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August 06, 2003

 



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Local Companies | Article published August 6, 2003
QUARTERLY RESULTS
FirstEnergy posts loss of $58 million Edison parent to restate earnings for prior periods

By GARY T. PAKULSKI
BLADE BUSINESS WRITER


Shares of the parent of Toledo Edison Co. plunged nearly 8 percent yesterday after the company announced it lost money in the second quarter of 2003 and was restating earnings for prior quarters.

Executives of Akron-based FirstEnergy Corp. also advised investors that profits will be lower than expected this year.

"I’m disappointed that we’ve lowered our earnings guidance," Chief Executive H. Peter Burg told analysts in a conference call yesterday.

Amid the bad news, he said the utility continues to expect to restart the Davis-Besse nuclear power station near Oak Harbor this fall. "We really do see the light at the end of the tunnel here," he said.

He declined to give a date when the plant will resume electricity production but said the firm does not believe costs of the outage this year will surpass the firm’s revised estimate of $80 million. The plant was shut down in February, 2002, for routine maintenance but has been out of service since because a corroded reactor head was discovered.

FirstEnergy’s second-quarter financial report showed that it lost $58 million, or 20 cents a share, compared with expected restated profits of $216 million, or 73 cents a share, at the same time last year.

Quarterly sales decreased 1.2 percent to $2.86 billion from $2.9 billion in 2002.

Executives said the accounting adjustments, which affect profit in 2002 and the first quarter of 2003, resulted from mistakes in the way the company depreciated capital expenses incurred before the deregulation of electricity in Ohio as well as from overvaluation of certain assets of FirstEnergy’s Toledo Edison and Cleveland Electric Illuminating subsidiaries.

The correction will decrease profits through 2005 but will boost them for the following 12 years. The impact is expected to be 23 cents a share in 2002 and 17 cents a share in 2003. Overall, the company will report $381 million more in profit through 2017 than it would have without the changes.

The company said it now expects full-year earnings, including special charges, of $2.68 to $2.88 a share, down from previous estimates of $3.35 to $3.55.

Factors included mild weather that reduced electricity consumption this summer, expenses for Davis-Besse, and abandonment of certain foreign investments.

FirstEnergy shares fell $2.54 to $31.33 in heavy trading on the New York Stock Exchange. Volume was four times normal with 5.4 million shares trading hands.



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