|Local Companies | Article
published August 27, 2002|
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
"It’s cheap to buy power right now," Mr.
Halloran said. "They’re hedging their bet."
DiNicola declined to give any specifics of the power purchase for
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
The company says it plans to cut $3 billion of its
estimated $14.3 billion in debt.
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