EX-99.2 3 ex99_2.htm EXHIBIT 99.2 CONSOLIDATED REPORT TO FINANCIAL COMMUNITY Exhibit 99.2 Consolidated Report to Financial Community
Consolidated Report to the Financial Community                                             EXHIBIT 99.2
Second Quarter 2005
(Released July 27, 2005)
 
       
 
    Highlights
 
 After-Tax EPS Variance Analysis
2nd Qtr.
  
 
   n  Normalized non-GAAP* earnings, excluding 
 
 
 2Q 2004 Basic EPS - GAAP Basis
 
$       0.62
  
 
       unusual items, were $0.71 per share for the
 
 
    Unusual Items - 2004
 
0.05
  
 
       second quarter of 2005, compared with
 
 
 2Q 2004 Normalized Earnings - Non-GAAP Basis
 
$       0.67
  
 
       $0.67 per share for the second quarter of
 
 
    Electric Gross Margin:
 
 
  
 
       2004. GAAP earnings were $0.54 per share,
  
 
       - Nuclear Outage Replacement Power
 
(0.09)
  
 
       compared with $0.62 per share in the second
 
 
       - Other Electric Gross Margin
 
0.07
  
 
       quarter of 2004.
 
 
    Nuclear Operating Expenses
 
(0.06)
  
 
      
 
 
    Fossil Operating Expenses
 
0.01
  
 
       
  
 
    Pension and Other Employee Benefits
 
0.05
  
 
       
  
 
    Depreciation and Amortization
 
(0.02)
  
   
 
    Investment Income from COLI
 
0.02
 
        Financing Costs 0.04  
       Other 0.02  
   
 
 2Q 2005 Normalized Earnings - Non-GAAP Basis
 
$       0.71
  
   
 
    Unusual Items - 2005
 
(0.17)
  
   
 
 2Q 2005 Basic EPS - GAAP Basis
 
$       0.54
  
         
 
 
 
2Q 2005 Results vs. 2Q 2004
 
 
n
Electric distribution deliveries increased 2%. Residential and commercial deliveries increased 9% and 3%, respectively, while industrial deliveries decreased by 4%. Heating-degree-days were 26% higher than during the same period last year and 5% above normal. Cooling-degree-days were 9% lower than during the same period last year, although 12% above normal. Total electric generation sales rose 1% as a 2% increase in retail generation sales was partially offset by a 1% decrease in wholesale sales.
 
n
Electric gross margin decreased $10 million, or $0.02 per share, after adjusting for changes in regulatory deferrals. Replacement power costs for refueling outages at Beaver Valley Unit 2 and the Perry Plant reduced electric gross margin by $0.09 per share. This was partially offset by higher generation sales and prices, as well as increased distribution deliveries that contributed an increase of $0.07 per share in electric gross margin.
 
n
Nuclear operating expenses increased $33 million due to refueling outages at Beaver Valley Unit 2 and the Perry Plant this year versus no refueling outages last year.
 
n
Fossil operating expenses decreased $7 million as a result of fewer planned outages.
 
n
Pension and other employee benefit costs decreased approximately $26 million due to the voluntary $500 million contribution to the pension plan in September 2004, favorable market returns in 2004, and changes in health care benefits.
 
n
Total depreciation and amortization expenses, adjusted for changes in regulatory deferrals, increased by $12 million. The increase was primarily due to higher Ohio transition cost amortization and increased depreciation expense, partially offset by the deferral of incremental transmission and ancillary service-related MISO charges.
 
n
Higher investment income from corporate-owned life insurance increased net income by $6 million.
 

 
n
Net interest charges decreased $19 million. Financing activities during the quarter included $136 million in debt and preferred securities redemptions and $310 million of refinancing and repricing transactions.
 
n
During the quarter, we recognized a one-time charge of $72 million, or $0.22 per share, associated with the write-off of deferred tax benefits that will not be realized due to legislative changes in Ohio’s tax system enacted in June. We also recognized a one-time benefit of $28 million, or $0.05 per share, from the creation of a new regulatory asset associated with the approval of the JCP&L Phase II rate settlement.
 
2005 Revised Earnings and Cash Generation Guidance*
 
n
As a result of recent regulatory orders in Ohio and New Jersey, reduced fossil depreciation expenses, lower operating expenses, and favorable performance from our generation fleet, we have revised our 2005 normalized non-GAAP earnings guidance from $2.70 - $2.85 per share to $2.85 - $3.00 per share. Year-to-date normalized non-GAAP earnings now stand at $1.18 per share. We anticipate that the remaining earnings for the year, exclusive of any unusual items, will be allocated 55% to the third quarter and 45% to the fourth quarter.
 
n
Total cash generation (non-GAAP) guidance for 2005 has been revised to $620 million (from $560 million), with free cash flow (non-GAAP) guidance revised to $535 million (from $425 million). Our estimated 2005 free cash flow reflects capital expenditures of $1.0 billion.
 
 
2006 Earnings and Cash Generation Guidance*
 
n
Earnings guidance for 2006 has been established at $3.40 - $3.60 per share, exclusive of any unusual items. The increase over our revised 2005 earnings guidance reflects the net impact of a variety of regulatory and operating items, including the net reduction in Ohio transition cost amortization, increased generation margin, and growth in the wires business.
 
n
Total cash generation (non-GAAP) guidance for 2006 has been established at a range of $300 million to $400 million, with a free cash flow (non-GAAP) guidance range of $280 million to $380 million. Our estimated 2006 free cash flow reflects a capital expenditure range of $1.0 billion to $1.1 billion.
 
 
 
* The GAAP to Non-GAAP reconciliation statements are attached and available on the Investor Information section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005 Letter to the Investment Community, which is also posted on the website.



