About Firstenergy Corp.

FirstEnergy's first goal is to generate and deliver power, but its second goal is to stay profitable in a market undergoing deregulation. Its ten utilities provide electricity to 6 million customers in the Midwest and the Mid-Atlantic. The company's domestic power plants have a total generating capacity of more than 17,000 MW, an amount expected to diminish as the company winds down its deregulated business. Subsidiary FirstEnergy Solutions trades energy commodities in deregulated US markets. FirstEnergy's other nonregulated operations include electrical and mechanical contracting and energy planning and procurement.

Operations

FirstEnergy has three primary operating segments: Regulated Distribution, Regulated Transmission, and Competitive Energy Services (CES). About 65% of total revenue comes from Regulated Distribution, roughly 30% from Competitive Energy Services, and the rest from Regulated Transmission. The company is transitioning away from its competitive wholesale business and therefore the percent of revenue from CES is expected to dwindle.

The Regulated Distribution segment distributes electricity through FirstEnergy's ten utilities which serve 6 million customers in a service area with a total population of 13.3 million. It has a controlling interest in 3,8000 MWs of generation capacity in West Virginia, Virginia, and New Jersey. It fulfills the additional electricity needs of its customers through power purchase agreements.

The Competitive Energy Services segment, through its subsidiaries FES and AE Supply, supplies electricity through retail and wholesale arrangements, including competitive retail sale to customers primarily in Ohio, Pennsylvania, Illinois, Michigan, New Jersey and Maryland. It controls some 13,100 MW of capacity.

The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Trans-Allegheny Interstate Line Company, and a number of FirstEnergy's utilities. Transmission operations include approximately 24,000 miles of lines and two regional transmission operation centers.

Geographic Reach

FirstEnergy operates and serves customers in a service area of 65,000 square miles in Illinois, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, and West Virginia.

Its power generating assets are located in Pennsylvania, Ohio, West Virginia, New Jersey, and Indiana.

Sales and Marketing

The Regulated Distribution segment sells roughly equal amounts of electricity to its residential and industrial customers, and slightly less to its commercial customers. Generally, there is no competition for electric distribution service in its service territories in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York.

FirstEnergy's CES segment participates in deregulated energy markets in Ohio, Pennsylvania, Maryland, Michigan, New Jersey and Illinois, through FES and AE Supply. CES competes to provide retail generation service directly to end users, to provide wholesale generation service to utilities, municipalities and co-operatives, which, in turn, resell to end users, and in the electricity wholesale market.

Over the next few years, FirstEnergy is transitioning away from deregulated markets (served by its CES segment) and shoring up its regulated utility business. The change is due to shifting economics of supplying electricity with older format energy plants powered with coal, oil, etc. against that provided by newer sources such as natural gas, wind, and solar.

Financial Performance

Until 2016, the company's financial performance was steady through trending slightly downward. Revenue peaked at $16.1 billion in 2011 and since slid to below $15 billion in 2016. Net income slipped from $885 million in 2011 to below $300 million in 2014, before an upward tick in 2015, which preceded a massive fall in 2016.

For the year 2016, revenue was $14.6 billion, down 3% from the prior year as a result of expected lower energy contract sales in the CES segment, partially offset by higher revenue from the Regulated Transmission segment (via cost recoveries and a higher rate base) and increased revenue from Regulated Distribution (via higher demand and increased customer-charged rates).

Net income plummeted on the back of a $10.6 billion pre-tax impairment charge. Although revenue slipped only 3% and expenses were held in check, the impairment of its CES assets such as power plants and nuclear fuel, drove 2016's earnings to a $6.2 billion loss. Because CES is exiting its business by mid-2018 it will not receive the anticipated cash flows and earnings from its long-lived assets and therefore chose to take the significant charge.

Cash on hand at the end of 2016 was $200 million, up nearly $70 million from 2015. Cash provided by operating activities was $3.4 billion, mainly the result of the $6.2 billion loss adjusted by the $10.6 billion asset impairment. Financing activities largely balanced out, while investing activities used $3.3 billion, mostly for capital expenditures.

Strategy

The overriding long-term objective for FirstEnergy is to transition its business model from being a holding company of competitive energy wholesaler subsidiaries into one that holds solely regulated utilities. As an energy wholesaler, the CES subsidiary is tossed about by the volatile pricing of energy products (oil, coal, etc.) and therefore carries a high risk with volatile financial results. The move to wind down CES and focus on regulated utilities brings with it a much lower risk profile and predictable, steady cash flows.

Part of its plan includes divestitures. In 2017, FirstEnergy's CES segment agreed to sell four natural gas generating plants in Pennsylvania, its ownership interests in a Virginia hydroelectric power station, and gas/oil-fired facility to a subsidiary of LS Power Equity Partners III, LP, for $925 million. In total, it is selling off more than 1,600 MW of generation capacity. Additionally, it plans to retire by 2020 720 MW of capacity at its Sammis Plant and 136 MW at its Bay Shore plant, both in Ohio.

Meanwhile, First Energy continues to invest in its regulated companies. To date, it's installed 550,000 smart meters across its Pennsylvania market and plans to replace them for all 2 million of the state's customers by 2019. It is working with Ohio regulator agencies to pursue a similar grid modernization effort in that state. In total, it plans to spend roughly $1 billion/year on its utilities companies between 2017 and 2020.

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Firstenergy Corp.

76 S Main St
Akron, OH 44308-1817
Phone: 1 (800) 736-3402

Stats

  • Employer Type: Public
  • Stock Symbol: FE
  • Stock Exchange: NYSE
  • President, CEO, and Director: Charles E. Jones
  • EVP and CFO: James F. Pearson
  • Chairman: George M. Smart
  • 2016 Employees: 15,707

Major Office Locations

  • Akron, OH

Other Locations

  • Beebe, AR
  • Washington, DC
  • Hagerstown, MD
  • Luke, MD
  • Blairstown, NJ
  • Boonton, NJ
  • Dover, NJ
  • Farmingdale, NJ
  • Flemington, NJ
  • Landing, NJ
  • Morristown, NJ
  • Old Bridge, NJ
  • Red Bank, NJ
  • Toms River, NJ
  • Union Beach, NJ
  • Washington, NJ
  • Ashtabula, OH
  • Brecksville, OH
  • Cleveland, OH
  • Elyria, OH
  • Fairlawn, OH
  • Holland, OH
  • Mansfield, OH
  • Marion, OH
  • Massillon, OH
  • Oak Harbor, OH
  • Painesville, OH
  • Put In Bay, OH
  • Sandusky, OH
  • Shadyside, OH
  • Springfield, OH
  • Stratton, OH
  • Wadsworth, OH
  • Willoughby, OH
  • Youngstown, OH
  • Altoona, PA
  • Butler, PA
  • Clearfield, PA
  • Connellsville, PA
  • Easton, PA
  • Erie, PA
  • Harrisburg, PA
  • Indiana, PA
  • Irwin, PA
  • Johnstown, PA
  • Lebanon, PA
  • Lewistown, PA
  • Montrose, PA
  • Oil City, PA
  • Philadelphia, PA
  • Reading, PA
  • Reinholds, PA
  • Shippingport, PA
  • Springdale, PA
  • Warren, PA
  • York, PA
  • Gleason, TN
  • Norfolk, VA
  • Belmont, WV
  • Elkins, WV
  • Haywood, WV
  • Maidsville, WV
  • Ronceverte, WV
  • Sistersville, WV
  • Weston, WV
  • Willow Island, WV
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