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Updated Thursday, July 25, 2002
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Posted on Thu, Jul. 25, 2002 story:PUB_DESC
Utility reports stock increase
FirstEnergy shares rise 16 percent. 2nd-quarter results beat expectations

Beacon Journal business writer

Better-than-expected news, combined with a stock market that exploded upward, catapulted FirstEnergy Corp.'s stock up more than 16 percent Wednesday.

The Akron utility giant reported second-quarter financial results that exceeded analysts' expectations. The company had net income of $233 million, or 79 cents per share, on revenue of $2.9 billion. Net income was up 60 percent, and revenue up 61 percent, compared with a year ago, prior to the company's acquisition of New Jersey-based GPU Inc.

Shares in FirstEnergy closed up 16.4 percent to $29.16. Even with the huge one-day rise, FirstEnergy shares are down 16.6 percent this year to date, reflecting concerns over the utility's damaged Davis-Besse nuclear plant, possible delays in the sale of four coal-fired plants, and the overall downdraft in the stock market.

Company officials say they still expect Davis-Besse, which has been shut down since mid-February, to be ready to be restarted by the end of the year, providing the Nuclear Regulatory Commission gives permission. Boric acid ate two cavities in the thick steel reactor vessel head that covers the nuclear fuel.

Expenses associated withDavis-Besse, including the purchase of $32 million in replacement electricity, cost FirstEnergy $52 million in the second quarter, the company reported. That doesn't include the costs for the replacement vessel head, estimated at between $55 million and $75 million.

The company has contracts in place to buy replacement electricity through the end of the year to make up for the loss of Davis-Besse's 850 megawatt capacity, and can make similar hedges for the first few months of 2003 if needed, officials said Wednesday.

Despite Davis-Besse problems, FirstEnergy officials said they were able to reduce debt and increase electric sales margins, among other things, to improve the company's finances.

``That was a very strong quarter,'' said analyst Paul Ridzon, associate vice president with Cleveland-based McDonald Investments. He said he expected FirstEnergy to earn 76 cents a share.

``I knew they would do everything they could to offset Davis-Besse impacts,'' Ridzon said.

FirstEnergy executives said the company remains committed to aggressively slashing billions of dollars of debt over the next several years.

Senior Vice President and Chief Financial Officer Richard Marsh also said the company expects to sell four coal power plants along Lake Erie to NRG Energy Inc. for $1.5 billion. The financially strapped Minnesota-based utility has delayed its purchase of the plants for now.

``We continue to anticipate a timely closing to the transaction,'' Marsh said.

FirstEnergy should earn between $3.30 and $3.45 a share for this year, and anticipates earnings will grow 7 percent to 8 percent in 2003, he said.

FirstEnergy earned $349.8 million, or $1.19 per share, on revenue of $5.8 billion for the first six months of the year, up from $243.7 million, or $1.11 per share, on revenue of $3.8 billion for the same period a year ago.


Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com
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