For additional information, please contact:

Kurt E. Turosky
Terrance G. Howson
Rey Y. Jimenez
Director, Investor Relations
Vice President, Investor Relations
Principal, Investor Relations
(330) 384-5500
(973) 401-8519
(330) 761-4239
 
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                         2
 

FirstEnergy Corp.
Consolidated Statements of Income
(In thousands except for per share amounts)
 
 
Consolidated Statements of Income
  
         
Three Months Ended June 30,
  
Six Months Ended June 30,
  
         
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
   Revenues  
 
                          
 (1)
 Electric sales 
        
$
2,478,413
  
$
2,645,165
  
$
(166,752
)
$
4,915,602
  
$
5,300,777
  
$
(385,175
)
 (2)
 FE Facilities 
          
56,391
   
50,301
   
6,090
   
102,099
   
94,720
   
7,379
 
 (3)
 MYR 
          
129,254
   
77,024
   
52,230
   
221,635
   
165,899
   
55,736
 
 (4)
 Other 
          
265,220
   
219,672
   
45,548
   
490,661
   
413,669
   
76,992
 
 (5)
 Total Revenues
          
2,929,278
   
2,992,162
   
(62,884
)
  
5,729,997
   
5,975,065
   
(245,068
)
                                               
 
 Expenses
                                            
 (6)
 Fuel 
          
280,228
   
191,562
   
88,666
   
513,117
   
389,921
   
123,196
 
 (7)
 Purchased power 
          
652,368
   
903,573
   
(251,205
)
  
1,314,811
   
1,839,540
   
(524,729
)
 (8)
 Other operating expenses 
          
729,199
   
704,390
   
24,809
   
1,482,093
   
1,368,833
   
113,260
 
 (9)
 FE Facilities 
          
56,212
   
49,028
   
7,184
   
103,904
   
95,506
   
8,398
 
 (10)
 MYR 
          
127,181
   
78,980
   
48,201
   
219,590
   
167,403
   
52,187
 
 (11)
 Provision for depreciation 
          
149,025
   
146,155
   
2,870
   
291,657
   
291,965
   
(308
)
 (12)
 Amortization of regulatory assets 
          
306,572
   
270,986
   
35,586
   
617,413
   
581,188
   
36,225
 
 (13)
 Deferral of new regulatory assets 
          
(120,162
)
  
(68,315
)
  
(51,847
)
  
(179,669
)
  
(112,720
)
  
(66,949
)
 (14)
 General taxes 
          
167,865
   
157,732
   
10,133
   
353,044
   
336,722
   
16,322
 
 (15)
 Total Expenses
          
2,348,488
   
2,434,091
   
(85,603
)
  
4,715,960
   
4,958,358
   
(242,398
)
                                               
 
 Income Before Interest and
                                           
 (16)
 Income Taxes
          
580,790
   
558,071
   
22,719
   
1,014,037
   
1,016,707
   
(2,670
)
 
 Net interest charges: 
                                            
 (17)
 Interest expense
          
161,714
   
179,542
   
(17,828
)
  
326,358
   
352,048
   
(25,690
)
 (18)
 Capitalized interest
          
(4,697
)
  
(5,280
)
  
583
   
(4,952
)
  
(11,750
)
  
6,798
 
 (19)
 Subsidiaries' preferred stock dividends
          
3,733
   
5,389
   
(1,656
)
  
10,286
   
10,670
   
(384
)
 (20)
 Net interest charges 
          
160,750
   
179,651
   
(18,901
)
  
331,692
   
350,968
   
(19,276
)
 (21)
 Income taxes 
          
241,275
   
176,560
   
64,715
   
362,550
   
291,530
   
71,020
 
 (22)
 Income before discontinued operations 
          
178,765
   
201,860
   
(23,095
)
  
319,795
   
374,209
   
(54,414
)
 (23)
 Discontinued operations 
          
(773
)
  
2,185
   
(2,958
)
  
17,923
   
3,835
   
14,088
 
 (24)
 Net Income
        
$
177,992
  
$
204,045
  
$
(26,053
)
$
337,718
  
$
378,044
  
$
(40,326
)
                                               
 
 Basic Earnings Per Common Share:
                                            
 (25)
 Before discontinued operations 
        
$
0.54
  
$
0.61
  
$
(0.07
)
$
0.98
  
$
1.15
  
$
(0.17
)
 (26)
 Discontinued operations 
          
-
   
0.01
   
(0.01
)
  
0.05
   
0.01
   
0.04
 
 (27)
 Basic Earnings Per Common Share
        
$
0.54
  
$
0.62
  
$
(0.08
)
$
1.03
  
$
1.16
  
$
(0.13
)
 
 Weighted Average Number of
                                           
 (28)
 Basic Shares Outstanding
          
328,063
   
327,284
   
779
   
327,986
   
327,171
   
815
 
                                               
 
 Diluted Earnings Per Common Share:
                                            
 (29)
 Before discontinued operations 
        
$
0.54
  
$
0.61
  
$
(0.07
)
$
0.97
  
$
1.14
  
$
(0.17
)
 (30)
 Discontinued operations 
          
-
   
0.01
 
 
(0.01
)
  
0.05
   
0.01
 
 
0.04
  
 (31)
 Diluted Earnings Per Common Share
        
$
0.54
  
$
0.62
  
$
(0.08
)
$
1.02
  
$
1.15
  
$
(0.13
)
 
 Weighted Average Number of
                                           
 (32)
 Diluted Shares Outstanding
          
329,879
   
329,103
   
776
   
329,679
   
329,061
   
618
 
                                               
 
 
 
Consolidated Report to the Financial Community - 2ndQuarter                                                                        3
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)

                                 
         
Three Months Ended June 30, 2005
  
                                 
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
   Revenues                            
 (1)
 Electric sales 
        
$
1,164,685
  
$
1,313,728
  
$
-
  
$
-
  
$
-
  
$
2,478,413
  
 (2)
 FE Facilities 
          
-
   
-
   
56,391
   
-
   
-
   
56,391
 
 (3)
 MYR 
          
-
   
-
   
-
   
129,254
   
-
   
129,254
 
 (4)
 Other 
          
186,174
   
64,879
   
-
   
7,527
   
6,640
   
265,220
 
 (5)
 Internal Revenues 
          
79,972
   
-
   
-
   
-
   
(79,972
)
  
-
 
 (6)
 Total Revenues
          
1,430,831
   
1,378,607
   
56,391
   
136,781
   
(73,332
)
  
2,929,278
 
                                               
 
