first energywallstreetaccess_121407_new
TRANSCRIPT
Ron SeeholzerVice President, Investor Relations
Wall Street Access / Berenson & Company West Coast Seminar
Las Vegas • December 14, 2007
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
2
Safer Harbor Statement under the Private SecuritiesLitigation Reform Act of 1995These Presentations 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 our, or our 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 our 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 and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Ohio and Pennsylvania, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of FirstEnergy’s regulated utilities to collect transition and other charges or to recover increased transmission costs, maintenance costs being higher than anticipated, other legislative and regulatory changes including revised environmental requirements, the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation or other potential regulatory initiatives, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight by the Nuclear Regulatory Commission including, but not limited to, the Demand for Information issued to FENOC on May 14, 2007) as disclosed in our SEC filings, the timing and outcome of various proceedings before the PUCO (including, but not limited to, the Distribution Rate Cases and the generation supply plan filing for the Ohio Companies and the successful resolution of the issues remanded to the PUCO by the Supreme Court of Ohio regarding the Rate Stabilization Plan and the Rate Certainty Plan, including the deferral of fuel costs) and the PPUC (including the resolution of the Petitions for Review filed with the Commonwealth Court of Pennsylvania with respect to the transition rate plan for Met-Ed and Penelec), the continuing availability of generating units and their ability to continue to operate at or near full capacity, the ability to comply with applicable state and federal reliability standards, the inability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities and other capital markets and the cost of such capital, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the risks and other factors discussed from time to time in our SEC filings, and other similar factors. The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for us to predict all such factors, nor can we assess the impact of any such factor on our 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. Dividends declared from time to time on FirstEnergy's common stock during any annual period may in aggregate vary from the indicated amounts due to circumstances considered by FirstEnergy's Board of Directors at the time of the actual declarations. Also, a security rating is not a recommendation to buy, sell or hold securities, and it may be subject to revision or withdrawal at any time and each such rating should be evaluated independently of any other rating. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
3
RegulatorySuccessfully transitioned Penn Power to competitive generation market prices Filed distribution rate case requests and competitive generationprocurement proposal for Ohio utilities
2007 – Key Accomplishments
FinancialNarrowed EPS guidance to top-half of the original range: $4.15–$4.25* Expecting to generate $1.7B of cash from operationsIncreased dividend 11.1% Completed accelerated repurchase of approx. 14.4 million sharesCompleted $1.3B sale and leaseback transaction on 779 MW of Mansfield Unit 1
* See GAAP to Non-GAAP reconciliations in the Appendix.
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
4
OperationalExpecting generation output in excess of 81 million MWh –20% increase from 2003
Added over 300 MW of additional generating capacity through uprates, wind contracts and peaking enhancements – with significantly less risk than new plant construction
Continued improvement in T&D reliability metrics – SAIDI down 15%
Achieving top-decile safety performance – 0.89 YTD OSHA rate
On schedule and budget for Air Quality Control (AQC) projects at the Sammis Plant
NRC accepted Beaver Valley Units 1 & 2 license renewal applications for review
2007 Key Accomplishments (continued)
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
5
ObjectivesOperations
– Realize the full potential of our generation assets
– Reinvest in the business– Minimize commodity risks
Regulatory– Recover cost of service– Transition to competitive
generation market prices
Financial Strength & Flexibility– Achieve targeted growth– Deploy cash effectively
2008 and Beyond – Key Objectives
A strong and stable corporation with a focus on the fundamentals
– Operational excellence– Financial discipline– Management credibility– Continuous improvement
Based on the Fundamentals
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
6
Generation Output
0
20
40
60
80
100
(mill
ion
MW
h)
Nuclear 29.9 28.7 29.0 30.7 32.0 31.0 32.2 32.0Fossil 46.5 51.5 53.0 51.5 52.7 52.4 53.7 54.6
2004 2005 2006 2007F 2008F 2009F 2010F 2011F
Realizing Full Potential of Generating Fleet
Significant scale: FES controls about 14,000 MWBalanced fuel mix: 38% nuclear; 62% fossil & other (2007F output)
Geographic diversity: Participate in two RTOs (MISO and PJM)Fleet strategy optimizes performance and reliability
– Each unit has a specific mission (baseload, load-following or peaking) – Increases efficiency and reduces wear and tear on baseload units
Fleet Characteristics and Mission-Driven Strategy
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
7
Realizing Full Potential of Generating Fleet
Mining Our Assets benefits:– ~$700/kW average capital cost is competitive vs. current market price of new capacity– Lower risk than large, long lead-time projects– Quicker to market– Low technology and construction risk
Clarity on capacity and ancillary services market structure, technological advances, and environmental regulations will impact generation asset decisions in the future
* Reflects 12 separate projects including returning 70 MW at Burger Unit 3 that has not been available since summer 2005.
