 
-1.5
 %
 
20,465

 
20,908

 
-2.1
 %
 
 
Total Industrial
 
 
12,795

 
12,346

 
3.6
 %
 
25,399

 
24,724

 
2.7
 %
 
 
Total Other
 
 
138

 
145

 
-4.8
 %
 
281

 
292

 
-3.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Distribution Deliveries
 
34,238

 
34,496

 
-0.7
 %
 
71,128

 
71,916

 
-1.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    21


FirstEnergy Corp.
Statistical Summary




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weather
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
 
 
 
2017
 
2016
 
Normal
 
2017
 
2016
 
Normal
 
 
Composite Heating-Degree-Days
 
450
 
644
 
592
 
2,790
 
3,180
 
3,371
 
 
Composite Cooling-Degree-Days
 
293
 
294
 
266
 
294
 
296
 
268
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
 
Shopping Statistics (Based on MWH)
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
OE
 
83%
 
80%
 
81%
 
79%
 
 
Penn
 
71%
 
65%
 
68%
 
62%
 
 
CEI
 
89%
 
85%
 
88%
 
84%
 
 
TE
 
88%
 
80%
 
88%
 
78%
 
 
JCP&L
 
53%
 
54%
 
52%
 
52%
 
 
Met-Ed
 
72%
 
70%
 
69%
 
68%
 
 
Penelec
 
73%
 
72%
 
71%
 
70%
 
 
PE(1)
 
54%
 
53%
 
49%
 
48%
 
 
WP
 
67%
 
68%
 
66%
 
65%
 
 
(1) Represents Maryland only.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive Operating Statistics
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
 
 
 
2017
 
2016
 
2017
 
2016
 
 
Generation Capacity Factors:
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 
88%
 
88%
 
88%
 
88%
 
 
 
Fossil - Baseload
 
47%
 
48%
 
48%
 
46%
 
 
 
Fossil - Load Following
 
26%
 
39%
 
24%
 
40%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Generation Fuel Rate:
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 
$6
 
$7
 
$7
 
$7
 
 
 
Fossil
 
$25
 
$24
 
$25
 
$24
 
 
 
Total Fleet
 
$15
 
$15
 
$15
 
$15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Generation Output Mix:
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 
53%
 
51%
 
53%
 
51%
 
 
 
Fossil - Baseload
 
35%
 
35%
 
36%
 
33%
 
 
 
Fossil - Load Following
 
4%
 
6%
 
4%
 
7%
 
 
 
Peaking/CT/Hydro
 
8%
 
8%
 
7%
 
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    22


FirstEnergy Corp.
Competitive Energy Services - Sources & Uses
Statistical Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Competitive Energy Services - Sources and Uses (MWH in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
 
 
Contract Sales
 
 
2017
 
2016
 
Change
 
2017
 
2016
 
Change
 
 
 
POLR
 
 
2,049

 
2,081

 
(32
)
 
4,813

 
4,633

 
180

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
              Structured Sales
 
 
1,956

 
2,842

 
(886
)
 
3,907

 
6,738

 
(2,831
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct
 
 
3,919

 
3,684

 
235

 
7,859

 
7,478

 
381

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregation
 
 
1,617

 
2,991

 
(1,374
)
 
3,754

 
6,560

 
(2,806
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mass Market
 
 
404

 
536

 
(132
)
 
947

 
1,239

 
(292
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Contract Sales
 
 
9,945

 
12,134

 
(2,189
)
 
21,280

 
26,648

 
(5,368
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale Spot Sales
 
5,934

 
3,577

 
2,357

 
10,389

 
5,490

 
4,899

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchased Power
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       - Bilaterals
 
 
712

 
444

 
268

 
1,502

 
1,079

 
423

 
 
       - Spot
 
 
948

 
690

 
258

 
1,735

 
2,041

 
(306
)
 
 
               Total Purchased Power
 
1,660

 
1,134

 
526

 
3,237

 
3,120

 
117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Generation Output
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      - Fossil
 
 
6,831

 
7,411

 
(580
)

13,655

 
14,704

 
(1,049
)
 
 
      - Nuclear
 
 
7,770

 
7,796

 
(26
)
 
15,446

 
15,547

 
(101
)
 
 
 
Total Generation Output
 
14,601

 
15,207


(606
)
 
29,101


30,251


(1,150
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    23


FirstEnergy Corp.
Consolidated GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
3,309

 
$
—


 
$
3,401

 
$
—

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 

 
 
 
 
 
 
 
(2
)
 
Fuel
 
343

 
—


 
438

 
(66
)
(c,e)
 
(3
)
 
Purchased power
 
735

 
—


 
889

 
—

 
 
(4
)
 
Other operating expenses
 
957

 
(15
)
(a,b)
 
964

 
(80
)
(a,b)
 
(5
)
 
Provision for depreciation
 
281

 
—

 
 
334

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
65

 
—

 
 
63

 
—

 
 
(7
)
 
General taxes
 
253

 
—

 
 
241

 
—

 
 
(8
)
 
Impairment of assets
 
131

 
(131
)
(c)
 
1,447

 
(1,447
)
(c)
 
(9
)
Total Operating Expenses
 
2,765

 
(146
)
 
 
4,376

 
(1,593
)
 
 
(10
)
Operating Income (Loss)
 
544

 
146

 
 
(975
)
 
1,593

 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 

 
 
 
 
 
 
 
(11
)
 
Investment income
 
17

 
4

(d)
 
19

 
2

(d)
 
(12
)
 
Interest expense
 
(290
)
 
—

 
 
(289
)
 
2

(f)
 
(13
)
 
Capitalized financing costs
 
20

 
—

 
 
26

 
—

 
 
(14
)
Total Other Expense
 
(253
)
 
4

 
 
(244
)
 
4

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
(15
)
Income (Loss) Before Income Taxes (Benefits)
 
291

 
150

 
 
(1,219
)
 
1,597

 
 
(16
)
 
Income taxes (benefits)
 
117

 
53


 
(130
)
 
271

(c)
 
(17
)
Net Income (Loss)
 
$
174

 
$
97

 
 
$
(1,089
)
 
$
1,326

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

 
Regulatory charges: 2017 ($0.01 per share), ($9) million included in "Other operating expenses". 2016 ($0.01 per share), ($10) million included in "Other operating expenses".
 
