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FirstEnergy 10-Q 2012
FE-3.31.2012-10Q


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________
Commission
 
Registrant; State of Incorporation;
 
I.R.S. Employer
File Number
 
Address; and Telephone Number
 
Identification No.
 
 
 
 
 
333-21011
 
FIRSTENERGY CORP.
 
34-1843785
 
 
(An Ohio Corporation)
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
000-53742
 
FIRSTENERGY SOLUTIONS CORP.
 
31-1560186
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-2578
 
OHIO EDISON COMPANY
 
34-0437786
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
1-3141
 
JERSEY CENTRAL POWER & LIGHT COMPANY
 
21-0485010
 
 
(A New Jersey Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer þ
FirstEnergy Corp.
 
 
Accelerated Filer o
N/A
 
 
Non-accelerated Filer (Do not check
if a smaller reporting company)
þ
FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company
 
 
Smaller Reporting Company o
N/A
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ
 
FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
 
OUTSTANDING
CLASS
 
AS OF APRIL 30, 2012
FirstEnergy Corp., $.10 par value
 
418,216,437

FirstEnergy Solutions Corp., no par value
 
7

Ohio Edison Company, no par value
 
60

Jersey Central Power & Light Company, $10 par value
 
13,628,447

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company common stock.
This combined Form 10-Q is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the FirstEnergy subsidiary registrants is also attributed to FirstEnergy Corp.
FirstEnergy Web Site
Each of the registrants’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through FirstEnergy’s Internet web site at www.firstenergycorp.com.
These reports are posted on the web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, the registrants routinely post important information on FirstEnergy’s Internet web site and recognize FirstEnergy’s Internet web site as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Internet web site shall not be deemed incorporated into, or to be part of, this report.
OMISSION OF CERTAIN INFORMATION
FirstEnergy Solutions Corp., Ohio Edison Company and Jersey Central Power & Light Company meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.
 




Forward-Looking Statements: This Form 10-Q includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” 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.
 
Actual results may differ materially due to:
The speed and nature of increased competition in the electric utility industry.
The impact of the regulatory process on the pending matters before FERC and in the various states in which we do business including, but not limited to, matters related to rates.
The status of the PATH project in light of PJM's direction to suspend work on the project pending review of its planning process, its re-evaluation of the need for the project and the uncertainty of the timing and amounts of any related capital expenditures.
The uncertainties of various cost recovery and cost allocation issues resulting from ATSI's realignment into PJM.
Economic or weather conditions affecting future sales and margins.
Changes in markets for energy services.
Changing energy and commodity market prices and availability.
Financial derivative reforms that could increase our liquidity needs and collateral costs.
The continued ability of our regulated utilities to collect transition and other costs.
Operation and maintenance costs being higher than anticipated.
Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water intake and coal combustion residual regulations, the potential impacts of any laws, rules or regulations that ultimately replace CAIR, including CSAPR which was stayed by the courts on December 30, 2011, and the effects of the EPA's MATS rules.
The uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to shut down or idle certain generating units).
The uncertainties associated with our plan to retire our older unscrubbed regulated and competitive fossil units, including the impact on vendor commitments, and PJM's review of our plans for, and the timing of, those retirements.
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 NRC or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant).
Issues that could result from our continuing evaluation of the indications of cracking in the Davis-Besse Plant shield building imposed by the CAL issued by the NRC.
Adverse legal decisions and outcomes related to ME's and PN's ability to recover certain transmission costs through their transmission service charge riders.
The continuing availability of generating units and changes in their ability to operate at or near full capacity.
Replacement power costs being higher than anticipated or inadequately hedged.
The ability to comply with applicable state and federal reliability standards and energy efficiency mandates.
Changes in customers' demand for power, including but not limited to, changes resulting from the implementation of state and federal energy efficiency mandates.
The ability to accomplish or realize anticipated benefits from strategic goals.
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.
The ability to experience growth in the distribution business.
Changing market conditions that could affect the value of assets held in our NDTs, pension trusts and other trust funds, and cause us and 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 financing plans, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries.
Changes in general economic conditions affecting us and our subsidiaries.
Interest rates and any actions taken by credit rating agencies that could negatively affect us and our subsidiaries' access to financing, increased costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees.
The state of the national and regional economy and its impact on our major industrial and commercial customers.
Issues concerning the soundness of domestic and foreign financial institutions and counterparties with which we do business.
The risks and other factors discussed from time to time in our SEC filings, and other similar factors.