Type of MW Addition 2005–2007F 2008F–2011F Cumulative MW
Fossil baseload uprates 130 89 219Fossil load following uprates 0 84 84Nuclear baseload uprates 92 78 170Peaking capacity enhancements* 149 0 149Total MW additions 371 251 622
Mining Our Assets – incremental, low-risk investment approach to fleet expansion
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
8
Status Capacity RECs/Year
In-service 2007 145 MW 384 GWh
In-service 2008 70 MW 180 GWh
Total: 215 MW 564 GWh
FES Wind Energy PortfolioState Renewable
Mandate Overview
PA 18% by 2020Drives our renewable strategy today
On the horizon and will impact our renewable strategy in the future
Represents a minimal part of our renewable requirements
OH 25% by 2025(Proposed)
NJ 22.5% by 2020
Leading the Way in Procuring Renewable Energy to Meet Growing Demand
Leading wind energy supplier in PAEvaluating expansion of current wind portfolio Considering other renewable technologies:
– Solar– Compressed air– Biomass– Land fill gas– Anaerobic digestion
Realizing Full Potential of Generating Fleet
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
9
Reinvesting in the Business
* AQC annual expenditures include $500M (2009), $156M (2010), and $11M (2011)
2004 2005 2006 2007F 2008F2009F-2011F
Average
Energy Delivery
- Aged infrastructure rebuild- Pockets of load growth- Reliability improvements
$455 $724 $650 $746 $730 $730
Fossil- Improve managing operating risk- Upgrade aged equipment- Environmental / fuel enhancements
$106 $148 $116 $104 $96 $155
Nuclear- Availability improvements- Dry fuel storage / license renewal- Materials issues
$141 $173 $229 $149 $131 $260
Corporate - Information Technology, etc $29 $45 $39 $88 $86 $75
Sub-Total $731 $1,090 $1,034 $1,087 $1,043 $1,220
AQC- Compliance strategy totals - Sammis, Burger Units, Mansfield and Eastlake Unit 5
$0 $54 $136 $387 $650 $222 *
Total $731 $1,144 $1,170 $1,474 $1,693 $1,442
Capital Expenditures ($ millions)Project AreasBusiness
Unit
Capital Expenditure Forecast
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
10
AQC Construction Overview
Sammis Plant (2,233 MW) – $1.65B– SO2 control (scrubbers) all units– NOx control (SCRs) Units 6 & 7 (1,200 MW)
NOx control (SNCR) Units 1–5 (1,033 MW) completed
Mansfield Plant (2,490 MW) – $50MSO2 control (scrubber) upgrades completed
Burger Plant – $180M– NOx control (SNCR) and SO2 control
Electro-Catalytic Oxidation (ECO) Units 4 & 5 (312 MW)
Eastlake Plant – $6MNOx control (SNCR) Unit 5 (597 MW) completed
Reinvesting in the Business
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
11
CO2 control – Over 35% of annual fleet output is non-emitting– Involved in CO2 capture and sequestration R&D
Mercury control – Excellent reduction through “co-benefits”– Based on current rules and plans, additional equipment not required before 2018
Longer-term environmental considerations
Reinvesting in the Business
Fleet Emission Control Status2007 2010
Fleet%
Fleet%
34% 34%
19% 38%
9% 9%
62% 81%
Capacity (MW)
Capacity (MW)
Non-Emitting 4,581 4,638Coal Controlled(SO2/NOx – full control) 2,626 5,237
Natural Gas Peaking 1,283 1,283
8,490 11,158
Our generation fleet is well-positioned for the future
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
12
* Top quartile
Reliability
Distribution SAIDI (minutes) 128 118 103
TOF (per circuit) 0.39* 0.31 0.31
Financial Performance
Total Cost Per Customer $270 $265 $263
Focus Area Key Metrics
Top-quartile performance SAIDI and top-decile in TOF
Achieve top-quartile total spend per customer
2007F 2008F 2011 Target
Top Quartile
ED&CS
$150
$180
$210
$240
$270
$300
Tota
l CPC
2005 2006 2007 2008 2009 2010 2011 2012
Total Cost per CustomerSAIDI Performance
Top Quartile
ED&CS
10
40
70
100
130