 Expenses
                                            
 (7)
 Fuel 
          
-
   
280,228
   
-
   
-
   
-
   
280,228
 
 (8)
 Purchased power 
          
-
   
652,368
   
-
   
-
   
-
   
652,368
 
 (9)
 Other operating expenses 
          
408,174
   
398,889
   
-
   
(4,048
)
  
(73,816
)
  
729,199
 
 (10)
 FE Facilities 
          
-
   
-
   
56,212
   
-
   
-
   
56,212
 
 (11)
 MYR 
          
-
   
-
   
-
   
127,181
   
-
   
127,181
 
 (12)
 Provision for depreciation 
          
134,995
   
7,128
   
-
   
523
   
6,379
   
149,025
 
 (13)
 Amortization of regulatory assets 
          
306,572
   
-
   
-
   
-
   
-
   
306,572
 
 (14)
 Deferral of new regulatory assets 
          
(120,162
)
  
-
   
-
   
-
   
-
   
(120,162
)
 (15)
 General taxes 
          
149,676
   
13,568
   
-
   
761
   
3,860
   
167,865
 
 (16)
 Total Expenses
          
879,255
   
1,352,181
   
56,212
   
124,417
   
(63,577
)
  
2,348,488
 
                                               
 (17)
 Income Before Interest and Income Taxes
          
551,576
   
26,426
   
179
   
12,364
   
(9,755
)
  
580,790
 
 
 Net interest charges: 
                                            
 (18)
 Interest expense
          
99,301
   
8,840
   
234
   
2,131
   
51,208
   
161,714
 
 (19)
 Capitalized interest
          
(4,133
)
  
(525
)
  
-
   
(2
)
  
(37
)
  
(4,697
)
 (20)
 Subsidiaries' preferred stock dividends
          
3,733
   
-
   
-
   
-
   
-
   
3,733
 
 (21)
 Net interest charges 
          
98,901
   
8,315
   
234
   
2,129
   
51,171
   
160,750
 
 (22)
 Income taxes 
          
185,597
   
7,425
   
2,944
   
3,957
   
41,352
   
241,275
 
 (23)
 Income before discontinued operations 
          
267,078
   
10,686
   
(2,999
)
  
6,278
   
(102,278
)
  
178,765
 
 (24)
 Discontinued operations 
          
-
   
-
   
222
   
(995
)
  
-
   
(773
)
 (25)
 Net Income
        
$
267,078
  
$
10,686
  
$
(2,777
)
$
5,283
  
$
(102,278
)
$
177,992
  
                                               
                                               
 
(a) Other consists of MYR (a construction service company); natural gas operations and telecommunications services. 
  
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest  
  
 
        expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to expenses
 
 
     for internal management reporting purposes and elimination of intersegment transactions.
  
                                               

 

 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                       4
 
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)


 
         
Three Months Ended June 30, 2004
  
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
   Revenues                            
 (1)
Electric sales 
        
$
1,125,486
  
$
1,519,679
  
$
-
  
$
-
  
$
-
  
$
2,645,165
  
 (2)
FE Facilities 
          
-
   
-
   
50,301
   
-
   
-
   
50,301
 
 (3)
MYR 
          
-
   
-
   
-
   
77,024
   
-
   
77,024
 
 (4)
Other 
          
152,713
   
30,593
   
-
   
41,583
   
(5,217
)
  
219,672
 
 (5)
Internal Revenues 
          
79,597
   
-
   
-
   
-
   
(79,597
)
  
-
 
 (6)
 Total Revenues
          
1,357,796
   
1,550,272
   
50,301
   
118,607
   
(84,814
)
  
2,992,162
 
                                               
 
 Expenses
                                            
 (7)
Fuel 
          
-
   
191,562
   
-
   
-
   
-
   
191,562
 
 (8)
Purchased power 
          
-
   
903,573
   
-
   
-
   
-
   
903,573
 
 (9)
Other operating expenses 
          
375,078
   
355,665
   
-
   
24,610
   
(50,963
)
  
704,390
 
 (10)
FE Facilities 
          
-
   
-
   
49,028
   
-
   
-
   
49,028
 
 (11)
MYR 
          
-
   
-
   
-
   
78,980
   
-
   
78,980
 
 (12)
Provision for depreciation 
          
126,652
   
8,770
   
527
   
41
   
10,165
   
146,155
 
 (13)
Amortization of regulatory assets 
          
270,986
   
-
   
-
   
-
   
-
   
270,986
 
 (14)
Deferral of new regulatory assets 
          
(68,315
)
  
-
   
-
   
-
   
-
   
(68,315
)
 (15)
General taxes 
          
135,428
   
17,551
   
-
   
669
   
4,084
   
157,732
 
 (16)
 Total Expenses
          
839,829
   
1,477,121
   
49,555
   
104,300
   
(36,714
)
  
2,434,091
 
                                               
 (17)
 Income Before Interest and Income Taxes
          
517,967
   
73,151
   
746
   
14,307
   
(48,100
)
  
558,071
 
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
112,193
   
11,098
   
143
   
737
   
55,371
   
179,542
 
 (19)
 Capitalized interest
          
(4,072
)
  
(1,167
)
  
-
   
80
   
(121
)
  
(5,280
)
 (20)
 Subsidiaries' preferred stock dividends
          
5,389
   
-
   
-
   
-
   
-
   
5,389
 
 (21)
Net interest charges 
          
113,510
   
9,931
   
143
   
817
   
55,250
   
179,651
 
 (22)
Income taxes 
          
170,946
   
25,920
   
318
   
(22,103
)
  
1,479
   
176,560
 
 (23)
Income before discontinued operations 
          
233,511
   
37,300
   
285
   
35,593
   
(104,829
)
  
201,860
 
 (24)
Discontinued operations 
          
-
   
-
   
1,172
   
1,013
   
-
   
2,185
 
 (25)
 Net Income
        
$
233,511
  
$
37,300
  
$
1,457
  
$
36,606
  
$
(104,829
)
$
204,045
  
                                               
                                               
 
(a) Other consists of MYR (a construction service company); natural gas operations and telecommunications services. 
                
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest  
    
 
     expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to expenses
     
 
     for internal management reporting purposes and elimination of intersegment transactions.
                
