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Posted on Tue, Sep. 09, 2003 story:PUB_DESC
FirstEnergy to sell stock under plan to cut debt
Sale of 24.8 million more shares expected to dilute 2003 earnings per share

Beacon Journal business writer

FirstEnergy Corp. said Monday it will sell as many as 24.8 million additional shares of common stock to reduce short-term debt, a move it expects to dilute 2003 earnings per share by about 2.5 percent.

FirstEnergy said it now expects to post earnings per share in the range of $2.61 to $2.81. Earlier, the company said the range would be between $2.68 and $2.88.

But that amount will be cut even further when the company tallies up the cost of unusual expenses, as well as the financial effects of closing its Davis-Besse nuclear power plant, which has been shut since February 2002 to deal with corrosion problems in the reactor vessel head.

After those expenses are subtracted, the company said it expects to post earnings of $1.91 to $2.11 a share -- a decrease of as much as 34 percent from the company's original guidance.

Separately, the Nuclear Regulatory Commission will begin a seven-day inspection this week of the reactor cooler system atDavis-Besse. The company called the inspection ``a pretty significant milestone'' toward reopening the plant. It said it has made extensive repairs to Davis-Besse and hopes inspectors will approve the repairs.

``This test, we believe, will validate the integrity of the reactor coolant system, the reactor vessel, the new head we put on, all the new valves, the piping and everything,'' Davis-Besse spokesman Richard Wilkins said.

As part of the test, the company will raise the reactor coolant system to operating temperature and pressure, which is about 530 degrees Fahrenheit and 2,155 pounds per square inch. It will hold that pressure for a week, during which time company and federal inspectors will visually inspect the equipment.

Wilkins said the company still hopes to restart the nuclear plant this fall.

Meantime, FirstEnergy is preparing to sell shares sometime this week. As of Monday afternoon, the company did not have a price set on the shares. FirstEnergy did not say how much it expected the new stock to bring in, beyond earlier statements that it would sell as much as $2 billion in securities. Citigroup Global Markets Inc. and Morgan Stanley & Co. will manage the offering.

The company released the information after the market closed. Shares finished the day at $30.60, up 35 cents. FirstEnergy currently has 297.6 million shares outstanding.

FirstEnergy attributed the cut in earnings guidance to several factors, some of which have already been announced. The shutdown at Davis-Besse is expected to reduce earnings by 49 cents a share. A previously disclosed second-quarter charge of $63 million from FirstEnergy's divestiture of Argentine distribution company Emdersa will take an additional 20 cents a share. The effects of accounting changes in the first quarter will take away an additional 34 cents.

And unusual charges in the second quarter, including disallowed regulatory assets in New Jersey, the loss from the sale of a natural gas operations unit and the impairment of a note receivable, will take away an additional 35 cents.

John Russell can be reached at 330-996-3550 or jrussell@thebeaconjournal.com
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