160
190
220
SAID
I (M
inut
es)
2005 2006 2007 2008 2009 2010 2011 2012
Reinvesting in the BusinessEnergy Delivery – striving to achieve top quartile performance
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
13
Expected FES Total Supply*
0
20
40
60
80
100
(mill
ion
MW
h)
Forward / Spot Purchases 11 7 9Nuclear 32 31 32Fossil, Hydro, Wind 52 52 53
2008F 2009F 2010F
Supply numbers exclude JCP&L and firm contract portion of ME/PN
Managing Commodity Positions
Significant reductions in mostly on-peak energy purchases
Significant increases in higher margin sales
9590 94
Expected FES Total Sales*
020406080
100
(mill
ion
MW
h)
Retail Auction 1 31 29Competitive Retail 12 20 24Forward / Spot Sales 16 20 21ME/PN PRA Obligations 14 19 20OH PSA Obligations 52 0 0
2008F 2009F 2010F
Sales numbers exclude JCP&L and firm contract portion of ME/PN
95 90 94
•*Assumes move to open market in Ohio in 2009 and beyond
Expected FES Supply & Sales*
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
14
Engaged in fuel flexibility initiative to expand margins and fuel choices
Actively pursuing closure to long-term transportation positions – rail contract signed, 2010 barge contract agreement reached
2009–2010 seasonal NOx requirements are expected to be fully covered as State allocations are made (OH due Jan. 2008)
Managing Commodity Positions
% Hedged 2008 2009 2010
Coal only 99% 91%
91%
>100%
78%
100%
Coal transportation 97% 58%
SO2 99% >100%
NOx >100% 74%
Coal and Related Commodity Hedging
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
15
Proposed increase (Effective 1/09 for OE & TE 1/09; 5/09 for CEI): $ millionsTraditional distribution costs $212Recovery of costs deferred under prior rate plans 120
Total proposed increase to "distribution" revenues $332
Ohio
Seeking Full Recovery of CostsOhio Distribution Rate Cases
Company Filing
Proposed increase (Effective 1/09 for OE & TE 1/09; 5/09 for CEI): $ millionsTraditional distribution costs $100 -$119Recovery of costs deferred under prior rate plans 61
Total proposed increase to "distribution" revenues $161 - $180Key Staff Report differences:Matters to be considered in other cases ($106)ROE @ 10.06% to 11.09% (vs. Co. @ 11.75%) ($33) - ($14)Capital structure (equity ratio @ 43.75% vs. Co. @ 49%) ($18)Other issues (net) ($14)
PUCO Staff Report (Dec. 4, 2007) – Based on initial review
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
16
Transitioning to Competitive Generation Markets
Penn Power successfully transitioned to competitive generation market prices on Jan. 2007Ohio utilities transition scheduled for Jan. 2009; Met-Ed and Penelec transition scheduled for Jan. 2011Efforts are underway in both OH and PA on potential new energy legislationFirstEnergy actively engaged in the legislative processMultiple issues being considered…key is to assure a smooth transition to market in both states
FirstEnergy is positioned in each state FirstEnergy is positioned in each state to successfully transition to marketto successfully transition to market
Legislative Update: Ohio and Pennsylvania
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
17
Achieving Targeted Growth
Established 2008 Non-GAAP earnings guidance of $4.15 to $4.35 per share*– Normalized to exclude anticipated gain on the planned sale of
non-core assets, currently estimated at $0.08 per share in 2008
2007 Non-GAAP Earnings Guidance*
Original (Feb. 2007) $4.05 – $4.25
Revised (Oct. 2007) $4.15 – $4.25
Affirmed (Dec. 2007) $4.15 – $4.25
* Financial Guidance is current as of December 5, 2007. See GAAP to Non-GAAP reconciliations in the Appendix. On a GAAP basis, 2008 EPS is expected to be $4.23 to $4.43 reflecting an $0.08 gain on the planned sale of non-core assets.
