-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+I8tm1oAk+44evZ2zKmwiPKfnXDoGa3Pt11acVbYfstS34XWA0ajXYJwlkO8qYX ozSMX3fNPb5W+jlUWO91NQ== 0001031296-00-000022.txt : 20000515 0001031296-00-000022.hdr.sgml : 20000515 ACCESSION NUMBER: 0001031296-00-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-21011 FILM NUMBER: 629088 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC ILLUMINATING CO CENTRAL INDEX KEY: 0000020947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340150020 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02323 FILM NUMBER: 629089 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN STREET STREET 2: C/O FIRSTENERGY CORP CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2166229800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO EDISON CO CENTRAL INDEX KEY: 0000073960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340437786 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02578 FILM NUMBER: 629090 BUSINESS ADDRESS: STREET 1: 76 S MAIN ST CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2163845100 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENNSYLVANIA POWER CO CENTRAL INDEX KEY: 0000077278 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 250718810 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03491 FILM NUMBER: 629091 BUSINESS ADDRESS: STREET 1: 1 E WASHINGTON ST STREET 2: P O BOX 891 CITY: NEW CASTLE STATE: PA ZIP: 16103-0891 BUSINESS PHONE: 4126525531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLEDO EDISON CO CENTRAL INDEX KEY: 0000352049 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 344375005 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03583 FILM NUMBER: 629092 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 43308 BUSINESS PHONE: 2166229800 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. - ----------- --------------------------------------- ------------------ 333-21011 FIRSTENERGY CORP. 34-1843785 (An Ohio Corporation) 76 South Main Street Akron, Ohio 44308 Telephone (800)736-3402 1-2578 OHIO EDISON COMPANY 34-0437786 (An Ohio Corporation) 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-2323 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 34-0150020 (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-3583 THE TOLEDO EDISON COMPANY 34-4375005 (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402 1-3491 PENNSYLVANIA POWER COMPANY 25-0718810 (A Pennsylvania Corporation) 1 East Washington Street P. O. Box 891 New Castle, Pennsylvania 16103 Telephone (412)652-5531 Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: OUTSTANDING CLASS AS OF MAY 5, 2000 ----- ----------------- FirstEnergy Corp., $.10 par value 230,504,441 Ohio Edison Company, $9 par value 100 The Cleveland Electric Illuminating Company, no par value 79,590,689 The Toledo Edison Company, $5 par value 39,133,887 Pennsylvania Power Company, $30 par value 6,290,000 FirstEnergy Corp. is the sole holder of Ohio Edison Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company common stock; Ohio Edison Company is the sole holder of Pennsylvania Power Company common stock. This combined Form 10-Q is separately filed by FirstEnergy Corp., Ohio Edison Company, Pennsylvania Power Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the four FirstEnergy subsidiaries is also attributed to FirstEnergy. This Form 10-Q includes forward looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate", "potential", "expect", "believe", "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy market prices, legislative and regulatory changes (including revised environmental requirements), availability and cost of capital and other similar factors. TABLE OF CONTENTS Pages Part I. Financial Information Notes to Financial Statements 1-4 FirstEnergy Corp. Consolidated Statements of Income 5 Consolidated Balance Sheets 6-7 Consolidated Statements of Cash Flows 8 Report of Independent Public Accountants 9 Management's Discussion and Analysis of Results of Operations and Financial Condition 10-13 Ohio Edison Company Consolidated Statements of Income 14 Consolidated Balance Sheets 15-16 Consolidated Statements of Cash Flows 17 Report of Independent Public Accountants 18 Management's Discussion and Analysis of Results of Operations and Financial Condition 19-20 The Cleveland Electric Illuminating Company Consolidated Statements of Income 21 Consolidated Balance Sheets 22-23 Consolidated Statements of Cash Flows 24 Report of Independent Public Accountants 25 Management's Discussion and Analysis of Results of Operations and Financial Condition 26-27 The Toledo Edison Company Consolidated Statements of Income 28 Consolidated Balance Sheets 29-30 Consolidated Statements of Cash Flows 31 Report of Independent Public Accountants 32 Management's Discussion and Analysis of Results of Operations and Financial Condition 33-34 Pennsylvania Power Company Statements of Income 35 Balance Sheets 36-37 Statements of Cash Flows 38 Report of Independent Public Accountants 39 Management's Discussion and Analysis of Results of Operations and Financial Condition 40-41 Part II. Other Information PART I. FINANCIAL INFORMATION - ------------------------------ FIRSTENERGY CORP. AND SUBSIDIARIES OHIO EDISON COMPANY AND SUBSIDIARIES THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY THE TOLEDO EDISON COMPANY AND SUBSIDIARY PENNSYLVANIA POWER COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) 1 - FINANCIAL STATEMENTS: The principal business of FirstEnergy Corp. (FirstEnergy) is the holding, directly or indirectly, of all of the outstanding common stock of its four principal electric utility operating subsidiaries, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE) and Pennsylvania Power Company (Penn). These utility subsidiaries are referred to throughout as "Companies." Penn is a wholly owned subsidiary of OE. The condensed unaudited financial statements of FirstEnergy and each of the Companies reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. These statements should be read in connection with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 1999 for FirstEnergy and the Companies. Significant intercompany transactions have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. The reported results of operations are not indicative of results of operations for any future period. Certain prior year amounts have been reclassified to conform with the current year presentation. Penn's results of operations for the three months ended March 31, 1999 include Penn and its wholly owned subsidiary, Penn Power Energy, Inc. (PPE). Penn's interest in PPE was transferred to FirstEnergy Services Corp., an affiliate, effective December 31, 1999. The sole assets of the subsidiary trust that is the obligor on the preferred securities included in FirstEnergy's and OE's capitalization are $123,711,350 principal amount of 9% Junior Subordinated Debentures of OE due December 31, 2025. 2 - COMMITMENTS, GUARANTEES AND CONTINGENCIES: CAPITAL EXPENDITURES- FirstEnergy's current forecast reflects expenditures of approximately $3.0 billion (OE-$766 million, CEI-$529 million, TE-$259 million, Penn-$234 million and unregulated subsidiaries-$1.212 billion) for property additions and improvements from 2000-2004, of which approximately $689 million (OE-$215 million, CEI-$99 million, TE-$94 million, Penn-$32 million and unregulated subsidiaries-$249 million) is applicable to 2000. Investments for additional nuclear fuel during the 2000-2004 period are estimated to be approximately $489 million (OE-$123 million, CEI-$164 million, TE-$113 million and Penn-$89 million), of which approximately $149 million (OE-$35 million, CEI-$54 million, TE-$38 million and Penn-$22 million) applies to 2000. STOCK REPURCHASE PROGRAM- On November 17, 1998, the Board of Directors authorized the repurchase of up to 15 million shares of FirstEnergy's common stock over a three-year period beginning in 1999. Repurchases are made on the open market, at prevailing prices, and are funded primarily through the use of operating cash flows. During the first quarter of 2000, FirstEnergy repurchased and retired 2.0 million shares of its common stock at an average price of $21.37 per share. In 1999, FirstEnergy also entered into a forward contract with Credit Suisse First Boston Corporation for the purchase of 1.4 million shares of FirstEnergy's common stock at an average price of $24.22 per share to be settled on November 3, 2000. The contract may be settled through gross physical settlement, net share settlement or net cash settlement at FirstEnergy's election. - 1 - ENVIRONMENTAL MATTERS- Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies estimate capital expenditures for environmental compliance of approximately $292 million (OE-$144 million, CEI-$84 million, TE-$33 million and Penn-$31 million), which is included in the construction estimate given under "Capital Expenditures" for 2000 through 2004. The Companies are in compliance with the current sulfur dioxide (SO2) and nitrogen oxides (NOx) reduction requirements under the Clean Air Act Amendments of 1990. SO2 reductions are being achieved by burning lower- sulfur fuel, generating more electricity from lower-emitting plants, and/or purchasing emission allowances. NOx reductions are being achieved through combustion controls and the generation of more electricity at lower- emitting plants. In September 1998, the Environmental Protection Agency (EPA) finalized regulations requiring additional NOx reductions from the Companies' Ohio and Pennsylvania facilities by May 2003. The EPA's NOx Transport Rule imposes uniform reductions of NOx emissions across a region of twenty-two states and the District of Columbia, including Ohio and Pennsylvania, based on a conclusion that such NOx emissions are contributing significantly to ozone pollution in the eastern United States. In March 2000, the U.S. Court of Appeals for the D.C. Circuit upheld EPA's NOx Transport Rule except as applied to the State of Wisconsin and portions of Georgia and Missouri. The Court's decision left in place a stay which delays the requirement for states to submit revised State Implementation Plans (SIP) which comply with individual state NOx budgets established by the EPA contemplating an approximate 85% reduction in utility plant NOx emissions from projected 2007 emissions. A proposed Federal Implementation Plan accompanied the NOx Transport Rule and may be implemented by the EPA in states which fail to revise their SIP. In another separate but related action, eight states filed petitions with the EPA under Section 126 of the Clean Air Act seeking reductions of NOx emissions which are alleged to contribute to ozone pollution in the eight petitioning states. The EPA position is that the Section 126 petitions will be adequately addressed by the NOx Transport Program, but a December 17, 1999 rulemaking established an alternative program which would require nearly identical 85% NOx reductions at 392 utility plants, including the Companies' Ohio and Pennsylvania plants, by May 2003, in the event implementation of the NOx Transport Rule is delayed. Additional Section 126 petitions were filed by New Jersey, Maryland, Delaware and the District of Columbia in mid-1999 and are still under evaluation by the EPA. The Companies continue to evaluate their compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $27,500 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The Companies cannot predict what action the EPA may take in the future with respect to the interim enforcement policy. In July 1997, EPA promulgated changes in the National Ambient Air Quality Standard (NAAQS) for ozone and proposed a new NAAQS for previously unregulated ultra-fine particulate matter. In May 1999, the U.S. Court of Appeals for the D.C. Circuit remanded both standards to the EPA, having found constitutional and other defects in the new NAAQS rules. The D.C. Circuit Court, on October 29, 1999, denied an EPA petition for rehearing. The Companies cannot predict the EPA's action in response to the Court's remand order. The cost of compliance with these regulations, if they are reinstated, may be substantial and will depend on the manner in which they are ultimately implemented, if at all, by the states in which the Companies operate affected facilities. In September 1999, FirstEnergy received, and subsequently in October 1999, OE and Penn received, a citizen suit notification letter from the New York Attorney General's office alleging Clean Air Act violations at the