(b)

 
Mark-to-market adjustments: 2017 ($0.01 per share), ($6) million included in "Other operating expenses". 2016 ($0.11 per share), ($70) million included in "Other operating expenses".
 
(c)

 
Asset impairment/Plant exit costs: 2017 ($0.19 per share), ($131) million included in "Impairment of assets". 2016 ($2.99 per share), ($58) million included in "Fuel"; ($1,447) million included in "Impairment of assets"; and $159 million included in "Income taxes (benefits)".
 
(d)

 
Trust securities impairment: 2017 ($0.01 per share), $4 million included in "Investment income". 2016, $2 million included in "Investment income".
 
(e)

 
Merger accounting - commodity contracts: 2016 ($0.01 per share), ($8) million included in "Fuel".
 
(f)

 
Loss on debt redemptions: 2016, $2 million included in "Interest expense".
 
 
 
 
 
 
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 444 million shares in the second quarter of 2017 and 425 million shares in the second quarter of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    24


FirstEnergy Corp.
Consolidated GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
6,861

 
$
(5
)
(c)
 
$
7,270

 
$
—


 
 
 
 
 
 
 

 
 
 
 

 
 
Operating Expenses
 
 
 
 

 
 
 
 

 
(2
)
 
Fuel
 
711

 
—


 
819

 
(74
)
(c,e)
 
(3
)
 
Purchased power
 
1,598

 
—


 
2,013

 
—


 
(4
)
 
Other operating expenses
 
2,099

 
(234
)
(a,b,c)
 
1,882

 
(77
)
(a,b)
 
(5
)
 
Provision for depreciation
 
556

 
—


 
663

 
—


 
(6
)
 
Amortization of regulatory assets, net
 
124

 
—


 
124

 
—


 
(7
)
 
General taxes
 
524

 
—


 
521

 
—

 
 
(8
)
 
Impairment of assets
 
131

 
(131
)
(c)
 
1,447

 
(1,447
)
(c)
 
(9
)
Total Operating Expenses
 
5,743

 
(365
)

 
7,469

 
(1,598
)

 
(10
)
Operating Income (Loss)
 
1,118

 
360


 
(199
)
 
1,598


 
 
 
 
 
 
 

 
 
 
 

 
 
Other Income (Expense)
 
 
 
 

 
 
 
 

 
(11
)
 
Investment income
 
41

 
7

(d)
 
47

 
9

(c,d)
 
(12
)
 
Interest expense
 
(577
)
 
—


 
(577
)
 
2

(f)
 
(13
)
 
Capitalized financing costs
 
40

 
—


 
51

 
—


 
(14
)
Total Other Expense
 
(496
)
 
7


 
(479
)
 
11


 
 
 
 
 
 
 
 

 
 
 
 

 
(15
)
Income (Loss) Before Income Taxes
 
622

 
367


 
(678
)
 
1,609


 
(16
)
 
Income taxes
 
243

 
131


 
83

 
274

(c)
 
(17
)
Net Income (Loss)
 
$
379

 
$
236


 
$
(761
)
 
$
1,335


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

 
Regulatory charges: 2017 ($0.02 per share), ($17) million included in "Other operating expenses". 2016 ($0.11 per share), ($71) million included in "Other operating expenses".
 
(b)

 
Mark-to-market adjustments: 2017 ($0.08 per share), ($53) million included in "Other operating expenses". 2016 ($0.01 per share), ($6) million included in "Other operating expenses".
 
(c)

 
Asset impairment/Plant exit costs: 2017 ($0.42 per share), ($5) million included in "Revenues"; ($164) million included in "Other operating expenses"; and ($131) million included in "Impairment of assets". 2016 ($2.99 per share), ($58) million included in "Fuel"; ($1,447) million included in "Impairment of assets"; ($2) million included in "Investment income"; and $159 million in "Income taxes (benefits)".
 
(d)

 
Trust securities impairment: 2017 ($0.01 per share), $7 million included in "Investment income". 2016 ($0.01 per share), $11 million included in "Investment income".
 
(e)

 
Merger accounting - commodity contracts: 2016 ($0.02 per share), ($16) million included in "Fuel".
 
(f)

 
Loss on debt redemptions: 2016, $2 million included in "Interest expense".
 