2007 and 2008 Earnings Guidance
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
18
$3.50
$4.00
$4.50
$5.00
Midpoint 2007 Non-GAAP
EPS Guidance
Midpoint 2008Non-GAAP
EPS Guidance
* Financial Guidance is current as of December 5, 2007. See GAAP to Non-GAAP reconciliations in the Appendix. 2008 EPS guidance, excluding special items, is $4.15 to $4.35. On a GAAP basis, 2008 EPS is expected to be $4.23 to $4.43 reflecting an $0.08 gain on the planned sale of non-core assets.
$4.20*$0.04
$0.06 $0.03
$0.14
($0.13)
($0.10)$4.25*
FinancingCosts
GenerationOutput
WiresSales
Growth
2007Share
Buyback
OhioTransition
CostAmortization
Depreciation &General Taxes
OutageO&MCosts
$0.05 Other
($0.04)
Achieving Targeted Growth2008 Earnings Guidance
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
19
Distribution rate case in OH effective 2009
Market generation prices in OH in 2009
Market generation prices in PA in 2011
Asset mining / realizing full potential of generation assets
Further operational enhancements
Timely recovery of regulated costs and capital investments
Achieving Targeted GrowthMajor Earnings Drivers 2009 - 2011
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
20
Declining margin from OH transition plans
Impact of expiring Met-Ed/Penelec third-party power contract in 2009
Increasing fuel and purchased power costs
Increasing O&M costs
Higher depreciation expenses (non-cash)
Achieving Targeted Growth (continued)Major Earnings Drivers 2009 - 2011
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
21
Deploying Cash EffectivelyAvailable Cash Forecast
($ millions) 2007F 2008F Change$1,698 $2,224
(1,693)
(136)
$395
(1,474)
$526
(219)
(42)(94)
$130 $265
Net Cash from Operating Activities
Capital Expenditures
Nuclear Fuel Fabrication
Available Cash before Dividends
Potential uses of substantial growth in free cash following completion of AQC projects– Dividend growth– Potential for share repurchases– Invest for future growth– Ability to take advantage of strategic opportunities
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
22
Management will recommend that the Board of Directors declare a quarterly dividend of $0.55 per share payable March 2008 at their December 18 meeting
Dividend Increases:Payment
DateQuarterly
RateChange fromPrior Period
AnnualizedRate
1Q 2008 55.00¢ 10.00% $2.20
$2.00
$1.80
$1.72
$1.65
$1.50
1Q 2007 50.00¢ 11.10%
1Q 2006 45.00¢ 4.65%
4Q 2005 43.00¢ 4.24%
1Q 2005 41.25¢ 10.00%
4Q 2004 37.50¢ –
Deploying Cash Effectively Common Dividend
Wall Street Access / Berenson & CompanyWest Coast SeminarLas Vegas • December 14, 2007
23
SignificantEarningsGrowth
Potential
Bottom Line –FirstEnergy is an attractive risk/reward opportunity
Effectively managing transitionto competitive markets
Realizing full potential of assets
Reinvesting for future growth
Effectively deploying strong cash flow
Striving for continuous improvement
Maintaining strategic flexibility
Well-positioned for climate legislation
Appendix
Corporate Profile
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
FirstEnergy Corporate Profile
Diversified energy company headquartered in Akron, Ohio
Involved in Generation, Transmission and Distribution of electricity, as well as other energy-related services
Fifth largest investor owned electric utility in U.S based on customers served
4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey
Control more than 14,000 megawatts of generating capacity
$11.5B in annual revenues and more than $31B in assets