Dividends declared from time to time on FE's common stock during any annual period may in the aggregate vary from the indicated amount due to circumstances considered by FE'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 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. The registrants expressly disclaim 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.





TABLE OF CONTENTS
 
Page
 
 
Part I. Financial Information
 
 
 
 
 
Item 1. Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FirstEnergy Corp. Management's Discussion of Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 3. Defaults Upon Senior Securities
 
 
Item 4. Mine Safety Disclosures
 
 
Item 5. Other Information
 
 

i



GLOSSARY OF TERMS
The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

AE
Allegheny Energy, Inc., a Maryland utility holding company that merged with a subsidiary of FirstEnergy on February 25, 2011
AE Supply
Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary of AE
AET
Allegheny Energy Transmission, LLC, a subsidiary of AE, which is the parent of ATSI and TrAIL and has a joint venture in PATH
AGC
Allegheny Generating Company, a generation subsidiary of AE
Allegheny
Allegheny Energy, Inc., together with its consolidated subsidiaries
ATSI
American Transmission Systems, Incorporated, formerly a direct subsidiary of FE that became a subsidiary of AET in April 2012, which owns and operates transmission facilities.
CEI
The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FE
FirstEnergy Corp., a public utility holding company
FENOC
FirstEnergy Nuclear Operating Company, which operates nuclear generating facilities
FES
FirstEnergy Solutions Corp., which provides energy-related products and services
FESC
FirstEnergy Service Company, which provides legal, financial and other corporate support services
FEV
FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures
FGCO
FirstEnergy Generation Corp., a subsidiary of FES, which owns and operates non-nuclear generating facilities
FirstEnergy
FirstEnergy Corp., together with its consolidated subsidiaries
Global Holding
Global Mining Holding Company, LLC, a joint venture between FEV, WMB Marketing Ventures, LLC and Gunvor Group, Ltd. that owns Global Rail and Signal Peak
Global Rail
A joint venture between FEV, WMB Marketing Ventures, LLC and Gunvor Group, Ltd. that owns coal transportation operations near Roundup, Montana
JCP&L
Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
ME
Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
MP
Monongahela Power Company, a West Virginia electric utility operating subsidiary of AE
NGC
FirstEnergy Nuclear Generation Corp., a subsidiary of FES, which owns nuclear generating facilities
OE
Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies
CEI, OE and TE
PATH
Potomac-Appalachian Transmission Highline, LLC, a joint venture between Allegheny and a subsidiary of AEP
PATH-Allegheny
PATH Allegheny Transmission Company, LLC
PATH-VA
PATH Allegheny Virginia Transmission Corporation
PE
The Potomac Edison Company, a Maryland electric utility operating subsidiary of AE
PN
Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn
Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies
ME, PN, Penn and WP
PNBV
PNBV Capital Trust, a special purpose entity created by OE in 1996
Shippingport
Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak
A joint venture between FEV, WMB Marketing Ventures, LLC and Gunvor Group, Ltd. that owns mining operations near Roundup, Montana
TE
The Toledo Edison Company, an Ohio electric utility operating subsidiary
TrAIL
Trans-Allegheny Interstate Line Company, a subsidiary of AET, which owns and operates transmission facilities
Utilities
OE, CEI, TE, Penn, JCP&L, ME, PN, MP, PE and WP
WP
West Penn Power Company, a Pennsylvania electric utility operating subsidiary of AE
 