W. H. Sammis Plant. In November 1999, OE and Penn received a citizen suit notification letter from the Connecticut Attorney General's office alleging Clean Air Act violations at the Sammis Plant. In November 1999 and March 2000, the EPA issued Notices of Violation (NOV) or a Compliance Order to eight utilities covering 36 power plants, including the Sammis Plant. In addition, the U.S. Department of Justice filed seven civil complaints against various investor-owned utilities, which included a complaint against OE and Penn in the U.S. District Court for the Southern District of Ohio. The NOV and complaint allege violations of the Clean Air Act based on operation and maintenance of the Sammis Plant dating back to 1984. The complaint requests permanent injunctive relief to require the installation of "best available control technology" and civil penalties of up to $27,500 per day of violation. Although unable to predict the outcome of these proceedings, FirstEnergy believes the Sammis Plant is in full compliance with the Clean Air Act and the NOV and complaint are without merit. Penalties could be imposed if the Sammis Plant continues to operate without correcting the alleged violations and a court determines that the allegations are valid. It is anticipated at this time that the Sammis Plant will continue to operate until these proceedings are concluded. - 2 - As a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976, federal and state hazardous waste regulations have been promulgated. Certain fossil- fuel combustion waste products, such as coal ash, were exempted from hazardous waste disposal requirements pending EPA's evaluation of the need for future regulation. EPA has issued its final regulatory determination that regulation of coal ash as a hazardous waste is unnecessary. On April 25, 2000, EPA announced that it will develop national standards regulating disposal of coal ash under its authority to regulate nonhazardous waste. CEI and TE have been named as "potentially responsible parties" (PRPs) at waste disposal sites which may require cleanup under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. Allegations of disposal of hazardous substances at historical sites and the liability involved, are often unsubstantiated and subject to dispute. Federal law provides that all PRPs for a particular site be held liable on a joint and several basis. CEI and TE have accrued liabilities of $4.8 million and $0.6 million, respectively, as of March 31, 2000, based on estimates of the costs of cleanup and the proportionate responsibility of other PRPs for such costs. CEI and TE believe that waste disposal costs will not have a material adverse effect on their financial condition, cash flows or results of operations. 3 - REGULATORY ACCOUNTING: FirstEnergy has reached an agreement with major parties to the transition plan it had filed in 1999, on behalf of OE, CEI and TE under Ohio's electric utility restructuring law. Other parties recommending approval to The Public Utilities Commission of Ohio (PUCO) included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, power marketers and others. Major provisions of the agreement consist of approval of the transition plan as filed, including recovery of transition costs through no later than 2006 for OE, mid-2007 for TE and 2008 for CEI, except where a longer period of recovery is provided for in the agreement. The total transition cost amounts to be recovered are as filed in the transition plan. FirstEnergy will also allow preferred access to non-affiliated marketers, brokers and aggregators over FirstEnergy's subsidiaries to 1,120 megawatts of generation capacity through 2005 at established prices for sales to the Ohio operating companies' retail customers. The base electric rate freeze for distribution service for OE, CEI and TE under their current respective regulatory plans will be extended from December 31, 2005 through December 31, 2007. The transition rate credits for customers under their current regulatory plans will also be extended through the Companies' respective transition cost recovery periods. Beginning January 1, 2001 when Ohio electric customers have the choice to select their generation suppliers under the Ohio restructuring law, the agreement provides to FirstEnergy's Ohio customers electing alternative suppliers, an additional incentive applied to the shopping credit of 45% for residential customers, 30% for commercial customers and 15% for industrial customers. The amount of the incentive will serve to reduce the amortization of transition costs during the market development period (January 1, 2001 through December 31, 2005) and will be recovered through the extension of the transition cost recovery periods. If the customer shopping goals established in the agreement are not achieved by the end of 2005, the transition cost recovery periods could be shortened for OE, CEI and TE to reduce recovery by as much as $500 million (OE-$250 million, CEI-$170 million and TE-$80 million), but any such adjustment would be computed on a class-by-class and pro-rata basis. The application of Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting for the Effect of Certain Types of Regulation" (SFAS 71) to OE's generation business and the nonnuclear generation businesses of CEI and TE will be discontinued when the PUCO issues its order. If the stipulated agreement is approved by the PUCO, OE, CEI and TE do not anticipate a charge to earnings. The Companies will continue to bill and collect cost-based rates for their transmission and distribution services, which will remain regulated; accordingly, it is appropriate that the Companies continue the application of SFAS 71 to those respective operations after December 31, 2000. 4 - NEW ACCOUNTING STANDARD: In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement. FirstEnergy has not completed quantifying the impacts of adopting SFAS 133 on its financial statements or determined the method of its adoption. However, SFAS 133 could - 3 - increase volatility in earnings and other comprehensive income. FirstEnergy anticipates adopting the new statement on its amended effective date of January 1, 2001. 5 - SEGMENT INFORMATION: FirstEnergy's primary segment is its Electric Utility Operating Companies which include four electric utility operating companies that provide electric service in Ohio and Pennsylvania. Its other material business segment consists of the subsidiaries that operate unregulated businesses. Financial data for these business segments are as follows: Segment Financial Information - -----------------------------
Electric Unregulated Reconciling Three Months Ended: Utilities Businesses Eliminations Totals - ------------------ --------- ----------- ------------ ------ (In millions) March 31, 2000 - -------------- External revenues $ 1,275 $ 333 $ -- $ 1,608 Intersegment revenues 28 26 (54) -- Total revenues 1,303 359 (54) 1,608 Depreciation and amortization 197 5 -- 202 Net interest charges 131 18 (14) 135 Income taxes 97 1 -- 98 Net income/Earnings on common stock 141 2 (2) 141 Total assets 16,721 2,091 (704) 18,108 Property additions 117 35 -- 152 Acquisitions -- -- -- -- March 31, 1999 - -------------- External revenues $ 1,278 $ 145 $ -- $ 1,423 Intersegment revenues 8 23 (31) -- Total revenues 1,286 168 (31) 1,423 Depreciation and amortization 186 5 -- 191 Net interest charges 142 16 (12) 146 Income taxes 96 (2) -- 94 Net income/Earnings on common stock 143 (5) (1) 137 Total assets 17,558 1,912 (1,282) 18,188 Property additions 52 30 -- 82 Acquisitions -- 9 -- 9
- 4 - FIRSTENERGY CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, ------------------------ 2000 1999 ---------- ---------- (In thousands, except per share amounts) REVENUES: Electric sales $1,206,475 $1,209,122 Other - electric utilities 74,455 74,202 Facilities services 118,146 104,606 Trading services 47,209 11,477 Other 161,645 23,145 ---------- ---------- Total revenues 1,607,930 1,422,552 ---------- ---------- EXPENSES: Fuel and purchased power 179,190 204,357 Other expenses: Electric utilities 408,445 371,015 Facilities services 115,231 99,393 Trading services 47,916 12,804 Other 140,165 29,330 Provision for depreciation and amortization 202,084 191,213 General taxes 141,055 138,094 ---------- ---------- Total expenses 1,234,086 1,046,206 ---------- ---------- INCOME BEFORE INTEREST AND INCOME TAXES 373,844 376,346 ---------- ---------- NET INTEREST CHARGES: Interest expense 122,843 129,381 Allowance for borrowed funds used during construction and capitalized interest (6,104) (2,685) Subsidiaries' preferred stock dividends 18,288 19,381 ---------- ---------- Net interest charges 135,027 146,077 ---------- ---------- INCOME TAXES 97,899 93,548 ---------- ---------- NET INCOME $ 140,918 $ 136,721 ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 224,859 229,140 ======= ======= BASIC AND DILUTED EARNINGS PER SHARE OF COMMON STOCK $.63 $.60 ==== ==== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $.375 $.375 ===== ===== The preceding Notes to Financial Statements as they relate to FirstEnergy Corp. are an integral part of these statements.
- 5 - FIRSTENERGY CORP. CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ----------- ------------ (In thousands) ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 43,046 $ 111,788 Receivables- Customers (less accumulated provisions of $6,778,000 and $6,719,000, respectively, for uncollectible accounts) 337,670 322,687 Other (less accumulated provisions of $7,629,000 and $5,359,000, respectively, for uncollectible accounts) 416,110 445,242 Materials and supplies, at average cost- Owned 133,782 154,834 Under consignment 113,445 99,231 Prepayments and other 214,527 167,894 ----------- ----------- 1,258,580 1,301,676 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT: In service 14,700,661 14,645,131 Less--Accumulated provision for depreciation 6,075,635 5,919,170 ----------- ----------- 8,625,026 8,725,961 Construction work in progress 492,869 367,380 ----------- ----------- 9,117,895 9,093,341 ----------- ----------- INVESTMENTS: Capital trust investments 1,242,189 1,281,834 Nuclear plant decommissioning trusts 558,266 543,694 Letter of credit collateralization 277,763 277,763 Other 590,139 599,443 ----------- ----------- 2,668,357 2,702,734 ----------- ----------- DEFERRED CHARGES: Regulatory assets 2,499,321 2,543,427 Goodwill 2,117,761 2,129,902 Property taxes 267,226 276,997 Other 178,708 175,970 ----------- ----------- 5,063,016 5,126,296 ----------- ----------- $18,107,848 $18,224,047 =========== ===========
- 6 - FIRSTENERGY CORP. CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ----------- ------------- (In thousands) CAPITALIZATION AND LIABILITIES ------------------------------ CURRENT LIABILITIES: Currently payable long-term debt and preferred stock $ 657,517 $ 762,520 Short-term borrowings 353,827 417,819 Accounts payable 342,060 360,379 Accrued taxes 416,821 409,724 Accrued interest 131,159 125,397 Other 301,503 301,572 ----------- ----------- 2,202,887 2,377,411 ----------- ----------- CAPITALIZATION: Common stockholders' equity- Common stock, $.10 par value, authorized 300,000,000 shares - 230,909,041 and 232,454,287 shares outstanding, respectively 23,091 23,245 Other paid-in capital 3,689,672 3,722,375 Accumulated comprehensive income (195) (195) Retained earnings 1,001,704 945,241 Unallocated employee stock ownership plan common stock - 6,492,051 and 6,778,905 shares, respectively (121,137) (126,776) ----------- ----------- Total common stockholders' equity 4,593,135 4,563,890 Preferred stock of consolidated subsidiaries- Not subject to mandatory redemption 648,395 648,395 Subject to mandatory redemption 136,246 136,246 OE obligated mandatorily redeemable preferred securities of subsidiary trust holding solely OE subordinated debentures 120,000 120,000 Long-term debt 6,056,213 6,001,264 ----------- ----------- 11,553,989 11,469,795 ----------- ----------- DEFERRED CREDITS: Accumulated deferred income taxes 2,212,445 2,231,265 Accumulated deferred investment tax credits 264,209 269,083 Other postretirement benefits 510,950 498,184 Nuclear plant decommissioning costs 577,321 562,295 Other 786,047 816,014 ----------- ----------- 4,350,972 4,376,841 ----------- ----------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ----------- ----------- $18,107,848 $18,224,047 =========== =========== The preceding Notes to Financial Statements as they relate to FirstEnergy Corp. are an integral part of these balance sheets.