Approx. $22B market capitalization
2Corporate Profile
Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Akron
Toledo
Reading
Beaver Valley1,779 MW
Davis-Besse893 MW
Perry1,258 MW
R. E. Burger413 MW
W. H. Sammis2,233 MW
Bruce Mansfield2,490 MW
Eastlake1,262 MW
Ashtabula244 MW
Seneca451 MW
Edgewater48 MW
Richland432 MW
Stryker18 MW Yards Creek
200 MW
Mad River60 MW
West Lorain545 MW
Lake Shore249 MW
Sumpter340 MW
Erie
Ohio
Pennsylvania
NewJersey
Harrisburg
MorristownNewark
Allenhurst
Trenton
Bay Shore648 MW
Columbus
New Castle
Cleveland
Johnstown
Forked River86 MW
Michigan
Baseload Load Following Peaking Units
Unit Mission Strategy
Towanda
MW MWMW
FirstEnergy Generation – Diversity & Scale
West Lorain 545Seneca 451Richland 432Sumpter 340Yards Creek 200Burger 3 & EMDs 101Forked River* 86Mad River 60Edgewater 48Stryker 18Other 63
Total Peaking Units 2,344
Mansfield 1-3 2,490Beaver Valley 1,2 1,779Perry 1,258Sammis 6,7 1,200Davis-Besse 893Eastlake 5 597Bay Shore 1 136
Total Baseload 8,353
Sammis 1-5 1,020Eastlake 1-4 636Bay Shore 2-4 495Burger 4 -5 312Lake Shore 245Ashtabula 244
Total Load Following 2,952
OVEC 463Wind 145
Total 608
Other MW
FirstEnergy Power Sources
C Coal 7,469 MWN Nuclear 3,930 H Hydro 651 G Gas & O Oil 1,599
Other 608Total 14,257 MW
* Sale pending
2Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Fossil 2007F 2008F 2011 Target
OSHA Incident Rate (per 100 employees) 1.12 1.12 0.80
Total Generation (million MWh) 51.5 52.7 54.6
Capacity Factor (Baseload %) 81.0 87.2 90.7
Fossil Operating Performance
2007 Highlights– Top-quartile safety performance – New monthly all time generation
record set August 2007 (4.6 million MWh)
– Environmental projects (AQC) on track– Outage performance improving– Implemented Fossil Excellence at
Bay Shore and Sammis (continuous improvement)
– On track for workforce replenishment– Improved performance accountability– Mansfield Unit 3 uprate (30 MW)
2008 Look Ahead– Achieve top-decile safety performance – Drive continuous improvement
through fleet standardization of best practices, benchmarking and Fossil Excellence annual diagnostics
– Continue to focus on transitioning workforce knowledge and skills to a new generation of employees
– Execute Mining Our Assets strategies– Develop and implement a full start-up
testing, training and operation strategy for AQC
3Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
2007 Highlights – Top-quartile safety performance– DB worked > 7.5 million hours
without a Lost Time Accident – Record Fleet Generation projected
(30.7 million MWh) – BV1 uprate (43 MW); BV2 uprate (24 MW)– No forced losses at BV1; BV2 top
quartile (0.24%)– PY returned to Standard Reactor
Oversight Process– NRC accepted BV license renewal application– Successful NRC Security drills at PY and BV– Lowest BV dose during fall outage
2008 Look Ahead– Maintain top-quartile safety performance– Targeting record generation
(32.0 million MWh) – Two outages – DB and BV2– Additional 12 MW from DB Caldon
modification– Additional 45 MW from BV power uprate– NRC Emergency Preparedness Evaluated
Exercises at BV and PY – Dry Cask Fuel Storage underway at PY
Nuclear 2007F 2008F 2011 Target
OSHA Incident Rate (per 100 employees) 0.25 0.25 0.25
Total Generation (million MWh) 30.7 32.0 32.0
Capability Factor (%) 90.0 92.9 92.4
Nuclear Operating Performance
4Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Mission-driven strategy in Fossil has resulted in significant reductions in cost since 2004 as well as increased outputIn spite of increased AQC-related O&M in 2008–2010, non-fuel production costs are expected to remain stable Cost-effective execution of outages is expected to drive improvement and stability of nuclear non-fuel expenses
Focus on Cost Control Top-Tier Operational Capability
Fossil
2004 2005 2006 2007F 2008F
($ /
MW
h)
Non-Fuel Fuel
Nuclear
2004 2005 2006 2007F 2008F
($ /
MW
h)
Non-Fuel Fuel
5Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Top-Tier Operational Capability
Garnered significant nuclear reliability improvements during 2006–2007 outages
Fossil fleet expected to return to top-quartile performance in 2008 – AQC-related outages will lower capacity factors in 2009 and 2010– Expect to reach top-decile performance levels by 2011
Baseload Capability/Capacity Factors
75%
80%
85%
90%
95%
100%
Fact
ors
(%)
Fossil baseload 84.6% 86.9% 88.5% 81.0% 87.2% 90.7%
Nuclear 89.5% 86.2% 86.8% 90.0% 92.9% 92.4%
2004 2005 2006 2007F 2008F 2011 Target
Continued Improvement of Asset Utilization
6Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Operational Performance TargetsOperational Performance 2004 2005 2006 2007F 2008F 2011
Targets
Total Generation (million MWh) 76.4 80.2 82.0 82.2 84.7 86.6
Fossil Reliability
Capacity Factor (Baseload %) 84.6 86.9 88.5 81.0 87.2 90.7
Nuclear Reliability
Capability Factor % 89.5 86.2 86.8 90.0 92.9 92.4
Energy Delivery Reliability
Distribution SAIDI (minutes) 159 191 152 128 118 103
7Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007 8
Nuclear Generation
Year PlantExpected
Outage Costs($ millions)
Expected Outage Duration
(days)Scope Driving Duration
(Items with asterisk* denote duration drivers)
Perry 1R11 $30 30Refueling *IVVIActual Outage Period (4/2/07 – 5/13/07)
Beaver Valley 1R18 $32 28
Split Pins *Containment Sump Modifications*Reactor Vessel ISI *100% Eddy Current TestReactor Vessel Head InspectionPressurizer OverlayActual Outage Period (9/24/07 – 10/24/07)
Davis-Besse 1R15 $30 31 Rewind Main Generator *
2008 Beaver Valley 2R13 $30 30
Split Pins *Low Pressre-2 Turbine Inspection *Reactor Vessel Head InspectionMain Cond Tube Replacement, Expansion Joints *Replace High Pressure Turbine *Type A Containment Pressurization Test
Perry 1R12 $30 25Refueling *10-year IVVI / Bioshield In-service InspectionRecirc Pump Motor Replacement
Beaver Valley 1R19 $30 30Replace Low Pressure Turbines (2) *Reactor Coolant System Loop Stop Valves (2)Reactor Vessel Head Inspection
Beaver Valley 2R14 $30 25 Refueling *
2009
2007
Generation
Future refueling outages focus on reliability
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Generation – Implementing Plans for the Future
Nuclear license renewal
Nuclear steam generator replacements– Davis-Besse in 2014– Beaver Valley Unit 2 in 2017
Current Expiration
Submit Request (NRC Docket)
Approval Expected
New Expiration
Submitted 2007* 2036
Beaver Valley Unit 2 2027 Submitted 2007* 2009 2047
Davis-Besse 2017 2010 2012 2037
2046Perry 2026 2013 2015
Beaver Valley Unit 1 2016 2009
* The NRC accepted the application for review
9Generation
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Nuclear spent fuel storage– Since 1983, FirstEnergy has collected $494M from the rate-payers
for the long-term storage of used nuclear fuel. At the federal level, Yucca Mountain has been proposed as a site for long-term storage and may be available as early as 2017 to receive used fuel, but this is not likely. If Yucca Mountain is available in 2017, FirstEnergy will be eligible to ship fuel starting in 2021.