 
 
 
 
 
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first six months of 2017 and 424 million shares in the first six months of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    25


FirstEnergy Corp.
Regulated Distribution
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
2,262

 
$
—

 
 
$
2,189

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
121

 
—

 
 
141

 
—

 
 
(3
)
 
Purchased power
 
657

 
—

 
 
721

 
—

 
 
(4
)
 
Other operating expenses
 
627

 
(9
)
(a)
 
579

 
(10
)
(a)
 
(5
)
 
Provision for depreciation
 
179

 
—

 
 
168

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
62

 
—

 
 
61

 
—

 
 
(7
)
 
General taxes
 
175

 
—

 
 
170

 
—


 
(8
)
 
Impairment of assets
 
—

 
—

 
 
—

 
—

 
 
(9
)
Total Operating Expenses
 
1,821

 
(9
)
 
 
1,840

 
(10
)
 
 
(10
)
Operating Income
 
441

 
9

 
 
349

 
10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(11
)
 
Investment income
 
14

 
—

 
 
13

 
—

 
 
(12
)
 
Interest expense
 
(134
)
 
—

 
 
(148
)
 
—

 
 
(13
)
 
Capitalized financing costs
 
5

 
—

 
 
5

 
—

 
 
(14
)
Total Other Expense
 
(115
)
 
—

 
 
(130
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Income Before Income Taxes
 
326

 
9

 
 
219

 
10

 
 
(16
)
 
Income taxes
 
121

 
3

 
 
80

 
4

 
 
(17
)
Net Income
 
$
205

 
$
6

 
 
$
139

 
$
6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

 
Regulatory charges: 2017 ($0.01 per share), ($9) million included in "Other operating expenses". 2016 ($0.01 per share), ($10) million included in "Other operating expenses".
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 444 million shares in the second quarter of 2017 and 425 million shares in the second quarter of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    26


FirstEnergy Corp.
Regulated Distribution
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
4,752

 
$
—


 
$
4,699

 
$
—


 
 
 
 
 
 
 

 
 
 
 

 
 
Operating Expenses
 
 
 
 

 
 
 
 

 
(2
)
 
Fuel
 
262

 
—


 
280

 
—


 
(3
)
 
Purchased power
 
1,470

 
—


 
1,647

 
—


 
(4
)
 
Other operating expenses
 
1,251

 
(17
)
(a)
 
1,226

 
(71
)
(a)
 
(5
)
 
Provision for depreciation
 
357

 
—


 
335

 
—


 
(6
)
 
Amortization of regulatory assets, net
 
119

 
—


 
120

 
—


 
(7
)
 
General taxes
 
359

 
—


 
355

 
—


 
(8
)
 
Impairment of assets
 
—

 
—


 
—

 
—


 
(9
)
Total Operating Expenses
 
3,818

 
(17
)

 
3,963

 
(71
)

 
(10
)
Operating Income
 
934

 
17


 
736

 
71


 
 
 
 
 
 
 

 
 
 
 

 
 
Other Income (Expense)
 
 
 
 

 
 
 
 

 
(11
)
 
Investment income
 
28

 
—


 
24

 
1

(b)
 
(12
)
 
Interest expense
 
(272
)
 
—


 
(298
)
 
—


 
(13
)
 
Capitalized financing costs
 
11

 
—


 
9

 
—


 
(14
)
Total Other Expense
 
(233
)
 
—


 
(265
)
 
1


 
 
 
 
 
 
 
 

 
 
 
 

 
(15
)
Income Before Income Taxes
 
701

 
17


 
471

 
72


 
(16
)
 
Income taxes
 
259

 
6


 
174

 
26


 
(17
)
Net Income
 
$
442

 
$
11


 
$
297

 
$
46


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)

 
Regulatory charges: 2017 ($0.02 per share), ($17) million included in "Other operating expenses". 2016 ($0.11 per share), ($71) million included in "Other operating expenses".
 
(b)

 
Trust securities impairment: 2016, $1 million included in "Investment income".
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first six months of 2017 and 424 million shares in the first six months of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    27


FirstEnergy Corp.
Regulated Transmission
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
GAAP
 
Special Items
 
(1
)
Revenues
 
$
327

 
$
—

 
$
275

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
—

 
—

 
—

 
—

 
(3
)
 
Purchased power
 
—

 
—

 
—

 
—

 
(4
)
 
Other operating expenses
 
50

 
—

 
37

 
—

 
(5
)
 
Provision for depreciation
 
54

 
—

 
46

 
—

 
(6
)
 
Amortization of regulatory assets, net
 
3

 
—

 
2

 
—

 
(7
)
 
General taxes
 
43

 
—

 
36

 
—

 
(8
)
 
Impairment of assets
 
—

 
—

 
—

 
—

 
(9
)
Total Operating Expenses
 
150

 
—

 
121

 
—

 
(10
)
Operating Income
 
177

 
—

 
154

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
(11
)
 
Investment income
 
—

 
—

 
—

 
—

 
(12
)
 
Interest expense
 
(39
)
 
—

 
(39
)
 
—

 
(13
)
 
Capitalized financing costs
 
7

 
—

 
9

 
—

 
(14
)
Total Other Expense
 
(32
)
 
—

 
(30
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Income Before Income Taxes
 
145

 
—

 
124

 
—

 
(16
)
 
Income taxes
 
53

 
—

 
46

 
—

 
(17
)
Net Income
 
$
92

 
$
—

 
$
78

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 





_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    28


FirstEnergy Corp.
Regulated Transmission
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
640

 
$
—

 
$
561

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
—

 
—

 
—

 
—

 
 
(3
)
 
Purchased power
 
—

 
—

 
—

 
—

 
 
(4
)
 
Other operating expenses
 
95

 
—

 
74

 
—

 
 
(5
)
 
Provision for depreciation
 
105

 
—

 
91

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
5

 
—

 
4

 
—

 
 
(7
)
 
General taxes
 
85

 
—

 
77

 
—

 
 
(8
)
 
Impairment of assets
 
—

 
—

 
—

 
—

 
 
(9
)
Total Operating Expenses
 
290

 
—

 
246

 
—

 
 
(10
)
Operating Income
 
350

 
—

 
315

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
(11
)
 
Investment income
 
—

 
—

 
—

 
—

 
 