- 7 - FIRSTENERGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ------------------------ 2000 1999 ---------- --------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $140,918 $ 136,721 Adjustments to reconcile net income to net cash from operating activities- Provision for depreciation and amortization 202,084 191,213 Nuclear fuel and lease amortization 29,761 26,595 Other amortization, net (3,167) (465) Deferred income taxes, net (5,373) (6,435) Investment tax credits, net (5,554) (3,444) Receivables 26,101 (18,370) Materials and supplies 6,838 (5,006) Accounts payable (18,319) 12,158 Other (45,374) (120,337) -------- --------- Net cash provided from operating activities 327,915 212,630 -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing- Long-term debt 17,319 12,277 Short-term borrowings, net -- 11,264 Redemptions and Repayments- Common stock 33,962 44,499 Long-term debt 102,055 80,802 Short-term borrowings, net 63,992 -- Common stock dividend payments 84,455 86,137 -------- --------- Net cash used for financing activities 267,145 187,897 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 151,680 90,705 Cash investments (39,106) (41,268) Other 16,938 7,482 -------- --------- Net cash used for investing activities 129,512 56,919 -------- --------- Net decrease in cash and cash equivalents 68,742 32,186 Cash and cash equivalents at beginning of period 111,788 77,798 -------- --------- Cash and cash equivalents at end of period $ 43,046 $ 45,612 ======== ========= The preceding Notes to Financial Statements as they relate to FirstEnergy Corp. are an integral part of these statements.
- 8 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To FirstEnergy Corp.: We have reviewed the accompanying consolidated balance sheet of FirstEnergy Corp. (an Ohio corporation) and subsidiaries as of March 31, 2000, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of FirstEnergy Corp. and subsidiaries as of December 31, 1999 (not presented herein), and, in our report dated February 11, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 12, 2000 - 9 - FIRSTENERGY CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- Revenues increased $185.4 million in the first quarter of 2000, compared to the same period in 1999, due to increased sales by our unregulated businesses. The sources of increases in the first quarter of 2000, compared to the first quarter of 1999, are summarized in the following table. Sources of Revenue Changes - -------------------------- (In millions) Electric Utility Operating Companies (EUOC): Electric sales $ (2.6) Other electric utility revenues 0.2 ------ Total EUOC (2.4) Unregulated Businesses: Retail electric sales 50.8 FirstEnergy Trading Services, Inc. (FETS) 35.7 Other businesses 101.3 ------ Net Revenue Increase $185.4 ====== Electric Sales EUOC revenues decreased slightly by $2.4 million in the first quarter of 2000 from the same period in 1999. Lower kilowatt-hour prices (representing sales from traditional vertically integrated operations) offset an increase in EUOC electric generation sales. Kilowatt-hour electric generation sales by the EUOCs were 1.3% higher in the first quarter of 2000 than the same period last year. Total electric generation kilowatt-hour sales increased 12.9% including unregulated sales that more than doubled from the first quarter of 1999. FirstEnergy continued to make progress in expanding its retail electric sales to target markets within the eastern portion of the U.S., which are opening up to competition. Sales to wholesale customers also contributed to the increase in unregulated sales with a 56.8% increase in the first quarter of 2000 compared to the same period last year, reflecting additional available generation from the EUOC and continued demand for electricity in the wholesale market. EUOC distribution deliveries (to customers in their franchise territory) to commercial and industrial customers grew in the first quarter of 2000 compared to the same quarter in 1999 due to continuing economic strength in the service area. Mild weather in the first quarter of 2000 contributed to lower residential deliveries compared to the same period of 1999. Changes in kilowatt-hour generation sales and distribution deliveries in the first quarter of 2000 compared to the first quarter of 1999 are summarized in the following table. - 10 - FIRSTENERGY CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Changes in KWH Sales - --------------------- % Increase (Decrease) ---------- Electric Generation Sales: EUOC - Retail 1.3% Unregulated 143.0% ------ Total Electric Generation Sales 12.9% ====== EUOC Distribution Deliveries: Residential (4.2)% Commercial 2.9% Industrial 5.6% ------ Total Distribution Deliveries 1.7% ====== Nonelectric Sales Retail natural gas sales by FirstEnergy Services, Corp., a wholly owned subsidiary, was the largest factor contributing to the $101.3 million increase in other business revenues in the first quarter of 2000 from the same period in 1999. Revenues from new business acquisitions completed during 1999 by the FirstEnergy Facilities Services Group, Inc. and FETS provided a smaller contribution to the overall increase recognized in the first quarter of 2000. Operating Expenses The $25.2 million reduction in EUOC fuel and purchased power costs resulted from a $20.1 million decrease in fuel expense and a $5.1 million reduction of purchased power costs. Several factors contributed to the lower fuel expense, which occurred despite a 12.2% increase in generation (fossil up 4.9%; nuclear up 25.1%). These factors included: - a higher proportion of nuclear generation (i.e., lower cost fuel) due to improved nuclear availability and increased nuclear ownership; - the expiration of an above-market coal contract; and - more extensive use of lower cost western coal. The increased nuclear ownership resulted from the exchange of generating assets with Duquesne Light Company in December 1999. Because more internal generation was available in the first quarter of 2000 compared to the same quarter in 1999, FirstEnergy also reduced its need for purchased power. Other expenses for the EUOC rose in the first quarter of 2000 compared to the same period in 1999 primarily due to outage related costs at Beaver Valley Unit 1 and increased ownership of nuclear plants resulting from the Duquesne asset swap. Expansion of unregulated sales activity also resulted in a corresponding increase of $161.8 million in other operating costs for FirstEnergy Facilities Services Group, LLC and FETS, as well as FirstEnergy Services Corp., which is reflected in "Other" expenses. Accelerated cost recovery in connection with OE's rate reduction plan was the primary factor contributing $12.6 million to the increase in depreciation and amortization in the first quarter of 2000, compared to the prior year. General taxes increased in the first quarter of 2000 from the first quarter in 1999, principally due to higher payroll taxes as a result of the nuclear refueling outage at Beaver Valley Unit 1 and an increase in the Ohio unemployment tax rate. - 11 - FIRSTENERGY CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Interest Charges Interest charges continued their downward trend, decreasing by $6.5 million in the first three months of 2000, compared to the same period in 1999, because of debt redemptions and refinancing activities. During the first quarter of 2000, FirstEnergy redeemed an additional $17.1 million of debt which will result in annualized savings of $1.3 million. Net Income As a result of additional unregulated sales, lower fuel and purchased power costs and reduced interest charges that were partially offset by higher other operating expenses and depreciation and amortization, net income increased in the first quarter of 2000 to $140.9 million, compared to $136.7 million in the same period in 1999. Basic and diluted earnings per share of common stock were $0.63 in the first quarter of 2000, compared to $0.60 in 1999. Capital Resources and Liquidity - ------------------------------- FirstEnergy and its subsidiaries have continuing cash requirements for planned capital expenditures and debt and preferred stock maturities. During the last three quarters of 2000, capital requirements for property additions and capital leases are expected to be about $639 million, including $89 million for nuclear fuel. The Companies have additional cash requirements of approximately $388.9 million to meet sinking fund requirements for preferred stock and maturing long-term debt during the remainder of 2000. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. During the first quarter of 2000, FirstEnergy repurchased 2.0 million shares of its common stock at an average price of $21.37 per share. The Company has an equity forward purchase contract, which will enable it to purchase an additional 1.4 million shares in November 2000 at an average price of $24.22 per share. As of March 31, 2000, FirstEnergy and its subsidiaries had about $43.0 million of cash and temporary investments and $353.8 million of short- term indebtedness. Available borrowings included $196.0 million from unused revolving lines of credit. FirstEnergy Telecom Corp., a wholly owned subsidiary of FirstEnergy, joined with five other companies to create America's Fiber Network, LLC (AFN) a high-speed fiber optics company with a 7,000-mile network in the eastern United States. AFN connects major markets in the eastern United States to secondary markets with a growing need for broadband access. FirstEnergy's ownership interest is expected to be approximately 6.5%. FirstEnergy joined with 14 other utilities in signing an agreement to form an Internet marketplace for utility supplies and services, which will be available for use by companies in the energy industry. The business- to-business exchange is expected to generate benefits for utilities by streamlining the purchasing process, reducing the purchase cycle and increasing access between buyers and sellers. The group expects to establish an independent company by June 2000 to operate the exchange, which will be initially owned by the founding companies. Market Risk - Commodity Prices - ------------------------------ FirstEnergy is exposed to market risk due to fluctuations in electricity, coal, natural gas and oil prices. To manage the volatility relating to these exposures, FirstEnergy uses a variety of derivative instruments, including forward contracts, options and futures contracts. These derivatives are used principally for hedging purposes, and to a lesser extent, for trading purposes. Although FirstEnergy believes that the policies and procedures it has adopted are prudent, financial position, results of operations or cash flow may be adversely impacted by unanticipated fluctuations in the commodity prices for electricity, coal, natural gas, oil, or by the failure of contract counterparties to perform. - 12 - FIRSTENERGY CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Regulatory Matters - ------------------ FirstEnergy has reached an agreement with major parties to the transition plan it filed in 1999, on behalf of OE, CEI and TE under Ohio's electric utility restructuring law. Other parties recommending approval to the PUCO included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, power marketers and others. If the PUCO adopts the agreement, OE, CEI and TE will have the opportunity to recover their transition costs and would anticipate no charges to earnings resulting from implementation of the transition plan. Major provisions of the agreement consist of approval of the transition plan as filed, including recovery of transition costs through no later than 2006 for OE, mid-2007 for TE and 2008 for CEI, except where a longer period of recovery is provided for in the agreement. FirstEnergy will also allow preferred access to non-affiliated marketers, brokers and aggregators over FirstEnergy's subsidiaries to 1,120 megawatts of generation capacity through 2005 at established prices for sales in the Ohio operating companies' franchise areas. The base electric rate freeze for distribution service for OE, CEI and TE under their current respective regulatory plans will be extended from December 31, 2005 through December 31, 2007. The transition rate credits for customers under their current regulatory plans will also be extended through the Ohio EUOCs' respective transition cost recovery periods. Beginning January 1, 2001, when Ohio electric customers have the choice to select their generation suppliers under the Ohio restructuring law, the stipulated agreement provides that OE, CEI and TE customers who select alternative suppliers will have a shopping credit subtracted from their bills (equal to their energy usage times the forecast energy prices in the transition plan filing plus an additional incentive applied to the shopping credit of 45% for residential customers, 30% for commercial customers, and 15% for industrial customers). The amount of the incentive will serve to reduce the amortization of transition costs during the market development period and will be recovered by OE, CEI and TE through the extension of their transition cost recovery periods. The agreement establishes shopping goals of 20% for each customer class. If these goals are not reached, the size of the incentive may be increased. If the customer shopping goals are still not reached by the end of 2005, the transition cost recovery periods could be shortened for OE, CEI and TE to reduce recovery by as much as $500 million (OE-$250 million, CEI-$170 million and TE-$80 million), but any such adjustment would be computed on a class-by-class and pro-rata basis. The application of Statement of Financial Accounting Standards No. 71 (SFAS 71), "Accounting for the Effect of Certain Types of Regulation" to OE's generation business and the nonnuclear generation businesses of CEI and TE will be discontinued when the PUCO issues its order. The Ohio EUOC will continue to bill and collect cost-based rates for their transmission and distribution services, which will remain regulated; accordingly, it is appropriate that OE, CEI and TE continue the application of SFAS 71 to those respective operations after December 31, 2000. - 13 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, ----------------------- 2000 1999 -------- -------- (In thousands) OPERATING REVENUES $644,365 $633,118 -------- -------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 95,578 112,022 Nuclear operating costs 111,619 72,436 Other operating costs 97,594 100,283 -------- -------- Total operation and maintenance expenses 304,791 284,741 Provision for depreciation and amortization 113,951 103,404 General taxes 59,453 62,260 Income taxes 46,621 47,763 -------- -------- Total operating expenses and taxes 524,816 498,168 -------- -------- OPERATING INCOME 119,549 134,950 OTHER INCOME 12,323 9,318 -------- -------- INCOME BEFORE NET INTEREST CHARGES 131,872 144,268 -------- -------- NET INTEREST CHARGES: Interest on long-term debt 42,539 45,083 Allowance for borrowed funds used during construction and capitalized interest (2,559) (1,097) Other interest expense 7,471 8,619 Subsidiaries' preferred stock dividend requirements 3,626 3,857 -------- -------- Net interest charges 51,077 56,462 -------- -------- NET INCOME 80,795 87,806 PREFERRED STOCK DIVIDEND REQUIREMENTS 2,808 2,913 -------- -------- EARNINGS ON COMMON STOCK $ 77,987 $ 84,893 ======== ======== The preceding Notes to Financial Statements as they relate to Ohio Edison Company are an integral part of these statements.
