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Tuesday, August 05, 2003

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FirstEnergy sees red
 
 
FirstEnergy Corp. (NYSE: FE) has posted a second-quarter loss of nearly $58 million, is restating its results for 2002, and has revised its 2003 earnings guidance downward.

FirstEnergy said the restatement of earnings for 2002 and the first quarter of 2003 reflects implementation of changed accounting treatments regarding the recovery of transition assets in Ohio and the recognition of above-market values of certain leased generation facilities. FirstEnergy said the restatements are expected to reduce its earnings per share by 23 cents to $1.92 for 2002, and are expected to lower the company's 2003 earnings by 17 cents a share compared with FirstEnergy's original earnings guidance.

In addition, earnings through 2005 are expected to be lower than originally estimated and earnings from 2006 through 2017 are expected to be higher than they otherwise would have been as a result of the restatement. For the period from 2002 to 2017, the cumulative impact of the restatement will be an increase in net income of an expected $381 million.

As for results in the latest second quarter, FirstEnergy said the loss includes a non-cash charge from discontinued operations of $67 million due to the company's divestiture in April of Emdersa through the abandonment of FirstEnergy's shares in Emdersa's parent company, GPU Argentina Holdings Inc. FirstEnergy had acquired Emdersa through its 2001 merger with the former GPU Inc.

FirstEnergy said unusual items affecting 2003 second-quarter results included a pre-tax charge of $158.5 million, or 32 cents per share after-tax, based on the New Jersey Board of Public Utilities' decision on Jersey Central Power & Light's rate proceeding, which reduced the amount of deferred energy and other costs that JCP&L can recover; pre-tax charges totaling $18.8 million, or four cents per share after tax, resulting from the impairment of a note receivable; and the sale in June of a non-core asset, Northeast Ohio Natural Gas Corp.

Also hurting FirstEnergy's second-quarter results were pre-tax costs associated with the effort to restart the troubled Davis-Besse Nuclear Power Station. Those costs totaled $63 million on a pre-tax basis, or 13 cents a share after tax, during the period. Other factors that reduced FirstEnergy's second-quarter results were an increase in nuclear operating expenses primarily related to longer-than-anticipated refueling outages at the Perry and Beaver Valley Unit 1 plants; a rise in pension and other post-employment benefits; and an increase in depreciation and amortization expenses.

In the second quarter of 2002, FirstEnergy reported restated earnings of $216 million, or 74 cents a share.

As a result of lower-than-expected results for the quarter, FirstEnergy has revised downward its 2003 earnings guidance. FirstEnergy now is estimating that its per-share earnings including costs connected with the Davis-Besse outage as well as various other charges will be in a range of $1.96 to $2.16.

 

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