(12
)
 
Interest expense
 
(78
)
 
—

 
(79
)
 
—

 
 
(13
)
 
Capitalized financing costs
 
13

 
—

 
16

 
—

 
 
(14
)
Total Other Expense
 
(65
)
 
—

 
(63
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Income Before Income Taxes
 
285

 
—

 
252

 
—

 
 
(16
)
 
Income taxes
 
105

 
—

 
93

 
—

 
 
(17
)
Net Income
 
$
180

 
$
—

 
$
159

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 





_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    29


FirstEnergy Corp.
Competitive Energy Services
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
864

 
$
—

 
 
$
1,116

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
222

 
—


 
297

 
(66
)
(b,d)
 
(3
)
 
Purchased power
 
164

 
—

 
 
276

 
—

 
 
(4
)
 
Other operating expenses
 
349

 
(6
)
(a)
 
432

 
(70
)
(a)
 
(5
)
 
Provision for depreciation
 
29

 
—

 
 
103

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
—

 
—

 
 
—

 
—

 
 
(7
)
 
General taxes
 
27

 
—

 
 
29

 
—

 
 
(8
)
 
Impairment of assets
 
131

 
(131
)
(b)
 
1,447

 
(1,447
)
(b)
 
(9
)
Total Operating Expenses
 
922

 
(137
)
 
 
2,584

 
(1,583
)
 
 
(10
)
Operating Income (Loss)
 
(58
)
 
137

 
 
(1,468
)
 
1,583

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(11
)
 
Investment income
 
12

 
4

(c)
 
18

 
2

(c)
 
(12
)
 
Interest expense
 
(47
)
 
—

 
 
(48
)
 
2

(e)
 
(13
)
 
Capitalized financing costs
 
7

 
—

 
 
9

 
—

 
 
(14
)
Total Other Expense
 
(28
)
 
4

 
 
(21
)
 
4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Income (Loss) Before Income Taxes (Benefits)
 
(86
)
 
141

 
 
(1,489
)
 
1,587

 
 
(16
)
 
Income taxes (benefits)
 
(30
)
 
51


 
(230
)
 
267

(b)
 
(17
)
Net Income (Loss)
 
$
(56
)
 
$
90

 
 
$
(1,259
)
 
$
1,320

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
 
Mark-to-market adjustments: 2017 ($0.01 per share), ($6) million included in "Other operating expenses". 2016 ($0.11 per share), ($70) million included in "Other operating expenses".
 
(b)
 
Asset impairment/Plant exit costs: 2017 ($0.19 per share), ($131) million included in "Impairment of assets". 2016 ($2.99 per share), ($58) million included in "Fuel"; ($1,447) million included in "Impairment of assets"; and $159 million included in "Income taxes (benefits)".
 
(c)
 
Trust securities impairment: 2017 ($0.01 per share), $4 million included in "Investment income". 2016, $2 million included in "Investment income".
 
(d)
 
Merger accounting - commodity contracts: 2016 ($0.01 per share), ($8) million included in "Fuel".
 
(e)
 
Loss on debt redemptions: 2016, $2 million included in "Interest expense".
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 444 million shares in the second quarter of 2017 and 425 million shares in the second quarter of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    30


FirstEnergy Corp.
Competitive Energy Services
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
1,795

 
$
(5
)
(b)
 
$
2,420

 
$
—

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
Operating Expenses
 
 
 
 

 
 
 
 
 
 
(2
)
 
Fuel
 
449

 
—


 
539

 
(74
)
(b,d)
 
(3
)
 
Purchased power
 
331

 
—


 
626

 
—

 
 
(4
)
 
Other operating expenses
 
913

 
(217
)
(a,b)
 
753

 
(6
)
(a)
 
(5
)
 
Provision for depreciation
 
57

 
—


 
205

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
—

 
—


 
—

 
—

 
 
(7
)
 
General taxes
 
57

 
—


 
68

 
—

 
 
(8
)
 
Impairment of assets
 
131

 
(131
)
(b)
 
1,447

 
(1,447
)
(b)
 
(9
)
Total Operating Expenses
 
1,938

 
(348
)

 
3,638

 
(1,527
)
 
 
(10
)
Operating Income (Loss)
 
(143
)
 
343


 
(1,218
)
 
1,527

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 

 
 
 
 
 
 
(11
)
 
Investment income
 
32

 
7

(c)
 
33

 
8

(b,c)
 
(12
)
 
Interest expense
 
(92
)
 
—


 
(95
)
 
2

(e)
 
(13
)
 
Capitalized financing costs
 
15

 
—


 
20

 
—

 
 
(14
)
Total Other Expense
 
(45
)
 
7


 
(42
)
 
10

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
(15
)
Income (Loss) Before Income Taxes (Benefits)
 
(188
)
 
350


 
(1,260
)
 
1,537

 
 
(16
)
 
Income taxes (benefits)
 
(65
)
 
125


 
(145
)
 
248

(b)
 
(17
)
Net Income (Loss)
 
$
(123
)
 
$
225


 
$
(1,115
)
 
$
1,289

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
(a)
 
Mark-to-market adjustments: 2017 ($0.08 per share), ($53) million included in "Other operating expenses". 2016 ($0.01 per share), ($6) million included in "Other operating expenses".
 
(b)
 
Asset impairment/Plant exit costs: 2017 ($0.42 per share), ($5) million included in "Revenues"; ($164) million included in "Other operating expenses"; and ($131) million included in "Impairment of assets". 2016 ($2.99 per share), ($58) million included in "Fuel"; ($1,447) million included in "Impairment of assets"; ($2) million included in "Investment income"; and $159 million included in "Income taxes (benefits)".
 
