FirstEnergy (FE) Q4 2008 earnings summary

Executive summary

• 2008 net income was $1.342B, up from $1.309B in 2007; basic EPS was $4.41 vs. $4.27 and diluted EPS was $4.38 vs. $4.22.

• Generation reached a record 82.4B kWh, including record nuclear output of 32.2B kWh, up 6% from the prior record.

• Strategy emphasized reliability, generation utilization, Ohio and Pennsylvania market transitions, liquidity, and cost reductions amid recession and credit-market stress.

Financial highlights

• Revenue was $13.627B vs. $12.802B in 2007; operating income was $2.762B vs. $2.815B, and net income was $1.342B vs. $1.309B.

• Operating cash flow reached $2.219B vs. $1.694B in 2007; cash and equivalents were $545M at year-end vs. $129M.

• Pension and OPEB trust losses reduced funded status by $1.7B and common equity after tax by $1.2B; 2008 plan investment return was -23.8% vs. an assumed +9%.

• Nuclear decommissioning trust securities impairments totaled $123M; 2008 EPS reconciliation also included $0.03/share for trust impairments and $0.04/share for litigation settlement.

Outlook and guidance

• 2009 sales were projected to be relatively flat vs. 2008; earnings guidance was to follow greater regulatory clarity on Ohio’s ESP or MRO.

• Spending reductions of more than $600M vs. 2008 were planned through lower capital and O&M spending; the Fremont plant schedule and Sammis environmental project schedule were adjusted.

• 2009-2013 capital spending forecast was ~$8.1B, including ~$506M for air-quality compliance; regulated delivery investment was planned at ~$4B over the period.

• 2009 pension and OPEB expense was expected to rise by $230M; no pension plan contributions were expected in 2009 or 2010, with contributions anticipated in 2011.