Attached files
| file | filename |
|---|---|
| 8-K - 8-K - FIRSTENERGY CORP | fe-12312015x8kdatedfebruar.htm |
| EX-99.1 - EXHIBIT 99.1 - FIRSTENERGY CORP | ex991pressrelease-123115.htm |
Exhibit 99.2
Consolidated Report to the Financial Community
Fourth Quarter 2015
(Released February 16, 2016)
HIGHLIGHTS
GAAP losses for the fourth quarter of 2015 were ($0.53) per basic share, compared with fourth quarter 2014 losses of ($0.73) per basic share. Operating (non-GAAP) earnings*, excluding special items, were $0.58 per basic share for the fourth quarter of 2015, compared with fourth quarter 2014 Operating (non-GAAP) earnings of $0.80 per basic share.
Competitive | FirstEnergy | ||||||||||||
EPS Variance Analysis | Regulated | Regulated | Energy | Corporate / | Corp. | ||||||||
(in millions, except per share amounts) | Distribution | Transmission | Services** | Other** | Consolidated | ||||||||
4Q 2014 Net Income (Loss) - GAAP | $(134) | $54 | $(246) | $20 | $(306) | ||||||||
4Q 2014 Basic EPS* (avg. shares outstanding 421M) | $(0.31) | $0.13 | $(0.59) | $0.04 | $(0.73) | ||||||||
Special Items - 2014 | 0.76 | 0.01 | 0.76 | — | 1.53 | ||||||||
4Q 2014 Basic EPS - Operating (Non-GAAP) Earnings* | $0.45 | $0.14 | $0.17 | $0.04 | $0.80 | ||||||||
Distribution Revenues | |||||||||||||
Weather related | (0.06) | — | — | — | (0.06) | ||||||||
Normal Load | (0.02) | — | — | — | (0.02) | ||||||||
PA Rate Case | 0.05 | — | — | — | 0.05 | ||||||||
NJ Rate Case | (0.03) | — | — | — | (0.03) | ||||||||
Transmission Revenues | — | 0.08 | — | — | 0.08 | ||||||||
Commodity Margin | (0.01) | — | 0.05 | — | 0.04 | ||||||||
O&M Expenses | (0.06) | — | (0.04) | (0.02) | (0.12) | ||||||||
Depreciation | 0.02 | (0.01) | — | — | 0.01 | ||||||||
General Taxes | — | (0.02) | 0.02 | — | — | ||||||||
Investment Income | — | — | (0.01) | — | (0.01) | ||||||||
Interest Expense | — | — | — | (0.02) | (0.02) | ||||||||
Capitalized Financing Costs | — | (0.02) | — | — | (0.02) | ||||||||
Effective Income Tax Rate | — | — | (0.01) | (0.08) | (0.09) | ||||||||
Other | (0.02) | (0.01) | — | — | (0.03) | ||||||||
4Q 2015 Basic EPS - Operating (Non-GAAP) Earnings* | $0.32 | $0.16 | $0.18 | $(0.08) | $0.58 | ||||||||
Special Items - 2015 | (0.27) | — | (0.28) | (0.56) | (1.11) | ||||||||
4Q 2015 Basic EPS* (avg. shares outstanding 423M) | $0.05 | $0.16 | $(0.10) | $(0.64) | $(0.53) | ||||||||
4Q 2015 Net Income (Loss) - GAAP | $20 | $67 | $(40) | $(273) | $(226) | ||||||||
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after tax effect of each item divided by the weighted average basic shares outstanding for the period. | |||||||||||||
1
For the year ended December 31, 2015, GAAP earnings were $1.37 per basic share compared with $0.71 per basic share for the same period of 2014. Operating (non-GAAP) earnings*, excluding special items, were $2.71 per basic share for the year ended December 31, 2015, compared to $2.56 per basic share for the same period of 2014.
Competitive | FirstEnergy | ||||||||||
EPS Variance Analysis | Regulated | Regulated | Energy | Corporate / | Corp. | ||||||
(in millions, except per share amounts) | Distribution | Transmission | Services** | Other** | Consolidated | ||||||
2014 Net Income (Loss) - GAAP | $465 | $223 | $(331) | $(58) | $299 | ||||||
2014 Basic EPS* (avg. shares outstanding 420M) | $1.11 | $0.53 | $(0.79) | $(0.14) | $0.71 | ||||||
Special Items - 2014 | 0.82 | 0.01 | 1.01 | 0.01 | 1.85 | ||||||
2014 Basic EPS - Operating (Non-GAAP) Earnings* | $1.93 | $0.54 | $0.22 | $(0.13) | $2.56 | ||||||
Distribution Revenues | |||||||||||
Weather related | 0.04 | — | — | — | 0.04 | ||||||
Normal Load/Rate Change | (0.02) | — | — | — | (0.02) | ||||||
PA Rate Case | 0.13 | — | — | — | 0.13 | ||||||
NJ Rate Case | (0.08) | — | — | — | (0.08) | ||||||
WV Rate Case | 0.02 | — | — | — | 0.02 | ||||||
Transmission Revenues | — | 0.36 | — | — | 0.36 | ||||||
Commodity Margin | (0.01) | — | 0.45 | — | 0.44 | ||||||
O&M Expenses | (0.09) | — | (0.04) | (0.04) | (0.17) | ||||||
Depreciation | (0.02) | (0.04) | (0.01) | — | (0.07) | ||||||
Pension/OPEB | (0.03) | — | (0.01) | — | (0.04) | ||||||
General Taxes | — | (0.05) | 0.05 | — | — | ||||||
Investment Income | — | — | (0.02) | (0.02) | (0.04) | ||||||
Interest Expense | — | (0.05) | — | (0.05) | (0.10) | ||||||
Capitalized Financing Costs | — | (0.02) | — | — | (0.02) | ||||||
Effective Income Tax Rate | (0.03) | (0.02) | (0.03) | (0.20) | (0.28) | ||||||
Other | (0.02) | (0.01) | 0.01 | — | (0.02) | ||||||
2015 Basic EPS - Operating (Non-GAAP) Earnings* | $1.82 | $0.71 | $0.62 | $(0.44) | $2.71 | ||||||
Special Items - 2015 | (0.36) | — | (0.41) | (0.57) | (1.34) | ||||||
2015 Basic EPS* (avg. shares outstanding 422M) | $1.46 | $0.71 | $0.21 | $(1.01) | $1.37 | ||||||
2015 Net Income (Loss) - GAAP | $618 | $298 | $89 | $(427) | $578 | ||||||
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after tax effect of each item divided by the weighted average basic shares outstanding for the period. | |||||||||||
*Operating earnings exclude special items as described below, and are a non-GAAP financial measure. Management uses Operating earnings and Operating earnings by segment to evaluate FirstEnergy Corp.'s (FE) performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Basic EPS and Basic EPS-Operating, each on a segment basis, to further evaluate FE's performance by segment and references these non-GAAP financial measures in its decision making. Basic EPS for each segment is calculated by dividing segment net income (loss) on a GAAP basis by the basic weighted average shares outstanding for the period. Basic EPS-Operating for each segment is calculated by dividing segment Operating earnings (losses), which excludes special items as discussed below, by the basic weighted average shares outstanding for the period. Management believes that the non-GAAP financial measures of “Operating earnings”, "Basic EPS" and "Basic EPS-Operating" by segment provide a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). These non-GAAP financial measures are intended to complement, and are not considered as an alternative to, the most directly comparable GAAP financial measure. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. The 2015 and 2014 GAAP to Operating earnings reconciliations can be found on pages 24-35 of this report and all GAAP to Operating earnings reconciliations are available on FE’s Investor Information website at www.firstenergycorp.com/ir. Quarter over quarter earnings drivers, as summarized in this report, are consistent with management's analysis of each segment's historical and ongoing performance comparisons and exclude the impact of special items, as well as other items that do not impact earnings, including but not limited to the cost recovery of regulatory assets.
**Disclosures for FE's reportable operating segments for 2014 have been adjusted to include the activity of FirstEnergy Ventures Corp.'s (FEV) investment in Global Mining Holding Company (Global Holding) from Competitive Energy Services to Corporate/Other, to conform to the current presentation.
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 2
Special Items - The following special items were recognized during the fourth quarter of 2015 and 2014:
Competitive | FirstEnergy | ||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||
Special Items - 4Q 2015 | Distribution | Transmission | Services | Other | Consolidated | ||||||||
Mark-to-market adjustments - | |||||||||||||
Pension/OPEB actuarial assumptions | $0.26 | $— | $0.09 | $— | $0.35 | ||||||||
Other | — | — | (0.01) | — | (0.01) | ||||||||
Merger accounting - commodity contracts | — | — | 0.11 | — | 0.11 | ||||||||
Regulatory charges | 0.01 | — | — | — | 0.01 | ||||||||
Retail repositioning charges | — | — | 0.02 | — | 0.02 | ||||||||
Impact of non-core asset sales/impairments | — | — | 0.03 | 0.56 | 0.59 | ||||||||
Trust securities impairment | — | — | 0.04 | — | 0.04 | ||||||||
Special Items - 2015 | $0.27 | $— | $0.28 | $0.56 | $1.11 | ||||||||
Competitive | FirstEnergy | ||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||
Special Items - 4Q 2014 | Distribution | Transmission | Services | Other | Consolidated | ||||||||
Mark-to-market adjustments - | |||||||||||||
Pension/OPEB actuarial assumptions | $0.74 | $0.01 | $0.48 | $— | $1.23 | ||||||||
Other | — | — | 0.01 | — | 0.01 | ||||||||
Merger accounting - commodity contracts | — | — | 0.03 | — | 0.03 | ||||||||
Regulatory charges | 0.02 | — | — | — | 0.02 | ||||||||
Retail repositioning charges | — | — | 0.02 | — | 0.02 | ||||||||
Impact of non-core asset sales/impairments | — | — | 0.01 | — | 0.01 | ||||||||
Trust securities impairment | — | — | 0.04 | — | 0.04 | ||||||||
Plant deactivation costs | — | — | 0.17 | — | 0.17 | ||||||||
Special Items - 2014 | $0.76 | $0.01 | $0.76 | $— | $1.53 | ||||||||
The following special items were recognized during 2015 and 2014:
Competitive | FirstEnergy | ||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||
Special Items - 2015 | Distribution | Transmission | Services | Other | Consolidated | ||||||||
Mark-to-market adjustments - | |||||||||||||
Pension/OPEB actuarial assumptions | $0.26 | $— | $0.09 | $— | $0.35 | ||||||||
Other | — | — | (0.11) | — | (0.11) | ||||||||
Merger accounting - commodity contracts | — | — | 0.16 | — | 0.16 | ||||||||
Regulatory charges | 0.07 | — | — | — | 0.07 | ||||||||
Retail repositioning charges | — | — | 0.05 | — | 0.05 | ||||||||
Impact of non-core asset sales/impairments | 0.01 | — | 0.05 | 0.57 | 0.63 | ||||||||
Trust securities impairment | 0.02 | — | 0.13 | — | 0.15 | ||||||||
Plant deactivation costs | — | — | 0.04 | — | 0.04 | ||||||||
Special Items - 2015 | $0.36 | $— | $0.41 | $0.57 | $1.34 | ||||||||
Competitive | FirstEnergy | ||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||
Special Items - 2014 | Distribution | Transmission | Services | Other | Consolidated | ||||||||
Mark-to-market adjustments - | |||||||||||||
Pension/OPEB actuarial assumptions | $0.74 | $0.01 | $0.48 | $— | $1.23 | ||||||||
Other | — | — | 0.11 | — | $0.11 | ||||||||
Merger accounting - commodity contracts | — | — | 0.07 | — | $0.07 | ||||||||
Regulatory charges | 0.07 | — | 0.01 | — | $0.08 | ||||||||
Retail repositioning charges | — | — | 0.11 | — | $0.11 | ||||||||
Impact of non-core asset sales/impairments | — | — | (0.17) | 0.02 | $(0.15) | ||||||||
Trust securities impairment | 0.01 | — | 0.05 | — | $0.06 | ||||||||
Plant deactivation costs | — | — | 0.34 | — | $0.34 | ||||||||
Litigation resolution | — | — | — | (0.01) | $(0.01) | ||||||||
Loss on debt redemptions | — | — | 0.01 | — | $0.01 | ||||||||
Special Items - 2014 | $0.82 | $0.01 | $1.01 | $0.01 | $1.85 | ||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 3
2016 1st Quarter Earnings Guidance
Operating (non-GAAP) earnings guidance for the first quarter of 2016, excluding special items, is $0.75 - $0.85 per basic share.