(c)
 
Trust securities impairment: 2017 ($0.01 per share), $7 million included in "Investment income". 2016 ($0.01 per share), $10 million included in "Investment income".
 
(d)
 
Merger accounting - commodity contracts: 2016 ($0.02 per share), ($16) million included in "Fuel".
 
(e)
 
Loss on debt redemptions: 2016, $2 million included in "Interest expense".
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See page 37 for additional descriptions related to special items.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first six months of 2017 and 424 million shares in the first six months of 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    31


FirstEnergy Corp.
Corporate / Other
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
(144
)
 
$
—

 
$
(179
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
—

 
—

 
—

 
—

 
 
(3
)
 
Purchased power
 
(86
)
 
—

 
(108
)
 
—

 
 
(4
)
 
Other operating expenses
 
(69
)
 
—

 
(84
)
 
—

 
 
(5
)
 
Provision for depreciation
 
19

 
—

 
17

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
—

 
—

 
—

 
—

 
 
(7
)
 
General taxes
 
8

 
—

 
6

 
—

 
 
(8
)
 
Impairment of assets
 
—

 
—

 
—

 
—

 
 
(9
)
Total Operating Expenses
 
(128
)
 
—

 
(169
)
 
—

 
 
(10
)
Operating Loss
 
(16
)
 
—

 
(10
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
(11
)
 
Investment loss
 
(9
)
 
—

 
(12
)
 
—

 
 
(12
)
 
Interest expense
 
(70
)
 
—

 
(54
)
 
—

 
 
(13
)
 
Capitalized financing costs
 
1

 
—

 
3

 
—

 
 
(14
)
Total Other Expense
 
(78
)
 
—

 
(63
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Loss Before Income Tax Benefits
 
(94
)
 
—

 
(73
)
 
—

 
 
(16
)
 
Income tax benefits
 
(27
)
 
—

 
(26
)
 
—

 
 
(17
)
Net Loss
 
$
(67
)
 
$
—

 
$
(47
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 





_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    32


FirstEnergy Corp.
Corporate / Other
GAAP and Special Items (In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
Special Items
 
 
GAAP
 
Special Items
 
 
(1
)
Revenues
 
$
(326
)
 
$
—

 
 
$
(410
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
(2
)
 
Fuel
 
—

 
—

 
 
—

 
—

 
 
(3
)
 
Purchased power
 
(203
)
 
—

 
 
(260
)
 
—

 
 
(4
)
 
Other operating expenses
 
(160
)
 
—

 
 
(171
)
 
—

 
 
(5
)
 
Provision for depreciation
 
37

 
—

 
 
32

 
—

 
 
(6
)
 
Amortization of regulatory assets, net
 
—

 
—

 
 
—

 
—

 
 
(7
)
 
General taxes
 
23

 
—

 
 
21

 
—

 
 
(8
)
 
Impairment of assets
 
—

 
—

 
 
—

 
—

 
 
(9
)
Total Operating Expenses
 
(303
)
 
—

 
 
(378
)
 
—

 
 
(10
)
Operating Loss
 
(23
)
 
—

 
 
(32
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
(11
)
 
Investment loss
 
(19
)
 
—

 
 
(10
)
 
—

 
 
(12
)
 
Interest expense
 
(135
)
 
—

 
 
(105
)
 
—

 
 
(13
)
 
Capitalized financing costs
 
1

 
—

 
 
6

 
—

 
 
(14
)
Total Other Expense
 
(153
)
 
—

 
 
(109
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(15
)
Loss Before Income Tax Benefits
 
(176
)
 
—

 
 
(141
)
 
—

 
 
(16
)
 
Income tax benefits
 
(56
)
 
—

 
 
(39
)
 
—

 
 
(17
)
Net Loss
 
$
(120
)
 
$
—

 
 
$
(102
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    33


FirstEnergy Corp.
EPS Reconciliations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Share (EPS)
 
(Reconciliation of GAAP to Operating (Non-GAAP) Earnings)
 
(In millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
Competitive
 

 
FirstEnergy
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
Corp.
 
 
 
 
 
Distribution
 
Transmission
 
Services
 
Other
 
Consolidated
 

 
 
 
 
 
 
 
 
 
 
 
 
2Q 2017 Net Income (Loss) - GAAP
 
$
205

 
$
92

 
$
(56
)
 
$
(67
)
 
$
174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2017 Basic Earnings (Loss) per share (avg. shares outstanding 444M)
 
$
0.46

 
$
0.21

 
$
(0.13
)
 
$
(0.15
)
 
$
0.39

 
 
Excluding Special Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.01

 
—

 
—

 
—

 
0.01

 
 
 
Mark-to-market adjustments
 
—

 
—

 
0.01

 
—

 
0.01

 
 
 
Asset impairment/Plant exit costs
 
—

 
—

 
0.19

 
—

 
0.19

 
 
 
Trust securities impairment
 
—

 
—

 
0.01

 
—

 
0.01

 
 
 
Total Special Items
 
$
0.01

 
$
—

 
$
0.21

 
$
—

 
$
0.22

 
 
Basic Earnings (Loss) per share - Operating (Non-GAAP)
 
$
0.47

 
$
0.21

 
$
0.08

 
$
(0.15
)
 
$
0.61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
Competitive
 
 
 
FirstEnergy
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
Corp.
 