                                               
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                         5
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)

                                 
         
Three Months Ended June 30, 2005 vs. Three Months Ended June 30, 2004
  
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
 
 Revenues
  
 
                          
 (1)
Electric sales 
        
$
39,199
  
$
(205,951
)
$
-
  
$
-
  
$
-
  
$
(166,752
)
 (2)
FE Facilities 
          
-
   
-
   
6,090
   
-
   
-
   
6,090
 
 (3)
MYR 
          
-
   
-
   
-
   
52,230
   
-
   
52,230
 
 (4)
Other 
          
33,461
   
34,286
   
-
   
(34,056
)
  
11,857
   
45,548
 
 (5)
Internal Revenues 
          
375
   
-
   
-
   
-
   
(375
)
  
-
 
 (6)
 Total Revenues
          
73,035
   
(171,665
)
  
6,090
   
18,174
   
11,482
   
(62,884
)
                                               
 
 Expenses
                                            
 (7)
Fuel 
          
-
   
88,666
   
-
   
-
   
-
   
88,666
 
 (8)
Purchased power 
          
-
   
(251,205
)
  
-
   
-
   
-
   
(251,205
)
 (9)
Other operating expenses 
          
33,096
   
43,224
   
-
   
(28,658
)
  
(22,853
)
  
24,809
 
 (10)
FE Facilities 
          
-
   
-
   
7,184
   
-
   
-
   
7,184
 
 (11)
MYR 
          
-
   
-
   
-
   
48,201
   
-
   
48,201
 
 (12)
Provision for depreciation 
          
8,343
   
(1,642
)
  
(527
)
  
482
   
(3,786
)
  
2,870
 
 (13)
Amortization of regulatory assets 
          
35,586
   
-
   
-
   
-
   
-
   
35,586
 
 (14)
Deferral of new regulatory assets 
          
(51,847
)
  
-
   
-
   
-
   
-
   
(51,847
)
 (15)
General taxes 
          
14,248
   
(3,983
)
  
-
   
92
   
(224
)
  
10,133
 
 (16)
 Total Expenses
          
39,426
   
(124,940
)
  
6,657
   
20,117
   
(26,863
)
  
(85,603
)
                                               
 (17)
 Income Before Interest and Income Taxes
          
33,609
   
(46,725
)
  
(567
)
  
(1,943
)
  
38,345
   
22,719
 
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
(12,892
)
  
(2,258
)
  
91
   
1,394
   
(4,163
)
  
(17,828
)
 (19)
 Capitalized interest
          
(61
)
  
642
   
-
   
(82
)
  
84
   
583
 
 (20)
 Subsidiaries' preferred stock dividends
          
(1,656
)
  
-
   
-
   
-
   
-
   
(1,656
)
 (21)
Net interest charges 
          
(14,609
)
  
(1,616
)
  
91
   
1,312
   
(4,079
)
  
(18,901
)
 (22)
Income taxes 
          
14,651
   
(18,495
)
  
2,626
   
26,060
   
39,873
   
64,715
 
 (23)
Income before discontinued operations 
          
33,567
   
(26,614
)
  
(3,284
)
  
(29,315
)
  
2,551
   
(23,095
)
 (24)
Discontinued operations 
          
-
   
-
   
(950
)
  
(2,008
)
  
-
   
(2,958
)
 (25)
 Net Income
        
$
33,567
  
$
(26,614
)
$
(4,234
)
$
(31,323
)
$
2,551
  
$
(26,053
)
                                               
                                               
 
(a) Other consists of MYR (a construction service company); natural gas operations and telecommunications services. 
    
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest  
    
 
     expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to expenses
   
 
     for internal management reporting purposes and elimination of intersegment transactions.
          
                                               

 
Consolidated Report to the Financial Community - 2nd Quarter                                                                         6
 
FirstEnergy Corp.
Financial Statements
(In thousands)
Condensed Consolidated Balance Sheet 
  
        
As of
  
As of
  
        
June 30, 2005
  
December 31, 2004
  
 Assets             
 Current Assets:              
 Cash and cash equivalents
        
$
49,748
  
$
52,941
  
 Receivables
          
1,444,552
   
1,356,437
 
 Other
          
809,735
   
602,969
 
Total Current Assets 
          
2,304,035
   
2,012,347
 
                     
Property, Plant, and Equipment 
          
13,652,235
   
13,478,356
 
Investments 
          
3,314,068
   
3,273,966
 
Deferred charges 
          
11,940,905
    
12,303,275
 
Total Assets 
        
$
31,211,243
  
$
31,067,944
  
                     
Liabilities and Capitalization 
                    
Current Liabilities: 
                    
 Currently payable long-term debt
        
$
943,740
  
$
940,944
  
 Short-term borrowings
          
554,824
   
170,489
 
 Accounts payable
          
696,310
   
610,589
 
 Other
          
1,559,098
    
1,586,413
 
Total Current Liabilities 
          
3,753,972
    
3,308,435
 
                     
Capitalization: 
                    
 Common stockholders' equity
          
8,640,396
   
8,589,294
 
 Preferred stock
          
213,719
   
335,123
 
 Long-term debt and other long-term obligations
          
9,568,954
   
10,013,349
 
Total Capitalization 
          
18,423,069
   
18,937,766
 
Noncurrent Liabilities 
          
9,034,202
    
8,821,743
 
Total Liabilities and Capitalization 
        
$
31,211,243
  
$
31,067,944
  
                     
 
Adjusted Capitalization (Including Off-Balance Sheet Items)
  
        
As of June 30,
  
        
2005
  
% Total
  
2004
  
% Total
  
Total common equity 
        
$
8,640,396
    
41
%
$
8,432,963
    
39
%
Preferred stock  
          
213,719
   
1
%
  
335,123
   
2
%
Long-term debt * 
          
10,512,694
   
49
%
  
11,393,700
   
52
%
Short-term debt 
          
554,824
   
3
%
  
74,436
   
0
%
Off-balance sheet debt equivalents: 
                                
