Ohio-based FirstEnergy's Q2 net income drops 33% year-over-year to US$171M as higher maintenance, financing costs, lower commodity margins more than offset 29% jump in revenue to US$4.06B

Rachel Carter

AKRON, Ohio , August 2, 2011 (press release) – Narrows 2011 Guidance to Upper End of Previous Range

FirstEnergy Corp. (NYSE: FE) today announced second quarter 2011 basic earnings of $0.65 per share of common stock ($0.64 diluted) on a non-GAAP* basis. These results exclude the impact of special items listed below. This compares to basic and diluted non-GAAP earnings of $0.82 per share in the second quarter of 2010.

On a GAAP basis, second quarter 2011 basic and diluted earnings were $0.43 per share of common stock on net income of $171 million and revenue of $4.1 billion. Second quarter 2010 basic and diluted GAAP earnings were $0.87 per share on net income of $256 million, with revenue of $3.1 billion.

"These results are in line with our expectations, and today we are narrowing our 2011 non-GAAP earnings guidance to the upper end of the previous range – to $3.30 to $3.50 per share, from $3.20 to $3.50 per share," said FirstEnergy President and Chief Executive Officer Anthony J. Alexander. "We have already made significant progress in realizing benefits from the merger with Allegheny Energy, and we remain confident that we will achieve our 2011 merger targets."

Second quarter 2011 non-GAAP* results benefited from the net accretion from the Allegheny merger, including the impact of shares issued in the merger. Results were negatively affected by higher maintenance costs for the generation fleet (principally nuclear refueling outage costs), lower commodity margin from FirstEnergy Solutions resulting from unplanned generating unit outages, higher financing costs, and the absence of favorable tax settlements that were achieved last year.

Distribution deliveries, excluding Allegheny Energy deliveries, decreased 1 percent in the quarter. Usage by industrial customers decreased less than 1 percent, as higher usage in the steel sector was offset by decreased demand in the automotive and refinery industries. Residential sales decreased slightly, and commercial deliveries decreased 2 percent.

Commodity margin for FirstEnergy Solutions decreased compared to the second quarter of 2010, as higher competitive generation sales were offset by increases in transmission expense, higher purchased power costs, and lower wholesale sales.

For the first six months of 2011, net income was $216 million, or basic and diluted earnings of $0.61 per share of common stock, on revenue of $7.6 billion. This compares to first-half 2010 net income of $405 million, or basic earnings of $1.38 per share of common stock ($1.37 diluted), on revenue of $6.4 billion.

FirstEnergy's Consolidated Report to the Financial Community – which provides highlights on company developments and financial results for the second quarter of 2011 – is posted on the company's Investor Information website – www.firstenergycorp.com/ir. To access the report, click on Second Quarter 2011 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 at 1:00 p.m. Eastern Daylight Time today. FirstEnergy management will present an overview of the company's financial results for the quarter, followed by a question-and-answer session. The teleconference can be accessed on the company's website by selecting the Q2 2011 Earnings Conference Call link. The webcast will be archived on the website.

FirstEnergy is a diversified energy company dedicated to safety, reliability and operational excellence. Its ten electric distribution companies comprise the nation's largest investor-owned electric system. Its diverse generating fleet features non-emitting nuclear, scrubbed baseload coal, natural gas, and pumped-storage hydro and other renewables, and has a total generating capacity of approximately 23,000 megawatts.

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

Industry Intelligence Editor’s Note: In an omitted table, the company reported Q2 net income of US$171 million and total revenues of US$4.06 billion. For the same period a year ago, the company reported net income of US$256 million and total revenues of US$3.14 billion.

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