Q1 of 2016 | ||||
(In millions, except per share amounts) | FirstEnergy Corp. Consolidated | |||
1Q 2016F Net Income - GAAP | $305 - $345 | |||
1Q 2016F Basic EPS (avg. shares outstanding 424M) | $0.72 - $0.82 | |||
Excluding Special Items: | ||||
Regulatory charges | 0.02 | |||
Merger accounting - commodity contracts | 0.01 | |||
Total Special Items | 0.03 | |||
1Q 2016F Basic EPS - Operating (Non-GAAP) (avg. shares outstanding 424M) | $0.75 - $0.85 | |||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 4
4Q 2015 Results vs 4Q 2014 - By Segment
Regulated Distribution
Regulated Distribution - GAAP earnings for the fourth quarter of 2015 were $20 million, or $0.05 per basic share, compared with fourth quarter 2014 losses of ($134) million, or ($0.31) per basic share. Operating (non-GAAP) earnings, excluding special items, were $0.32 per basic share for the fourth quarter of 2015, compared with fourth quarter 2014 Operating (non-GAAP) earnings of $0.45 per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
4Q 2014 Net Loss - GAAP | $(134) | ||||||
4Q 2014 Basic EPS (avg. shares outstanding 421M) | $(0.31) | ||||||
Special Items - 2014 | 0.76 | ||||||
4Q 2014 Basic EPS - Operating (Non-GAAP) Earnings | $0.45 | ||||||
Distribution Revenues | |||||||
Weather related | (0.06) | ||||||
Normal Load | (0.02) | ||||||
PA Rate Case | 0.05 | ||||||
NJ Rate Case | (0.03) | ||||||
For the year ended December 31, 2015, GAAP earnings were $618 million, or $1.46 per basic share compared with $465 million, or $1.11 per basic share, for the same period of 2014. Operating (non-GAAP) earnings, excluding special items, were $1.82 per basic share for the year ended December 31, 2015, compared to $1.93 per basic share for the same period of 2014. | Regulated Commodity Margin | (0.01) | |||||
O&M Expenses | (0.06) | ||||||
Depreciation | 0.02 | ||||||
Other | (0.02) | ||||||
4Q 2015 Basic EPS - Operating (Non-GAAP) Earnings | $0.32 | ||||||
Special Items - 2015 | (0.27) | ||||||
4Q 2015 Basic EPS (avg. shares outstanding 423M) | $0.05 | ||||||
4Q 2015 Net Income - GAAP | $20 | ||||||
4Q 2015 vs 4Q 2014 Earnings Drivers, Excluding Special Items
• | Distribution Revenues - Total electric distribution deliveries decreased 2.2 million megawatt-hours (MWH), or 6.1%, and decreased earnings $0.08 per share. Residential sales decreased by 1.4 million MWH, or 10.6%, and sales to commercial customers decreased 350,000 MWH, or 3.4%. Heating-degree-days were 29.6% below the same period of 2014 and 29.5% below normal. Lower deliveries to both residential and commercial customers were primarily due to decreased weather-related usage, along with lower average customer usage. Deliveries to industrial customers decreased 489,000 MWH, or 3.9%, primarily due to lower usage in the steel, mining, chemical, and electrical and manufacturing sectors, partially offset by increased usage from shale gas and automotive sectors. |
• | Pennsylvania Rate Case - Earnings increased $0.05 per share due to approved base distribution rate increases, net of incremental operating expenses, effective May 3, 2015. |
• | New Jersey Rate Case - Earnings decreased $0.03 per share due to an approved distribution rate decrease, including the recovery of 2011 and 2012 storm costs, effective April 1, 2015. |
• | Regulated Commodity Margin - Lower regulated commodity margin decreased earnings $0.01 per share resulting from lower sales due to heating degree days that were 29.6% below the same period of 2014. |
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 5
• | O&M Expenses - Higher O&M expenses decreased earnings $0.06 per share, primarily due to increased reliability spend in New Jersey. |
• | Depreciation - Lower depreciation expense increased earnings $0.02 per share, reflecting lower depreciation rates in Pennsylvania based on updated asset life studies approved by the Pennsylvania Public Utility Commission (PAPUC). |
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 6
Regulated Transmission
Regulated Transmission - GAAP earnings for the fourth quarter of 2015 were $67 million, or $0.16 per basic share, compared with fourth quarter 2014 GAAP earnings of $54 million, or $0.13 per basic share. Operating (non-GAAP) earnings, excluding special items, for the fourth quarter of 2015 were $0.16 per basic share, compared with fourth quarter 2014 Operating (non-GAAP) earnings of $0.14 per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
4Q 2014 Net Income - GAAP | $54 | ||||||
4Q 2014 Basic EPS (avg. shares outstanding 421M) | $0.13 | ||||||
Special Items - 2014 | 0.01 | ||||||
4Q 2014 Basic EPS - Operating (Non-GAAP) Earnings | $0.14 | ||||||
Transmission Revenues | 0.08 | ||||||
Depreciation | (0.01) | ||||||
General Taxes | (0.02) | ||||||
Capitalized Financing Costs | (0.02) | ||||||
For the year ended December 31, 2015, GAAP earnings were $298 million, or $0.71 per basic share compared with $223 million, or $0.53 per basic share, for the same period of 2014. Operating (non-GAAP) earnings were $0.71 per basic share for the year ended December 31, 2015, compared to $0.54 per basic share for the same period of 2014. | Other | (0.01) | |||||
4Q 2015 Basic EPS - Operating (Non-GAAP) Earnings | $0.16 | ||||||
Special Items - 2015 | — | ||||||
4Q 2015 Basic EPS (avg. shares outstanding 423M) | $0.16 | ||||||
4Q 2015 Net Income - GAAP | $67 | ||||||
4Q 2015 vs 4Q 2014 Earnings Drivers, Excluding Special Items
• | Transmission Revenues - Higher transmission revenues increased earnings $0.08 per share, primarily due to the recovery of incremental operating expenses and a higher rate base at American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAILCo), and the impact of ATSI's "forward-looking" rate structure beginning January 2015, partially offset by a lower ROE at ATSI, as part of a FERC-approved comprehensive settlement in October 2015. |
• | Depreciation and General Taxes - Higher depreciation and general taxes decreased earnings $0.03 per share due primarily to a higher asset base at ATSI. These expenses are recovered through ATSI's "forward-looking" rate as discussed above. |
• | Capitalized Financing Costs - Lower capitalized financing costs decreased earnings $0.02 per share, primarily due to lower construction work in progress balances. |
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 7
Competitive Energy Services
Competitive Energy Services (CES) - GAAP losses for the fourth quarter of 2015 were ($40) million, or ($0.10) per basic share, compared with fourth quarter 2014 losses of ($246) million, or ($0.59) per basic share. Operating (non-GAAP) earnings, excluding special items, for the fourth quarter of 2015 were $0.18 per basic share, compared with fourth quarter 2014 Operating (non-GAAP) earnings of $0.17 per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
4Q 2014 Net Income - GAAP | $(246) | ||||||
4Q 2014 Basic EPS (avg. shares outstanding 421M) | $(0.59) | ||||||
Special Items - 2014 | 0.76 | ||||||
4Q 2014 Basic EPS - Operating (Non-GAAP) Earnings | $0.17 | ||||||
CES Commodity Margin | 0.05 | ||||||
O&M Expenses | (0.04) | ||||||
General Taxes | 0.02 | ||||||
Investment Income | (0.01) | ||||||
Effective Income Tax | (0.01) | ||||||
For the year ended December 31, 2015, GAAP earnings were $89 million, or $0.21 per basic share compared with losses of ($331) million, or ($0.79) per basic share, for the same period of 2014. Operating (non-GAAP) earnings, excluding special items, were $0.62 per basic share for the year ended December 31, 2015, compared to $0.22 per basic share for the same period of 2014. | 4Q 2015 Basic EPS - Operating (Non-GAAP) Earnings | $0.18 | |||||
Special Items - 2015 | (0.28) | ||||||
4Q 2015 Basic EPS (avg. shares outstanding 423M) | $(0.10) | ||||||
4Q 2015 Net Loss - GAAP | $(40) | ||||||
4Q 2015 vs 4Q 2014 Earnings Drivers, Excluding Special Items
CES commodity margin increased earnings $0.05 per share due to a combination of higher capacity revenues, and increased wholesale sales, partially offset by a contract sales decrease of 7.9 million MWH as CES continues to implement its retail sales strategy to more effectively hedge its generation.
A summary by key component of commodity margin is as follows:
Commodity Margin EPS - 4Q15 vs 4Q14 | Rate | Volume | Total | |||||||||||
(a) Contract Sales | ||||||||||||||
- Direct Sales (LCI & MCI) | $ | 0.01 | $ | (0.34 | ) | $ | (0.33 | ) | ||||||
- Governmental Aggregation Sales | 0.02 | (0.09 | ) | (0.07 | ) | |||||||||
- Mass Market Sales | — | (0.08 | ) | (0.08 | ) | |||||||||
- POLR Sales | 0.02 | (0.15 | ) | (0.13 | ) | |||||||||
- Structured Sales | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||
Subtotal - Contract Sales | $ | 0.04 | $ | (0.68 | ) | $ | (0.64 | ) | ||||||
(b) Wholesale Sales | (0.03 | ) | 0.14 | 0.11 | ||||||||||
(c) PJM Capacity, FRR Auction Revenues | 0.25 | — | 0.25 | |||||||||||
(d) Fuel Expense | (0.01 | ) | 0.11 | 0.10 | ||||||||||
(e) Purchased Power (net of financials) | 0.01 | 0.20 | 0.21 | |||||||||||
(f) Capacity Expense | (0.16 | ) | 0.12 | (0.04 | ) | |||||||||
(g) Net MISO - PJM Transmission Cost | — | 0.06 | 0.06 | |||||||||||
Net Decrease | $ | 0.10 | $ | (0.05 | ) | $ | 0.05 | |||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 8
(a) | Contract Sales - CES' contract sales decreased 7.9 million MWH, or 37%, and reduced earnings $0.64 per share. Lower contract sales reflect CES' efforts to reposition its sales portfolio to more effectively hedge its generation. Direct sales to large and medium commercial/industrial customers decreased 4.2 million MWH, or 47%. Governmental aggregation and mass market sales decreased 1.8 million MWH, or 33%. As of December 31, 2015, CES' total number of retail customers was 1.6 million, a decrease of approximately 445,000 customers since December 31, 2014. |
CES Contract Sales - 4Q15 vs 4Q14 | |||||||||||||||
(thousand MWH) | Retail | Non-Retail | |||||||||||||
Direct | Aggr. | Mass Market | POLR | Structured | Total | ||||||||||
Contract Sales (Decrease) | (4,219) | (991 | ) | (848) | (1,747) | (88) | (7,893) | ||||||||
(b) Wholesale Sales - Wholesale sales increased earnings $0.11 per share as a result of higher spot sales of 2.9 million MWH.
(c) PJM Capacity Revenues (Base Residual and Fixed Resource Requirement (FRR) Auctions) - Higher capacity revenues increased earnings $0.25 per share, primarily resulting from higher capacity prices in the RTO and ATSI zones. Capacity prices by zone for the applicable planning periods are summarized below.
Planning Period | RTO | ATSI | MAAC | ||||||
Price Per Megawatt-Day | BR | BR | BR | ||||||
June 2014 - May 2015 | $125.99 | $125.99 | $136.50 | ||||||
June 2015 - May 2016 | $136.00 | $357.00 | $167.46 | ||||||
(d) | Fuel Expense - Lower fuel expense increased earnings $0.10 per share, primarily due to decreased generation output. Fossil generation output decreased 2.8 million MWH, associated with lower economic dispatch of units resulting from low energy prices, increased maintenance outages on supercritical coal units, along with the absence of generation from Reliability Must-Run (RMR) units that were deactivated in April 2015. |
(e) Purchased Power (net of financials) - Lower purchased power volumes of 2.5 million MWH increased earnings $0.21 per share due to lower contract sales.
(f) Capacity Expense - Higher capacity expenses associated with contract sales decreased earnings $0.04 per share, primarily due to higher capacity prices in the ATSI and RTO zones, partially offset by lower contract sales.
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 9
(g) Net MISO-PJM Transmission Cost - Lower transmission expenses and PJM ancillary charges increased earnings $0.06 per share, primarily due to lower contract sales volumes.
• | O&M Expenses - Higher O&M expenses decreased earnings $0.04 per share primarily due to outage costs associated with the Beaver Valley Unit 2 nuclear refueling outage. |
• | General Taxes - Lower gross receipts tax, due to a decrease in retail sales, increased earnings $0.02 per share. |
• | Investment Income - Lower investment income decreased earnings $0.01 per share, due to lower investment income on nuclear decommissioning trust securities. |
• | Effective Income Tax Rate - A higher effective income tax rate decreased earnings $0.01 per share (37.2% in Q4 2015 vs. 33.0% in Q4 2014). The effective tax rate was 36.7% for the year ended 2015 compared to 33.1% for the same period of 2014. |
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 10
Corporate / Other
Corporate / Other - GAAP losses for the fourth quarter of 2015 were ($273) million, or ($0.64) per basic share, compared with fourth quarter 2014 earnings of $20 million, or $0.04 per basic share. Operating (non-GAAP) losses for the fourth quarter of 2015 were ($0.08) per basic share compared with Operating (non-GAAP) earnings of $0.04 per basic share for the fourth quarter of 2014. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
4Q 2014 Net Loss - GAAP | $20 | ||||||
4Q 2014 Basic EPS (avg. shares outstanding 421M) | $0.04 | ||||||
Special Items - 2014 | — | ||||||
4Q 2014 Basic EPS - Operating (Non-GAAP) Losses | $0.04 | ||||||
O&M Expenses | (0.02) | ||||||
Interest Expense | (0.02) | ||||||
Effective Income Tax Rate | (0.08) | ||||||
For the year ended December 31, 2015, GAAP losses were ($427) million, or ($1.01) per basic share, compared with ($58) million, or ($0.14) per basic share, for the same period of 2014. Operating (non-GAAP) losses, excluding special items, were ($0.44) per basic share for the year ended December 31, 2015, compared to ($0.13) per basic share for the same period of 2014. | 4Q 2015 Basic EPS - Operating (Non-GAAP) Earnings | $(0.08) | |||||
Special Items - 2015 | (0.56) | ||||||
4Q 2015 Basic EPS (avg. shares outstanding 423M) | $(0.64) | ||||||
4Q 2015 Net Income - GAAP | $(273) | ||||||
• | O&M Expenses - Higher O&M expenses decreased earnings $0.02 per share. |
• | Interest Expense - Higher interest expense decreased earnings $0.02 per share primarily due to the absence of a gain recognized in 2014 associated with the termination of interest rate swap arrangements. |
• | Effective Income Tax Rate - A higher effective income tax rate in the fourth quarter of 2015 compared to fourth quarter of 2014 decreased earnings $0.08 per share. |
The consolidated effective income tax rate for the fourth quarter of 2015 was 29.9% compared to 21.6% for the same period of 2014. The increase in the effective income tax rate resulted from the absence of tax benefits recognized in 2014 associated with the resolution of state tax positions and an adjustment to reverse tax liabilities. For the year ended December 31, 2015, the consolidated effective income tax rate was 36.0% compared to 29.3% for the same period of 2014.
For additional information, please contact:
Irene M. Prezelj | Meghan G. Beringer | Gina E. Caskey | Rey Y. Jimenez | |||
Vice President, | Director, | Manager, | Manager, | |||
Investor Relations | Investor Relations | Investor Relations | Investor Relations | |||
(330) 384-3859 | (330) 384-5832 | (330) 384-3841 | (330) 384-4239 | |||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 11
FirstEnergy Corp.