- 14 - OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) ASSETS ------ UTILITY PLANT: In service $8,143,590 $8,118,783 Less--Accumulated provision for depreciation 3,807,543 3,713,781 ---------- ---------- 4,336,047 4,405,002 ---------- ---------- Construction work in progress- Electric plant 241,967 205,671 Nuclear fuel 33,116 10,059 ---------- ---------- 275,083 215,730 ---------- ---------- 4,611,130 4,620,732 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: PNBV Capital Trust 468,585 469,124 Nuclear plant decommissioning trusts 242,204 236,903 Letter of credit collateralization 277,763 277,763 Other 439,430 425,872 ---------- ---------- 1,427,982 1,409,662 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 8,607 87,175 Receivables- Customers (less accumulated provisions of $6,455,000 and $6,452,000, respectively, for uncollectible accounts) 266,058 278,484 Associated companies 218,608 221,653 Other (less accumulated provisions of $1,000,000 for uncollectible accounts at both dates) 44,698 36,281 Notes receivable from associated companies 100,713 -- Materials and supplies, at average cost- Owned 61,725 69,119 Under consignment 58,930 55,278 Prepayments and other 97,296 73,682 ---------- ---------- 856,635 821,672 ---------- ---------- DEFERRED CHARGES: Regulatory assets 1,586,561 1,618,319 Property taxes 99,290 100,906 Unamortized sale and leaseback costs 83,850 85,100 Other 43,795 44,355 ---------- ---------- 1,813,496 1,848,680 ---------- ---------- $8,709,243 $8,700,746 ========== ==========
- 15 - OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) CAPITALIZATION AND LIABILITIES ------------------------------ CAPITALIZATION: Common stockholder's equity- Common stock, $9 par value, authorized 175,000,000 shares - 100 shares outstanding $ 1 $ 1 Other paid-in capital 2,098,728 2,098,728 Retained earnings 544,718 525,731 ---------- ---------- Total common stockholder's equity 2,643,447 2,624,460 Preferred stock- Not subject to mandatory redemption 160,965 160,965 Subject to mandatory redemption 5,000 5,000 Preferred stock of consolidated subsidiary- Not subject to mandatory redemption 39,105 39,105 Subject to mandatory redemption 15,000 15,000 OE obligated mandatorily redeemable preferred securities of subsidiary trust holding solely OE subordinated debentures 120,000 120,000 Long-term debt 2,207,858 2,175,812 ---------- ---------- 5,191,375 5,140,342 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt and preferred stock 341,163 422,838 Short-term borrowings- Associated companies -- 35,583 Other 307,357 322,713 Accounts payable- Associated companies 94,988 50,883 Other 72,474 63,219 Accrued taxes 245,860 207,362 Accrued interest 42,334 37,572 Other 110,957 94,967 ---------- ---------- 1,215,133 1,235,137 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 1,440,177 1,468,478 Accumulated deferred investment tax credits 139,923 143,336 Nuclear plant decommissioning costs 245,449 239,695 Other postretirement benefits 151,860 148,421 Other 325,326 325,337 ---------- ---------- 2,302,735 2,325,267 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ---------- ---------- $8,709,243 $8,700,746 ========== ========== The preceding Notes to Financial Statements as they relate to Ohio Edison Company are an integral part of these balance sheets.
- 16 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ----------------------- 2000 1999 -------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 80,795 $ 87,806 Adjustments to reconcile net income to net cash from operating activities- Provision for depreciation and amortization 113,951 103,404 Nuclear fuel and lease amortization 13,102 10,677 Deferred income taxes, net (15,958) (12,010) Investment tax credits, net (4,093) (1,977) Receivables 7,055 (35,370) Materials and supplies 3,742 742 Accounts payable 53,360 12,418 Other 37,829 (6,531) -------- -------- Net cash provided from operating activities 289,783 159,159 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing- Long-term debt 17,318 9,935 Short-term borrowings, net -- 15,226 Redemptions and Repayments- Long-term debt 71,033 50,682 Short-term borrowings, net 50,939 -- Dividend Payments- Common stock 59,000 81,738 Preferred stock 2,808 2,769 -------- -------- Net cash used for financing activities 166,462 110,028 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 88,121 54,038 Loans to associated companies 100,713 -- Other 13,055 13,767 -------- -------- Net cash used for investing activities 201,889 67,805 -------- -------- Net decrease in cash and cash equivalents 78,568 18,674 Cash and cash equivalents at beginning of period 87,175 33,213 -------- -------- Cash and cash equivalents at end of period $ 8,607 $ 14,539 ======== ======== The preceding Notes to Financial Statements as they relate to Ohio Edison Company are an integral part of these statements.
- 17 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Ohio Edison Company: We have reviewed the accompanying consolidated balance sheet of Ohio Edison Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiaries as of March 31, 2000, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Ohio Edison Company and subsidiaries as of December 31, 1999 (not presented herein), and, in our report dated February 11, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 12, 2000 - 18 - OHIO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- Operating revenues increased $11.2 million in the first quarter of 2000, compared to the same period of 1999. Higher operating revenues resulted from increased kilowatt-hour sales, which were partially offset by lower unit prices. Total retail kilowatt-hour sales to industrial customers were higher as the steel industry experienced a rebound in demand for domestic steel and the economy remained strong. However, sales to residential and commercial customers declined in the first quarter of 2000, compared to the first quarter of 1999. These sales were lower, partially as a result of reduced kilowatt-hour sales by Penn, a wholly owned subsidiary, as a portion of Penn's customers elected to receive energy from alternative suppliers. Mild weather in the first quarter of 2000 also adversely affected residential sales. However, sales to wholesale customers benefited from additional available internal generation and continued demand in the wholesale market. Higher sales to retail and wholesale customers combined to increase total kilowatt-hour sales by 6.8% in the first quarter of 2000, compared to the same period of 1999. Changes in kilowatt-hour sales by customer class between the first quarter of 2000 and the same period in 1999 are summarized in the following table. Changes in KWH Sales - -------------------- % Increase (Decrease) ---------- Residential (2.0)% Commercial (1.5)% Industrial 7.0% ------ Total Retail 1.4% ------ Wholesale 33.6% ----- Total Sales 6.8% ===== Operating Expenses and Taxes Total operating expenses and taxes increased $26.6 million in the first quarter of 2000 from the first quarter of 1999. The increase resulted from higher nuclear operating costs and depreciation and amortization which were partially offset by lower fuel and purchased power costs, other operating costs and general taxes. The $16.4 million reduction in fuel and purchased power costs resulted from a $15.8 million decrease in fuel expense and a $0.6 million reduction of purchased power costs. Two primary factors contributed to the lower fuel expense, which occurred despite a 7.9% increase in generation (nuclear up 33.2%; fossil unchanged). These factors included a higher proportion of nuclear generation (i.e., lower cost fuel) due to increased nuclear generation ownership, and the expiration of an above-market coal contract. The increased nuclear generation ownership resulted from the Duquesne asset swap, which was completed in December 1999. Nuclear operating costs also increased in the first quarter of 2000 compared to the same period in 1999 primarily as a result of refueling outage related costs at Beaver Valley Unit 1 and increased ownership of the Beaver Valley Plant following the asset swap. Other operating costs were lower in the first quarter of 2000, compared to the first quarter of 1999, primarily due to a larger nuclear insurance refund in 2000, as well as the transfer of ownership in PPE from Penn, a wholly owned subsidiary, to FirstEnergy Services Corp., an affiliated company. The transfer moved Penn's unregulated electric generation sales to an affiliated entity dedicated to unregulated sales activity with an effective date of December 31, 1999. Accelerated cost recovery in connection with OE's rate plan resulted in a $10.5 million increase in depreciation and amortization in the first quarter of 2000, compared to the same period in 1999. Total accelerated depreciation and amortization of nuclear and regulatory assets under the OE rate plan and Penn's restructuring plan was $57.3 million in the first quarter of 2000, up from $44.7 million in the first quarter of 1999. General taxes were lower primarily due to a tax settlement and reduced gross receipts taxes, which were partially offset by higher payroll taxes from the nuclear refueling outage at Beaver Valley Unit 1 and an increase in the Ohio unemployment tax rate. - 19 - OHIO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Net Interest Charges Net interest charges declined in the first quarter of 2000, compared to the same period in 1999, primarily due to refinancings and redemptions of long term debt. Interest on short term debt also declined as a result of reduced borrowing. Capital Resources and Liquidity - ------------------------------ OE and Penn (OE companies) have continuing cash requirements for planned capital expenditures and debt and preferred stock maturities. During the last three quarters of 2000, capital requirements for property additions and leases are expected to be about $215 million, including $34 million for nuclear fuel. The OE companies will need additional cash of approximately $118.4 million (excluding an OE revolving credit agreement) to meet sinking fund payments for preferred stock and maturing long-term debt during the remainder of 2000. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 2000, the OE companies had about $109.3 million of cash and temporary investments and $307.4 million of short-term indebtedness. In addition, the OE companies' available borrowing capability included $86.0 million from unused revolving lines of credit and a $2.0 million bank facility that provides for borrowing on a short-term basis at the bank's discretion. As of March 31, 2000, OE had the capability to issue up to $1.2 billion of additional first mortgage bonds on the basis of property additions and retired bonds. Regulatory Matters - ------------------ FirstEnergy has reached an agreement with major parties to the transition plan it filed in 1999, on OE's behalf, as well as for its other Ohio electric utility operating companies - CEI and TE - under Ohio's electric utility restructuring law. Other parties recommending approval to the PUCO included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, power marketers and others. If the PUCO adopts the agreement, OE will have the opportunity to recover its transition costs and would anticipate no charge to earnings resulting from implementation of the transition plan. Major provisions of the agreement consist of approval of the transition plan as filed, including recovery of transition costs through no later than 2006 for OE, except where a longer period of recovery is provided for in the agreement. FirstEnergy will also allow preferred access to non- affiliated marketers, brokers and aggregators over FirstEnergy's subsidiaries to 1,120 megawatts of generation capacity through 2005 at established prices for sales in the Ohio operating companies' franchise areas. The base electric rate freeze for distribution service for OE under the current regulatory plan will be extended from December 31, 2005 through December 31, 2007. The transition rate credits for customers under OE's current regulatory plan will also be extended through its transition cost recovery period. Beginning January 1, 2001, when Ohio electric customers have the choice to select their generation suppliers under the Ohio restructuring law, the stipulated agreement provides that OE customers who select alternative suppliers will have a shopping credit subtracted from their bills (equal to their energy usage times the forecast energy prices in the transition plan filing plus an additional incentive applied to the shopping credit of 45% for residential customers, 30% for commercial customers, and 15% for industrial customers). The amount of the incentive will serve to reduce amortization of transition costs during the market development period and will be recovered by OE through the extension of its transition cost recovery period. The agreement establishes shopping goals of 20% for each customer class. If these goals are not reached, the size of the incentive may be increased. If the customer shopping goals are still not reached by the end of 2005, the transition cost recovery period could be shortened for OE to reduce recovery by as much as $250 million, but any such adjustment would be computed on a class-by-class and pro-rata basis. The application of SFAS 71 to OE's generation business will be discontinued when the PUCO issues its order. OE will continue to bill and collect cost-based rates for its transmission and distribution services, which will remain regulated; accordingly, it is appropriate that OE continue the application of SFAS 71 to its transmission and distribution operations after December 31, 2000. - 20 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, -------------------- 2000 1999 -------- -------- (In thousands) OPERATING REVENUES $423,657 $423,943 -------- -------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 88,978 91,030 Nuclear operating costs 29,431 29,516 Other operating costs 82,217 84,917 -------- -------- Total operation and maintenance expenses 200,626 205,463 Provision for depreciation and amortization 58,014 57,687 General taxes 56,904 54,013 Income taxes 21,330 20,155 -------- -------- Total operating expenses and taxes 336,874 337,318 -------- -------- OPERATING INCOME 86,783 86,625 OTHER INCOME 3,428 1,353 -------- -------- INCOME BEFORE NET INTEREST CHARGES 90,211 87,978 -------- -------- NET INTEREST CHARGES: Interest on long-term debt 51,184 53,753 Allowance for borrowed funds used during construction (512) (216) Other interest expense (credit) 829 (479) -------- -------- Net interest charges 51,501 53,058 -------- -------- NET INCOME 38,710 34,920 PREFERRED STOCK DIVIDEND REQUIREMENTS 7,790 8,541 -------- -------- EARNINGS ON COMMON STOCK $ 30,920 $ 26,379 ======== ======== The preceding Notes to Financial Statements as they relate to The Cleveland Electric Illuminating Company are an integral part of these statements.
- 21 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) ASSETS ------ UTILITY PLANT: In service $4,486,664 $4,479,098 Less--Accumulated provision for depreciation 1,540,138 1,498,798 ---------- ---------- 2,946,526 2,980,300 ---------- ---------- Construction work in progress- Electric plant 59,215 55,002 Nuclear fuel 19,448 408 ---------- ---------- 78,663 55,410 ---------- ---------- 3,025,189 3,035,710 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Shippingport Capital Trust 493,132 517,256 Nuclear plant decommissioning trusts 188,780 183,291 Other 17,905 20,708 ---------- ---------- 699,817 721,255 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 5,912 376 Receivables- Customers 16,572 17,010 Associated companies 21,877 18,318 Other (less accumulated provisions of $1,000,000 for uncollectible accounts at both dates) 125,046 171,274 Notes receivable from associated companies 32,820 -- Materials and supplies, at average cost- Owned 33,955 39,294 Under consignment 32,673 23,721 Prepayments and other 71,847 56,447 ---------- ---------- 340,702 326,440 ---------- ---------- DEFERRED CHARGES: Regulatory assets 533,214 539,824 Goodwill 1,430,771 1,440,283 Property taxes 124,488 132,643 Other 10,692 12,606 ---------- ---------- 2,099,165 2,125,356 ---------- ---------- $6,164,873 $6,208,761 ========== ==========
- 22 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------ ------------ (In thousands) CAPITALIZATION AND LIABILITIES ------------------------------ CAPITALIZATION: Common stockholder's equity- Common stock, without par value, authorized 105,000,000 shares - 79,590,689 shares outstanding $ 931,962 $ 931,962 Retained earnings 55,574 34,654 ---------- ---------- Total common stockholder's equity 987,536 966,616 Preferred stock- Not subject to mandatory redemption 238,325 238,325 Subject to mandatory redemption 116,246 116,246 Long-term debt 2,694,621 2,682,795 ---------- ---------- 4,036,728 4,003,982 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt and preferred stock 235,357 240,684 Accounts payable- Associated companies 52,804 85,950 Other 36,635 50,570 Notes payable to associated companies 111,464 103,471 Accrued taxes 189,790 177,006 Accrued interest 63,764 60,740 Other 48,423 83,292 ---------- ---------- 738,237 801,713 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 571,292 567,478 Accumulated deferred investment tax credits 86,017 86,999 Nuclear plant decommissioning costs 197,973 192,484 Pensions and other postretirement benefits 220,002 220,731 Other 314,624 335,374 ---------- ---------- 1,389,908 1,403,066 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ---------- ---------- $6,164,873 $6,208,761 ========== ========== The preceding Notes to Financial Statements as they relate to The Cleveland Electric Illuminating Company are an integral part of these balance sheets.
- 23 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ----------------------- 2000 1999 --------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 38,710 $ 34,920 Adjustments to reconcile net income to net cash from operating activities- Provision for depreciation and amortization 58,014 57,687 Nuclear fuel and lease amortization 10,026 9,306 Other amortization (3,167) (465) Deferred income taxes, net 4,085 3,740 Investment tax credits, net (982) (987) Receivables 43,107 (15,193) Materials and supplies (3,613) (1,913) Accounts payable (47,081) 17,247 Other (41,779) (70,133) -------- -------- Net cash provided from operating activities 57,320 34,209 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing- Short-term borrowings, net 7,993 -- Redemptions and Repayments- Long-term debt 10,137 17,668 Short-term borrowings, net -- 11,845 Dividend Payments- Common stock 10,000 7,163 Preferred stock 7,790 8,541 -------- -------- Net cash used for financing activities 19,934 45,217 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 14,450 10,095 Loans to associated companies 32,820 5,568 Capital trust investments (24,124) (25,898) Other 8,704 4,321 -------- -------- Net cash used for (provided from) investing activities 31,850 (5,914) -------- -------- Net increase (decrease) in cash and cash equivalents 5,536 (5,094) Cash and cash equivalents at beginning of period 376 19,526 -------- -------- Cash and cash equivalents at end of period $ 5,912 $ 14,432 ======== ======== The preceding Notes to Financial Statements as they relate to The Cleveland Electric Illuminating Company are an integral part of these statements.