 Sale-leaseback net debt equivalents
          
1,294,166
   
6
%
  
1,352,729
   
6
%
 Accounts receivable factoring **
          
-
   
0
%
  
178,000
   
1
%
Total  
        
$
21,215,799
    
100
%
$
21,766,951
    
100
%
                                 
 
                       
  GENERAL INFORMATION  
 
  
Three Months Ended June 30,
 
Six Months Ended June 30,
 
       
2005
  
2004
  
2005
  
2004
  
L-t debt and preferred stock redemptions
        
$
494,610
  
$
721,023
  
$
828,398
  
$
989,943
  
New L-t debt issues
        
$
245,350
  
$
303,162
  
$
245,350
  
$
884,720
  
Short-term debt increase (decrease) **
        
$
245,803
  
$
(59,563
)
$
385,614
  
$
(447,104
)
Capital expenditures
        
$
232,791
  
$
196,094
  
$
461,675
  
$
334,500
  
                                 
*   Includes amounts due to be paid within one year, JCP&L securitization of $273 million and $289 million in 2005 and 2004, respectively.
  
** Off-balance sheet accounts receivable factoring agreement renewed as an on-balance sheet short-term debt financing agreement in June 2005.
  
   
                               
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        7
 
FirstEnergy Corp.
Financial Statements
(In thousands)
                       
Condensed Consolidated Statements of Cash Flows
  
   
 
 Three Months Ended June 30,  
Six Months Ended June 30,
  
       
2005
  
2004
  
2005
  
2004
  
Cash flows from operating activities:
                    
Net income
        
$
177,992
  
$
204,045
  
$
337,718
  
$
378,044
  
Adjustments to reconcile net income to net cash from
                               
operating activities:
                                
Depreciation and amortization of regulatory assets,  
                                
 nuclear fuel, and leases
          
354,365
   
371,958
   
766,979
   
805,439
 
Deferred purchased power and other costs 
          
(82,990
)
  
(60,974
)
  
(192,223
)
  
(144,881
)
Deferred income taxes and investment tax credits 
          
76,041
   
(100,056
)
  
61,885
   
(94,133
)
Loss (income) from discontinued operations 
          
773
   
(2,185
)
  
(17,923
)
  
(3,835
)
Change in working capital and other 
          
(163,855
)
  
(81,228
)
  
(25,320
)
  
38,777
 
Cash flows from operating activities
        
$
362,326
  
$
331,560
  
$
931,116
  
$
979,411
  
                                 
Cash flows from financing activities
          
(109,174
)
  
(573,360
)
  
(468,394
)
  
(813,384
)
                                 
Cash flows from investing activities
          
(284,595
)
  
61,069
   
(465,915
)
  
(180,464
)
                                 
Net decrease in cash and cash equivalents
          
(31,443
)
  
(180,731
)
  
(3,193
)
  
(14,437
)
Cash and cash equivalents at beginning of period
          
81,191
   
280,269
   
52,941
   
113,975
 
Cash and cash equivalents at end of period
        
$
49,748
  
$
99,538
  
$
49,748
  
$
99,538
  
                                 
 
 REGULATORY DEFERRALS       
Three Months Ended June 30,
  
Six Months Ended June 30,
  
        
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
 Ohio Transition Plan and MISO costs                             
 Beginning balance
        
$
769,526
  
$
498,020
        
$
710,019
  
$
453,614
        
 Deferral of shopping incentives
          
57,583
   
52,238
 
$
5,345
    
102,996
   
93,799
 
$
9,197
  
 Interest on shopping incentives
          
11,098
   
14,265
 
 
(3,167
)
  
21,531
   
14,265
 
 
7,266
  
 Deferral of new regulatory assets
          
23,716
   
1,811
   
21,905
   
27,377
   
4,656
   
22,721
 
 Current period deferrals
        
$
92,397
  
$
68,314
  
$
24,083
  
$
151,904
  
$
112,720
  
$
39,184
  
                                             
Ending Balance  
        
$
861,923
  
$
566,334
        
$
861,923
  
$
566,334
        
Deferred Energy Costs - New Jersey 
                                            
 Beginning balance
        
$
472,400
  
$
425,400
        
$
445,600
  
$
440,900
        
 Deferral (recovery) of energy costs
          
45,400
   
(22,700
)
$
68,100
    
72,200
   
(38,200
)
$
110,400
  
Ending Balance 
        
$
517,800
  
$
402,700
        
$
517,800
  
$
402,700
        
                                             
 
                                
 UNUSUAL ITEMS     
Three Months Ended June 30,
  
Six Months Ended June 30,
  
        
2005
  
2004
  
Change
  
2005
  
2004
 
Change
  
 Gain (Loss) on Non-Core Asset Sales                             
 FES Natural Gas Business (a)
        
$
-
  
$
-
  
$
-
  
$
8,229
  
$
-
  
$
8,229
  
 FirstCommunications (b)
          
-
   
-
   
-
   
6,800
   
-
   
6,800
 
 FSG Subsidiary - Elliott-Lewis (a) (f)
          
-
   
-
   
-
   
51
   
-
   
51
 
 Venture Capital Funds (b)
          
-
   
-
   
-
   
2,015
   
-
   
2,015
 
 Great Lakes Energy Partner (b) (g)
          
-
   
15,777
   
(15,777
)
  
-
   
15,777
   
(15,777
)
 MYR Subsidiary (a)
          
-
   
-
   
-
   
(524
)
  
-
   
(524
)
 FSG Subsidiary - Cranston (a) (h)
          
(42
)
  
-
   
(42
)
  
(42
)
  
-
   
(42
)
Total Gain on Non-Core Asset Sales 
          
(42
)
  
15,777
   
(15,819
)
  
16,529
   
15,777
   
752
 
Litigation Settlement (c) 
          
-
   
(17,980
)
  
17,980
   
-
   
(17,980
)
  
17,980
 
EPA Settlement - Environmental Projects (c) 
          
-
   
-
   
-
   
(10,000
)
  
-
   
(10,000
)
EPA Penalty (c) (i) 
          
-
   
-
   
-
   
(8,500
)
  
-
   
(8,500
)
NRC Fine (c) (i) 
          
-
   
-
   
-
   
(3,450
)
  