Consolidated Statements of Income (Loss)
(In millions, except for per share amounts)
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
(1 | ) | Regulated distribution | $ | 2,200 | $ | 2,130 | $ | 70 | $ | 9,625 | $ | 9,102 | $ | 523 | |||||||||||||||
(2 | ) | Regulated transmission | 256 | 199 | 57 | 1,011 | 769 | 242 | |||||||||||||||||||||
(3 | ) | Competitive energy services | 1,285 | 1,426 | (141 | ) | 5,384 | 6,289 | (905 | ) | |||||||||||||||||||
(4 | ) | Other and reconciling adjustments | (200 | ) | (272 | ) | 72 | (994 | ) | (1,111 | ) | 117 | |||||||||||||||||
(5 | ) | Total Revenues | 3,541 | 3,483 | 58 | 15,026 | 15,049 | (23 | ) | ||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
(6 | ) | Fuel | 477 | 569 | (92 | ) | 1,855 | 2,280 | (425 | ) | |||||||||||||||||||
(7 | ) | Purchased power | 1,007 | 990 | 17 | 4,318 | 4,716 | (398 | ) | ||||||||||||||||||||
(8 | ) | Other operating expenses | 952 | 901 | 51 | 3,749 | 3,962 | (213 | ) | ||||||||||||||||||||
(9 | ) | Pensions and OPEB mark-to-market adjustment | 242 | 835 | (593 | ) | 242 | 835 | (593 | ) | |||||||||||||||||||
(10 | ) | Provision for depreciation | 313 | 316 | (3 | ) | 1,282 | 1,220 | 62 | ||||||||||||||||||||
(11 | ) | Amortization (deferral) of regulatory assets, net | 67 | (15 | ) | 82 | 268 | 12 | 256 | ||||||||||||||||||||
(12 | ) | General taxes | 231 | 224 | 7 | 978 | 962 | 16 | |||||||||||||||||||||
(13 | ) | Impairment of long lived assets | 16 | — | 16 | 42 | — | 42 | |||||||||||||||||||||
(14 | ) | Total Expenses | 3,305 | 3,820 | (515 | ) | 12,734 | 13,987 | (1,253 | ) | |||||||||||||||||||
(15 | ) | Operating Income (Loss) | 236 | (337 | ) | 573 | 2,292 | 1,062 | 1,230 | ||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||||||
(16 | ) | Loss on debt redemptions | — | — | — | — | (8 | ) | 8 | ||||||||||||||||||||
(17 | ) | Investment income (loss) | (8 | ) | 5 | (13 | ) | (22 | ) | 72 | (94 | ) | |||||||||||||||||
(18 | ) | Impairment of equity method investment | (362 | ) | — | (362 | ) | (362 | ) | — | (362 | ) | |||||||||||||||||
(19 | ) | Interest expense | (286 | ) | (271 | ) | (15 | ) | (1,132 | ) | (1,073 | ) | (59 | ) | |||||||||||||||
(20 | ) | Capitalized financing costs | 24 | 29 | (5 | ) | 117 | 118 | (1 | ) | |||||||||||||||||||
(21 | ) | Total Other Expense | (632 | ) | (237 | ) | (395 | ) | (1,399 | ) | (891 | ) | (508 | ) | |||||||||||||||
(22 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | (396 | ) | (574 | ) | 178 | 893 | 171 | 722 | |||||||||||||||||||
(23 | ) | Income taxes (benefits) | (170 | ) | (268 | ) | 98 | 315 | (42 | ) | 357 | ||||||||||||||||||
(24 | ) | Income (Loss) From Continuing Operations | (226 | ) | (306 | ) | 80 | 578 | 213 | 365 | |||||||||||||||||||
(25 | ) | Discontinued operations (net of income taxes) | — | — | — | — | 86 | (86 | ) | ||||||||||||||||||||
(26 | ) | Net Income (Loss) | $ | (226 | ) | $ | (306 | ) | $ | 80 | $ | 578 | $ | 299 | $ | 279 | |||||||||||||
Earnings (Loss) Per Share of Common Stock | |||||||||||||||||||||||||||||
(27 | ) | Basic - Continuing Operations | $ | (0.53 | ) | $ | (0.73 | ) | $ | 0.20 | $ | 1.37 | $ | 0.51 | $ | 0.86 | |||||||||||||
(28 | ) | Basic - Discontinued Operations | — | — | — | — | 0.20 | (0.20 | ) | ||||||||||||||||||||
(29 | ) | Basic - Net Income (Loss) | $ | (0.53 | ) | $ | (0.73 | ) | $ | 0.20 | $ | 1.37 | $ | 0.71 | $ | 0.66 | |||||||||||||
(30 | ) | Diluted - Continuing Operations | $ | (0.53 | ) | $ | (0.73 | ) | $ | 0.20 | $ | 1.37 | $ | 0.51 | $ | 0.86 | |||||||||||||
(31 | ) | Diluted - Discontinued Operations | — | — | — | — | 0.20 | (0.20 | ) | ||||||||||||||||||||
(32 | ) | Diluted - Net Income (Loss) | $ | (0.53 | ) | $ | (0.73 | ) | $ | 0.20 | $ | 1.37 | $ | 0.71 | $ | 0.66 | |||||||||||||
Weighted Average Number of | |||||||||||||||||||||||||||||
Common Shares Outstanding | |||||||||||||||||||||||||||||
Basic | 423 | 421 | 2 | 422 | 420 | 2 | |||||||||||||||||||||||
Diluted | 424 | 421 | 3 | 424 | 421 | 3 | |||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 12
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Three Months Ended December 31, 2015 | |||||||||||||||||||||||
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | |||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | |||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,152 | $ | 256 | $ | 1,112 | $ | (44 | ) | $ | 3,476 | ||||||||||
(2 | ) | Other | 48 | — | 50 | (33 | ) | 65 | |||||||||||||||
(3 | ) | Internal | — | — | 123 | (123 | ) | — | |||||||||||||||
(4 | ) | Total Revenues | 2,200 | 256 | 1,285 | (200 | ) | 3,541 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(5 | ) | Fuel | 127 | — | 350 | — | 477 | ||||||||||||||||
(6 | ) | Purchased power | 787 | — | 343 | (123 | ) | 1,007 | |||||||||||||||
(7 | ) | Other operating expenses | 573 | 42 | 406 | (69 | ) | 952 | |||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | 179 | 3 | 60 | — | 242 | ||||||||||||||||
(9 | ) | Provision for depreciation | 156 | 40 | 101 | 16 | 313 | ||||||||||||||||
(10 | ) | Amortization (deferral) of regulatory assets, net | 65 | 2 | — | — | 67 | ||||||||||||||||
(11 | ) | General taxes | 167 | 29 | 28 | 7 | 231 | ||||||||||||||||
(12 | ) | Impairment of long-lived assets | — | — | 16 | — | 16 | ||||||||||||||||
(13 | ) | Total Expenses | 2,054 | 116 | 1,304 | (169 | ) | 3,305 | |||||||||||||||
(14 | ) | Operating Income (Loss) | 146 | 140 | (19 | ) | (31 | ) | 236 | ||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
(15 | ) | Investment income (loss) | 9 | — | (9 | ) | (8 | ) | (8 | ) | |||||||||||||
(16 | ) | Impairment of equity method investment | — | — | — | (362 | ) | (362 | ) | ||||||||||||||
(17 | ) | Interest expense | (147 | ) | (42 | ) | (48 | ) | (49 | ) | (286 | ) | |||||||||||
(18 | ) | Capitalized financing costs | 4 | 8 | 10 | 2 | 24 | ||||||||||||||||
(19 | ) | Total Other Expense | (134 | ) | (34 | ) | (47 | ) | (417 | ) | (632 | ) | |||||||||||
(20 | ) | Income (Loss) Before Income Taxes (Benefits) | 12 | 106 | (66 | ) | (448 | ) | (396 | ) | |||||||||||||
(21 | ) | Income taxes (benefits) | (8 | ) | 39 | (26 | ) | (175 | ) | (170 | ) | ||||||||||||
(22 | ) | Net Income (Loss) | $ | 20 | $ | 67 | $ | (40 | ) | $ | (273 | ) | $ | (226 | ) | ||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | ||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | ||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | ||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 13
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Three Months Ended December 31, 2014 | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,076 | $ | 199 | $ | 1,182 | $ | (48 | ) | $ | 3,409 | |||||||||||
(2 | ) | Other | 54 | — | 49 | (29 | ) | 74 | ||||||||||||||||
(3 | ) | Internal | — | — | 195 | (195 | ) | — | ||||||||||||||||
(4 | ) | Total Revenues | 2,130 | 199 | 1,426 | (272 | ) | 3,483 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 126 | — | 443 | — | 569 | |||||||||||||||||
(6 | ) | Purchased power | 785 | — | 400 | (195 | ) | 990 | ||||||||||||||||
(7 | ) | Other operating expenses | 501 | 35 | 450 | (85 | ) | 901 | ||||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | 506 | 2 | 327 | — | 835 | |||||||||||||||||
(9 | ) | Provision for depreciation | 167 | 34 | 100 | 15 | 316 | |||||||||||||||||
(10 | ) | Amortization (deferral) of regulatory assets, net | (17 | ) | 2 | — | — | (15 | ) | |||||||||||||||
(11 | ) | General taxes | 165 | 18 | 38 | 3 | 224 | |||||||||||||||||
(12 | ) | Impairment of long-lived assets | — | — | — | — | — | |||||||||||||||||
(13 | ) | Total Expenses | 2,233 | 91 | 1,758 | (262 | ) | 3,820 | ||||||||||||||||
(14 | ) | Operating Income (Loss) | (103 | ) | 108 | (332 | ) | (10 | ) | (337 | ) | |||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(15 | ) | Investment income (loss) | 12 | — | (1 | ) | (6 | ) | 5 | |||||||||||||||
(16 | ) | Impairment of equity method investment | — | — | — | — | — | |||||||||||||||||
(17 | ) | Interest expense | (144 | ) | (41 | ) | (46 | ) | (40 | ) | (271 | ) | ||||||||||||
(18 | ) | Capitalized financing costs | 2 | 17 | 9 | 1 | 29 | |||||||||||||||||
(19 | ) | Total Other Expense | (130 | ) | (24 | ) | (38 | ) | (45 | ) | (237 | ) | ||||||||||||
(20 | ) | Income (Loss) Before Income Taxes (Benefits) | (233 | ) | 84 | (370 | ) | (55 | ) | (574 | ) | |||||||||||||
(21 | ) | Income taxes (benefits) | (99 | ) | 30 | (124 | ) | (75 | ) | (268 | ) | |||||||||||||
(22 | ) | Net Income (Loss) | $ | (134 | ) | $ | 54 | $ | (246 | ) | $ | 20 | $ | (306 | ) | |||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | |||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 14
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Three Months Ended December 31, 2015 vs. Three Months Ended December 31, 2014 | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 76 | $ | 57 | $ | (70 | ) | $ | 4 | $ | 67 | |||||||||||
(2 | ) | Other | (6 | ) | — | 1 | (4 | ) | (9 | ) | ||||||||||||||
(3 | ) | Internal revenues | — | — | (72 | ) | 72 | — | ||||||||||||||||
(4 | ) | Total Revenues | 70 | 57 | (141 | ) | 72 | 58 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 1 | — | (93 | ) | — | (92 | ) | |||||||||||||||
(6 | ) | Purchased power | 2 | — | (57 | ) | 72 | 17 | ||||||||||||||||
(7 | ) | Other operating expenses | 72 | 7 | (44 | ) | 16 | 51 | ||||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | (327 | ) | 1 | (267 | ) | — | (593 | ) | ||||||||||||||
(9 | ) | Provision for depreciation | (11 | ) | 6 | 1 | 1 | (3 | ) | |||||||||||||||
(10 | ) | Amortization (deferral) of regulatory assets, net | 82 | — | — | — | 82 | |||||||||||||||||
(11 | ) | General taxes | 2 | 11 | (10 | ) | 4 | 7 | ||||||||||||||||
(12 | ) | Impairment of long-lived assets | — | — | 16 | — | 16 | |||||||||||||||||
(13 | ) | Total Expenses | (179 | ) | 25 | (454 | ) | 93 | (515 | ) | ||||||||||||||
(14 | ) | Operating Income (Loss) | 249 | 32 | 313 | (21 | ) | 573 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(15 | ) | Investment income (loss) | (3 | ) | — | (8 | ) | (2 | ) | (13 | ) | |||||||||||||
(16 | ) | Impairment of equity method investment | — | — | — | (362 | ) | (362 | ) | |||||||||||||||
(17 | ) | Interest expense | (3 | ) | (1 | ) | (2 | ) | (9 | ) | (15 | ) | ||||||||||||
(18 | ) | Capitalized financing costs | 2 | (9 | ) | 1 | 1 | (5 | ) | |||||||||||||||
(19 | ) | Total Other Income (Expense) | (4 | ) | (10 | ) | (9 | ) | (372 | ) | (395 | ) | ||||||||||||
(20 | ) | Income (Loss) Before Income Taxes (Benefits) | 245 | 22 | 304 | (393 | ) | 178 | ||||||||||||||||
(21 | ) | Income taxes (benefits) | 91 | 9 | 98 | (100 | ) | 98 | ||||||||||||||||
(22 | ) | Net Income (Loss) | $ | 154 | $ | 13 | $ | 206 | $ | (293 | ) | $ | 80 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | |||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 15
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Year Ended December 31, 2015 | |||||||||||||||||||||||
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | |||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | |||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1 | ) | Electric sales | $ | 9,429 | $ | 1,011 | $ | 4,493 | $ | (173 | ) | $ | 14,760 | ||||||||||
(2 | ) | Other | 196 | — | 205 | (135 | ) | 266 | |||||||||||||||
(3 | ) | Internal | — | — | 686 | (686 | ) | — | |||||||||||||||
(4 | ) | Total Revenues | 9,625 | 1,011 | 5,384 | (994 | ) | 15,026 | |||||||||||||||
Expenses | |||||||||||||||||||||||
(5 | ) | Fuel | 533 | — | 1,322 | — | 1,855 | ||||||||||||||||
(6 | ) | Purchased power | 3,548 | — | 1,456 | (686 | ) | 4,318 | |||||||||||||||
(7 | ) | Other operating expenses | 2,242 | 154 | 1,670 | (317 | ) | 3,749 | |||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | 179 | 3 | 60 | — | 242 | ||||||||||||||||
(9 | ) | Provision for depreciation | 672 | 156 | 394 | 60 | 1,282 | ||||||||||||||||
(10 | ) | Amortization of regulatory assets, net | 261 | 7 | — | — | 268 | ||||||||||||||||
(11 | ) | General taxes | 703 | 102 | 140 | 33 | 978 | ||||||||||||||||
(12 | ) | Impairment of long-lived assets | 8 | — | 34 | — | 42 | ||||||||||||||||
(13 | ) | Total Expenses | 8,146 | 422 | 5,076 | (910 | ) | 12,734 | |||||||||||||||
(14 | ) | Operating Income (Loss) | 1,479 | 589 | 308 | (84 | ) | 2,292 | |||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
(15 | ) | Loss on debt redemptions | — | — | — | — | — | ||||||||||||||||
(16 | ) | Investment income (loss) | 42 | — | (16 | ) | (48 | ) | (22 | ) | |||||||||||||
(17 | ) | Impairment of equity method investment | — | — | — | (362 | ) | (362 | ) | ||||||||||||||
(18 | ) | Interest expense | (586 | ) | (161 | ) | (192 | ) | (193 | ) | (1,132 | ) | |||||||||||
(19 | ) | Capitalized financing costs | 25 | 44 | 39 | 9 | 117 | ||||||||||||||||
(20 | ) | Total Other Expense | (519 | ) | (117 | ) | (169 | ) | (594 | ) | (1,399 | ) | |||||||||||
(21 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | 960 | 472 | 139 | (678 | ) | 893 | |||||||||||||||
(22 | ) | Income taxes (benefits) | 342 | 174 | 50 | (251 | ) | 315 | |||||||||||||||
(23 | ) | Income (Loss) From Continuing Operations | 618 | 298 | 89 | (427 | ) | 578 | |||||||||||||||
(24 | ) | Discontinued operations (net of income taxes) | — | — | — | — | — | ||||||||||||||||
(25 | ) | Net Income (Loss) | $ | 618 | $ | 298 | $ | 89 | $ | (427 | ) | $ | 578 | ||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | ||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | ||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | ||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 16
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Year Ended December 31, 2014 | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 8,898 | $ | 769 | $ | 5,281 | $ | (193 | ) | $ | 14,755 | |||||||||||
(2 | ) | Other | 204 | — | 189 | (99 | ) | 294 | ||||||||||||||||
(3 | ) | Internal | — | — | 819 | (819 | ) | — | ||||||||||||||||
(4 | ) | Total Revenues | 9,102 | 769 | 6,289 | (1,111 | ) | 15,049 | ||||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 567 | — | 1,713 | — | 2,280 | |||||||||||||||||
(6 | ) | Purchased power | 3,385 | — | 2,150 | (819 | ) | 4,716 | ||||||||||||||||
(7 | ) | Other operating expenses | 2,081 | 139 | 2,075 | (333 | ) | 3,962 | ||||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | 506 | 2 | 327 | — | 835 | |||||||||||||||||
(9 | ) | Provision for depreciation | 658 | 127 | 387 | 48 | 1,220 | |||||||||||||||||
(10 | ) | Amortization of regulatory assets, net | 1 | 11 | — | — | 12 | |||||||||||||||||
(11 | ) | General taxes | 693 | 70 | 171 | 28 | 962 | |||||||||||||||||
(12 | ) | Impairment of long-lived assets | — | — | — | — | — | |||||||||||||||||
(13 | ) | Total Expenses | 7,891 | 349 | 6,823 | (1,076 | ) | 13,987 | ||||||||||||||||
(14 | ) | Operating Income (Loss) | 1,211 | 420 | (534 | ) | (35 | ) | 1,062 | |||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(15 | ) | Loss on debt redemptions | — | — | (8 | ) | — | (8 | ) | |||||||||||||||
(16 | ) | Investment income | 56 | — | 54 | (38 | ) | 72 | ||||||||||||||||
(17 | ) | Impairment of equity method investment | — | — | — | — | — | |||||||||||||||||
(18 | ) | Interest expense | (589 | ) | (131 | ) | (189 | ) | (164 | ) | (1,073 | ) | ||||||||||||
(19 | ) | Capitalized financing costs | 14 | 55 | 37 | 12 | 118 | |||||||||||||||||
(20 | ) | Total Other Expense | (519 | ) | (76 | ) | (106 | ) | (190 | ) | (891 | ) | ||||||||||||
(21 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | 692 | 344 | (640 | ) | (225 | ) | 171 | |||||||||||||||
(22 | ) | Income taxes (benefits) | 227 | 121 | (223 | ) | (167 | ) | (42 | ) | ||||||||||||||
(23 | ) | Income (Loss) From Continuing Operations | 465 | 223 | (417 | ) | (58 | ) | 213 | |||||||||||||||
(24 | ) | Discontinued operations (net of income taxes) | — | — | 86 | — | 86 | |||||||||||||||||
(25 | ) | Net Income (Loss) | $ | 465 | $ | 223 | $ | (331 | ) | $ | (58 | ) | $ | 299 | ||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | |||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 17
FirstEnergy Corp.