- 24 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Cleveland Electric Illuminating Company: We have reviewed the accompanying consolidated balance sheet of The Cleveland Electric Illuminating Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiary as of March 31, 2000, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of The Cleveland Electric Illuminating Company and subsidiary as of December 31, 1999 (not presented herein), and, in our report dated February 11, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 12, 2000 - 25 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- Operating revenues in the first quarter of 2000 were nearly unchanged from the same period in 1999. Underlying this small change in operating revenue was a change in the mix of kilowatt-hour sales. Total retail kilowatt-hour sales were slightly higher as sales to industrial and commercial customers continued to benefit from the strong economy. Mild weather contributed to lower residential sales during the first quarter of 2000. However, sales to wholesale customers were significantly higher due to an increase in available internal generation and the continued demand in the wholesale market. As a consequence, while first quarter kilowatt-hour sales increased substantially, these sales were offset by lower unit prices reflecting the lower margins available in the wholesale market, resulting in very little change in total operating revenues. Changes in kilowatt-hour sales by customer class between the first quarter of 2000 and the same period in 1999 are summarized in the following table. Changes in KWH Sales - -------------------- % Increase (Decrease) ---------- Residential (8.1)% Commercial 3.5% Industrial 5.6% ------ Total Retail 0.9% ------ Wholesale 570.5% ------ Total Sales 16.5% ====== Operating Expenses and Taxes Total operating expenses and taxes decreased slightly in the first quarter of 2000, compared the first quarter of 1999. Lower fuel and purchased power costs and other operating costs were substantially offset by additional taxes. The $2.1 million reduction in fuel and purchased power resulted from a $3.8 million decrease in fuel expense and a $1.7 million increase in purchased power costs. Several factors contributed to the lower fuel expense, which occurred despite a 21.1% increase in generation (fossil up 14.4%; nuclear up 29.1%). These factors included: - a higher proportion of nuclear generation (i.e., lower cost fuel) due to increased nuclear generation ownership; - the expiration of an above-market coal contract; and - more extensive use of lower cost western coal. The increased nuclear generation ownership resulted from the Duquesne asset swap, which was completed in December 1999. Other operating costs were also lower in the first quarter of 2000, compared to the first quarter of last year partially due to a larger nuclear insurance refund. - 26 - THE CLEVELAND ELECTRIC ILLUMINATING COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) Net Interest Charges Net interest charges decreased in the first quarter of 2000 from the same period a year ago due to refinancings and redemptions of long-term debt. The reduction was partially offset by an increase in interest expense on additional short-term borrowings. Capital Resources and Liquidity - ------------------------------ CEI has continuing cash requirements for planned capital expenditures and debt and preferred stock maturities. During the last three quarters of 2000, capital requirements for property additions and capital leases are expected to be about $116 million, including $35 million for nuclear fuel. CEI will need additional cash of approximately $208.5 million to meet sinking fund payments for preferred stock and maturing long-term debt during the remainder of 2000. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 2000, CEI had approximately $38.7 million of cash and temporary investments and $111.5 million of short-term indebtedness to associated companies. Under its first mortgage indenture, as of March 31, 2000, CEI had the capability to issue up to $615 million of additional first mortgage bonds on the basis of property additions and retired bonds. Regulatory Matters - ------------------ FirstEnergy has reached an agreement with major parties to the transition plan it had filed in 1999, on CEI's behalf, as well as for its other Ohio electric utility operating companies - OE and TE - under Ohio's electric utility restructuring law. Other parties recommending approval to the PUCO included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, power marketers and others. If the PUCO adopts the agreement, CEI will have the opportunity to recover its transition costs and would anticipate no charge to earnings resulting from implementation of the transition plan. Major provisions of the agreement consist of approval of the transition plan as filed, including recovery of transition costs through no later than 2008 for CEI, except where a longer period of recovery is provided for in the agreement. FirstEnergy will also allow preferred access to non-affiliated marketers, brokers and aggregators over FirstEnergy's subsidiaries to 1,120 megawatts of generation capacity through 2005 at established prices for sales in the Ohio operating companies' franchise areas. The base electric rate freeze for distribution service for CEI under the current regulatory plan will be extended from December 31, 2005 through December 31, 2007. The transition rate credits for customers under CEI's current regulatory plan will also be extended through its transition cost recovery period. Beginning January 1, 2001, when Ohio electric customers have the choice to select their generation suppliers under the Ohio restructuring law, the stipulated agreement provides that CEI customers who select alternative suppliers will have a shopping credit subtracted from their bills (equal to their energy usage times the forecast energy prices in the transition plan filing plus an additional incentive applied to the shopping credit of 45% for residential customers, 30% for commercial customers, and 15% for industrial customers). The amount of the incentive will serve to reduce amortization of transition costs during the market development period and will be recovered by CEI through the extension of its transition cost recovery period. The agreement establishes shopping goals of 20% for each customer class. If these goals are not reached, the size of the incentive may be increased. If the customer shopping goals are still not reached by the end of 2005, the transition cost recovery period could be shortened for CEI to reduce recovery by as much as $170 million, but any such adjustment would be computed on a class-by-class and pro-rata basis. The application of SFAS 71 to the nonnuclear generation businesses of CEI will be discontinued when the PUCO issues its order. CEI will continue to bill and collect cost-based rates for its transmission and distribution services, which will remain regulated; accordingly, it is appropriate that CEI continue the application of SFAS 71 to its transmission and distribution operations after December 31, 2000. - 27 - THE TOLEDO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, ---------------------- 2000 1999 -------- -------- (In thousands) OPERATING REVENUES $217,391 $224,262 -------- -------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 33,133 36,402 Nuclear operating costs 38,197 41,894 Other operating costs 37,213 33,514 -------- -------- Total operation and maintenance expenses 108,543 111,810 Provision for depreciation and amortization 26,180 25,743 General taxes 23,424 21,098 Income taxes 15,318 16,907 -------- -------- Total operating expenses and taxes 173,465 175,558 -------- -------- OPERATING INCOME 43,926 48,704 OTHER INCOME 2,689 2,922 -------- -------- INCOME BEFORE NET INTEREST CHARGES 46,615 51,626 -------- -------- NET INTEREST CHARGES: Interest on long-term debt 19,141 21,041 Allowance for borrowed funds used during construction (1,214) (202) Other interest expense (credit) (832) (1,361) -------- -------- Net interest charges 17,095 19,478 -------- -------- NET INCOME 29,520 32,148 PREFERRED STOCK DIVIDEND REQUIREMENTS 4,064 4,070 -------- -------- EARNINGS ON COMMON STOCK $ 25,456 $ 28,078 ======== ======== The preceding Notes to Financial Statements as they relate to The Toledo Edison Company are an integral part of these statements.
- 28 - THE TOLEDO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------ ------------ (In thousands) ASSETS ------ UTILITY PLANT: In service $1,787,508 $1,776,534 Less--Accumulated provision for depreciation 689,583 670,866 ---------- ---------- 1,097,925 1,105,668 ---------- ---------- Construction work in progress- Electric plant 120,755 95,854 Nuclear fuel 18,368 386 ---------- ---------- 139,123 96,240 ---------- ---------- 1,237,048 1,201,908 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Shippingport Capital Trust 280,472 295,454 Nuclear plant decommissioning trusts 127,282 123,500 Other 4,570 4,678 ---------- ---------- 412,324 423,632 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 301 312 Receivables- Customers 8,187 12,965 Associated companies 26,554 40,998 Other 4,214 9,827 Notes receivable from associated companies 2,697 7,863 Materials and supplies, at average cost- Owned 21,300 23,243 Under consignment 21,842 20,232 Prepayments and other 29,781 25,931 ---------- ---------- 114,876 141,371 ---------- ---------- DEFERRED CHARGES: Regulatory assets 379,546 385,284 Goodwill 462,097 465,169 Property taxes 43,448 43,448 Other 4,900 6,116 ---------- ---------- 889,991 900,017 ---------- ---------- $2,654,239 $2,666,928 ========== ==========
- 29 - THE TOLEDO EDISON COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) CAPITALIZATION AND LIABILITIES ------------------------------ CAPITALIZATION: Common stockholder's equity- Common stock, $5 par value, authorized 60,000,000 shares - 39,133,887 shares outstanding $ 195,670 $ 195,670 Other paid-in capital 328,559 328,559 Retained earnings 34,921 27,475 ---------- ---------- Total common stockholder's equity 559,150 551,704 Preferred stock not subject to mandatory redemption 210,000 210,000 Long-term debt 994,446 981,029 ---------- ---------- 1,763,596 1,742,733 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt 78,014 95,765 Accounts payable- Associated companies 10,696 20,537 Other 23,712 27,100 Notes payable to associated companies 50,710 33,876 Accrued taxes 42,267 57,742 Accrued interest 21,730 21,961 Other 59,098 60,414 ---------- ---------- 286,227 317,395 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 179,527 172,236 Accumulated deferred investment tax credits 38,269 38,748 Nuclear plant decommissioning costs 133,899 130,116 Pensions and other postretirement benefits 122,442 122,986 Other 130,279 142,714 ---------- ---------- 604,416 606,800 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ---------- ---------- $2,654,239 $2,666,928 ========== ========== The preceding Notes to Financial Statements as they relate to The Toledo Edison Company are an integral part of these balance sheets.
- 30 - THE TOLEDO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ---------------------- 2000 1999 --------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 29,520 $ 32,148 Adjustments to reconcile net income to net cash from operating activities- Provision for depreciation and amortization 26,180 25,743 Nuclear fuel and lease amortization 6,633 6,612 Deferred income taxes, net 6,608 3,682 Investment tax credits, net (479) (481) Receivables 24,835 (15,417) Materials and supplies 333 (2,380) Accounts payable (13,229) (1,108) Other (33,058) (37,480) -------- -------- Net cash provided from operating activities 47,343 11,319 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing- Short-term borrowings, net 16,834 -- Redemptions and Repayments- Long-term debt 20,884 12,434 Dividend Payments- Common stock 18,000 -- Preferred stock 4,064 4,070 -------- -------- Net cash used for financing activities 26,114 16,504 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 37,709 8,931 Loans to associated companies -- 2,862 Loan payments from associated companies (5,166) -- Capital investments (14,982) (15,370) Other 3,679 2,359 -------- -------- Net cash used for (provided from) investing activities 21,240 (1,218) -------- -------- Net decrease in cash and cash equivalents 11 3,967 Cash and cash equivalents at beginning of period 312 4,140 -------- -------- Cash and cash equivalents at end of period $ 301 $ 173 ======== ======== The preceding Notes to Financial Statements as they relate to The Toledo Edison Company are an integral part of these statements.
