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August 27, 2002

 



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Local Companies | Article published August 27, 2002
Edison parent stands by profit-growth forecast

Despite a rocky 2002, Akron-based FirstEnergy Corp. is sticking to its forecast that earnings next year will be 9 percent higher than this year’s.

The parent company of Toledo Edison said in a filing late last week with the U.S. Securities and Exchange Commission that its earnings target for 2003 will range from $3.70 to $3.90 a share, up from the $3.30 to $3.45 it now expects to earn this year and from its original 2002 estimate of $3.45 to $3.65.

Analysts forecast $3 a share for the firm this year and $3.58 next year, according to the research firm Thomson First Call.

The company’s projections for this year do not count the impact of the prolonged shutdown of its Davis-Besse nuclear plant in Oak Harbor and adjustments if a buyer is not found for an Argentinean distributor of power that was part of last year’s merger with GPU, Inc.

"Most of the expenses associated with Davis-Besse will take place in 2002 ... and the factors that led to the original earnings target for 2003 hadn’t changed," said Ralph DiNicola, a spokesman for FirstEnergy.

Those factors include benefits from the GPU merger, the strength of its service territory, a hoped-for economic turnaround next year, lower financing costs thanks to lower interest rates, and growth in the company’s delivery business, Mr. DiNicola said.

Davis-Besse was shut down for normal refueling Feb. 16 for what was supposed to be six weeks. But serious corrosion was discovered, and the company has had to order, transport, and install a new reactor head. That project, as well as additional improvements at the Oak Harbor plant, could cost FirstEnergy as much as $145 million.

James Halloran, an analyst with National City Bank’s private client group in Cleveland, said the utility is betting that sales of power between wholesalers will not be as weak as they were this year.

The SEC filing also notes that FirstEnergy has purchased power for the early months of 2003, even though it expects Davis-Besse to be operating by year’s end. The firm has purchased power, as needed, during the plant’s shutdown, costing $10 million to $15 million in the non-summer months.

"It’s cheap to buy power right now," Mr. Halloran said. "They’re hedging their bet."

FirstEnergy’s Mr. DiNicola declined to give any specifics of the power purchase for next year.

The firm also conceded it is behind in its planned debt repayment, largely because of a soured deal to sell Toledo’s Bay Shore and three other Ohio coal-burning plants. That deal was for $1.5 billion, much of which was expected to help reduce debt.

The company says it plans to cut $3 billion of its estimated $14.3 billion in debt.


More articles on this subject
Plants told to expect tougher inspections 08/24/2002
The Editors: Let the Navy manage nuke plants, Kaptur says 08/23/2002
Regulator cites retaliation fears at Davis-Besse nuclear plant 08/21/2002
Error jolts rebound of nuclear industry 08/18/2002
NRC told: Let new panel probe N-plant conditions 08/17/2002

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