Statements of Income (Loss) - By Segment
(In millions)
Year Ended December 31, 2015 vs. Year Ended December 31, 2014 | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate/ | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 531 | $ | 242 | $ | (788 | ) | $ | 20 | $ | 5 | |||||||||||
(2 | ) | Other | (8 | ) | — | 16 | (36 | ) | (28 | ) | ||||||||||||||
(3 | ) | Internal revenues | — | — | (133 | ) | 133 | — | ||||||||||||||||
(4 | ) | Total Revenues | 523 | 242 | (905 | ) | 117 | (23 | ) | |||||||||||||||
Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | (34 | ) | — | (391 | ) | — | (425 | ) | ||||||||||||||
(6 | ) | Purchased power | 163 | — | (694 | ) | 133 | (398 | ) | |||||||||||||||
(7 | ) | Other operating expenses | 161 | 15 | (405 | ) | 16 | (213 | ) | |||||||||||||||
(8 | ) | Pension and OPEB mark-to-market adjustment | (327 | ) | 1 | (267 | ) | — | (593 | ) | ||||||||||||||
(9 | ) | Provision for depreciation | 14 | 29 | 7 | 12 | 62 | |||||||||||||||||
(10 | ) | Amortization of regulatory assets, net | 260 | (4 | ) | — | — | 256 | ||||||||||||||||
(11 | ) | General taxes | 10 | 32 | (31 | ) | 5 | 16 | ||||||||||||||||
(12 | ) | Impairment of long-lived assets | 8 | — | 34 | — | 42 | |||||||||||||||||
(13 | ) | Total Expenses | 255 | 73 | (1,747 | ) | 166 | (1,253 | ) | |||||||||||||||
(14 | ) | Operating Income (Loss) | 268 | 169 | 842 | (49 | ) | 1,230 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(15 | ) | Loss on debt redemptions | — | — | 8 | — | 8 | |||||||||||||||||
(16 | ) | Investment income (loss) | (14 | ) | — | (70 | ) | (10 | ) | (94 | ) | |||||||||||||
(17 | ) | Impairment of equity method investment | — | — | — | (362 | ) | (362 | ) | |||||||||||||||
(18 | ) | Interest expense | 3 | (30 | ) | (3 | ) | (29 | ) | (59 | ) | |||||||||||||
(19 | ) | Capitalized financing costs | 11 | (11 | ) | 2 | (3 | ) | (1 | ) | ||||||||||||||
(20 | ) | Total Other Expense | — | (41 | ) | (63 | ) | (404 | ) | (508 | ) | |||||||||||||
(21 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | 268 | 128 | 779 | (453 | ) | 722 | ||||||||||||||||
(22 | ) | Income taxes (benefits) | 115 | 53 | 273 | (84 | ) | 357 | ||||||||||||||||
(23 | ) | Income (Loss) From Continuing Operations | 153 | 75 | 506 | (369 | ) | 365 | ||||||||||||||||
(24 | ) | Discontinued operations (net of income taxes) | — | — | (86 | ) | — | (86 | ) | |||||||||||||||
(25 | ) | Net Income (Loss) | $ | 153 | $ | 75 | $ | 420 | $ | (369 | ) | $ | 279 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FE's service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily from transmission services provided pursuant to the PJM Tariff to LSEs. The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from electric generation sales less the related costs of electricity generation, including fuel, purchased power and net transmission (including congestion) and ancillary costs and capacity costs charged by PJM to deliver energy to the segment’s customers. | |||||||||||||||||||||||
(d) | Contains corporate support and other businesses that do not constitute an operating segment, interest expense on stand-alone holding company debt and corporate income taxes. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 18
FirstEnergy Corp.
Financial Information
(In millions)
Condensed Consolidated Balance Sheets (GAAP) | |||||||||||
As of | As of | ||||||||||
Assets | Dec. 31, 2015 | Dec. 31, 2014 | |||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 131 | $ | 85 | |||||||
Receivables | 1,595 | 1,779 | |||||||||
Other | 1,314 | 1,494 | |||||||||
Total Current Assets | 3,040 | 3,358 | |||||||||
Property, Plant and Equipment | 37,214 | 35,783 | |||||||||
Investments | 2,788 | 3,222 | |||||||||
Deferred Charges and Other Assets | 9,145 | 9,285 | |||||||||
Total Assets | $ | 52,187 | $ | 51,648 | |||||||
Liabilities and Capitalization | |||||||||||
Current Liabilities: | |||||||||||
Currently payable long-term debt | $ | 1,166 | $ | 804 | |||||||
Short-term borrowings | 1,708 | 1,799 | |||||||||
Accounts payable | 1,075 | 1,279 | |||||||||
Other | 1,653 | 1,679 | |||||||||
Total Current Liabilities | 5,602 | 5,561 | |||||||||
Capitalization: | |||||||||||
Total equity | 12,422 | 12,422 | |||||||||
Long-term debt and other long-term obligations | 19,192 | 19,176 | |||||||||
Total Capitalization | 31,614 | 31,598 | |||||||||
Noncurrent Liabilities | 14,971 | 14,489 | |||||||||
Total Liabilities and Capitalization | $ | 52,187 | $ | 51,648 | |||||||
General Information | ||||||||||||||||||
Three Months Ended December 31 | Year Ended December 31 | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
Debt redemptions | $ | (98 | ) | $ | (697 | ) | $ | (879 | ) | $ | (1,759 | ) | ||||||
New long-term debt issues | $ | 227 | $ | 750 | $ | 1,311 | $ | 4,528 | ||||||||||
Short-term borrowings increase (decrease) | $ | (225 | ) | $ | 178 | $ | (91 | ) | $ | (1,605 | ) | |||||||
Property additions | $ | 679 | $ | 839 | $ | 2,704 | $ | 3,312 | ||||||||||
Debt to Total Capitalization Ratio as Defined Under the FE Credit Facility | ||||||||||||||||
As of December 31 | As of December 31 | |||||||||||||||
2015 | % Total | 2014 | % Total | |||||||||||||
Total Equity (GAAP) | $ | 12,422 | 35 | % | $ | 12,422 | 36 | % | ||||||||
Non-cash Charges / Non-cash Write Downs* | 2,077 | 6 | % | 1,935 | 5 | % | ||||||||||
Accumulated Other Comprehensive Income | (171 | ) | (1 | )% | (246 | ) | (1 | )% | ||||||||
Adjusted Equity** | 14,328 | 40 | % | 14,111 | 40 | % | ||||||||||
Long-term Debt and Other Long-term Obligations (GAAP) | 19,192 | 54 | % | 19,176 | 55 | % | ||||||||||
Currently Payable Long-term Debt (GAAP) | 1,166 | 3 | % | 804 | 2 | % | ||||||||||
Short-term Borrowings (GAAP) | 1,708 | 5 | % | 1,799 | 5 | % | ||||||||||
Reimbursement Obligations | 54 | — | % | 54 | — | % | ||||||||||
Guarantees of Indebtedness | 328 | 1 | % | 487 | 1 | % | ||||||||||
Less Securitization Debt | (919 | ) | (3 | )% | (1,005 | ) | (3 | )% | ||||||||
Adjusted Debt** | 21,529 | 60 | % | 21,315 | 60 | % | ||||||||||
Adjusted Capitalization** | $ | 35,857 | 100 | % | $ | 35,426 | 100 | % | ||||||||
*Includes after-tax non-cash charges and non-cash write downs, primarily associated with pensions and OPEB mark-to-market adjustments, impairment of long-lived assets and regulatory asset charges through December 31, 2015, as required by the FE Credit Facility, as amended. | ||||||||||||||||
**Management uses Adjusted Equity, Adjusted Debt, and Adjusted Capitalization, each of which is a non-GAAP financial measure, to calculate and monitor its compliance with the debt to total capitalization financial covenant under the FE Credit Facility. These financial measures, as calculated in accordance with the FE Credit Facility, help shareholders understand FE's compliance with, and provide a basis for understanding FE's incremental debt capacity under the debt to total capitalization financial covenant. The financial covenant under the FE Credit Facility requires FE to maintain a consolidated debt to total capitalization ratio of no more than 65%, measured at the end of each fiscal quarter. | ||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 19
FirstEnergy Corp.
Statements of Cash Flows and Liquidity
(In millions)
Condensed Consolidated Statements of Cash Flows (GAAP) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31 | December 31 | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Cash flows from operating activities | |||||||||||||||||||
Net income (loss) | $ | (226 | ) | $ | (306 | ) | $ | 578 | $ | 299 | |||||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||||||||
Depreciation and amortization (1) | 453 | 382 | 1,836 | 1,563 | |||||||||||||||
Impairments of long-lived assets | 16 | — | 42 | — | |||||||||||||||
Impairment of equity method investment / investment impairment | 394 | 27 | 464 | 37 | |||||||||||||||
Pension and OPEB mark-to-market adjustment | 242 | 835 | 242 | 835 | |||||||||||||||
Deferred income taxes and investment tax credits, net | (144 | ) | (165 | ) | 284 | 162 | |||||||||||||
Deferred costs on sale leaseback transaction, net | 11 | 11 | 48 | 48 | |||||||||||||||
Deferred purchased power and other costs | (32 | ) | (26 | ) | (105 | ) | (115 | ) | |||||||||||
Asset removal costs charged to income | 15 | 6 | 55 | 28 | |||||||||||||||
Retirement benefits | (2 | ) | 7 | (20 | ) | (53 | ) | ||||||||||||
Commodity derivative transactions, net | (9 | ) | 4 | (73 | ) | 64 | |||||||||||||
Pension trust contributions | — | — | (143 | ) | — | ||||||||||||||
Gain on sale of investment securities held in trusts | (4 | ) | (19 | ) | (23 | ) | (64 | ) | |||||||||||
Loss on debt redemptions | — | — | — | 8 | |||||||||||||||
Lease payments on sale and leaseback transaction | (29 | ) | (37 | ) | (131 | ) | (137 | ) | |||||||||||
Income from discontinued operations | — | — | — | (86 | ) | ||||||||||||||
Change in working capital and other | 445 | 257 | 393 | 124 | |||||||||||||||
Cash flows provided from operating activities | 1,130 | 976 | 3,447 | 2,713 | |||||||||||||||
Cash flows provided from (used for) financing activities | (250 | ) | 69 | (279 | ) | 513 | |||||||||||||
Cash flows used for investing activities | (835 | ) | (1,069 | ) | (3,122 | ) | (3,359 | ) | |||||||||||
Net change in cash and cash equivalents | $ | 45 | $ | (24 | ) | $ | 46 | $ | (133 | ) | |||||||||
(1 | ) | Includes Amortization of Regulatory Assets, net, nuclear fuel, customer intangibles, debt related costs, deferred advertising costs and other assets. | |||||||||||||||||
Liquidity position as of January 31, 2016 | ||||||||||
Company | Type | Maturity | Amount | Available | ||||||
FirstEnergy(1) | Revolving | March 2019 | $3,500 | $1,595 | ||||||
FirstEnergy Solutions Corp. (FES) / Allegheny Energy Supply Company, LLC (AE Supply) | Revolving | March 2019 | 1,500 | 1,442 | ||||||
FET(2) | Revolving | March 2019 | 1,000 | 1,000 | ||||||
(1) FE and FEU subsidiary borrowers | Subtotal: | $6,000 | $4,037 | |||||||
(2) Includes FET, ATSI, and TrAILCo | Cash: | — | 63 | |||||||
Total: | $6,000 | $4,100 | ||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 20
FirstEnergy Corp.
Statistical Summary
Electric Distribution Deliveries | Three Months Ended December 31 | Year Ended December 31 | |||||||||||||||||||
(MWH in thousand) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||
Ohio | - Residential | 3,777 | 4,198 | -10.0 | % | 17,181 | 17,440 | -1.5 | % | ||||||||||||
- Commercial | 3,560 | 3,665 | -2.9 | % | 15,185 | 15,261 | -0.5 | % | |||||||||||||
- Industrial | 4,933 | 5,137 | -4.0 | % | 20,548 | 21,138 | -2.8 | % | |||||||||||||
- Other | 84 | 84 | 0.0 | % | 335 | 334 | 0.3 | % | |||||||||||||
Total Ohio | 12,354 | 13,084 | -5.6 | % | 53,249 | 54,173 | -1.7 | % | |||||||||||||
Pennsylvania | - Residential | 4,162 | 4,676 | -11.0 | % | 18,823 | 18,948 | -0.7 | % | ||||||||||||
- Commercial | 3,090 | 3,169 | -2.5 | % | 12,985 | 12,809 | 1.4 | % | |||||||||||||
- Industrial | 4,865 | 5,084 | -4.3 | % | 20,086 | 20,663 | -2.8 | % | |||||||||||||
- Other | 30 | 30 | 0.0 | % | 120 | 122 | -1.6 | % | |||||||||||||
Total Pennsylvania | 12,147 | 12,959 | -6.3 | % | 52,014 | 52,542 | -1.0 | % | |||||||||||||
New Jersey | - Residential | 1,896 | 2,053 | -7.6 | % | 9,639 | 9,336 | 3.2 | % | ||||||||||||
- Commercial | 2,099 | 2,213 | -5.2 | % | 9,135 | 9,095 | 0.4 | % | |||||||||||||
- Industrial | 518 | 553 | -6.3 | % | 2,201 | 2,295 | -4.1 | % | |||||||||||||
- Other | 22 | 22 | 0.0 | % | 86 | 87 | -1.1 | % | |||||||||||||
Total New Jersey | 4,535 | 4,841 | -6.3 | % | 21,061 | 20,813 | 1.2 | % | |||||||||||||
Maryland | - Residential | 707 | 804 | -12.1 | % | 3,304 | 3,327 | -0.7 | % | ||||||||||||
- Commercial | 485 | 496 | -2.2 | % | 2,100 | 2,068 | 1.5 | % | |||||||||||||
- Industrial | 422 | 404 | 4.5 | % | 1,642 | 1,590 | 3.3 | % | |||||||||||||
- Other | 4 | 4 | 0.0 | % | 16 | 16 | 0.0 | % | |||||||||||||
Total Maryland | 1,618 | 1,708 | -5.3 | % | 7,062 | 7,001 | 0.9 | % | |||||||||||||
West Virginia | - Residential | 1,218 | 1,419 | -14.2 | % | 5,519 | 5,715 | -3.4 | % | ||||||||||||
- Commercial | 852 | 893 | -4.6 | % | 3,686 | 3,692 | -0.2 | % | |||||||||||||
- Industrial | 1,382 | 1,431 | -3.4 | % | 5,792 | 5,590 | 3.6 | % | |||||||||||||
- Other | 7 | 7 | 0.0 | % | 28 | 27 | 3.7 | % | |||||||||||||
Total West Virginia | 3,459 | 3,750 | -7.8 | % | 15,025 | 15,024 | 0.0 | % | |||||||||||||
Total Residential | 11,760 | 13,150 | -10.6 | % | 54,466 | 54,766 | -0.5 | % | |||||||||||||
Total Commercial | 10,086 | 10,436 | -3.4 | % | 43,091 | 42,925 | 0.4 | % | |||||||||||||
Total Industrial | 12,120 | 12,609 | -3.9 | % | 50,269 | 51,276 | -2.0 | % | |||||||||||||
Total Other | 147 | 147 | 0.0 | % | 585 | 586 | -0.2 | % | |||||||||||||
Total Distribution Deliveries | 34,113 | 36,342 | -6.1 | % | 148,411 | 149,553 | -0.8 | % | |||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 21
FirstEnergy Corp.