 
 
 
 
Distribution
 
Transmission
 
Services
 
Other
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2016 Net Income (Loss) - GAAP
 
$
139

 
$
78

 
$
(1,259
)
 
$
(47
)
 
$
(1,089
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q 2016 Basic Earnings (Loss) per share (avg. shares outstanding 425M)
 
$
0.33

 
$
0.19

 
$
(2.96
)
 
$
(0.12
)
 
$
(2.56
)
 
 
Excluding Special Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.01

 
—

 
—

 
—

 
0.01

 
 
 
Mark-to-market adjustments
 
—

 
—

 
0.11

 
—

 
0.11

 
 
 
Asset impairment/Plant exit costs
 
—

 
—

 
2.99

 
—

 
2.99

 
 
 
Merger accounting - commodity contracts
 
—

 
—

 
0.01

 
—

 
0.01

 
 
 
Total Special Items
 
$
0.01

 
$
—

 
$
3.11

 
$
—

 
$
3.12

 
 
 
Basic Earnings (Loss) per share - Operating (Non-GAAP)
$
0.34

 
$
0.19

 
$
0.15

 
$
(0.12
)
 
$
0.56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the weighted average basic shares outstanding for the period. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount. The income tax rates range from 35% to 38%.
 





_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    34


FirstEnergy Corp.
EPS Reconciliations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Share (EPS)
 
(Reconciliation of GAAP to Operating (Non-GAAP) Earnings)
 
(In millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
Competitive
 
 
 
FirstEnergy
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
Corp.
 
 
 
 
 
Distribution
 
Transmission
 
Services
 
Other
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Net Income (Loss) - GAAP
 
$
442

 
$
180

 
$
(123
)
 
$
(120
)
 
$
379

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Basic Earnings (Loss) Per Share (avg. shares outstanding 443M)
 
$
1.00

 
$
0.41

 
$
(0.28
)
 
$
(0.27
)
 
$
0.86

 
 
Excluding Special Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.02

 
—

 
—

 
—

 
0.02

 
 
 
Mark-to-market adjustments
 
—

 
—

 
0.08

 
—

 
0.08

 
 
 
Asset impairment/Plant exit costs
 
—

 
—

 
0.42

 
—

 
0.42

 
 
 
Trust securities impairment
 
—

 
—

 
0.01

 
—

 
0.01

 
 
 
Total Special Items
 
$
0.02

 
$
—

 
$
0.51

 
$
—

 
$
0.53

 
 
Basic Earnings (Loss) Per Share - Operating (Non-GAAP)
 
$
1.02

 
$
0.41

 
$
0.23

 
$
(0.27
)
 
$
1.39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
Competitive
 
 
 
FirstEnergy
 
 
 
 
 
Regulated
 
Regulated
 
Energy
 
Corporate /
 
Corp.
 
 
 
 
 
Distribution
 
Transmission
 
Services
 
Other
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016 Net Income (Loss) - GAAP
 
$
297

 
$
159

 
$
(1,115
)
 
$
(102
)
 
$
(761
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016 Basic Earnings (Loss) Per Share (avg. shares outstanding 424M)
 
$
0.69

 
$
0.38

 
$
(2.62
)
 
$
(0.24
)
 
$
(1.79
)

 
Excluding Special Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory charges
 
0.11

 
—

 
—

 
—

 
0.11

 
 
 
Mark-to-market adjustments
 
—

 
—

 
0.01

 
—

 
0.01

 
 
 
Asset impairment/Plant exit costs
 
—

 
—

 
2.99

 
—

 
2.99


 
 
Trust securities impairment
 
—

 
—

 
0.01

 
—

 
0.01


 
 
Merger accounting - commodity contracts
 
—

 
—

 
0.02

 
—

 
0.02


 
 
Total Special Items
 
$
0.11

 
$
—

 
$
3.03

 
$
—

 
$
3.14


 
Basic Earnings (Loss) Per Share - Operating (Non-GAAP)
 
$
0.80

 
$
0.38

 
$
0.41

 
$
(0.24
)
 
$
1.35


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the weighted average basic shares outstanding for the period. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount. The income tax rates ranges from 35% to 38%.
 

















_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    35




FirstEnergy Corp.
Special Items

 
 
 
 
 
 
 
 
 
(In millions, except per share amount)
 
 
 
 
 
 
 
 
 
Estimate for Year 2017
Pre-tax
 
After-tax
 
EPS*
 
 
 
 
 
 
 
 
 
 
 
Special Items:
 
 
 
 
 
 
 
 
Regulatory charges
$
26

 
$
16

 
$
0.04

 
 
 
Mark-to-market adjustments
53

 
34

 
0.08

 
 
 
Asset impairments/Plant exit costs
290

 
187

 
0.42

 
 
 
Trust securities impairment
7

 
5

 
0.01

 
 
 
Debt redemption costs
142

 
93

 
0.20

 
 
Total Special Items
$
518

 
$
335

 
$
0.75

 
 
 
 
 
 
 
 
 
 
Estimate for Q3 2017
Pre-tax
 
After-tax
 
EPS*
 
 
Special Items
 
 
 
 
 
 
 
 
Regulatory charges
$
6

 
$
4

 
$
0.01

 
 
 
Debt redemption costs
6

 
4

 
0.01

 
 
Total Special Items
$
12

 
$
8

 
$
0.02

 
 
 
 
 
 
 
 
 
Estimate for Q4 2017
Pre-tax
 
After-tax
 
EPS*
 
 
Special Items
 
 
 
 
 
 
 
 
Regulatory charges
$
3

 
$
2

 
$
—

 
 
 
Debt redemption costs
135

 
89

 
0.19

 
 
Total Special Items
$
138

 
$
91

 
$
0.19

 
 
 
 
 
 
 
 
 
 
*Per share amounts for the special items above are based on the after-tax effect of each item, divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017, of which ~$100 million relates to employee benefit and other plans. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory rate to the pre-tax amount. The income tax rates range from 35% to 42%.
 