- 31 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Toledo Edison Company: We have reviewed the accompanying consolidated balance sheet of The Toledo Edison Company (an Ohio corporation and wholly owned subsidiary of FirstEnergy Corp.) and subsidiary as of March 31, 2000, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of The Toledo Edison Company and subsidiary as of December 31, 1999 (not presented herein), and, in our report dated February 11, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 12, 2000 - 32 - THE TOLEDO EDISON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- Operating revenues decreased by $6.9 million in the first quarter of 2000, compared to the same period in 1999. Underlying this decrease in operating revenues was a change in the mix of kilowatt-hour sales. Sales to commercial customers in the first quarter of 2000 were relatively unchanged from the same period in 1999. However, sales to residential and industrial customers were both lower in 2000. Mild weather principally contributed to lower residential sales in the first quarter of 2000. However, sales to wholesale customers increased significantly due to additional available internal generation coupled with continued demand in the wholesale market. The increase in sales to the wholesale market more than offset the decline in retail kilowatt-hour sales resulting in an increase of 8.9% in total sales. However, while first quarter kilowatt-hour sales increased substantially, these sale were offset by lower unit prices reflecting the lower margins available in the wholesale market, resulting in the net decrease in operating revenues. Changes in kilowatt-hour sales by customer class between the first quarter of 2000 and the same period in 1999 are summarized in the following table. Changes in KWH Sales - -------------------- % Increase (Decrease) ---------- Residential (8.9)% Commercial -- Industrial (2.9)% ------ Total Retail (3.8)% ------ Wholesale 80.6% ----- Total Sales 8.9% ===== Operating Expenses and Taxes Total operating expenses and taxes decreased $2.1 million in the first quarter of 2000 from the first quarter of 1999. The decrease resulted from lower fuel and purchased power and nuclear operating costs, which were partially offset by higher other operating costs and general taxes. The $3.3 million reduction in fuel and purchased power costs was comprised of a $0.5 million decrease in fuel expense and a $2.8 million reduction of purchased power costs. The expiration of an above-market coal contract contributed to the lower fuel expense which occurred despite an 11.3% increase in generation (fossil up 13.0%; nuclear up 10.1%). Nuclear operating costs were lower in the first three months of 2000, compared to the same period in 1999, due to lower costs at the Perry Plant and Beaver Valley Unit 2, which had refueling outages that began in the first quarter of 1999. Higher costs at the Bay Shore Plant and additional distribution expenses for forestry work combined to increase other expenses in the first quarter of 2000, compared to the first quarter of 1999. Net Interest Charges Net interest charges decreased in the first quarter of 2000 from the same period a year ago due to redemptions and refinancings of long-term debt. Interest on additional short-term borrowings partially offset the reduction of interest on long-term debt. Capital Resources and Liquidity - ------------------------------ TE has continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 2000, capital requirements for property additions and capital leases are expected to be about $75 million, including $20 million for nuclear fuel. TE will need additional cash of approximately $61.9 million for maturing long-term debt - 33 - THE TOLEDO EDISON COMOPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (Cont'd) during the remainder of 2000. These cash requirements are expected to be satisfied with internal cash and/or short-term credit arrangements. As of March 31, 2000, TE had approximately $3.0 million of cash and temporary investments and $50.7 million of short-term indebtedness to associated companies. Under its first mortgage indenture, as of March 31, 2000, TE had the capability to issue up to $373 million of additional first mortgage bonds on the basis of property additions and retired bonds. Regulatory Matters - ------------------ FirstEnergy has reached an agreement with major parties to the transition plan it filed in 1999, on TE's behalf, as well as for its other Ohio electric utility operating companies - OE and CEI - under Ohio's electric utility restructuring law. Other parties recommending approval to the PUCO included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, power marketers and others. If the PUCO adopts the agreement TE will have the opportunity to recover its transition costs and would anticipate no charges to earnings resulting from implementation of the transition plan. Major provisions of the agreement consist of approval of the transition plan as filed, including recovery of transition costs through no later than mid-2007 for TE, except where a longer period of recovery is provided for in the agreement. FirstEnergy will also allow preferred access to non-affiliated marketers, brokers and aggregators over FirstEnergy's subsidiaries to 1,120 megawatts of generation capacity through 2005 at established prices for sales in the Ohio operating companies' franchise areas. The base electric rate freeze for distribution service for TE under its current regulatory plan will be extended from December 31, 2005 through December 31, 2007. The transition rate credits for customers under TE's current regulatory plan will also be extended through its transition cost recovery period. Beginning January 1, 2001, when Ohio electric customers have the choice to select their generation suppliers under the Ohio restructuring law, the stipulated agreement provides that TE customers who select alternative suppliers will have a shopping credit subtracted from their bills (equal to their energy usage times the forecast energy prices in the transition plan filing plus an additional incentive applied to the shopping credit of 45% for residential customers, 30% for commercial customers, and 15% for industrial customers). The amount of the incentive will serve to reduce amortization of transition costs during the market development period and will be recovered by TE through the extension of its transition cost recovery period. The agreement establishes shopping goals of 20% for each customer class. If these goals are not reached, the size of the incentive may be increased. If the customer shopping goals are still not reached by the end of 2005, the transition cost recovery period could be shortened for TE to reduce recovery by as much as $80 million, but any such adjustment would be computed on a class-by-class and pro-rata basis. The application of SFAS 71 to the nonnuclear generation businesses of TE will be discontinued when the PUCO issues its order. TE will continue to bill and collect cost-based rates for its transmission and distribution services, which will remain regulated; accordingly, it is appropriate that TE continue the application of SFAS 71 to its transmission and distribution operations after December 31, 2000. - 34 - PENNSYLVANIA POWER COMPANY STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, ---------------------- 2000 1999 -------- -------- (In thousands) OPERATING REVENUES $ 83,951 $81,372 -------- ------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 13,390 16,912 Nuclear operating costs 45,507 6,713 Other operating costs 13,535 14,728 -------- ------- Total operation and maintenance expenses 72,432 38,353 Provision for depreciation and amortization 15,731 14,437 General taxes 7,058 5,904 Income taxes (credit) (4,903) 8,386 -------- ------- Total operating expenses and taxes 90,318 67,080 -------- ------- OPERATING INCOME (LOSS) (6,367) 14,292 OTHER INCOME 413 997 -------- ------- INCOME (LOSS) BEFORE NET INTEREST CHARGES (5,954) 15,289 -------- ------- NET INTEREST CHARGES: Interest expense 5,407 5,096 Allowance for borrowed funds used during construction (975) (146) -------- ------- Net interest charges 4,432 4,950 -------- ------- NET INCOME (LOSS) (10,386) 10,339 PREFERRED STOCK DIVIDEND REQUIREMENTS 926 1,157 -------- ------- EARNINGS (LOSS) ATTRIBUTABLE TO COMMON STOCK $(11,312) $ 9,182 ======== ======= The preceding Notes to Financial Statements as they relate to Pennsylvania Power Company are an integral part of these statements.
- 35 - PENNSYLVANIA POWER COMPANY BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) ASSETS ------ UTILITY PLANT: In service $ 652,584 $ 646,186 Less--Accumulated provision for depreciation 243,417 237,893 ---------- ---------- 409,167 408,293 ---------- ---------- Construction work in progress- Electric plant 25,085 18,558 Nuclear fuel 21,285 6,540 ---------- ---------- 46,370 25,098 ---------- ---------- 455,537 433,391 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Nuclear plant decommissioning trusts 111,366 104,775 Other 21,407 19,784 ---------- ---------- 132,773 124,559 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 324 5,670 Notes receivable from parent company 2,557 15,423 Receivables- Customers (less accumulated provisions of $3,601,000 and $3,537,000, respectively, for uncollectible accounts) 32,601 34,568 Associated companies 37,135 38,565 Other 12,819 8,896 Materials and supplies, at average cost 28,715 32,483 Prepayments 14,865 2,208 ---------- ---------- 129,016 137,813 ---------- ---------- DEFERRED CHARGES: Regulatory assets 301,273 314,593 Other 5,014 5,260 ---------- ---------- 306,287 319,853 ---------- ---------- $1,023,613 $1,015,616 ========== ==========
- 36 - PENNSYLVANIA POWER COMPANY BALANCE SHEETS (Unaudited)
March 31, December 31, 2000 1999 ------------- ------------ (In thousands) CAPITALIZATION AND LIABILITIES ------------------------------ CAPITALIZATION: Common stockholder's equity- Common stock, $30 par value, authorized 6,500,000 shares - 6,290,000 shares outstanding $ 188,700 $ 188,700 Other paid-in capital (310) (310) Retained earnings (accumulated deficit) (94) 11,218 ---------- ---------- Total common stockholder's equity 188,296 199,608 Preferred stock- Not subject to mandatory redemption 39,105 39,105 Subject to mandatory redemption 15,000 15,000 Long-term debt- Associated companies 29,222 18,007 Other 256,823 256,814 ---------- ---------- 528,446 528,534 ---------- ---------- CURRENT LIABILITIES: Currently payable long-term debt- Associated companies 13,966 13,504 Other 24,283 29,521 Accounts payable- Associated companies 52,667 26,220 Other 20,549 28,903 Accrued taxes 20,397 21,863 Accrued interest 3,886 6,592 Other 14,672 16,506 ---------- ---------- 150,420 143,109 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 175,654 182,702 Accumulated deferred investment tax credits 7,155 7,266 Nuclear plant decommissioning costs 114,860 107,816 Other 47,078 46,189 ---------- ---------- 344,747 343,973 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 2) ---------- ---------- $1,023,613 $1,015,616 ========== ========== The preceding Notes to Financial Statements as they relate to Pennsylvania Power Company are an integral part of these balance sheets.
- 37 - PENNSYLVANIA POWER COMPANY STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ---------------------- 2000 1999 -------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(10,386) $10,339 Adjustments to reconcile net income (loss) to net cash from operating activities- Provision for depreciation and amortization 15,731 14,437 Nuclear fuel and lease amortization 3,170 1,823 Deferred income taxes, net (3,622) (2,023) Investment tax credits, net (791) (183) Receivables (526) (3,785) Materials and supplies 3,768 (732) Accounts payable 18,093 6,185 Other (19,356) (12,451) -------- -------- Net cash provided from operating activities 6,081 13,610 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemptions and Repayments- Long-term debt 8,365 1,745 Dividend Payments- Common stock -- 31,765 Preferred stock 926 1,066 -------- -------- Net cash used for financing activities 9,291 34,576 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 13,191 4,633 Loan payment from parent (12,866) (20,242) Other 1,811 1,263 -------- -------- Net cash used for (provided from) investing activities 2,136 (14,346) -------- -------- Net decrease in cash and cash equivalents 5,346 6,620 Cash and cash equivalents at beginning of period 5,670 7,485 -------- -------- Cash and cash equivalents at end of period $ 324 $ 865 ======== ======== The preceding Notes to Financial Statements as they relate to Pennsylvania Power Company are an integral part of these statements.