Statistical Summary
Weather | Three Months Ended December 31 | Year Ended December 31 | |||||||||||||||||||
2015 | 2014 | Normal | 2015 | 2014 | Normal | ||||||||||||||||
Composite Heating-Degree-Days | 1,363 | 1,936 | 1,933 | 5,241 | 5,877 | 5,393 | |||||||||||||||
Composite Cooling-Degree-Days | 5 | 9 | 14 | 1,088 | 824 | 933 | |||||||||||||||
Shopping Statistics (Based Upon MWH) | Three Months Ended December 31 | Year Ended December 31 | ||||||||
2015 | 2014 | 2015 | 2014 | |||||||
OE | 79% | 79% | 79% | 80% | ||||||
Penn | 61% | 64% | 60% | 66% | ||||||
CEI | 84% | 84% | 83% | 85% | ||||||
TE | 76% | 75% | 75% | 77% | ||||||
JCP&L | 52% | 54% | 50% | 52% | ||||||
Met-Ed | 69% | 69% | 67% | 69% | ||||||
Penelec | 70% | 71% | 70% | 71% | ||||||
PE(1) | 51% | 49% | 48% | 47% | ||||||
WP | 63% | 63% | 61% | 64% | ||||||
(1) Represents Maryland only. | ||||||||||
Competitive Operating Statistics (1) | Three Months Ended December 31 | Year Ended December 31 | |||||||||
2015 | 2014 | 2015 | 2014 | ||||||||
Generation Capacity Factors: | |||||||||||
Nuclear | 93% | 94% | 90% | 87% | |||||||
Fossil - Baseload | 51% | 71% | 60% | 75% | |||||||
Fossil - Load Following | 39% | 38% | 44% | 56% | |||||||
Generation Fuel Rate: | |||||||||||
Nuclear | $6.75 | $7.07 | $6.97 | $7.45 | |||||||
Fossil | $27 | $27 | $27 | $27 | |||||||
Total Fleet | $17 | $18 | $17 | $19 | |||||||
Generation Output Mix: | |||||||||||
Nuclear | 51% | 46% | 47% | 41% | |||||||
Fossil - Baseload | 35% | 42% | 39% | 44% | |||||||
Fossil - Load Following | 6% | 5% | 7% | 8% | |||||||
Peaking/CT/Hydro | 8% | 7% | 7% | 7% | |||||||
(1) Excludes RMR and units deactivated in April 2015. | |||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 22
FirstEnergy Corp.
Competitive Energy Services - Sources & Uses
Competitive Energy Services - Sources and Uses (MWH in thousands) | |||||||||||||||||||||||
Three Months Ended December 31 | Year Ended December 31 | ||||||||||||||||||||||
Contract Sales | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
POLR | |||||||||||||||||||||||
- OH | 877 | 1,194 | (317 | ) | 4,244 | 4,844 | (600 | ) | |||||||||||||||
- PA | 853 | 1,970 | (1,117 | ) | 5,853 | 8,414 | (2,561 | ) | |||||||||||||||
- MD | 310 | 623 | (313 | ) | 1,853 | 2,450 | (597 | ) | |||||||||||||||
Total POLR | 2,040 | 3,787 | (1,747 | ) | 11,950 | 15,708 | (3,758 | ) | |||||||||||||||
Structured Sales | |||||||||||||||||||||||
- Bilaterals | 2,534 | 2,072 | 462 | 10,218 | 8,177 | 2,041 | |||||||||||||||||
- Muni/Co-op | 578 | 1,128 | (550 | ) | 2,684 | 4,637 | (1,953 | ) | |||||||||||||||
Total Structured Sales | 3,112 | 3,200 | (88 | ) | 12,902 | 12,814 | 88 | ||||||||||||||||
Direct - LCI | |||||||||||||||||||||||
- OH | 2,017 | 4,168 | (2,151 | ) | 10,444 | 22,209 | (11,765 | ) | |||||||||||||||
- PA | 1,545 | 2,523 | (978 | ) | 7,013 | 11,341 | (4,328 | ) | |||||||||||||||
- NJ | 80 | 314 | (234 | ) | 685 | 1,275 | (590 | ) | |||||||||||||||
- MI | 472 | 653 | (181 | ) | 2,225 | 2,859 | (634 | ) | |||||||||||||||
- IL | 237 | 405 | (168 | ) | 1,150 | 2,088 | (938 | ) | |||||||||||||||
- MD | 28 | 118 | (90 | ) | 202 | 704 | (502 | ) | |||||||||||||||
Total Direct - LCI | 4,379 | 8,181 | (3,802 | ) | 21,719 | 40,476 | (18,757 | ) | |||||||||||||||
Direct - MCI | |||||||||||||||||||||||
- OH | 266 | 411 | (145 | ) | 1,217 | 1,929 | (712 | ) | |||||||||||||||
- PA | 65 | 306 | (241 | ) | 562 | 1,395 | (833 | ) | |||||||||||||||
- IL | 6 | 38 | (32 | ) | 59 | 187 | (128 | ) | |||||||||||||||
- NJ | 7 | 6 | 1 | 25 | 18 | 7 | |||||||||||||||||
- MD | 1 | 1 | — | 3 | 7 | (4 | ) | ||||||||||||||||
Total Direct - MCI | 345 | 762 | (417 | ) | 1,866 | 3,536 | (1,670 | ) | |||||||||||||||
Aggregation | |||||||||||||||||||||||
- OH | 2,912 | 3,603 | (691 | ) | 14,009 | 15,216 | (1,207 | ) | |||||||||||||||
- IL | 253 | 549 | (296 | ) | 1,425 | 4,338 | (2,913 | ) | |||||||||||||||
- NJ | — | 4 | (4 | ) | 9 | 15 | (6 | ) | |||||||||||||||
Total Aggregation | 3,165 | 4,156 | (991 | ) | 15,443 | 19,569 | (4,126 | ) | |||||||||||||||
Mass Market | |||||||||||||||||||||||
- OH | 118 | 381 | (263 | ) | 822 | 1,825 | (1,003 | ) | |||||||||||||||
- PA | 495 | 1,037 | (542 | ) | 2,934 | 4,645 | (1,711 | ) | |||||||||||||||
- IL | 7 | 32 | (25 | ) | 50 | 160 | (110 | ) | |||||||||||||||
- MD | 10 | 28 | (18 | ) | 65 | 139 | (74 | ) | |||||||||||||||
- NJ | 1 | 1 | — | 7 | 4 | 3 | |||||||||||||||||
Total Mass Market | 631 | 1,479 | (848 | ) | 3,878 | 6,773 | (2,895 | ) | |||||||||||||||
Total Contract Sales | 13,672 | 21,565 | (7,893 | ) | 67,758 | 98,876 | (31,118 | ) | |||||||||||||||
Wholesale Sales | |||||||||||||||||||||||
- Spot | 3,302 | 412 | 2,890 | 7,326 | 680 | 6,646 | |||||||||||||||||
Total Wholesale Sales | 3,302 | 412 | 2,890 | 7,326 | 680 | 6,646 | |||||||||||||||||
Purchased Power | |||||||||||||||||||||||
- Bilaterals | 545 | 604 | (59 | ) | 1,996 | 2,222 | (226 | ) | |||||||||||||||
- Spot | 555 | 3,030 | (2,475 | ) | 8,030 | 25,546 | (17,516 | ) | |||||||||||||||
Total Purchased Power | 1,100 | 3,634 | (2,534 | ) | 10,026 | 27,768 | (17,742 | ) | |||||||||||||||
Generation Output | |||||||||||||||||||||||
- Fossil | 7,981 | 10,027 | (2,046 | ) | 35,418 | 43,830 | (8,412 | ) | |||||||||||||||
- Nuclear | 8,282 | 8,394 | (112 | ) | 31,915 | 31,040 | 875 | ||||||||||||||||
- RMR /Deactivated Units (1) | — | 726 | (726 | ) | 758 | 1,556 | (798 | ) | |||||||||||||||
Total Generation Output | 16,263 | 19,147 | (2,884 | ) | 68,091 | 76,426 | (8,335 | ) | |||||||||||||||
(1) | Includes RMR and units deactivated in April 2015. | ||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 23
FirstEnergy Corp.
Consolidated GAAP to Non-GAAP Reconciliation
(In millions)
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 3,541 | $ | — | $ | 3,541 | $ | 3,483 | $ | — | $ | 3,483 | ||||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 477 | (76 | ) | (b,c) | 401 | 569 | (98 | ) | (b,c) | 471 | ||||||||||||||||
(3 | ) | Purchased power | 1,007 | — | 1,007 | 990 | — | 990 | ||||||||||||||||||||
(4 | ) | Other operating expenses | 952 | (14 | ) | (a,b,g,h) | 938 | 901 | (37 | ) | (a,b,g,h) | 864 | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 242 | (242 | ) | (d) | — | 835 | (835 | ) | (d) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 313 | — | 313 | 316 | — | 316 | ||||||||||||||||||||
(7 | ) | Amortization (deferral) of regulatory assets, net | 67 | — | 67 | (15 | ) | — | (15 | ) | ||||||||||||||||||
(8 | ) | General taxes | 231 | (1 | ) | (b) | 230 | 224 | — | 224 | ||||||||||||||||||
(9 | ) | Impairment of long-lived assets | 16 | (16 | ) | (e) | — | — | — | — | ||||||||||||||||||
(10 | ) | Total Expenses | 3,305 | (349 | ) | 2,956 | 3,820 | (970 | ) | 2,850 | ||||||||||||||||||
(11 | ) | Operating Income (Loss) | 236 | 349 | 585 | (337 | ) | 970 | 633 | |||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | (8 | ) | 33 | (e,f) | 25 | 5 | 35 | (e,f) | 40 | |||||||||||||||||
(14 | ) | Impairment of equity method investment | (362 | ) | 362 | (e) | — | — | — | — | ||||||||||||||||||
(15 | ) | Interest expense | (286 | ) | — | (286 | ) | (271 | ) | — | (271 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 24 | — | 24 | 29 | — | 29 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (632 | ) | 395 | (237 | ) | (237 | ) | 35 | (202 | ) | ||||||||||||||||
(18 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | (396 | ) | 744 | 348 | (574 | ) | 1,005 | 431 | ||||||||||||||||||
(19 | ) | Income taxes (benefits) | (170 | ) | 274 | 104 | (268 | ) | 361 | (b) | 93 | |||||||||||||||||
(20 | ) | Income (Loss) From Continuing Operations | (226 | ) | 470 | 244 | (306 | ) | 644 | 338 | ||||||||||||||||||
(21 | ) | Discontinued operations (net of income taxes) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income (Loss) | $ | (226 | ) | $ | 470 | $ | 244 | $ | (306 | ) | $ | 644 | $ | 338 | ||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2015 ($0.01 per share),($7) million included in "Other operating expenses". 2014 ($0.02 per share),($16) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(b) | Plant deactivation costs: 2015, ($1) million included in "Fuel", ($1) million included in "Other operating expenses", and ($1) million included in "General taxes". 2014 ($0.17 per share), ($87) million included in "Fuel", ($2) million included in "Other operating expenses", and $15 million included in "Income taxes (benefits)". | |||||||||||||||||||||||||||
(c) | Merger accounting - commodity contracts: 2015 ($0.11 per share), ($75) million included in "Fuel". 2014 ($0.03 per share), ($11) million included in "Fuel". | |||||||||||||||||||||||||||
(d) | Mark-to-market adjustments - Pension / OPEB actuarial assumptions: 2015 ($0.35 per share), ($242) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($1.23 per share), ($835) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(e) | Impact of non-core asset sales/impairments: 2015 ($0.59 per share), ($16) million included in "Impairment of long-lived assets"; $2 million included in "Investment income (loss)", and $362 million included in "Impairment of equity method investment". 2014 ($0.01 per share), $8 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(f) | Trust securities impairment: 2015 ($0.04 per share), $31 million included in "Investment income (loss)". 2014 ($0.04 per share), $27 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(g) | Retail repositioning charges: 2015 ($0.02 per share), ($15) million included in "Other operating expenses". 2014 ($0.02 per share), ($12) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(h) | Mark-to-market adjustments - Other: 2015 (($0.01) per share), $9 million included in "Other operating expenses". 2014 ($0.01 per share), ($7) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 423 million shares in the fourth quarter of 2015 and 421 million shares in the fourth quarter of 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 24
FirstEnergy Corp.
Consolidated GAAP to Non-GAAP Reconciliation
(In millions)
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 15,026 | $ | (3 | ) | (a,b,e) | $ | 15,023 | $ | 15,049 | $ | 4 | (a) | $ | 15,053 | |||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 1,855 | (123 | ) | (b,c) | 1,732 | 2,280 | (220 | ) | (b,c) | 2,060 | ||||||||||||||||
(3 | ) | Purchased Power | 4,318 | — | 4,318 | 4,716 | 1 | (a) | 4,717 | |||||||||||||||||||
(4 | ) | Other operating expenses | 3,749 | (9 | ) | (a,b,h,k) | 3,740 | 3,962 | (212 | ) | (a,b,c,h, i,j,k) | 3,750 | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 242 | (242 | ) | (d) | — | 835 | (835 | ) | (d) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 1,282 | — | 1,282 | 1,220 | — | 1,220 | ||||||||||||||||||||
(7 | ) | Amortization of regulatory assets, net | 268 | (2 | ) | (a) | 266 | 12 | (1 | ) | (a) | 11 | ||||||||||||||||
(8 | ) | General taxes | 978 | (2 | ) | (b) | 976 | 962 | (2 | ) | (b) | 960 | ||||||||||||||||
(9 | ) | Impairment of long-lived assets | 42 | (42 | ) | (e) | — | — | — | — | ||||||||||||||||||
(10 | ) | Total Expenses | 12,734 | (420 | ) | 12,314 | 13,987 | (1,269 | ) | 12,718 | ||||||||||||||||||
(11 | ) | Operating Income | 2,292 | 417 | 2,709 | 1,062 | 1,273 | 2,335 | ||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | (8 | ) | 8 | (g) | — | ||||||||||||||||||
(13 | ) | Investment income (loss) | (22 | ) | 115 | (e,f) | 93 | 72 | 57 | (e,f) | 129 | |||||||||||||||||
(14 | ) | Impairment of equity method investment | (362 | ) | 362 | (e) | — | — | — | — | ||||||||||||||||||
(15 | ) | Interest expense | (1,132 | ) | — | (1,132 | ) | (1,073 | ) | — | (1,073 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 117 | — | 117 | 118 | — | 118 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (1,399 | ) | 477 | (922 | ) | (891 | ) | 65 | (826 | ) | ||||||||||||||||
(18 | ) | Income From Continuing Operations Before Income Taxes (Benefits) | 893 | 894 | 1,787 | 171 | 1,338 | 1,509 | ||||||||||||||||||||
(19 | ) | Income taxes (benefits) | 315 | 328 | 643 | (42 | ) | 484 | (b) | 442 | ||||||||||||||||||
(20 | ) | Income From Continuing Operations | 578 | 566 | 1,144 | 213 | 854 | 1,067 | ||||||||||||||||||||
(21 | ) | Discontinued operations (net of income taxes) | — | — | — | 86 | (78 | ) | (e) | 8 | ||||||||||||||||||
(22 | ) | Net Income | $ | 578 | $ | 566 | $ | 1,144 | $ | 299 | $ | 776 | $ | 1,075 | ||||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2015 ($0.07 per share), $2 million included in "Revenues", ($42) million included in "Other operating expenses", and ($2) million included in "Amortization of regulatory assets, net". 2014 ($0.08 per share), $4 million included in "Revenues", $1 million included in "Purchased power", ($46) million included in "Other operating expenses", and ($1) million included in "Amortization of regulatory assets, net". | |||||||||||||||||||||||||||
(b) | Plant deactivation costs: 2015 ($0.04 per share), ($2) million included in "Revenues", ($13) million included in "Fuel", ($9) million included in "Other operating expenses", and ($2) million included in "General taxes". 2014 ($0.34 per share), ($178) million included in "Fuel", ($26) million included in "Other operating expenses", ($2) million included in "General taxes", and $15 million included in "Income taxes (benefits)". | |||||||||||||||||||||||||||
(c) | Merger accounting - commodity contracts: 2015 ($0.16 per share), ($110) million included in "Fuel". 2014 ($0.07 per share), ($42) million included in "Fuel", and $1 million included in "Other operating expenses". | |||||||||||||||||||||||||||
(d) | Mark-to-market adjustments - Pension/OPEB actuarial assumptions: 2015 ($0.35 per share), ($242) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($1.23 per share), ($835) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(e) | Impact of non-core asset sales/impairments: 2015 ($0.63 per share), ($3) million included in "Revenues", ($42) million included in "Impairment of long-lived assets", $13 million included in "Investment income (loss)", and $362 million included in "Impairment of equity method investment". 2014 (($0.15) per share), $20 million included in "Investment income (loss)", and ($78) million included in "Discontinued operations (net of income taxes)". | |||||||||||||||||||||||||||
(f) | Trust securities impairment: 2015 ($0.15 per share), $102 million included in "Investment income (loss)". 2014 ($0.06 per share), $37 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(g) | Loss on debt redemptions: 2014 ($0.01 per share), $8 million included in "Loss on debt redemptions". | |||||||||||||||||||||||||||
(h) | Retail repositioning charges: 2015 ($0.05 per share), ($31) million included in "Other operating expenses". 2014 ($0.11 per share), ($71) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(i) | Litigation resolution: 2014 (($0.01) per share), $6 million included in "Other operating expenses". | |||||||||||||||||||||||||||
(j) | Restructuring Costs: 2014, ($1) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(k) | Mark-to-market adjustments - Other: 2015 (($0.11) per share), $73 million included in "Other operating expenses". 2014 ($0.11 per share), ($75) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 422 million shares in 2015 and 420 million shares in 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 25
FirstEnergy Corp.