 
The following abbreviations and acronyms are used to identify frequently used terms in this report:
ALJ
Administrative Law Judge
Anker WV
Anker West Virginia Mining Company, Inc.
Anker Coal
Anker Coal Group, Inc.
AOCI
Accumulated Other Comprehensive Income
AEP
American Electric Power Company, Inc.
AREPA
Alternative and Renewable Energy Portfolio Act
ARR
Auction Revenue Right
ASLB
Atomic Safety and Licensing Board

ii



GLOSSARY OF TERMS, Continued

BGS
Basic Generation Service
BMP
Bruce Mansfield Plant
CAA
Clean Air Act
CAL
Confirmatory Action Letter
CAIR
Clean Air Interstate Rule
CBP
Competitive Bid Process
CCB
Coal Combustion By-products
CDWR
California Department of Water Resources
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
CO2
Carbon Dioxide
CSAPR
Cross-State Air Pollution Rule
CWA
Clean Water Act
DCPD
Deferred Compensation Plan for Outside Directors
DCR
Delivery Capital Recovery Rider
DOE
United States Department of Energy
DOJ
United States Department of Justice
DSP
Default Service Plan
EDC
Electric Distribution Company
EDCP
Executive Deferred Compensation Plan
EE&C
Energy Efficiency and Conservation
EGS
Electric Generation Supplier
EHB
Environmental Hearing Board
ENEC
Expanded Net Energy Cost
EPA
United States Environmental Protection Agency
ERO
Electric Reliability Organization
ESP
Electric Security Plan
FERC
Federal Energy Regulatory Commission
Fitch
Fitch Ratings
FMB
First Mortgage Bond
FPA
Federal Power Act
FTR
Financial Transmission Right
GAAP
Accounting Principles Generally Accepted in the United States of America
GHG
Greenhouse Gases
HCL
Hydrochloric Acid
ICG
International Coal Group Inc.
ILP
Integrated License Application Process
IRS
Internal Revenue Service
kV
Kilovolt
KWH
Kilowatt-hour
LBR
Little Blue Run
LOC
Letter of Credit
LSE
Load Serving Entity
LTIP
Long-Term Incentive Plan
MATS
Mercury and Air Toxics Standards
MDPSC
Maryland Public Service Commission
MISO
Midwest Independent Transmission System Operator, Inc.
Moody’s
Moody’s Investors Service, Inc.
MTEP
MISO Regional Transmission Expansion Plan
MVP
Multi-value Project
MW
Megawatt
MWH
Megawatt-hour

iii



GLOSSARY OF TERMS, Continued

NCEA
NERC Compliance Enforcement Authority
NDT
Nuclear Decommissioning Trust
NEPA
National Environmental Policy Act
NERC
North American Electric Reliability Corporation
NJBPU
New Jersey Board of Public Utilities
NNSR
Non-Attainment New Source Review
NOV
Notice of Violation
NOx
Nitrogen Oxide
NPDES
National Pollutant Discharge Elimination System
NRC
Nuclear Regulatory Commission
NSR
New Source Review
NUG
Non-Utility Generation
NYPSC
New York State Public Service Commission
NYSEG
New York State Electric and Gas
OCI
Other Comprehensive Income
OPEB
Other Post-Employment Benefits
OTTI
Other Than Temporary Impairments
OVEC
Ohio Valley Electric Corporation
PA DEP
Pennsylvania Department of Environmental Protection
PCRB
Pollution Control Revenue Bond
PJM
PJM Interconnection LLC
PM
Particulate Matter
POLR
Provider of Last Resort
PPUC
Pennsylvania Public Utility Commission
PSA
Power Supply Agreement
PSD
Prevention of Significant Deterioration
PUCO
Public Utilities Commission of Ohio
PURPA
Public Utility Regulatory Policies Act of 1978
REC
Renewable Energy Credit
RFC
ReliabilityFirst
RFP
Request for Proposal
RGGI
Regional Greenhouse Gas Initiative
ROE
Return on Equity
RTEP
Regional Transmission Expansion Plan
RTO
Regional Transmission Organization
S&P
Standard & Poor’s Ratings Service
SB221
Amended Substitute Senate Bill 221
SBC
Societal Benefits Charge
SEC
United States Securities and Exchange Commission
SIP
State Implementation Plan(s) Under the Clean Air Act
SMIP
Smart Meter Implementation Plan
SO2
Sulfur Dioxide
SOS
Standard Offer Service
SREC
Solar Renewable Energy Credit
TDS
Total Dissolved Solid
TMDL
Total Maximum Daily Load
TMI-2
Three Mile Island Unit 2
TSC
Transmission Service Charge
VIE
Variable Interest Entity
VSCC
Virginia State Corporation Commission
WVDEP
West Virginia Department of Environmental Protection
WVPSC
Public Service Commission of West Virginia
 

iv



FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months
Ended March 31
(In millions, except per share amounts)
 