-
   
(3,450
)
JCP&L Rate Settlement (d) 
          
27,765
   
-
   
27,765
   
27,765
   
-
   
27,765
 
Total-Pretax Items 
          
27,723
   
(2,203
)
  
29,926
   
22,344
   
(2,203
)
  
24,547
 
                                             
Ohio Tax Write-off (e) 
          
(71,702
)
  
-
   
(71,702
)
  
(71,702
)
  
-
   
(71,702
)
                                             
EPS Effect 
        
$
(0.17
)
$
(0.05
)
$
(0.12
)
$
(0.15
)
$
(0.05
)
$
(0.10
)
                                             
(a) Included in "Discontinued Operations" 
                      
(f) Before income tax benefit of $12.2 million
  
(b) Included in "Other Revenues" 
                      
(g) Before income taxes of $22.6 million
  
(c) Included in "Other Operating Expenses" 
                      
(h) Before income tax benefit of $0.4 million
  
(d) Included in "Deferral of New Regulatory Assets" 
                      
(i) No income tax benefit
  
(e) Included in "Income Taxes" 
                                            
                                             
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        8
 
FirstEnergy Corp.
Statistical Summary
                                  
 ELECTRIC SALES STATISTICS         
Three Months Ended June 30,
  
Six Months Ended June 30,
  
 (kWh in millions)         
2005
  
2004
  
Change
  
2005
2004
  
Change
  
 Electric Generation Sales                               
 Retail- Regulated 
                
20,073
   
19,245
   
4.3
%
  
41,719
 
39,987
   
4.3
%
 Retail - Competitive 
                
3,444
   
3,751
   
-8.2
%
  
6,858
 
7,767
   
-11.7
%
 Total Retail
                
23,517
   
22,996
   
2.3
%
  
48,577
 
47,754
   
1.7
%
 Wholesale * 
                
7,164
   
7,230
   
-0.9
%
  
13,595
 
13,838
   
-1.8
%
 Total Electric Generation Sales 
                
30,681
   
30,226
   
1.5
%
  
62,172
 
61,592
   
0.9
%
 Electric Distribution Deliveries 
                                                
 Ohio       - Residential
          
 
    
3,811
   
3,342
   
14.0
%
  
8,334
 
7,943
   
4.9
%
            - Commercial
                
3,616
   
3,489
   
3.6
%
  
7,377
 
7,090
   
4.0
%
            - Industrial
                
5,842
   
6,000
   
-2.6
%
  
11,656
 
11,664
   
-0.1
%
            - Other
                
95
   
92
   
3.3
%
  
193
 
186
   
3.8
%
            Total Ohio
                
13,364
   
12,923
   
3.4
%
  
27,560
 
26,883
   
2.5
%
 Pennsylvania         - Residential
          
 
    
2,426
   
2,271
   
6.8
%
  
5,600
 
5,412
   
3.5
%
            - Commercial
                
2,593
   
2,532
   
2.4
%
  
5,287
 
5,082
   
4.0
%
            - Industrial
                
2,585
   
2,754
   
-6.1
%
  
5,205
 
5,144
   
1.2
%
            - Other
                
20
   
19
   
5.3
%
  
42
 
39
   
7.7
%
            Total Pennsylvania
                
7,624
   
7,576
   
0.6
%
  
16,134
 
15,677
   
2.9
%
 New Jersey       - Residential 
          
 
    
2,216
   
2,109
   
5.1
%
  
4,570
 
4,474
   
2.1
%
            - Commercial
                
2,297
   
2,242
   
2.5
%
  
4,526
 
4,387
   
3.2
%
            - Industrial
                
751
   
784
   
-4.2
%
  
1,495
 
1,528
   
-2.2
%
            - Other
                
22
   
14
   
57.1
%
  
43
 
33
   
30.3
%
            Total New Jersey
                
5,286
   
5,149
   
2.7
%
  
10,634
 
10,422
   
2.0
%
 Total Residential 
                
8,453
   
7,722
   
9.5
%
  
18,504
 
17,829
   
3.8
%
 Total Commercial 
                
8,506
   
8,263
   
2.9
%
  
17,190
 
16,559
   
3.8
%
 Total Industrial 
                
9,178
   
9,538
   
-3.8
%
  
18,356
 
18,336
   
0.1
%
 Total Other 
                
137
   
125
   
9.6
%
  
278
 
258
   
7.8
%
 Total Distribution Deliveries 
                
26,274
   
25,648
   
2.4
%
  
54,328
 
52,982
   
2.5
%
                                                 
 Electric Sales Shopped 
                                                
 Ohio        - Residential 
          
 
    
1,725
   
1,539
   
12.1
%
  
3,608
 
3,419
   
5.5
%
            - Commercial
                
1,789
   
1,726
   
3.7
%
  
3,564
 
3,424
   
4.1
%
            - Industrial
                
1,235
   
1,134
   
8.9
%
  
2,402
 
2,211
   
8.6
%
            Total Ohio
                
4,749
   
4,399
   
8.0
%
  
9,574
 
9,054
   
5.7
%
                                                 
 Pennsylvania      - Residential
          
 
    
5
   
6
   
-16.7
%
  
11
 
12
   
-8.3
%
            - Commercial
                
22
   
41
   
-46.3
%
  
46
 
78
   
-41.0
%
            - Industrial
                
383
   
548
   
-30.1
%
  
830
 
1,080
   
-23.1
%
            Total Pennsylvania
                
410
   
595
   
-31.1
%
  
887
 
1,170
   
-24.2
%
                                                 
 New Jersey       - Residential
          
 
    
1
   
233
   
-99.6
%
  
2
 
520
   
-99.6
%
            - Commercial
                
490
   
599
   
-18.2
%
  
1,032
 
1,200
   
-14.0
%
            - Industrial
                
551
   
577
   
-4.5
%
  
1,114
 
1,051
   
6.0
%
            Total New Jersey
                
1,042
   
1,409
   
-26.0
%
  
2,148
 
2,771
   
-22.5
%
                                                 
 Total Electric Sales Shopped 
                
6,201
   
6,403
   
-3.2
%
  
12,609
 
12,995
   
-3.0
%
                                                 
 * 2004 excludes the reporting of PJM sales and purchases on a gross basis. 
                  