Regulated Distribution
GAAP to Non-GAAP Reconciliation
(In millions)
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 2,200 | $ | — | $ | 2,200 | $ | 2,130 | $ | — | $ | 2,130 | ||||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 127 | — | 127 | 126 | — | 126 | ||||||||||||||||||||
(3 | ) | Purchased power | 787 | — | 787 | 785 | — | 785 | ||||||||||||||||||||
(4 | ) | Other operating expenses | 573 | (7 | ) | (a) | 566 | 501 | (11 | ) | (a) | 490 | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 179 | (179 | ) | (b) | — | 506 | (506 | ) | (b) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 156 | — | 156 | 167 | — | 167 | ||||||||||||||||||||
(7 | ) | Amortization (deferral) of regulatory assets, net | 65 | — | 65 | (17 | ) | — | (17 | ) | ||||||||||||||||||
(8 | ) | General taxes | 167 | — | 167 | 165 | — | 165 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | — | — | — | — | — | — | ||||||||||||||||||||
(10 | ) | Total Expenses | 2,054 | (186 | ) | 1,868 | 2,233 | (517 | ) | 1,716 | ||||||||||||||||||
(11 | ) | Operating Income (Loss) | 146 | 186 | 332 | (103 | ) | 517 | 414 | |||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | 9 | 4 | (c) | 13 | 12 | 3 | (c) | 15 | ||||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (147 | ) | — | (147 | ) | (144 | ) | — | (144 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 4 | — | 4 | 2 | — | 2 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (134 | ) | 4 | (130 | ) | (130 | ) | 3 | (127 | ) | ||||||||||||||||
(18 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | 12 | 190 | 202 | (233 | ) | 520 | 287 | |||||||||||||||||||
(19 | ) | Income taxes (benefits) | (8 | ) | 75 | 67 | (99 | ) | 199 | 100 | ||||||||||||||||||
(20 | ) | Income (Loss) From Continuing Operations | 20 | 115 | 135 | (134 | ) | 321 | 187 | |||||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income (Loss) | $ | 20 | $ | 115 | $ | 135 | $ | (134 | ) | $ | 321 | $ | 187 | |||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2015 ($0.01 per share), $(7) million included in "Other operating expenses". 2014 ($0.02 per share), $(11) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(b) | Mark-to-market adjustments - Pension/OPEB actuarial assumptions: 2015 ($0.26 per share), ($179) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.74 per share), ($506) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(c) | Trust securities impairment: 2015, $4 million included in "Investment income (loss)". 2014, $3 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 423 million shares in the fourth quarter of 2015 and 421 million shares in the fourth quarter of 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 26
FirstEnergy Corp.
Regulated Distribution
GAAP to Non-GAAP Reconciliation
(In millions)
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 9,625 | $ | 2 | (a) | $ | 9,627 | $ | 9,102 | $ | 4 | (a) | $ | 9,106 | ||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 533 | — | 533 | 567 | — | 567 | ||||||||||||||||||||
(3 | ) | Purchased power | 3,548 | — | 3,548 | 3,385 | 1 | (a) | 3,386 | |||||||||||||||||||
(4 | ) | Other operating expenses | 2,242 | (41 | ) | (a) | 2,201 | 2,081 | (42 | ) | (a,d,e) | 2,039 | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 179 | (179 | ) | (b) | — | 506 | (506 | ) | (b) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 672 | — | 672 | 658 | — | 658 | ||||||||||||||||||||
(7 | ) | Amortization of regulatory assets, net | 261 | (2 | ) | (a) | 259 | 1 | (1 | ) | (a) | — | ||||||||||||||||
(8 | ) | General taxes | 703 | — | 703 | 693 | — | 693 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | 8 | (8 | ) | (d) | — | — | — | — | ||||||||||||||||||
(10 | ) | Total Expenses | 8,146 | (230 | ) | 7,916 | 7,891 | (548 | ) | 7,343 | ||||||||||||||||||
(11 | ) | Operating Income | 1,479 | 232 | 1,711 | 1,211 | 552 | 1,763 | ||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | 42 | 12 | (c) | 54 | 56 | 4 | (c) | 60 | ||||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (586 | ) | — | (586 | ) | (589 | ) | — | (589 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 25 | — | 25 | 14 | — | 14 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (519 | ) | 12 | (507 | ) | (519 | ) | 4 | (515 | ) | ||||||||||||||||
(18 | ) | Income From Continuing Operations Before Income Taxes | 960 | 244 | 1,204 | 692 | 556 | 1,248 | ||||||||||||||||||||
(19 | ) | Income taxes | 342 | 95 | 437 | 227 | 212 | 439 | ||||||||||||||||||||
(20 | ) | Income From Continuing Operations | 618 | 149 | 767 | 465 | 344 | 809 | ||||||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income | $ | 618 | $ | 149 | $ | 767 | $ | 465 | $ | 344 | $ | 809 | ||||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2015 ($0.07 per share), $2 million included in "Revenues", ($41) million included in "Other operating expenses", and ($2) million included in "Amortization of regulatory assets, net". 2014 ($0.07 per share), $4 million included in "Revenues", $1 million included in "Purchased power", ($40) million included in "Other operating expenses", and ($1) million included in "Amortization of regulatory assets, net". | |||||||||||||||||||||||||||
(b) | Mark-to-market adjustments - Pension/OPEB actuarial assumptions: 2015 ($0.26 per share), ($179) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.74 per share), ($506) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(c) | Trust securities impairment: 2015 ($0.02 per share), $12 million included in "Investment income (loss)". 2014 ($0.01 per share), $4 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(d) | Impact of non-core asset sales/impairments: 2015 ($0.01 per share), ($8) million included in "Impairment of long-lived assets". 2014, ($1) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(e) | Restructuring Costs: 2014, ($1) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 422 million shares in 2015 and 420 million shares in 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 27
FirstEnergy Corp.
Regulated Transmission
GAAP to Non-GAAP Reconciliation
(In millions)
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 256 | $ | — | $ | 256 | $ | 199 | $ | — | $ | 199 | ||||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | — | — | ||||||||||||||||||||
(3 | ) | Purchased power | — | — | — | — | — | — | ||||||||||||||||||||
(4 | ) | Other operating expenses | 42 | — | 42 | 35 | (2 | ) | (b) | 33 | ||||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 3 | (3 | ) | (a) | — | 2 | (2 | ) | (a) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 40 | — | 40 | 34 | — | 34 | ||||||||||||||||||||
(7 | ) | Amortization (deferral) of regulatory assets, net | 2 | — | 2 | 2 | — | 2 | ||||||||||||||||||||
(8 | ) | General taxes | 29 | — | 29 | 18 | — | 18 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | — | — | — | — | — | — | ||||||||||||||||||||
(10 | ) | Total Expenses | 116 | (3 | ) | 113 | 91 | (4 | ) | 87 | ||||||||||||||||||
(11 | ) | Operating Income | 140 | 3 | 143 | 108 | 4 | 112 | ||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | — | — | — | — | — | — | ||||||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (42 | ) | — | (42 | ) | (41 | ) | — | (41 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 8 | — | 8 | 17 | — | 17 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (34 | ) | — | (34 | ) | (24 | ) | — | (24 | ) | ||||||||||||||||
(18 | ) | Income From Continuing Operations Before Income Taxes | 106 | 3 | 109 | 84 | 4 | 88 | ||||||||||||||||||||
(19 | ) | Income taxes | 39 | 1 | 40 | 30 | 1 | 31 | ||||||||||||||||||||
(20 | ) | Income From Continuing Operations | 67 | 2 | 69 | 54 | 3 | 57 | ||||||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income | $ | 67 | $ | 2 | $ | 69 | $ | 54 | $ | 3 | $ | 57 | ||||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Mark-to-market adjustments- Pension/OPEB actuarial assumptions: 2015, ($3) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.01 per share), ($2) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(b) | Regulatory charges: 2014, ($2) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 423 million shares in the fourth quarter of 2015 and 421 million shares in the fourth quarter of 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 28
FirstEnergy Corp.
Regulated Transmission
GAAP to Non-GAAP Reconciliation
(In millions)
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating- Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 1,011 | $ | — | $ | 1,011 | $ | 769 | $ | — | $ | 769 | ||||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | — | — | ||||||||||||||||||||
(3 | ) | Purchased power | — | — | — | — | — | — | ||||||||||||||||||||
(4 | ) | Other operating expenses | 154 | — | 154 | 139 | (2 | ) | (b) | 137 | ||||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 3 | (3 | ) | (a) | — | 2 | (2 | ) | (a) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 156 | — | 156 | 127 | — | 127 | ||||||||||||||||||||
(7 | ) | Amortization of regulatory assets, net | 7 | — | 7 | 11 | — | 11 | ||||||||||||||||||||
(8 | ) | General taxes | 102 | — | 102 | 70 | — | 70 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | — | — | — | — | — | — | ||||||||||||||||||||
(10 | ) | Total Expenses | 422 | (3 | ) | 419 | 349 | (4 | ) | 345 | ||||||||||||||||||
(11 | ) | Operating Income (Loss) | 589 | 3 | 592 | 420 | 4 | 424 | ||||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | — | — | — | — | — | — | ||||||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (161 | ) | — | (161 | ) | (131 | ) | — | (131 | ) | ||||||||||||||||
(16 | ) | Capitalized financing costs | 44 | — | 44 | 55 | — | 55 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (117 | ) | — | (117 | ) | (76 | ) | — | (76 | ) | ||||||||||||||||
(18 | ) | Income From Continuing Operations Before Income Taxes | 472 | 3 | 475 | 344 | 4 | 348 | ||||||||||||||||||||
(19 | ) | Income taxes | 174 | 1 | 175 | 121 | 1 | 122 | ||||||||||||||||||||
(20 | ) | Income From Continuing Operations | 298 | 2 | 300 | 223 | 3 | 226 | ||||||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income | $ | 298 | $ | 2 | $ | 300 | $ | 223 | $ | 3 | $ | 226 | ||||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Mark-to-market adjustments-Pension/OPEB actuarial assumptions: 2015, ($3) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.01 per share), ($2) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(b) | Regulatory charges: 2014, ($2) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 422 million shares in 2015 and 420 million shares in 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 29
FirstEnergy Corp.
Competitive Energy Services
GAAP to Non-GAAP Reconciliation
(In millions)
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating- Non-GAAP | GAAP | Special Items | Operating- Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 1,285 | $ | — | $ | 1,285 | $ | 1,426 | $ | — | $ | 1,426 | ||||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 350 | (76 | ) | (b,e) | 274 | 443 | (98 | ) | (b,e) | 345 | ||||||||||||||||
(3 | ) | Purchased power | 343 | — | 343 | 400 | — | 400 | ||||||||||||||||||||
(4 | ) | Other operating expenses | 406 | (7 | ) | (b,g,h) | 399 | 450 | (24 | ) | (a,b,g,h) | 426 | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 60 | (60 | ) | (c) | — | 327 | (327 | ) | (c) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 101 | — | 101 | 100 | — | 100 | ||||||||||||||||||||
(7 | ) | Amortization (deferral) of regulatory assets, net | — | — | — | — | — | — | ||||||||||||||||||||
(8 | ) | General taxes | 28 | (1 | ) | (b) | 27 | 38 | — | 38 | ||||||||||||||||||
(9 | ) | Impairment of long-lived assets | 16 | (16 | ) | (d) | — | — | — | — | ||||||||||||||||||
(10 | ) | Total Expenses | 1,304 | (160 | ) | 1,144 | 1,758 | (449 | ) | 1,309 | ||||||||||||||||||
(11 | ) | Operating Income (Loss) | (19 | ) | 160 | 141 | (332 | ) | 449 | 117 | ||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | (9 | ) | 27 | (f) | 18 | (1 | ) | 27 | (d,f) | 26 | ||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (48 | ) | — | (48 | ) | (46 | ) | — | (46 | ) | ||||||||||||||||
(16 | ) | Capitalized interest | 10 | — | 10 | 9 | — | 9 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (47 | ) | 27 | (20 | ) | (38 | ) | 27 | (11 | ) | ||||||||||||||||
(18 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | (66 | ) | 187 | 121 | (370 | ) | 476 | 106 | ||||||||||||||||||
(19 | ) | Income taxes (benefits) | (26 | ) | 71 | 45 | (124 | ) | 159 | (b) | 35 | |||||||||||||||||
(20 | ) | Income (Loss) From Continuing Operations | (40 | ) | 116 | 76 | (246 | ) | 317 | 71 | ||||||||||||||||||
(21 | ) | Discontinued operations (net of income taxes) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income (Loss) | $ | (40 | ) | $ | 116 | $ | 76 | $ | (246 | ) | $ | 317 | $ | 71 | ||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2014, ($4) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(b) | Plant deactivation costs: 2015, ($1) million included in "Fuel", ($1) million included in "Other operating expenses", and ($1) million included in "General taxes". 2014 ($0.17 per share), ($87) million included in "Fuel", ($2) million included in "Other operating expenses", and $15 million included in "Income taxes (benefits)". | |||||||||||||||||||||||||||
(c) | Mark-to-market adjustments - Pension/OPEB actuarial assumptions: 2015 ($0.09 per share), ($60) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.48 per share), ($327) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(d) | Impact of non-core asset sales/impairments: 2015 ($0.03 per share), ($16) million included in "Impairment of long-lived assets". 2014 ($0.01 per share), $3 million included in "Investment Income (loss)". | |||||||||||||||||||||||||||
(e) | Merger accounting - commodity contracts: 2015 ($0.11 per share), ($75) million included in "Fuel". 2014 ($0.03 per share), ($11) million included in "Fuel". | |||||||||||||||||||||||||||
(f) | Trust securities impairment: 2015 ($0.04 per share), $27 million included in "Investment income (loss)". 2014 ($0.04 per share), $24 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(g) | Retail repositioning charges: 2015 ($0.02 per share), ($15) million included in "Other operating expenses". 2014 ($0.02 per share), ($12) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(h) | Mark-to-market adjustments-Other: 2015 (($0.01) per share), $9 million included in "Other operating expenses". 2014 ($0.01 per share), ($6) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 423 million shares in the fourth quarter of 2015 and 421 million shares in the fourth quarter of 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 30
FirstEnergy Corp.