2012
 
2011
 
 
 
 
 
REVENUES:
 
 
 
 
Electric utilities
 
$
2,554

 
$
2,332

Unregulated businesses
 
1,524

 
1,244

Total revenues*
 
4,078

 
3,576

 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
Fuel
 
541

 
453

Purchased power
 
1,347

 
1,186

Other operating expenses
 
812

 
993

Provision for depreciation
 
285

 
225

Amortization of regulatory assets, net
 
75

 
132

General taxes
 
272

 
237

Total operating expenses
 
3,332

 
3,226

 
 
 
 
 
OPERATING INCOME
 
746

 
350

 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
Investment income
 
11

 
21

Interest expense
 
(246
)
 
(231
)
Capitalized interest
 
17

 
18

Total other expense
 
(218
)
 
(192
)
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
528

 
158

 
 
 
 
 
INCOME TAXES
 
222

 
111

 
 
 
 
 
NET INCOME
 
306

 
47

 
 
 
 
 
Loss attributable to noncontrolling interest
 

 
(5
)
 
 
 
 
 
EARNINGS AVAILABLE TO FIRSTENERGY CORP.
 
$
306

 
$
52

 
 
 
 
 
EARNINGS PER SHARE OF COMMON STOCK:
 
 
 
 
Basic
 
$
0.73

 
$
0.15

Diluted
 
$
0.73

 
$
0.15

 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
 
 
 
 
Basic
 
418

 
342

Diluted
 
420

 
343

 
 
 
 
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
 
$
0.55

 
$
0.55


*
Includes excise tax collections of $121 million and $119 million in the three months ended March 31, 2012 and 2011, respectively.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


1



FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months
Ended March 31
(In millions)
 
2012
 
2011
 
 
 
 
 
NET INCOME
 
$
306

 
$
47

 
 
 
 
 
OTHER COMPREHENSIVE LOSS:
 
 
 
 
Pensions and OPEB prior service costs
 
(53
)
 
(44
)
Amortized losses on derivative hedges
 
(2
)
 
(6
)
Change in unrealized gain on available-for-sale securities
 
10

 
9

Other comprehensive loss
 
(45
)
 
(41
)
Income tax benefits on other comprehensive loss
 
(24
)
 
(19
)
Other comprehensive loss, net of tax
 
(21
)
 
(22
)
 
 
 
 
 
COMPREHENSIVE INCOME
 
285

 
25

 
 
 
 
 
Comprehensive loss attributable to noncontrolling interest
 

 
(5
)
 
 
 
 
 
COMPREHENSIVE INCOME AVAILABLE TO FIRSTENERGY CORP.
 
$
285

 
$
30


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.



2



FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
March 31,
2012
 
December 31,
2011
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
74

 
$
202

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $35 in 2012 and $37 in 2011
 
1,449

 
1,525

Other, net of allowance for uncollectible accounts of $8 in 2012 and $3 in 2011
 
286

 
269

Materials and supplies
 
927

 
811

Prepaid taxes
 
213

 
191

Derivatives
 
346

 
235

Other
 
182

 
122

 
 
3,477

 
3,355

PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
In service
 
40,587

 
40,122

Less — Accumulated provision for depreciation
 
12,086

 
11,839

 
 
28,501

 
28,283

Construction work in progress
 
2,065

 
2,054

 
 
30,566

 
30,337

INVESTMENTS:
 
 
 
 
Nuclear plant decommissioning trusts
 
2,135

 
2,112

Investments in lease obligation bonds
 
336

 
402

Other
 
1,011

 
1,008

 
 
3,482

 
3,522

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Goodwill
 
6,444

 
6,441

Regulatory assets
 
2,006

 
2,030

Other
 
1,716

 
1,641

 
 
10,166

 
10,112

 
 
$
47,691

 
$
47,326

LIABILITIES AND CAPITALIZATION

 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Currently payable long-term debt
 
$
1,772

 
$
1,621

Short-term borrowings
 
1,075

 

Accounts payable
 
918

 
1,174

Accrued taxes
 
442

 
558

Accrued compensation and benefits
 
258

 
384

Derivatives
 
299

 
218

Other
 
1,009

 
900

 
 