Generation – Implementing Plans for the Future
Beaver ValleyBeaver ValleyUnit 1Unit 1 Implement dry storage by the end of 2014
Beaver ValleyBeaver ValleyUnit 2Unit 2
Current ongoing criticality analysis will increase storage spaceRe-rack before 2011 to provide capacity through 2025 Dry storage could then be implemented
DavisDavis--BesseBesseContinue with wet storage until 2021Switch back to dry storage in 2022
PerryPerry Implement dry storage before 2011
10Generation
Environmental Strategy
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Sammis Plant with computer overlay of Wet Flue Gas Desulphurization (WFGD) equipment
AQC Upgrades – Sammis PlantFlue Duct Work – 9,000 tons (9,000 ft.)
Electrical Cable – 9,120 circuits (530 miles)
Foundation Piles – 5,600 piles (445,000 LF)
Concrete – 51,000 cubic yards
Tons of Steel – 17,200 tons
DCS I/O Points – 8,200
Large Bore Pipe – 88,300 ft. (17 miles)
Small Bore Pipe – 13,000 ft. (2.5 miles)
Overland “Pipe” Conveyor – 3.0 miles long
2Environmental Strategy
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Participating in Global Climate Change Policy• Global Roundtable on Climate Change• EPRI Global Climate Policy Costs & Benefits Research• EEI Climate Change Policy Subcommittee• NEI Climate Change Policy Subcommittee
GHG Reduction Technologies & Voluntary Actions• Asia-Pacific Partnership• EPA SF6 Reduction Partnership• EPRI GHG Reduction and Electric Transportation Research• Climate Vision• DOE 1605(b) Voluntary Reporting of GHGs Program• Powertree Carbon Company
Generation Initiatives• Fossil plant efficiencies • Nuclear plant uprates
CO2 Capture and Storage Technologies• MRCSP – R.E. Burger Plant Sequestration test well• ECO2 Carbon Capture – Powerspan• EPRI research• Power Partners• Oxy Fuel – B&W
End-user Energy Management• NJ Clean Energy Program• PA Sustainable Energy Fund• Ohio Energy-efficiency Programs
Renewables• 650 MWs Hydro• >200 MWs Wind Purchase Agreements
Renewal of Nuclear and Hydro Plant Operating Licenses
• Continued operation of non-emitting generation
Environmental StrategyFirstEnergy’s climate activities
3Environmental Strategy
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
FirstEnergy’s Position on Global Climate Change
Climate change is a global issue ultimately requiring a global solution
Technology development is key – Energy efficiency and demand-side management– Clean coal technologies– Carbon capture and sequestration
Significant future impact on price of electricity whether states are regulated or deregulated– Be consistent over broad geographic region– Include reasonable compliance timeframes – Encourage new cost-effective technologies
4Environmental Strategy
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Additional Key Technologies FirstEnergy is Actively Co-Funding
Plug-in hybrid electric vehicles (PHEV)– Considerably cleaner than
internal combustion engine vehicle, including battery charging– 30% less GHG– 15% less SO2 and NOx
– Provides largely off-peak demand, an opportunity for growth
– Advanced meters are an enabling technology
5Environmental Strategy
Commodity Operations
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Coal Commodity Position
Continue working to secure long-term fuel supply contracts
Actively testing alternate fuel blends at various plants to optimize plant economics and flexibility
Engaged in fuel flexibility initiative to expand margins and fuel choices
Securing Open Coal Commodity Positions
0 5,000 10,000 15,000 20,000 25,000
2010
2009
2008
Total Needed Tons Total Covered Tons
91%
99%
100%
Commodity Operations
2
