July 24, 2002 — FirstEnergy Corp. recently reported that net income for the second quarter of 2002 was $233.3 million, or basic earnings of 80 cents per share of common stock (79 cents diluted).
These results compare with FirstEnergy’s 2001 second quarter net income – prior to the company’s merger with the former GPU, Inc. – of $146 million, or basic and diluted earnings of 67 cents per share.
The company said the rise in earnings was attributed to accretion from its November 2001 merger with GPU, an increase in its electric sales margin, the elimination of goodwill amortization expenses associated with the adoption of Statement of Financial Accounting Standards No. 142, and strong performance by its generating plants.
For the six months ended June 30, 2002, FirstEnergy’s net income was $349.8 million, or basic and diluted earnings of $1.19 per share, including the cumulative effect of an accounting change.
The accounting change related to FirstEnergy’s agreement in the first quarter of 2002 to retain a 20.1 percent ownership interest in Avon Energy Partners Holdings as part of FirstEnergy’s sale of 79.9 percent of the United Kingdom-based company to Kansas City-based Aquila, Inc. Earnings for the six-month period before the accounting change were $318.1 million, or basic and diluted earnings of $1.08 per share.
These results compare with net income of $243.7 million, or basic earnings of $1.12 per share ($1.11 diluted) for the first six months of 2001, including the effect of an accounting change that resulted from the adoption of a new accounting standard for derivative transactions. Before that accounting change, earnings for the first six months of 2001 were $252.2 million, or basic earnings of $1.16 per share ($1.15 diluted).
FirstEnergy’s total revenues for the second quarter of 2002 were $2.9 billion, compared with $1.8 billion for the year-earlier quarter, prior to the GPU merger. For the six months ended June 30, 2002, total revenues were $5.8 billion, compared with $3.8 billion for the same period in 2001.
Second quarter 2002 retail generation kilowatt-hour sales rose 1.1 percent compared with the year-earlier quarter, including results of the former GPU companies. Regulated kilowatt-hour distribution deliveries to customers increased 1.8 percent for the second quarter of 2002, compared with the year- earlier quarter, also including results of the former GPU companies.
In its ongoing effort to improve its financial flexibility, FirstEnergy during the second quarter redeemed or refinanced long-term debt and preferred stock totaling $1.3 billion, which will produce annual savings of $58 million.
FirstEnergy also completed the sale of a 79.9 percent interest of its Avon Energy Partners Holdings subsidiary to Aquila for approximately $264 million. As a result, Avon’s debt of approximately $1.7 billion, which is non-recourse to FirstEnergy, is no longer included on FirstEnergy’s consolidated balance sheet. In addition, cash proceeds from the transaction were used to redeem high-cost debt during the quarter.
Aquila and FirstEnergy now own all of the outstanding shares of Avon Energy through a jointly owned subsidiary, with each company having a 50-percent voting interest.
Average common shares outstanding totaled 293.1 million for the second quarter, compared with 218.4 million in the second quarter of 2001. The increase reflects the additional number of shares outstanding resulting from the GPU merger.
Also during the quarter, FirstEnergy continued its efforts to restore its Davis-Besse Nuclear Power Station to service after finding an area of corrosion in the reactor vessel head near a nozzle penetration hole during a maintenance and refueling outage in March.
In May, FirstEnergy purchased an unused replacement reactor vessel head from Dearborn, Michigan-based Consumers Energy’s Midland Nuclear Plant, which was never completed as a nuclear plant. The reactor vessel head was delivered to Davis-Besse on July 18.
FirstEnergy expects refurbishment and installation of the replacement reactor head, as well as any other work related to restarting the plant, to be completed during the fourth quarter of this year. However, it is up to the Nuclear Regulatory Commission to determine when the plant can return to service.
Total costs to replace the Davis-Besse reactor head are estimated to be $55 million to $75 million, most of which will be capitalized. Other cost estimates associated with the outage include $50 million to $70 million for additional maintenance projects; $20 million per month for replacement power in July and August; and $10 million to $15 million per month for replacement power during non-summer months.
FirstEnergy’s second quarter results reflect costs of $46 million, or 9 cents per share of common stock, for replacement power and operating and maintenance expenses associated with restoration efforts at the plant.
FirstEnergy’s Consolidated Report to the Financial Community – which provides highlights on company developments and financial results for the second quarter of 2002 – is posted on the company’s Internet site – 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; and energy management and other energy-related services.