5,773

 
4,855

CAPITALIZATION:
 
 
 
 
Common stockholders’ equity-
 
 
 
 
Common stock, $0.10 par value, authorized 490,000,000 shares - 418,216,437 shares outstanding
 
42

 
42

Other paid-in capital
 
9,754

 
9,765

Accumulated other comprehensive income
 
405

 
426

Retained earnings
 
3,122

 
3,047

Total common stockholders’ equity
 
13,323

 
13,280

Noncontrolling interest
 
16

 
19

Total equity
 
13,339

 
13,299

Long-term debt and other long-term obligations
 
15,527

 
15,716

 
 
28,866

 
29,015

NONCURRENT LIABILITIES:
 
 
 
 
Accumulated deferred income taxes
 
5,904

 
5,670

Retirement benefits
 
2,240

 
2,823

Asset retirement obligations
 
1,522

 
1,497

Deferred gain on sale and leaseback transaction
 
917

 
925

Adverse power contract liability
 
458

 
469

Other
 
2,011

 
2,072

 
 
13,052

 
13,456

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
 

 

 
 
$
47,691

 
$
47,326


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


3



FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months
Ended March 31
(In millions)
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net Income
 
$
306

 
$
47

Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
Provision for depreciation
 
285

 
225

Amortization of regulatory assets, net
 
75

 
132

Nuclear fuel and lease amortization
 
58

 
47

Deferred purchased power and other costs
 
(107
)
 
(58
)
Deferred income taxes and investment tax credits, net
 
265

 
204

Deferred rents and lease market valuation liability
 
(23
)
 
(15
)
Stock based compensation
 
(29
)
 
(9
)
Accrued compensation and retirement benefits
 
(162
)
 
(53
)
Commodity derivative transactions, net
 
(64
)
 
(25
)
Pension trust contributions
 
(600
)
 
(157
)
Asset impairments
 
4

 
31

Cash collateral, net
 
(28
)
 
(28
)
Decrease (increase) in operating assets-
 
 
 
 
Receivables
 
59

 
164

Materials and supplies
 
(118
)
 
40

Prepayments and other current assets
 
(19
)
 
118

Increase (decrease) in operating liabilities-
 
 
 
 
Accounts payable
 
(256
)
 
(90
)
Accrued taxes
 
(116
)
 
(182
)
Accrued interest
 
70

 
76

Other
 
(13
)
 
24

Net cash provided from (used for) operating activities
 
(413
)
 
491

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
New Financing-
 
 
 
 
Long-term debt
 

 
217

Short-term borrowings, net
 
1,075

 

Redemptions and Repayments-
 
 
 
 
Long-term debt
 
(16
)
 
(359
)
Short-term borrowings, net
 

 
(214
)
Common stock dividend payments
 
(230
)
 
(190
)
Other
 
(10
)
 
(4
)
Net cash provided from (used for) financing activities
 
819

 
(550
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Property additions
 
(589
)
 
(449
)
Sales of investment securities held in trusts
 
251

 
969

Purchases of investment securities held in trusts
 
(266
)
 
(993
)
Cash investments
 
78

 
47

Cash received in Allegheny merger
 

 
590

Other
 
(8
)
 
(23
)
Net cash provided from (used for) investing activities
 
(534
)
 
141

 
 
 
 
 
Net change in cash and cash equivalents
 
(128
)
 
82

Cash and cash equivalents at beginning of period
 
202

 
1,019

Cash and cash equivalents at end of period
 
$
74

 
$
1,101

 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
 
Non-cash transaction: merger with Allegheny, common stock issued
 
$

 
$
4,354


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


4



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months
Ended March 31
(In millions)
 
2012
 
2011
 
 
 
 
 
STATEMENTS OF INCOME
 
 
 
 
REVENUES:
 
 
 
 
Electric sales to non-affiliates
 
$
1,332

 
$
1,044

Electric sales to affiliates
 
121

 
261

Other
 
63

 
86

Total revenues
 
1,516

 
1,391

 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
Fuel
 
295

 
343

Purchased power from affiliates
 
117

 
69

Purchased power from non-affiliates
 
487

 
297

Other operating expenses
 
295

 
465

Provision for depreciation
 
63

 
69

General taxes
 
37

 
29

Impairment of long-lived assets
 

 
14

Total operating expenses
 
1,294

 
1,286

 
 