                                                 
 

 OPERATING STATISTICS     
As of June 30,
  
 For 12 Months Ended     
2005
      
2004
  
                    
System Load Factor 
          
61.9
%
        
65.3
%
Capacity Factors: 
                          
 Fossil
         
60.8
%
        
58.6
%
 Nuclear
          
84.8
%
        
78.3
%
Generation Output: 
                          
 Fossil
         
63
%
        
64
%
 Nuclear
          
37
%
        
36
%
                           
WEATHER 
          
2005
    
Normal
    
2004
  
Composite Heating-Degree-Days 
                          
 2nd Quarter
          
684
   
654
   
544
 
 Year-to-Date
          
3,663
   
3,477
   
3,532
 
Composite Cooling-Degree-Days 
                          
 2nd Quarter
          
275
   
245
   
301
 
 Year-to-Date
          
275
   
246
   
301
 
                           
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        9
 

 FirstEnergy Corp.  
  
2005 EPS and Cash Flow  
  
   
 2005 Earnings Per Share (EPS)
  
(Reconciliation of GAAP to Non-GAAP) 
  
        
Three Months
 
Six Months
 
Annual
 
        
Ended June 30
  
Ended June 30
  
Guidance
  
                    
Basic EPS (GAAP basis) 
        
$
0.54
  
$
1.03
  
$
2.70 - $2.85
  
Excluding Unusual Items: 
                      
 
  
 Gain on non-core asset sales
          
-
   
(0.07
)
  
(0.07)
 
 EPA Settlement
          
-
   
0.04
   
0.04
 
 NRC Fine
          
-
   
0.01
   
0.01
 
 JCP&L Rate Settlement
          
(0.05
)
  
(0.05
)
  
(0.05)
 
 Ohio tax write-off
          
0.22
   
0.22
   
0.22
 
Basic EPS (non-GAAP basis) 
        
$
0.71
  
$
1.18
  
$
2.85 - $3.00
  
                           
 
 

               
Reconciliation of June 2005 Year-to-Date Cash From Operating Activities (GAAP) to
  
Free Cash Flow (Non-GAAP) and Cash Generation (Non-GAAP)
  
 (in millions)
  
Net Cash from Operating Activities:
            
               
Net Income
              
$
338
  
Adjustments:
                    
Depreciation 
                
292
 
Amortization and deferral of regulatory assets 
                
438
 
Deferred purchased power costs 
                
(192
)
Deferred income taxes and ITC, net 
                
62
 
Conversion of off-balance sheet receivables financing 
                    
 to on-balance sheet
                
(155
)
Other, including changes in working capital * 
                
148
 
Net Cash from Operating Activities (GAAP)
              
$
931
  
                     
Other Items:
                    
Capital expenditures
                
(429
)
Nuclear fuel fabrication
                
(63
)
Decommissioning
                
(51
)
Common stock dividends
                
(270
)
Conversion of off-balance sheet receivables financing
                    
 to on-balance sheet
                
155
 
Other, net
                
(80
)
 Free Cash Flow (Non-GAAP)
              
$
193
  
                     
Non-core asset sales
                
58
 
 Cash generation (Non-GAAP)
              
$
251
  
                     
                     
*  Includes $242 million from Ohio School Council's prepayment for electric service.
                  
                     
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        10
 

FirstEnergy Corp.
2005 Cash Flow Guidance

Reconciliation of 2005 Estimated Cash from Operating Activities (GAAP) to
  
Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP) 
  
(in millions) 
  
Net Cash from Operating Activities:
  
 
          
               
GAAP Earnings Guidance
              
$
887 - $937
  
Adjustments:
                    
Depreciation 
                
572
 
Amortization and deferral of regulatory assets 
                
908
 
Deferred purchased power costs 
                
(450
)
Deferred income taxes and ITC, net 
                
45
 
Conversion of off-balance sheet receivables financing 
                    
 to on-balance sheet
                
(155
)
Other, including changes in working capital * 
                
225
 
Net Cash from Operating Activities (GAAP)
              
$
2,057
  
                     
Other Items:
                    
                     
Capital expenditures
                
(1,005
)
Nuclear fuel fabrication
                
(80
)
Decommissioning
                
(100
)
Common stock dividends
                
(542
)
Conversion of off-balance sheet receivables financing
                    
to on-balance sheet
                
155
 
Other, net
                
50
 
 Free Cash Flow (Non-GAAP)
              
$
535
  
                     
Non-core asset sales
                
85
 
 Cash Generation (Non-GAAP)
              
$
620
  
                     
*  Includes net $220 million from Ohio School Council's prepayment for electric service.
          
 
        
                     
 The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at
 
  www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005
 
  Letter to the Investment Community, which is also posted on the website.
                    
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        11
 


FirstEnergy Corp.
2006 Cash Flow Guidance
 

           
Reconciliation of 2006 Estimated Cash from Operating Activities (GAAP) to 
  
Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)
  
 
(in millions)
 
  
           
           
 Net Cash from Operating Activities:        
           
GAAP Earnings Guidance
        
$
1,120 - $1,185
  
Adjustments:
              
Depreciation 
          
595
 
Amortization and deferral of regulatory assets 
          
780
 
Deferred purchased power costs 
          
(380
)
Deferred income taxes and ITC, net 
          
(110
)
Other, including changes in working capital 
          
32
 
 Net Cash from Operating Activities (GAAP)
        
$
2,070
  
               
Other Items:
              
               
Capital expenditures
          
(1,000) - (1,100
)
Nuclear fuel fabrication
          
(160
)
Common stock dividends
          
(570
)
Other, net
          
40
 
 Free Cash Flow (Non-GAAP)
        
$
280 - 380
  
               
Non-core asset sales
          
20
 
 Cash Generation (Non-GAAP)
        
$
300 - 400
  
               
  The GAAP to Non-GAAP reconciliation statements are available on the Investor Information section of FirstEnergy Corp.'s website at
 
   www.firstenergycorp.com/ir. Additional details on the earnings and cash generation guidance are available in a July 27, 2005 Letter to the Investment
 
   Community, which is also posted on the website.
              