Competitive Energy Services
GAAP to Non-GAAP Reconciliation
(In millions)
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | 5,384 | $ | (5 | ) | (b,e) | $ | 5,379 | $ | 6,289 | $ | — | $ | 6,289 | ||||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | 1,322 | (123 | ) | (b,c) | 1,199 | 1,713 | (220 | ) | (b,c) | 1,493 | ||||||||||||||||
(3 | ) | Purchased power | 1,456 | — | 1,456 | 2,150 | — | 2,150 | ||||||||||||||||||||
(4 | ) | Other operating expenses | 1,670 | 32 | (a,b,h,i) | 1,702 | 2,075 | (174 | ) | (a,b,h,i) | 1,901 | |||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | 60 | (60 | ) | (d) | — | 327 | (327 | ) | (d) | — | ||||||||||||||||
(6 | ) | Provision for depreciation | 394 | — | 394 | 387 | — | 387 | ||||||||||||||||||||
(7 | ) | Amortization of regulatory assets, net | — | — | — | — | — | — | ||||||||||||||||||||
(8 | ) | General taxes | 140 | (2 | ) | (b) | 138 | 171 | (2 | ) | (b) | 169 | ||||||||||||||||
(9 | ) | Impairment of long-lived assets | 34 | (34 | ) | (e) | — | — | — | — | ||||||||||||||||||
(10 | ) | Total Expenses | 5,076 | (187 | ) | 4,889 | 6,823 | (723 | ) | 6,100 | ||||||||||||||||||
(11 | ) | Operating Income (Loss) | 308 | 182 | 490 | (534 | ) | 723 | 189 | |||||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | (8 | ) | 8 | (g) | — | ||||||||||||||||||
(13 | ) | Investment income (loss) | (16 | ) | 90 | (f) | 74 | 54 | 36 | (e,f) | 90 | |||||||||||||||||
(14 | ) | Impairment of equity method investment | — | — | — | — | — | — | ||||||||||||||||||||
(15 | ) | Interest expense | (192 | ) | — | (192 | ) | (189 | ) | — | (189 | ) | ||||||||||||||||
(16 | ) | Capitalized interest | 39 | — | 39 | 37 | — | 37 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (169 | ) | 90 | (79 | ) | (106 | ) | 44 | (62 | ) | ||||||||||||||||
(18 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | 139 | 272 | 411 | (640 | ) | 767 | 127 | |||||||||||||||||||
(19 | ) | Income taxes (benefits) | 50 | 101 | 151 | (223 | ) | 265 | (b) | 42 | ||||||||||||||||||
(20 | ) | Income (Loss) From Continuing Operations | 89 | 171 | 260 | (417 | ) | 502 | 85 | |||||||||||||||||||
(21 | ) | Discontinued operations (net of income taxes) | — | — | — | 86 | (78 | ) | (e) | 8 | ||||||||||||||||||
(22 | ) | Net Income (Loss) | $ | 89 | $ | 171 | $ | 260 | $ | (331 | ) | $ | 424 | $ | 93 | |||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Regulatory charges: 2015, ($1) million included in "Other operating expenses". 2014 ($0.01 per share), ($4) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(b) | Plant deactivation costs: 2015 ($0.04 per share), ($2) million included in "Revenues", ($13) million included in "Fuel", ($9) million included in "Other operating expenses", and ($2) million included in "General taxes". 2014 ($0.34 per share), ($178) million included in "Fuel", ($26) million included in "Other operating expenses", ($2) million included in "General taxes", and $15 million included in "Income taxes (benefits)". | |||||||||||||||||||||||||||
(c) | Merger accounting - commodity contracts: 2015 ($0.16 per share), ($110) million included in "Fuel". 2014 ($0.07 per share), ($42) million included in "Fuel". | |||||||||||||||||||||||||||
(d) | Mark-to-market adjustments - Pension/OPEB actuarial assumptions: 2015 ($0.09 per share), ($60) million included in "Pension and OPEB mark-to-market adjustment". 2014 ($0.48 per share), ($327) million included in "Pension and OPEB mark-to-market adjustment". | |||||||||||||||||||||||||||
(e) | Impact of non-core asset sales/impairments: 2015 ($0.05 per share), ($3) million included in "Revenues", and ($34) million included in "Impairment of long-lived assets". 2014 (($0.17) per share), $3 included in "Investment income (loss)", and ($78) million included in "Discontinued operations (net of income taxes)". | |||||||||||||||||||||||||||
(f) | Trust securities impairment: 2015 ($0.13 per share), $90 million included in "Investment income (loss)". 2014 ($0.05 per share), $33 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
(g) | Loss on debt redemptions: 2014 ($0.01 per share), $8 million included in "Loss on debt redemption". | |||||||||||||||||||||||||||
(h) | Retail repositioning charges: 2015 ($0.05 per share), ($31) million included in "Other operating expenses". 2014 ($0.11 per share), ($70) million included in "Other operating expenses". | |||||||||||||||||||||||||||
(i) | Mark-to-market adjustments-Other: 2015 (($0.11) per share), $73 million included in "Other operating expenses". 2014 ($0.11 per share), ($74) million included in "Other operating expenses". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 422 million shares in 2015 and 420 million shares in 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 31
FirstEnergy Corp.
Corporate/Other
GAAP to Non-GAAP Reconciliation
(In millions)
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | (200 | ) | $ | — | $ | (200 | ) | $ | (272 | ) | $ | — | $ | (272 | ) | ||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | — | — | ||||||||||||||||||||
(3 | ) | Purchased power | (123 | ) | — | (123 | ) | (195 | ) | — | (195 | ) | ||||||||||||||||
(4 | ) | Other operating expenses | (69 | ) | — | (69 | ) | (85 | ) | — | (85 | ) | ||||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | — | — | — | — | — | — | ||||||||||||||||||||
(6 | ) | Provision for depreciation | 16 | — | 16 | 15 | — | 15 | ||||||||||||||||||||
(7 | ) | Amortization (deferral) of regulatory assets, net | — | — | — | — | — | — | ||||||||||||||||||||
(8 | ) | General taxes | 7 | — | 7 | 3 | — | 3 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | — | — | — | — | — | — | ||||||||||||||||||||
(10 | ) | Total Expenses | (169 | ) | — | (169 | ) | (262 | ) | — | (262 | ) | ||||||||||||||||
(11 | ) | Operating Income (Loss) | (31 | ) | — | (31 | ) | (10 | ) | — | (10 | ) | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | (8 | ) | 2 | (a) | (6 | ) | (6 | ) | 5 | (a) | (1 | ) | ||||||||||||||
(14 | ) | Impairment of equity method investment | (362 | ) | 362 | (a) | — | — | — | — | ||||||||||||||||||
(15 | ) | Interest expense | (49 | ) | — | (49 | ) | (40 | ) | — | (40 | ) | ||||||||||||||||
(16 | ) | Capitalized interest | 2 | — | 2 | 1 | — | 1 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (417 | ) | 364 | (53 | ) | (45 | ) | 5 | (40 | ) | ||||||||||||||||
(18 | ) | Income (Loss) From Continuing Operations Before Income Taxes (Benefits) | (448 | ) | 364 | (84 | ) | (55 | ) | 5 | (50 | ) | ||||||||||||||||
(19 | ) | Income taxes (benefits) | (175 | ) | 127 | (48 | ) | (75 | ) | 2 | (73 | ) | ||||||||||||||||
(20 | ) | Income (Loss) From Continuing Operations | (273 | ) | 237 | (36 | ) | 20 | 3 | 23 | ||||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Income (Loss) | $ | (273 | ) | $ | 237 | $ | (36 | ) | $ | 20 | $ | 3 | $ | 23 | ||||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 34 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Impact of non-core asset sales/impairments: 2015 ($0.56 per share), $2 million included in "Investment income", and $362 million included in "Impairment of equity method investment". 2014, $5 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 423 million shares in the fourth quarter of 2015 and 421 million shares in the fourth quarter of 2014. | ||||||||||||||||||||||||||||
_____________________________________________________________________________________________________
Consolidated Report to the Financial Community - 4th Quarter 2015 32
FirstEnergy Corp.
Corporate/Other
GAAP to Non-GAAP Reconciliation
(In millions)
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||||||||||
GAAP | Special Items | Operating -Non-GAAP | GAAP | Special Items | Operating -Non-GAAP | |||||||||||||||||||||||
(1 | ) | Revenues | $ | (994 | ) | $ | — | $ | (994 | ) | $ | (1,111 | ) | $ | — | $ | (1,111 | ) | ||||||||||
Expenses | ||||||||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | — | — | ||||||||||||||||||||
(3 | ) | Purchased power | (686 | ) | — | (686 | ) | (819 | ) | — | (819 | ) | ||||||||||||||||
(4 | ) | Other operating expenses | (317 | ) | — | (317 | ) | (333 | ) | 6 | (a) | (327 | ) | |||||||||||||||
(5 | ) | Pension and OPEB mark-to-market adjustment | — | — | — | — | — | — | ||||||||||||||||||||
(6 | ) | Provision for depreciation | 60 | — | 60 | 48 | — | 48 | ||||||||||||||||||||
(7 | ) | Amortization of regulatory assets, net | — | — | — | — | — | — | ||||||||||||||||||||
(8 | ) | General taxes | 33 | — | 33 | 28 | — | 28 | ||||||||||||||||||||
(9 | ) | Impairment of long-lived assets | — | — | — | — | — | — | ||||||||||||||||||||
(10 | ) | Total Expenses | (910 | ) | — | (910 | ) | (1,076 | ) | 6 | (1,070 | ) | ||||||||||||||||
(11 | ) | Operating Loss | (84 | ) | — | (84 | ) | (35 | ) | (6 | ) | (41 | ) | |||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
(12 | ) | Loss on debt redemptions | — | — | — | — | — | — | ||||||||||||||||||||
(13 | ) | Investment income (loss) | (48 | ) | 13 | (b) | (35 | ) | (38 | ) | 17 | (b) | (21 | ) | ||||||||||||||
(14 | ) | Impairment of equity method investment | (362 | ) | 362 | (b) | — | — | — | — | ||||||||||||||||||
(15 | ) | Interest expense | (193 | ) | — | (193 | ) | (164 | ) | — | (164 | ) | ||||||||||||||||
(16 | ) | Capitalized interest | 9 | — | 9 | 12 | — | 12 | ||||||||||||||||||||
(17 | ) | Total Other Expense | (594 | ) | 375 | (219 | ) | (190 | ) | 17 | (173 | ) | ||||||||||||||||
(18 | ) | Loss From Continuing Operations Before Income Tax Benefits | (678 | ) | 375 | (303 | ) | (225 | ) | 11 | (214 | ) | ||||||||||||||||
(19 | ) | Income tax benefits | (251 | ) | 131 | (120 | ) | (167 | ) | 6 | (161 | ) | ||||||||||||||||
(20 | ) | Loss From Continuing Operations | (427 | ) | 244 | (183 | ) | (58 | ) | 5 | (53 | ) | ||||||||||||||||
(21 | ) | Discontinued operations (net of income tax benefits) | — | — | — | — | — | — | ||||||||||||||||||||
(22 | ) | Net Loss | $ | (427 | ) | $ | 244 | $ | (183 | ) | $ | (58 | ) | $ | 5 | $ | (53 | ) | ||||||||||
The above GAAP to Non-GAAP Reconciliation provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. See page 35 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||||||||
(a) | Litigation resolution: 2014 (($0.01) per share), $6 million included in "Other operating expenses". | |||||||||||||||||||||||||||
(b) | Impact of non-core asset sales/impairments: 2015 ($0.57 per share), $13 million included in "Investment income (loss)", and $362 million included in "Impairment of equity method investment. 2014 ($0.02 per share), $17 million included in "Investment income (loss)". | |||||||||||||||||||||||||||
Per share amounts included above are based on the after tax effect of the above special items divided by the weighted average shares outstanding of 422 million shares in 2015 and 420 million shares in 2014. | ||||||||||||||||||||||||||||
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Consolidated Report to the Financial Community - 4th Quarter 2015 33
FirstEnergy Corp.
EPS Reconciliations
Earnings Per Share (EPS) | |||||||||||||||||||||||
(Reconciliation of GAAP to Operating (Non-GAAP) Earnings) | |||||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||||
Three Months Ended December 31, 2015 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
4Q 2015 Net Income (Loss) - GAAP | $ | 20 | $ | 67 | $ | (40 | ) | $ | (273 | ) | $ | (226 | ) | ||||||||||
4Q 2015 Basic EPS (avg. shares outstanding 423M) | $ | 0.05 | $ | 0.16 | $ | (0.10 | ) | $ | (0.64 | ) | $ | (0.53 | ) | ||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments - | |||||||||||||||||||||||
Pension/OPEB actuarial assumptions | 0.26 | — | 0.09 | — | 0.35 | ||||||||||||||||||
Other | — | — | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||
Merger accounting - commodity contracts | — | — | 0.11 | — | 0.11 | ||||||||||||||||||
Regulatory charges | 0.01 | — | — | — | 0.01 | ||||||||||||||||||
Retail repositioning charges | — | — | 0.02 | — | 0.02 | ||||||||||||||||||
Impact of non-core asset sales/impairments | — | — | 0.03 | 0.56 | 0.59 | ||||||||||||||||||
Trust securities impairment | — | — | 0.04 | — | 0.04 | ||||||||||||||||||
Total Special Items | $ | 0.27 | $ | — | $ | 0.28 | $ | 0.56 | $ | 1.11 | |||||||||||||
Basic EPS - Operating (Non-GAAP) | $ | 0.32 | $ | 0.16 | $ | 0.18 | $ | (0.08 | ) | $ | 0.58 | ||||||||||||
Three Months Ended December 31, 2014 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
4Q 2014 Net Income (Loss) - GAAP | $ | (134 | ) | $ | 54 | $ | (246 | ) | $ | 20 | $ | (306 | ) | ||||||||||
4Q 2014 Basic EPS (avg. shares outstanding 421M) | $ | (0.31 | ) | $ | 0.13 | $ | (0.59 | ) | $ | 0.04 | $ | (0.73 | ) | ||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments - | |||||||||||||||||||||||
Pension/OPEB actuarial assumptions | 0.74 | 0.01 | 0.48 | — | 1.23 | ||||||||||||||||||
Other | — | — | 0.01 | — | 0.01 | ||||||||||||||||||
Merger accounting - commodity contracts | — | — | 0.03 | — | 0.03 | ||||||||||||||||||
Regulatory charges | 0.02 | — | — | — | 0.02 | ||||||||||||||||||
Retail repositioning charges | — | — | 0.02 | — | 0.02 | ||||||||||||||||||
Impact of non-core asset sales/impairments | — | — | 0.01 | — | 0.01 | ||||||||||||||||||
Trust securities impairment | — | — | 0.04 | — | 0.04 | ||||||||||||||||||
Plant deactivation costs | — | — | 0.17 | — | 0.17 | ||||||||||||||||||
Total Special Items | $ | 0.76 | $ | 0.01 | $ | 0.76 | $ | — | $ | 1.53 | |||||||||||||
Basic EPS - Operating (Non-GAAP) | $ | 0.45 | $ | 0.14 | $ | 0.17 | $ | 0.04 | $ | 0.80 | |||||||||||||
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Consolidated Report to the Financial Community - 4th Quarter 2015 34
FirstEnergy Corp.