 
 
 
OPERATING INCOME
 
222

 
105

 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
Investment income
 
6

 
6

Miscellaneous income
 
4

 
4

Interest expense — affiliates
 
(2
)
 
(1
)
Interest expense — other
 
(41
)
 
(53
)
Capitalized interest
 
9

 
10

Total other income (expense)
 
(24
)
 
(34
)
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
198

 
71

 
 
 
 
 
INCOME TAXES
 
76

 
26

 
 
 
 
 
NET INCOME
 
$
122

 
$
45

 
 
 
 
 
STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
 
NET INCOME
 
$
122

 
$
45

 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
 
Pensions and OPEB prior service costs
 
(5
)
 
(10
)
Amortized losses on derivative hedges
 
(5
)
 
(9
)
Change in unrealized gain on available-for-sale securities
 
10

 
8

Other comprehensive loss
 

 
(11
)
Income taxes (benefits) on other comprehensive income (loss)
 
2

 
(6
)
Other comprehensive loss, net of tax
 
(2
)
 
(5
)
 
 
 
 
 
COMPREHENSIVE INCOME
 
$
120

 
$
40


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


5



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
March 31,
2012
 
December 31,
2011
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
7

 
$
7

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $16 in 2012 and 2011
 
395

 
424

Affiliated companies
 
541

 
600

Other, net of allowance for uncollectible accounts of $3 in 2012 and 2011
 
122

 
61

Notes receivable from affiliated companies
 
12

 
383

Materials and supplies
 
551

 
492

Derivatives
 
322

 
219

Prepayments and other
 
24

 
38

 
 
1,974

 
2,224

PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
In service
 
11,002

 
10,983

Less — Accumulated provision for depreciation
 
4,214

 
4,110

 
 
6,788

 
6,873

Construction work in progress
 
1,173

 
1,014

 
 
7,961

 
7,887

INVESTMENTS:
 
 
 
 
Nuclear plant decommissioning trusts
 
1,240

 
1,223

Other
 
7

 
7

 
 
1,247

 
1,230

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Customer intangibles
 
120

 
123

Goodwill
 
24

 
24

Property taxes
 
43

 
43

Unamortized sale and leaseback costs
 
120

 
80

Derivatives
 
117

 
79

Other
 
171

 
129

 
 
595

 
478

 
 
$
11,777

 
$
11,819

LIABILITIES AND CAPITALIZATION
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Currently payable long-term debt
 
$
905

 
$
905

Accounts payable-
 
 
 
 
Affiliated companies
 
483

 
436

Other
 
190

 
220

Accrued Taxes
 
75

 
227

Derivatives
 
281

 
189

Other
 
245

 
261

 
 
2,179

 
2,238

CAPITALIZATION:
 
 
 
 
Common stockholder's equity-
 
 
 
 
Common stock, without par value, authorized 750 shares- 7 shares outstanding
 
1,568

 
1,570

Accumulated other comprehensive income
 
74

 
76

Retained earnings
 
2,053

 
1,931

Total common stockholder's equity
 
3,695

 
3,577

Long-term debt and other long-term obligations
 
2,797

 
2,799

 
 
6,492

 
6,376

NONCURRENT LIABILITIES:
 
 
 
 
Deferred gain on sale and leaseback transaction
 
917

 
925

Accumulated deferred income taxes
 
365

 
286

Asset retirement obligations
 
919

 
904

Retirement benefits
 
151

 
356

Lease market valuation liability
 
160

 
171

Other
 
594

 
563

 
 
3,106

 
3,205

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
 

 

 
 
$
11,777

 
$
11,819


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


6



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months
Ended March 31
(In millions)
 
2012
 
2011
 
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net Income
 
$
122

 
$
45

Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
Provision for depreciation
 
63

 
69

Nuclear fuel and lease amortization
 
57

 
47

Deferred rents and lease market valuation liability
 
(47
)
 
(39
)
Deferred income taxes and investment tax credits, net
 
83

 
67

Asset impairments
 
3

 
19

Accrued compensation and retirement benefits
 
(10
)
 