- 38 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Pennsylvania Power Company: We have reviewed the accompanying balance sheet of Pennsylvania Power Company (a Pennsylvania corporation and wholly owned subsidiary of Ohio Edison Company) as of March 31, 2000, and the related statements of income and cash flows for the three-month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Pennsylvania Power Company as of December 31, 1999 (not presented herein), and, in our report dated February 11, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Cleveland, Ohio May 12, 2000 - 39 - PENNSYLVANIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations - --------------------- Operating revenues increased by $2.6 million in the first quarter of 2000, compared to the same period in 1999. Underlying this increase was a change in the mix of kilowatt-hour sales. Retail generation sales increased due to higher demand from the steel industry, which strongly rebounded from the depressed production levels experienced last year as a direct result of foreign imports of steel products. Total electric kilowatt-hour sales of generation increased significantly by 37.7% as sales to wholesale customers almost tripled from the first quarter of last year. The major increase in sales to wholesale customers occurred because of additional generation capacity received as part of the Duquesne asset swap and continued demand in the wholesale market. While first quarter generation sales increased substantially, these sales were offset by lower unit prices reflecting the lower margins available in the wholesale market, resulting in the modest increase in operating revenues. Total distribution deliveries (to customers in the Penn franchise territory) significantly increased on the strength of industrial sales. The rebound in the steel sector was a major contributing factor to the increase in kilowatt-hour sales. Mild weather in the first quarter of 2000 contributed to lower residential deliveries compared to the same period of 1999. Changes in kilowatt-hour generation sales and distribution deliveries in the first quarter of 2000 compared to the first quarter of 1999 are summarized in the following table. Changes in KWH Sales - -------------------- % Increase (Decrease) ---------- Electric Generation Sales: Retail 3.0% Wholesale 187.6% ------ Total Electric Generation Sales 37.7% ====== Distribution Deliveries: Residential (1.1)% Commercial 0.7% Industrial 29.2% ------ Total Distribution Deliveries 9.0% ====== Operating Expenses and Taxes Total operating expenses and taxes increased $23.2 million in the first quarter of 2000 from the same period of 1999. The increase resulted from higher nuclear operating costs, depreciation and amortization and general taxes which were partially offset by lower fuel and purchased power costs and other operating costs. The $3.5 million reduction in fuel and purchased power costs resulted from a $2.9 million decrease in fuel expense and a $0.6 million reduction in purchased power costs. Two primary factors contributed to the lower fuel expense, which occurred despite a 37.6% net increase in generation (nuclear up 150.8%; fossil down 13.6%). These factors included a higher proportion of nuclear generation (i.e., lower cost fuel) due to increased nuclear generation ownership and the expiration of an above-market coal contract. The increased nuclear generation ownership resulted from the Duquesne asset swap, which was completed in December 1999. Nuclear operating costs were much higher in the first quarter of 2000 compared to the same period in 1999 as a result of refueling outage costs at Beaver Valley Unit 1 combined with Penn's increased ownership of that unit and Beaver Valley Unit 2 as a result of the asset swap. Other operating costs were lower in the first quarter of 2000, compared to the first quarter of 1999 primarily due to the transfer of ownership in PPE to FirstEnergy Services Corp., an affiliated company. The transfer moved Penn's unregulated electric generation sales to an affiliated entity dedicated to unregulated sales activity, effective December 31, 1999. - 40 - PENNSYLVANIA POWER COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Cont'd) The provision for depreciation and amortization increased in the first quarter of 2000 compared to the same period of 1999, as a result of increases in the amortization of regulatory assets related to the Penn rate restructuring plan that began in 1999. General taxes increased in the first quarter of 2000 in part due to an increase in gross receipts tax resulting from higher taxable receipts. Capital Resources and Liquidity - ------------------------------- Penn has continuing cash requirements for planned capital expenditures and debt maturities. During the last three quarters of 2000, capital requirements for property additions and capital leases are expected to be about $28 million, including $7 million for nuclear fuel. Penn will need additional cash of approximately $24.0 million for maturing long-term debt during the remainder of 2000. These cash requirements are expected to be satisfied by internal cash. As of March 31, 2000, Penn had approximately $2.9 million of cash and temporary investments and no short-term indebtedness. Also, Penn had $2 million available from an unused bank facility as of March 31, 2000, which may be borrowed for up to several days at the bank's discretion. Under its first mortgage indenture, as of March 31, 2000, Penn had the capability to issue up to $181 million of additional first mortgage bonds on the basis of property additions and retired bonds. - 41 - PART II. OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The annual meeting of FirstEnergy shareholders was held on April 27, 2000. (b) At this meeting, the following persons were elected to FirstEnergy's Board of Directors: Number of Votes --------------------------- For Withheld ----------- --------- Dr. Carol A. Cartwright 183,742,058 7,079,706 William F. Conway 183,640,479 7,181,285 Paul J. Powers 183,813,374 7,008,390 George M. Smart 183,996,088 6,825,676 (c) At this meeting, the appointment of Arthur Andersen LLP, independent public accountants, as auditors for the year 2000 was ratified (ratification required a majority of votes cast): Number of Votes ------------------------------------- For Against Abstentions ----------- --------- ----------- 185,796,848 2,633,622 2,391,294 (d) At this meeting, a shareholder proposal designed to result in the election of the entire Board of Directors each year was rejected (passage required 80% of the 231,595,941 common shares outstanding): Number of Votes --------------------------------------------------- Broker For Against Abstentions Non-Votes ---------- ---------- ----------- ---------- 78,762,982 84,035,742 7,021,915 21,001,125 (e) At this meeting, a shareholder proposal to reinstate simple- majority vote on all issues that are submitted to shareholder vote was rejected (passage required 80% of the 231,595,941 common shares outstanding): Number of Votes --------------------------------------------------- Broker For Against Abstentions Non-Votes ---------- ---------- ----------- ---------- 79,078,310 83,613,566 7,128,773 21,001,115 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit Number ------- FirstEnergy, OE, CEI and Penn ----------------------------- 15 Letter from independent public accountants. - 42 - PART II. OTHER INFORMATION (Cont'd) - --------------------------- Item 6. Exhibits and Reports on Form 8-K (Cont'd) -------------------------------- TE -- None Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, neither FirstEnergy, OE, CEI, TE nor Penn has filed as an exhibit to this Form 10-Q any instrument with respect to long-term debt if the respective total amount of securities authorized thereunder does not exceed 10% of their respective total assets of FirstEnergy and its subsidiaries on a consolidated basis, or respectively, OE, CEI, TE or Penn, but hereby agrees to furnish to the Commission on request any such documents. (b) Reports on Form 8-K FirstEnergy, OE, CEI and TE - One combined report on Form 8-K was --------------------------- filed since December 31, 1999. A report dated April 18, 2000 reported that FirstEnergy Corp. had reached a stipulated agreement with major parties to the transition filing it made in December 1999 under Ohio's electric utility industry restructuring law. Penn ---- None - 43 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 12, 2000 FIRSTENERGY CORP. ----------------- Registrant OHIO EDISON COMPANY ------------------- Registrant THE CLEVELAND ELECTRIC ---------------------- ILLUMINATING COMPANY -------------------- Registrant THE TOLEDO EDISON COMPANY ------------------------- Registrant PENNSYLVANIA POWER COMPANY -------------------------- Registrant /s/ Harvey L. Wagner ---------------------------------- Harvey L. Wagner Controller Principal Accounting Officer - 44 - EX-15 2 EXHIBIT 15 May 12, 2000 FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that FirstEnergy Corp. has incorporated by reference in its Registration Statements No. 333-40065, No. 333-48587, No. 333-48651, No. 333-58279, No. 333-65409 and No. 333-75985 its Form 10-Q for the quarter ended March 31, 2000, which includes our report dated May 12, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP - 45 - EX-27 3
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for FirstEnergy Corp. and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's, except earnings per share.) 0001031296 FIRSTENERGY CORP. 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 PER-BOOK 9,117,895 2,668,357 1,258,580 5,063,016 0 18,107,848 23,091 3,568,340 1,001,704 4,593,135 256,246 648,395 6,056,213 193,945 0 159,882 572,739 38,464 0 46,314 5,542,515 18,107,848 1,607,930 97,899 1,234,086 1,331,985 275,945 0 275,945 135,027 140,918 0 0 84,455 469,930 327,915 .63 .63
EX-15 4 EXHIBIT 15 May 12, 2000 Ohio Edison Company 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that Ohio Edison Company has incorporated by reference in its Registration Statements No. 33-49135, No. 33-49259, No. 33-49413, No. 33- 51139, No. 333-01489 and No. 333-05277 its Form 10-Q for the quarter ended March 31, 2000, which includes our report dated May 12, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 5
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for Ohio Edison Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.) Income tax expense includes $5,053,000 related to other income. 0000073960 OHIO EDISON COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 PER-BOOK 4,611,130 1,427,982 856,635 1,813,496 0 8,709,243 1 2,098,728 544,718 2,643,447 140,000 200,070 2,207,858 147,475 0 159,882 332,796 5,000 0 3,367 2,869,348 8,709,243 644,365 51,674 478,195 524,816 119,549 12,323 131,872 51,077 80,795 2,808 77,987 59,000 179,493 289,783 0 0
EX-15 6 EXHIBIT 15 May 12, 2000 The Cleveland Electric Illuminating Company 76 South Main Street Akron, OH 44308 Gentlemen: We are aware that The Cleveland Electric Illuminating Company has incorporated by reference in its Registration Statements No. 33-55513, No. 333-47651 and No. 333-72891 its Form 10-Q for the quarter ended March 31, 2000, which includes our report dated May 12, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 7
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Cleveland Electric Illuminating Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's). Income tax expense includes $4,087,000 related to other income. 0000020947 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 PER-BOOK 3,025,189 699,817 340,702 2,099,165 0 6,164,873 931,962 0 55,574 987,536 116,246 238,325 2,694,621 111,464 0 0 175,030 33,464 0 26,863 1,781,324 6,164,873 423,657 25,417 315,544 336,874 86,783 3,428 90,211 51,501 38,710 7,790 30,920 10,000 204,011 57,320 0 0
EX-27 8
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for The Toledo Edison Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.) Income tax expense includes $1,273,000 related to other income. 0000352049 THE TOLEDO EDISON COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 PER-BOOK 1,237,048 412,324 114,876 889,991 0 2,654,239 195,670 328,559 34,921 559,150 0 210,000 994,446 50,710 0 0 61,930 0 0 16,084 761,919 2,654,239 217,391 16,591 158,147 173,465 43,926 2,689 46,615 17,095 29,520 4,064 25,456 18,000 75,522 47,343 0 0
EX-15 9 EXHIBIT 15 May 12, 2000 Pennsylvania Power Company 1 E. Washington Street P. O. Box 891 New Castle, PA 16103 Gentlemen: We are aware that Pennsylvania Power Company has incorporated by reference in its Registration Statements No. 33-62450 and No. 33-65156 its Form 10-Q for the quarter ended March 31, 2000, which includes our report dated May 12, 2000 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, ARTHUR ANDERSEN LLP EX-27 10
UT This schedule contains summary financial information extracted from the related Form 10-Q financial statements for Pennsylvania Power Company and is qualified in its entirety by reference to such financial statements. (Amounts in 1,000's.) Income tax expense includes $325,000 related to other income. 0000077278 PENNSYLVANIA POWER COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 MAR-31-2000 1 PER-BOOK 455,537 132,773 129,016 306,287 0 1,023,613 188,700 (310) (94) 188,296 15,000 39,105 286,045 0 0 0 23,974 0 0 14,275 456,918 1,023,613 83,951 (4,578) 95,221 90,318 (6,367) 413 (5,954) 4,432 (10,386) 926 (11,312) 0 19,106 6,081 0 0
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