EPS Reconciliations
Earnings Per Share (EPS) | |||||||||||||||||||||||
(Reconciliation of GAAP to Operating (Non-GAAP) Earnings) | |||||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||||
Year Ended December 31, 2015 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
2015 Net Income (Loss) - GAAP | $ | 618 | $ | 298 | $ | 89 | $ | (427 | ) | $ | 578 | ||||||||||||
2015 Basic EPS (avg. shares outstanding 422M) | $ | 1.46 | $ | 0.71 | $ | 0.21 | $ | (1.01 | ) | $ | 1.37 | ||||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments - | |||||||||||||||||||||||
Pension/OPEB actuarial assumptions | 0.26 | — | 0.09 | — | 0.35 | ||||||||||||||||||
Other | — | — | (0.11 | ) | — | (0.11 | ) | ||||||||||||||||
Merger accounting - commodity contracts | — | — | 0.16 | — | 0.16 | ||||||||||||||||||
Regulatory charges | 0.07 | — | — | — | 0.07 | ||||||||||||||||||
Retail repositioning charges | — | — | 0.05 | — | 0.05 | ||||||||||||||||||
Impact of non-core asset sales/impairments | 0.01 | — | 0.05 | 0.57 | 0.63 | ||||||||||||||||||
Trust securities impairment | 0.02 | — | 0.13 | — | 0.15 | ||||||||||||||||||
Plant deactivation costs | — | — | 0.04 | — | 0.04 | ||||||||||||||||||
Total Special Items | $ | 0.36 | $ | — | $ | 0.41 | $ | 0.57 | $ | 1.34 | |||||||||||||
Basic EPS - Operating (Non-GAAP) | $ | 1.82 | $ | 0.71 | $ | 0.62 | $ | (0.44 | ) | $ | 2.71 | ||||||||||||
Year Ended December 31, 2014 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
2014 Net Income (Loss) - GAAP | $ | 465 | $ | 223 | $ | (331 | ) | $ | (58 | ) | $ | 299 | |||||||||||
2014 Basic EPS (avg. shares outstanding 420M) | $ | 1.11 | $ | 0.53 | $ | (0.79 | ) | $ | (0.14 | ) | $ | 0.71 | |||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments - | |||||||||||||||||||||||
Pension/OPEB actuarial assumptions | 0.74 | 0.01 | 0.48 | — | 1.23 | ||||||||||||||||||
Other | — | — | 0.11 | — | 0.11 | ||||||||||||||||||
Merger accounting - commodity contracts | — | — | 0.07 | — | 0.07 | ||||||||||||||||||
Regulatory charges | 0.07 | — | 0.01 | — | 0.08 | ||||||||||||||||||
Retail repositioning charges | — | — | 0.11 | — | 0.11 | ||||||||||||||||||
Impact of non-core asset sales/impairments | — | — | (0.17 | ) | 0.02 | (0.15 | ) | ||||||||||||||||
Trust securities impairment | 0.01 | — | 0.05 | — | 0.06 | ||||||||||||||||||
Plant deactivation costs | — | — | 0.34 | — | 0.34 | ||||||||||||||||||
Litigation resolution | — | — | — | (0.01 | ) | (0.01 | ) | ||||||||||||||||
Loss on debt redemptions | — | — | 0.01 | — | 0.01 | ||||||||||||||||||
Total Special Items | $ | 0.82 | $ | 0.01 | $ | 1.01 | $ | 0.01 | $ | 1.85 | |||||||||||||
Basic EPS - Operating (Non-GAAP) | $ | 1.93 | $ | 0.54 | $ | 0.22 | $ | (0.13 | ) | $ | 2.56 | ||||||||||||
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Consolidated Report to the Financial Community - 4th Quarter 2015 35
Recent Developments
Financial Matters
Dividend
On January 19, 2016, the Board of Directors of FE declared an unchanged quarterly dividend of $0.36 cents per share of outstanding common stock. The dividend is payable March 1, 2016, to shareholders of record as of February 5, 2016.
Fitch Ratings Actions
On December 8, 2015, Fitch Ratings affirmed FE's long-term Issuer Default Rating (IDR) of BB+ and revised the Rating Outlook to Positive from Stable. Fitch also affirmed FE's senior unsecured debt rating at BB+. The positive outlook considers FE’s December stipulation in the Ohio utilities' Electric Security Plan IV (ESP IV) rate proceeding, including a separate 8-year power purchase agreement.
Moody’s Investors Service Actions
On December 10, 2015, Moody's affirmed the Baa3 issuer and senior unsecured ratings at FE, FES, and AE Supply. The outlook on all three companies is stable. The affirmation follows the comprehensive settlement agreement filed on December 1, 2015, by FE's Ohio utilities on their proposed ESP IV.
Investment in Global Holding
During the fourth quarter, given the continued decline in coal pricing, the current outlook for the coal market, including the significant decline in the market capitalization of coal companies, FE recognized a $362 million pre-tax, non-cash impairment charge associated with its investment in Global Holding, the holding company for a joint venture in the Signal Peak mining and coal transportation operation with coal sales in the U.S. and international markets.
Operational Matters
Beaver Valley Unit 2 Refueling Outage
On October 30, 2015, the 933-MW Beaver Valley Unit 2 returned to service following a scheduled month-long shutdown for refueling and maintenance. During the outage, one-third of the plant's 157 fuel assemblies were exchanged. Numerous inspections and preventative maintenance and improvement projects were completed to ensure continued safe and reliable operations.
Regulatory Matters
Davis-Besse Receives License Renewal
On December 8, 2015, FirstEnergy Nuclear Operating Company announced that the Nuclear Regulatory Commission approved a 20-year license extension for the Davis-Besse Nuclear Power Station allowing the unit to operate until 2037. The plant’s original license was set to expire on April 22, 2017.
ESP IV Update
On December 1, 2015, FE’s Ohio utilities filed with the Public Utilities Commission of Ohio (PUCO) a Third Supplemental Stipulation and Recommendation (Third Supplemental Stipulation) in their ESP IV. Together with previous stipulations, the Third Supplemental Stipulation sets forth ambitious steps to safeguard customers against retail price increases in future years, deploy new energy
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Consolidated Report to the Financial Community - 4th Quarter 2015 36
efficiency programs, and provide a clear path to a cleaner energy future by reducing carbon emissions. The PUCO staff and 16 other parties were signatories to the settlement agreement.
Key provisions:
• | An eight-year retail rate stability rider designed to help protect customers against rising retail price increases and market volatility, while helping preserve vital baseload power plants that serve Ohio customers and preserve $1 billion in annual statewide economic benefits, including tax revenues, and an estimated 3,000 direct and indirect family-sustaining jobs in the state. The plants involved include the Davis-Besse Nuclear Power Station, the W.H. Sammis Plant, and a portion of the output of Ohio Valley Electric Corporation units. |
• | A goal to reduce carbon dioxide (CO2) emissions across FE's six-state footprint by at least 90 percent below 2005 levels by 2045. |
• | More than $102 million to help low-income customers with bill payment and energy efficiency programs, along with economic development funding for Ohio communities. |
• | A contemplated continuation of the base distribution rate freeze through May 31, 2024. |
• | Filing a report by November 1, 2016, as part of the Ohio utilities' resource diversification commitment highlighting their then-current strategy regarding promoting fuel diversification and carbon reduction. |
• | A commitment to make a filing to evaluate future initiatives for smart meter/smart grid technologies across the Ohio utilities' service area for PUCO consideration and approval. |
Hearings on the Third Supplemental Stipulation began on January 14, 2016 and concluded on January 22, 2016. Initial briefs were filed on February 16, 2016 and reply briefs are due on February 26, 2016.
The PUCO is expected to rule on the settlement by the end of March 2016.
On January 27, 2016, certain entities filed a complaint at FERC against FES and FE's Ohio utilities. The complaint requests FERC review of the proposed PPA under Section 205 of the Federal Power Act. FE intends to vigorously defend against such challenges.
Pennsylvania Long Term Infrastructure Improvement Plans (LTIIPs)
On October 19, 2015, FirstEnergy's Pennsylvania utilities (Metropolitan Edison Company (ME), Pennsylvania Electric Company (PN), Pennsylvania Power Company (PP) and West Penn Power Company (WP)) filed LTIIPs with the Pennsylvania Public Utility Commission (PAPUC) for infrastructure improvement over the five year period from 2016 to 2020 for $245 million. The amounts submitted were as follows: WP $88.3 million; PN $56.7 million; PP $56.4 million; ME $43.4 million. Upgrading the distribution system more quickly through an LTIIP is intended to enhance and modernize services to customers and maintain or improve overall system reliability and resiliency.
On February 11, 2016, the PAPUC approved the Pennsylvania utilities LTIIPs. On February 16, 2016, the Pennsylvania utilities filed Distribution System Improvement Charge (DSIC) riders for PAPUC approval for quarterly cost recovery associated with the capital projects approved in the LTIIPs. The DSIC riders are expected to be effective July 1, 2016.
West Virginia Expanded Net Energy Costs (ENEC) Settlement
On August 14, 2015, Monongahela Power Company (MP) and The Potomac Edison Company (PE) filed their annual ENEC case with the Public Service Commission of West Virginia (WVPSC) proposing an approximate $165.1 million annual increase in rates effective January 1, 2016 or before, which would be a 12.5% increase over existing rates.
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Consolidated Report to the Financial Community - 4th Quarter 2015 37
On November 19, 2015, a settlement was presented to the WVPSC increasing revenues $96.9 million and deferring other costs for recovery into 2017.
On December 22, 2015, the WVPSC issued its final order approving the settlement with rates effective on January 1, 2016.
West Virginia Vegetation Management Settlement
On August 31, 2015, MP and PE filed with the WVPSC their biennial petition for reconciliation of the Vegetation Management Surcharge and regular review of the program.
On November 19, 2015, a settlement was presented to the WVPSC increasing revenues $36.7 million, annually, for the 2016/2017 period.
On December 21, 2015, the WVPSC approved the settlement without changes with rates effective on January 1, 2016.
Other Matters
Thomas N. Mitchell Elected to Board of Directors
On January 19, 2016, FE announced that Thomas N. Mitchell, 60, was elected to the company’s Board of Directors. Mitchell is a nuclear industry veteran with 38 years of experience, including leadership positions at key industry groups including the World Association of Nuclear Operators (WANO), the Institute of Nuclear Power Operations (INPO), the Nuclear Energy Institute (NEI) and the Electric Power Research Institute (EPRI). The election of Mitchell brings the size of FE’s Board to 14 members.
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Consolidated Report to the Financial Community - 4th Quarter 2015 38
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 include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” "forecast," "target," "will," "intend," “believe,” "project," “estimate," "plan" and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the speed and nature of increased competition in the electric utility industry, in general, and the retail sales market in particular; the ability to experience growth in the Regulated Distribution and Regulated Transmission segments and to successfully implement our sales strategy for the Competitive Energy Services segment; the accomplishment of our regulatory and operational goals in connection with our transmission investment plan, including but not limited to, the proposed transmission asset transfer to Mid-Atlantic Interstate Transmission, LLC, and the effectiveness of our strategy to reflect a more regulated business profile; changes in assumptions regarding economic conditions within our territories, assessment of the reliability of our transmission system, or the availability of capital or other resources supporting identified transmission investment opportunities; the impact of the regulatory process on the pending matters at the federal level and in the various states in which we do business including, but not limited to, matters related to rates and the Electric Security Plan IV in Ohio; the impact of the federal regulatory process on the Federal Energy Regulatory Commission (FERC)-regulated entities and transactions, in particular FERC regulation of wholesale energy and capacity markets, including PJM Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional wholesale transactions; FERC regulation of cost-of-service rates, including FERC Opinion No. 531’s revised Return on Equity methodology for FERC-jurisdictional wholesale generation and transmission utility service; and FERC’s compliance and enforcement activity, including compliance and enforcement activity related to North American Electric Reliability Corporation’s mandatory reliability standards; the uncertainties of various cost recovery and cost allocation issues resulting from American Transmission Systems, Incorporated's realignment into PJM; economic or weather conditions affecting future sales and margins such as a polar vortex or other significant weather events, and all associated regulatory events or actions; changing energy, capacity and commodity market prices including, but not limited to, coal, natural gas and oil prices, and their availability and impact on margins and asset valuations; the continued ability of our regulated utilities to recover their costs; costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices; other legislative and regulatory changes, and revised environmental requirements, including, but not limited to, the effects of the United States Environmental Protection Agency's Clean Power Plan, coal combustion residuals regulations, Cross-State Air Pollution Rule and Mercury and Air Toxics Standards programs, including our estimated costs of compliance, Clean Water Act (CWA) waste water effluent limitations for power plants, and CWA 316(b) water intake regulation; the uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including New Source Review litigation, or potential regulatory initiatives or rulemakings (including that such initiatives or rulemakings could result in our decision to deactivate or idle certain generating units); the uncertainties associated with the deactivation of certain older regulated and competitive fossil units, including the impact on vendor commitments and as it relates to the reliability of the transmission grid, the timing thereof; the impact of other future changes to the operational status or availability of our generating units and any capacity performance charges associated with unit unavailability; adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to the revocation or non-renewal of necessary licenses, approvals or operating permits by the Nuclear Regulatory Commission or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant); issues arising from the indications of cracking in the shield building at Davis-Besse; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings, including, but not limited to, any such proceedings related to vendor commitments; the impact of labor disruptions by our unionized workforce; replacement power costs being higher than anticipated or not fully hedged; the ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates; changes in customers' demand for power, including, but not limited to, changes resulting from the implementation of state and federal energy efficiency and peak demand reduction mandates; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, the ability to continue to reduce costs and to successfully execute our financial plans designed to improve our credit metrics and strengthen our balance sheet through, among other actions, our cash flow improvement plan and other proposed capital raising initiatives; our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins; changing market conditions that could affect the measurement of certain liabilities and the value of assets held in our Nuclear Decommissioning Trusts, pension trusts and other trust funds, and cause us and/or our subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated; the impact of changes to material accounting policies; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries; actions that may be taken by credit rating agencies that could negatively affect us and/or our subsidiaries' access to financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees; changes in national and regional economic conditions affecting us, our subsidiaries and/or our major industrial and commercial customers, and other counterparties with which we do business, including fuel suppliers; the impact of any changes in tax laws or regulations or adverse tax audit results or rulings; issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system that may compromise our generation, transmission and/or distribution services and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information regarding our business, employees, shareholders, customers, suppliers, business partners and other individuals in our data centers and on our networks; and the risks and other factors discussed from time to time in our United States Securities and Exchange Commission filings, and other similar factors. Dividends declared from time to time on FirstEnergy Corp.'s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.'s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy's business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any current intention to update, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.
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Consolidated Report to the Financial Community - 4th Quarter 2015 39