(16
)
Pension trust contribution
 
(209
)
 

Commodity derivative transactions, net
 
(52
)
 
(35
)
Cash collateral, net
 
(25
)
 
(27
)
Decrease (increase) in operating assets-
 
 
 
 
Receivables
 
28

 
(76
)
Materials and supplies
 
(59
)
 
61

Prepayments and other current assets
 
14

 
8

Increase (decrease) in operating liabilities-
 
 
 
 
Accounts payable
 
17

 
(18
)
Accrued taxes
 
(155
)
 
(3
)
Other
 
(8
)
 
(8
)
Net cash provided from (used for) operating activities
 
(178
)
 
94

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
New financing-
 
 
 
 
Long-term debt
 

 
150

Short-term borrowings, net
 

 
350

Redemptions and repayments-
 
 
 
 
Long-term debt
 

 
(332
)
Other
 
(3
)
 
(1
)
Net cash provided from (used for) financing activities
 
(3
)
 
167

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Property additions
 
(181
)
 
(159
)
Sales of investment securities held in trusts
 
83

 
216

Purchases of investment securities held in trusts
 
(90
)
 
(231
)
Loans from (to) affiliated companies, net
 
371

 
(82
)
Other
 
(2
)
 
(7
)
Net cash provided from (used for) investing activities
 
181

 
(263
)
 
 
 
 
 
Net change in cash and cash equivalents
 

 
(2
)
Cash and cash equivalents at beginning of period
 
7

 
9

Cash and cash equivalents at end of period
 
$
7

 
$
7


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


7



OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months
Ended March 31
(In millions)
 
2012
 
2011
 
 
 
 
 
STATEMENTS OF INCOME
 
 
 
 
REVENUES:
 
 
 
 
Electric sales
 
$
359

 
$
364

Excise and gross receipts tax collections
 
27

 
28

Total revenues
 
386

 
392

 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
Purchased power from affiliates
 
52

 
93

Purchased power from non-affiliates
 
70

 
60

Other operating expenses
 
121

 
96

Provision for depreciation
 
24

 
23

Amortization of regulatory assets, net
 

 
1

General taxes
 
50

 
50

Total operating expenses
 
317

 
323

 
 
 
 
 
OPERATING INCOME
 
69

 
69

 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
Investment income
 
4

 
5

Interest expense
 
(22
)
 
(22
)
Capitalized interest
 
1

 

Total other expense
 
(17
)
 
(17
)
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
52

 
52

 
 
 
 
 
INCOME TAXES
 
21

 
20

 
 
 
 
 
NET INCOME
 
$
31


$
32

 
 
 
 
 
STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
 
 
 
 
 
 
NET INCOME
 
$
31

 
$
32

 
 
 
 
 
OTHER COMPREHENSIVE LOSS:
 
 
 
 
Pensions and OPEB prior service costs
 
(10
)
 
(7
)
Other comprehensive loss
 
(10
)
 
(7
)
Income tax benefits on other comprehensive loss
 
(5
)
 
(4
)
Other comprehensive loss, net of tax
 
(5
)
 
(3
)
 
 
 
 
 
COMPREHENSIVE INCOME
 
$
26

 
$
29


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


8



OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
March 31,
2012
 
December 31,
2011
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$

 
$
26

Receivables-
 
 
 
 
Customers, net of allowance for uncollectible accounts of $4 in 2012 and 2011
 
154

 
163

Affiliated companies
 
72

 
86

Other
 
37

 
41

Notes receivable from affiliated companies
 
259

 
181

Prepayments and other
 
11

 
17

 
 
533

 
514

UTILITY PLANT:
 
 
 
 
In service
 
3,405

 
3,358

Less — Accumulated provision for depreciation
 
1,280

 
1,267

 
 
2,125

 
2,091

Construction work in progress
 
85

 
91

 
 
2,210

 
2,182

OTHER PROPERTY AND INVESTMENTS:
 
 
 
 
Investment in lease obligation bonds
 
162

 
163

Nuclear plant decommissioning trusts
 
137

 
137

Other
 
92

 
90

 
 
391

 
390

DEFERRED CHARGES AND OTHER ASSETS:
 
 
 
 
Regulatory assets
 
362

 
363