10/18/02

Akron-based FirstEnergy Corp. yesterday reported net income of $310.3 million for the third quarter, or $1.05 per diluted share. That's a 33 percent increase from earnings for the same period last year before the company merged with GPU Inc. of New Jersey.

Revenues for the third quarter were $3.6 billion, compared with $2 billion for the third quarter of 2001, before the merger.

Factors that contributed to the positive earnings were a hotter than normal July and August and increased production from the company's coal- and gas-fired plants, the company said.

The earnings were cut by nearly $92 million in expenses for replacement power and repairs to restore the Davis-Besse nuclear power plant, shut down since February with a large rust hole in its reactor lid.

The power plant cost stockholders 20 cents per share for the quarter, said Richard Marsh, chief financial officer.

The company estimates that by year's end, repairs at Davis-Besse and the net cost of buying power to replace what it would have generated will range from $230 million to $265 million - or 46 cents to 53 cents per share.

The company announced last week that it expects to spend $50 million on the plant next year finishing up jobs and doing maintenance it would have performed in future years had the plant not been shut down for so long.

FirstEnergy is treating the cost of replacing the lid - up to $75 million - as a capital expense that will be accounted for over time rather than coming out of current operating expenses.

The positive earnings report beat the $1.04 per share consensus forecast by analysts.

FirstEnergy stock closed yesterday at $28.15, up $1.85. That's still more than $10 below its all-time high just before the damage at the reactor was discovered.

The upturn came after two days of losses that resulted in part from news that Davis-Besse officials are investigating whether there may be leaks on the bottom of the reactor similar to the leaks in the lid that led to the corrosion.

The company sought to confront the fears about the possible additional leaks and unanticipated repairs and delays that might occur by making one of the top officials from its nuclear operating company available to analysts.

"We don't believe we have any additional leaks," said Gary Leidich, executive vice president of the FirstEnergy Operating Co., of the rusty residue that inspectors found along the sides and on the bottom of the reactor.

He said plant officials decided to have the residue analyzed even though it appears that it could have run down the sides of the reactor years ago when crews power-washed the lid.

If the chemical analysis of the residue is inconclusive, Leidich said, the company will consider testing the reactor bottom itself to make sure there are no cracks. Such tests include ultrasonic examination.

Leidich said that, if necessary, the company will pressurize the reactor before it restarts it and send inspectors into the area under it to eyeball for leaks.

He said he expects most of the hardware repairs to the reactor to be done by year's end or early next year.

Before it can restart the plant, the company must still convince the Nuclear Regulatory Commission it has reformed the plant's management practices and that it can be operated safely.

To reach this Plain Dealer reporter:

jfunk@plaind.com, 216-999-4138