April 24, 2002 — FirstEnergy Corp. on Wednesday reported that net income for the first quarter of 2002 was $116 million, or basic and diluted earnings of 40 cents per share of common stock.
These results include the cumulative effect of an accounting change related to the company’s agreement to retain a 20.1 percent ownership interest in Avon Energy Partners Holdings under the pending sale of the United Kingdom-based company to Aquila, Inc.; and several one-time charges primarily associated with unregulated business investments. First quarter earnings excluding the accounting change and one-time charges were $131 million, or 45 cents per share (basic and diluted).
These results compare with 2001 first quarter earnings — prior to FirstEnergy’s merger with GPU — of $98 million, or 45 cents per share (basic and diluted), after the cumulative effect of an accounting change related to a new reporting standard for derivative transactions, and a one-time charge for an early-retirement program. Earnings excluding that accounting change and one-time charge were $111 million, or 51 cents per share (basic and diluted).
FirstEnergy’s total revenues for the first quarter of 2002 were $2.8 billion, compared with $2.0 billion for the year-earlier quarter, before the GPU merger. Average common shares outstanding totaled 292.7 million in the first quarter of 2002, compared with 218.1 million in the first quarter of 2001. The increase reflects the additional number of shares outstanding resulting from the GPU merger.
FirstEnergy attributed lower 2002 first quarter earnings to unseasonably mild weather — which resulted in a 14-percent decrease in heating-degree days compared with the year-earlier quarter; the continued economic slowdown in the service areas of its electric operating companies; and a $33-million increase in nuclear operating expenses associated with nuclear refueling outages at the company’s Davis-Besse and Beaver Valley plants. Partially offsetting these costs was the elimination of goodwill amortization expenses associated with the adoption of new Statement of Financial Accounting Standards No. 142.
First quarter 2002 total generation kilowatt-hour sales decreased 4.6 percent, compared with the year-earlier quarter, including results of former GPU companies. Regulated kilowatt-hour distribution deliveries to customers declined 7.9 percent for the first quarter of 2002, compared with the year-earlier quarter, also including results of former GPU companies. This decline was primarily attributed to the economic slowdown and lower heating loads that resulted from mild weather.
Financing activity for the first quarter of 2002 included debt and preferred stock redemptions totaling $167.5 million, which will result in annualized pre-tax savings of approximately $14.5 million.
As announced on March 13, FirstEnergy extended by at least 60 to 90 days the current refueling and maintenance outage at Davis-Besse after finding an area of corrosion in the reactor vessel head near a nozzle penetration hole. FirstEnergy has submitted its root cause analysis to the Nuclear Regulatory Commission (NRC) and expects to soon file its proposed repair plan, which must have NRC approval.
As the company has progressed with development of the repair plan and related technical engineering evaluations, FirstEnergy now expects that — with NRC approval — Davis-Besse could return to service in the third quarter. Based on this timetable, the company has secured on-peak energy to replace generation from Davis-Besse through the end of August. Net replacement energy costs on a pre-tax basis are expected to be between $10 million to $15 million per month through June, and between $20 million to $25 million per month in July and August.
FirstEnergy’s Consolidated Report to the Financial Community — which provides highlights on company developments and financial results for the first quarter of 2002 — is posted on the company’s Internet site — http://www.firstenergycorp.com/ir . To access the report, click on Consolidated Report to the Financial Community.
FirstEnergy is a registered public utility holding company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity; exploration and production of oil and natural gas; transmission and marketing of natural gas; energy management and other energy-related services.