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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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