 
 
 
 
 
 
 
 
 


_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    36


2016/2017 Special Item Descriptions

•
Regulatory charges - Primarily reflects the impact of regulatory orders requiring certain commitments and/or disallowing the recoverability of costs.
•
Mark-to-market adjustments - Primarily reflects non-cash mark-to-market gains and losses on commodity contract positions.
•
Asset impairment/Plant exit costs - Primarily reflects charges or credits resulting from management's plan to exit competitive operations. Also reflects the non-cash amortization/impairment of certain non-core investments.
•
Trust securities impairment - Primarily reflects non-cash other than temporary impairment charges on nuclear decommissioning trust assets.
•
Merger accounting - commodity contracts - Primarily reflects the non-cash amortization of acquired commodity contracts from the Allegheny Energy Merger.
•
Debt redemption costs - Primarily reflects costs associated with the redemption and early retirement of debt.


















Note: Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items are not necessarily non-recurring.


_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 2nd Quarter 2017                    37


Recent Developments

Financial Matters
Dividend
On July 18, 2017, the Board of Directors of FE declared an unchanged quarterly dividend of $0.36 cents per share of outstanding common stock to be paid from other paid-in-capital. The dividend is payable September 1, 2017 to shareholders of record at the close of business on August 7, 2017.

Financing Activities
On May 16, 2017, Monongahela Power Company (MP) issued $250 million of 3.55% first mortgage bonds due 2027. Proceeds were used to repay short-term debt and for capital expenditures, working capital needs, and other general corporate purposes.

On June 1, 2017, Jersey Central Power & Light Company (JCP&L) retired $250 million of 5.65% senior notes at maturity.

On June 1, 2017, FirstEnergy Generation, LLC (FG) repurchased $129.6 million of 2.50% pollution control revenue bonds on their mandatory put date. These bonds are being held internally for future remarketing, subject to market and other conditions.

On June 21, 2017, FE issued an aggregate principal amount of $3 billion of senior notes with an average weighted coupon of 4.04% and an average weighted tenor of 15.8 years. Proceeds were used to redeem FE's $650M senior notes due March 2018 and for other corporate purposes, including the repayment of short-term debt.

Moody's Investors Service Actions
On May 9, 2017, Moody's assigned a Baa1 issuer rating to Mid-Atlantic Interstate Transmission, LLC (MAIT), upgraded the issuer and unsecured ratings at FirstEnergy Transmission, LLC (FET) to Baa2 from Baa3, and upgraded the issuer and unsecured ratings of ATSI to Baa1 from Baa2. TrAIL's A3 issuer and unsecured ratings were affirmed. The outlook on all ratings is stable.

Standard & Poor’s (S&P) Global Rating Actions
On May 2, 2017, S&P assigned a BBB- issuer rating to MAIT. Due to S&P’s “family approach” to ratings, the issuer rating and negative outlook matches that of FE Corp.
On May 10, 2017, S&P lowered FirstEnergy Solutions Corp.'s (FES) issuer and unsecured ratings to CCC from CCC+, lowered the unsecured rating to B- from B, and maintained a negative outlook. The downgrade was primarily due to revised expectations about the anticipated time to default.

Operational Matters
Beaver Valley Power Station Unit 2 Returns to Service following Refueling Outage
On May 21, 2017, Beaver Valley Power Station Unit 2 returned to service following a scheduled shutdown on April 22, 2017, for refueling and maintenance. While the unit was shut down, 60 of the 157 fuel assemblies were replaced. In addition, numerous safety inspections and preventive maintenance and improvement projects were successfully completed, including inspections of the unit's reactor vessel head, three steam generators and turbine.

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Consolidated Report to the Financial Community - 2nd Quarter 2017                    38


FE Executive Changes
On June 21, 2017, FE announced that James H. Lash, executive vice president of FE and president, FirstEnergy Generation, will retire effective August 1, 2017, after 28 years with the company.
On July 18, 2017, FE’s Board of Directors elected Ebony L. Yeboah-Amankwah to vice president, corporate secretary and chief ethics officer, effective July 30, 2017. She was previously vice president, State and Federal Regulatory Legal Affairs, at FE.