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                        12
 


RECENT DEVELOPMENTS

Regulatory Update
On May 18, 2005, the Public Utilities Commission of Ohio (PUCO) granted the accounting authority for FirstEnergy’s Ohio utility operating companies to defer, for future recovery, incremental transmission and ancillary service-related charges incurred as a participant in the Midwest Independent Transmission System Operator, Inc. The PUCO’s order applies to charges incurred from December 30, 2004, through January 1, 2006, and authorizes the companies to accrue carrying charges on the deferral balances. The amount to be deferred will reflect actual incremental expenses, including line losses and carrying charges. In a separate case, pending before the PUCO, the companies propose to begin recovery of these incremental costs on January 1, 2006, through a tariff rider, which also would amortize the deferred balance over five years. On July 22, we filed a settlement stipulation reached with various parties including the Ohio Consumers’ Counsel and the PUCO staff that provides for the requested recovery. If the settlement stipulation is approved by the PUCO, the actual amounts to be recovered in 2006 will be submitted to the PUCO on or before November 1, 2005.


On May 25, 2005, the New Jersey Board of Public Utilities approved a stipulated settlement agreement resolving the Jersey Central Power & Light (JCP&L) Phase II rate case filing, and a second stipulated settlement agreement resolving the motion for reconsideration of the 2003 decision in the JCP&L Phase I rate proceeding. The stipulated agreements are expected to increase JCP&L’s annual revenues by $51.1 million and result in a net annual earnings per share impact of approximately $0.12 per share. For 2005, the total impact is expected to be approximately $0.11 per share, which includes a $0.06 per share increase from revenues commencing on June 1 of this year and a one-time benefit of $0.05 per share from the creation of a new regulatory asset associated with accelerated tree trimming costs expensed in 2003 and 2004.

On May 27, 2005, FirstEnergy’s Ohio utility operating companies filed a request with the PUCO to establish a generation charge adjustment factor (GCAF) rider, as permitted under the Rate Stabilization Plan. The filing reflects projected increases in fuel and related costs in 2006 compared with 2002 costs. The companies request the tariff rider be implemented on January 1, 2006. Based on projected fuel costs and 2006 Ohio retail sales to which the GCAF rider will apply, the estimated revenue from the implementation of this rider is approximately $93 million in 2006.

Rating Agency Actions
On May 16, 2005, Standard & Poor's Ratings Services revised its outlook on FirstEnergy and its subsidiaries to "positive" from "stable" and affirmed its 'BBB-' corporate credit ratings on the companies. Standard & Poor’s stated that the outlook revision and rating affirmation reflect the successful restart of the Perry and Beaver Valley nuclear stations after their respective refueling outages.

On July 18, 2005, Moody's Investors Service changed its ratings outlook on FirstEnergy and its subsidiaries to "positive" from "stable", citing the companies’ improved finances and utility operations. FirstEnergy’s senior unsecured rating by Moody’s is ‘Baa3’.

Intra-System Generation Asset Transfers
In May 2005, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE), and Pennsylvania Power Company entered into certain agreements implementing a series of intra-system generation asset transfers, required under the restructuring plans approved in Ohio and Pennsylvania. When concluded, these transfers will result in the respective undivided ownership interests of the above utilities in FirstEnergy’s nuclear, fossil and hydroelectric plants being owned by FirstEnergy subsidiaries, FirstEnergy Nuclear Generation Corp., a new Ohio corporation, and FirstEnergy Generation Corp., respectively, separate and apart from the above utility subsidiaries. The generating plant interests that are being transferred do not include interests of CEI, TE and OE in certain of the plants that are currently subject to sale and leaseback arrangements with unaffiliated third parties.

Record Generation Output
FirstEnergy set a new generation output record of 19.1 million MWhs in the second quarter and 37.9 million MWhs for the first six months of the year. The output record was attributable to the outstanding performance of our generation fleet, particularly the 2,360 MW Bruce Mansfield Plant, which operated at a 97.4% availability factor for the six-month period.
 
On May 3, 2005, FirstEnergy’s Sammis Unit 2 became the longest-running single-turbine steam generating unit in the nation’s history when it surpassed a continuous-operation record of 819 days.

 
Consolidated Report to the Financial Community - 2nd Quarter                                                                                                    13


New Credit Facility
On June 14, 2005, FirstEnergy and certain of its subsidiaries, including all of its operating utility subsidiaries, entered into a new five-year syndicated credit facility totaling $2 billion. The new facility replaced FirstEnergy’s $1 billion and $375 million three-year credit agreements, as well as OE's $125 million three-year credit agreement and $250 million two-year credit agreement, which expired in May 2005. Borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sublimit as well as applicable regulatory and other limitations.
 
Nuclear Plant Update
On April 28, 2005, Beaver Valley Unit 2 returned to service following a scheduled refueling outage. Major work included replacement of fuel assemblies and a thorough inspection of the reactor vessel head and under-vessel, which were found to be in good condition.

On May 6, 2005, the Perry Plant returned to service following a scheduled refueling outage. The scope of the outage was increased by about 30% to enhance plant reliability, including work on the main generator, refurbishment of high-voltage breakers and modification of the emergency diesel generators’ exhaust system.

On May 20, 2005, the Nuclear Regulatory Commission (NRC) announced the return of Davis-Besse to the standard oversight process, effective July 1, 2005, augmented to include inspections supporting the NRC’s start-up order of March 8, 2004.

On July 8, 2005, the NRC issued their 95003 inspection report on the Perry plant. The inspection report concluded that Perry is being operated safely, however, the NRC will continue to provide increased oversight as FirstEnergy Nuclear Operating Company continues to implement Perry’s Performance Improvement Initiative.
 

Forward-Looking Statements: This Consolidated Report to the Financial Community 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 and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), the uncertainty of the timing and amounts of the capital expenditures (including that such amounts could be higher than anticipated) or levels of emission reductions related to the settlement agreement resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage and heightened scrutiny at the Perry Nuclear Power Plant in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital markets, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
 
Consolidated Report to the Financial Community - 2nd Quarter                                                                                                                    14