Updates on Strategic Review of Competitive Energy Services
In January 2017, FE announced that Allegheny Energy Supply, LLC (AE Supply) and Allegheny Generating Company (AGC) entered into an asset purchase agreement to sell four of AE Supply’s natural gas generating plants and its approximately 59% of AGC’s interest in Bath County to a subsidiary of LS Power Equity Partners III, LP (LS) for an all-cash purchase price of $925 million, subject to customary and other closing conditions, including receipt of regulatory approvals from the Federal Energy Regulatory Commission (FERC) and the Virginia State Corporation Commission (VSCC), third party consents and the satisfaction and discharge of $305 million of AE Supply’s senior notes, which is expected to require the payment of a “make-whole” premium currently estimated to be approximately $100 million based on current interest rates. As a further condition to closing, FE will provide the purchaser two limited guarantees of certain obligations of AE Supply and AGC arising under the purchase agreement. Additionally, the consent of Virginia Electric and Power Company (VEPCO) is needed for the sale of AGC’s interest in the Bath County pumped hydro facility, as well as agreement among AGC, LS and VEPCO with respect to certain amendments to the Bath County project agreements. On May 24, 2017, AE Supply and AGC and LS exercised a provision in the purchase agreement that allows either party to terminate the purchase agreement without penalty after June 23, 2017. All parties continue to negotiate, including consideration of various alternative structures regarding pricing and closing, and neither party has elected its termination rights under the provisions of the purchase agreement. As a result of the status of these ongoing negotiations regarding the asset purchase agreement and reflecting the impact of prevailing market conditions, CES recorded a non-cash pre-tax impairment charge of $131 million in the second quarter of 2017. FE is targeting to close the transaction with revised terms in the second half of 2017, subject to satisfaction of various customary and other closing conditions, including without limitation, receipt of regulatory approvals and third party consents.
On April 12, 2017, the arbitration panel in the pending proceedings between FG, a subsidiary of FES, and CSX Transportation, Inc. (CSX) and BNSF Railway Company (BNSF), denied FG's claim that force majeure excused FG's performance under a coal transportation contract and ruled that FG breached and repudiated the contract. On May 1, 2017, the parties entered into a definitive settlement agreement to resolve all claims related to this proceeding in return for the payment by FG of $109 million, payable in three annual installments beginning on May 1, 2017, which is guaranteed by FE. The settlement agreement further provides that in the event of the initiation of bankruptcy proceedings or failure to make timely settlement payments, the unpaid settlement amount will immediately accelerate and become due and payable in full. Further, FE and FG, and CSX and BNSF, agree to release, waive and discharge each other from any further obligations under the claims covered by the settlement agreement upon payment in full of the settlement amount. Until such time, CSX and BNSF will retain the claims covered by the settlement agreement and in the event of a bankruptcy proceeding, CSX and BNSF shall be entitled to seek damages for such claims in an amount to be determined by the arbitration panel or otherwise agreed by the parties. In addition, FG is subject to separate proceedings with BNSF and Norfolk Southern Corp. (NS) related to another long-term coal transportation dispute. The parties have exchanged settlement proposals to resolve all claims related to this proceeding and all remaining claims. FE

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Consolidated Report to the Financial Community - 2nd Quarter 2017                    39


and FES recorded a pre-tax charge of $55 million in the first quarter of 2017 based on an estimated settlement. If the dispute with BNSF and NS is not settled, the amount of damages owed to BNSF and NS could be materially higher and may cause FES to seek protection under U.S. bankruptcy laws. Absent a settlement, FG intends to vigorously assert its position in this arbitration proceeding.

Regulatory Matters
Mon Power Integrated Resource Plan Update
On April 27, 2017, the West Virginia Public Service Commission modified the procedural schedule in MP and Potomac Edison Company's filing requesting approval of MP's purchase of AE Supply’s Pleasants Power Station, which now includes an evidentiary hearing on September 26-28, 2017.
On June 27, 2017, FERC issued a deficiency letter requesting additional information to facilitate FERC’s review of the transaction. MP responded to the deficiency letter on July 18, 2017.
Regulatory approvals are anticipated by early 2018.
            
MAIT and JCP&L Transmission Rate Filing Updates                    
On March 10, 2017, FERC issued orders accepting both the MAIT and JCP&L formula transmission rates for filing, suspending both for five months and establishing hearing and settlement procedures. On April 10, 2017, both MAIT and JCP&L requested a rehearing of FERC’s decision to suspend the effective date of the formula rates. JCP&L’s rates went into effect on June 1, 2017, while MAIT’s rates went into effect on July 1, 2017, subject to refund pending the outcome of the hearing and settlement procedures. The settlement process is ongoing.

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Consolidated Report to the Financial Community - 2nd Quarter 2017                    40


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 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 ability to experience growth in the Regulated Distribution and Regulated Transmission segments and the effectiveness of our strategy to transition to a fully regulated business profile; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including, but not limited to, our planned transition to forward-looking formula rates; 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 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; success of legislative and regulatory solutions for generation assets that recognize their environmental or energy security benefits, including the United States Department of Energy study; the risks and uncertainties associated with the lack of viable alternative strategies regarding the Competitive Energy Services (CES) segment, thereby causing FirstEnergy Solutions Corp. (FES), and likely FirstEnergy Nuclear Operating Company (FENOC), to restructure its debt and other financial obligations with its creditors or seek protection under United States bankruptcy laws and the losses, liabilities and claims arising from such bankruptcy proceeding, including any obligations at FirstEnergy Corp.; the risks and uncertainties at the CES segment, including FES and its subsidiaries and FENOC, related to continued depressed wholesale energy and capacity markets, and the viability and/or success of strategic business alternatives, such as pending and potential CES generating unit asset sales, the potential conversion of the remaining generation fleet from competitive operations to a regulated or regulated-like construct or the potential need to deactivate additional generating units; the substantial uncertainty as to FES’ ability to continue as a going concern and substantial risk that it may be necessary for FES, and likely FENOC, to seek protection under United States bankruptcy laws; 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 uncertainties associated with the deactivation of older regulated and competitive 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; 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; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; replacement power costs being higher than anticipated or not fully hedged; 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; 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); 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; 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; 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 labor disruptions by our unionized workforce; 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; the impact of the regulatory process and resulting outcomes 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; 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; 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; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; other legislative and regulatory changes, including the new federal administration's required review and potential revision of 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; 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; 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 significant accounting policies; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; 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; further 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, increase requirements to post additional collateral to support, or accelerate payments under outstanding commodity positions, letters of credit and other financial guarantees, and the impact of these events on the financial condition and liquidity of FirstEnergy Corp. and/or its subsidiaries, specifically FES and its subsidiaries; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; 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. These forward-looking statements are also qualified by, 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. The foregoing review of factors also should not be construed as exhaustive. 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. We expressly disclaim 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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Consolidated Report to the Financial Community - 2nd Quarter 2017                    41
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