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Coal Transportation PositionActively pursuing closure to long-term transportation positions – rail contract signed, 2010 barge contract agreement reachedContinuing to evaluate additional delivery options to increase both capabilities and flexibilityEnhanced rail unloading capabilities in process at Ashtabula, Bay Shore and Lake ShoreIn 2008, FES will manage PRB rail logistics previously outsourced
Securing Open Coal Transportation Positions
0 5,000 10,000 15,000 20,000 25,000
2010
2009
2008
Total Needed Tons Total Covered Tons
91%
97%
58%
Commodity Operations
3
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Emission Allowance PositionBased on projected generation:
– SO2 emission allowance positions are well covered for 2008 and 2009
– Closed 2010 SO2 positions early to mitigate potential scrubber projects completion risks
– 2008 seasonal NOx is covered– 2009 – 2010 seasonal NOx
requirements are expected to be fully covered as allocations are made to states (OH due in Jan. 2008)
– Annual NOx allocations are beginning and markets are still thin
SO2 Position
-10,000
80,000
170,000
260,000
350,000
2008 2009 2010
(ton
s)
Needed Covered Position
Seasonal NOx Position
-10,000
0
10,000
20,000
30,000
2008 2009 2010
(ton
s)
Needed Covered Position
Commodity Operations
SO2 Position
4
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Fuel Flexibility Creates Margin & Fuel ChoicesEnhanced systems, tools and processes providing the ability to react and adjust blends quickly to match market prices
“Fuel Flex” creates value by continuously increasing fuel blend choices– Maximize revenues when real-time market prices are favorable– Minimize costs when market prices are low
The Right Fuel at the
Right Time
Commodity Operations
5
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
ME and PN have long-term capacity contractsBeaver Valley nuclear plant (1,779 MW) committed in PJM to covercapacity positionCovered capacity prior to RPM auction for planning year 2008-2009 to replace long-term contractsCommitted Seneca pumped storage (451 MW) to PJM as a capacity resource for planning year 2009 (commencing in June 2009)
PJM Net Capacity
(3500)(2800)(2100)(1400)(700)
0700
1400210028003500
Jan
Feb
Mar
Apr
May Jun
Jul
Aug
Sep
Oct
Nov
Dec Jan
Feb
Mar
Apr
May Jun
Jul
Aug
Sep
Oct
Nov
Dec Jan
Feb
Mar
Apr
May Jun
Jul
Aug
Sep
Oct
Nov
Dec
MW
FES View (continuing to serve the ME and PN PRA)
2008 2009
Includes Beaver Valley, Forked River and Seneca
2010
PJM Capacity Position
Commodity Operations
6
Energy Delivery
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Regulated Rate Base and Sales Growth
Projected Rate Base –Regulated Companies (T&D)($ millions)
2007F 2008F 2011 Target
Net Plant for Rate Base $9,800 $10,100
$394
$11,000
Capital Expenditures, Net of Depreciation $365 $330
Growing asset base and increased distribution throughput Growing asset base and increased distribution throughput
Average Annual (2009F – 2011F) OH PA NJ
0.9% 2.2%
Net Plant for Rate Base ($ millions) $4,420 $3,290 $3,000
1.12.1
Growth Rate (kWh) 1.7%
# of Customers (millions) 1.3
Projected Annual Growth
Energy Delivery
2
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Energy Delivery Performance Targets
* Top quartile** Per 100 employees
Safety
Consistently achieve top-decile (1.24) OSHA Incident Rate** 1.70* 1.62 1.00
Reliability
Distribution SAIDI (minutes) 128 118 103
TOF (per circuit) 0.39* 0.31 0.31
Financial Performance
Total Cost Per Customer $270 $265 $263
EmployeesAn environment where employees are valued and accountable for the performance of the business
Total Staffing 7,637 7,898 7,995
Focus Area Key Metrics
Top-quartile performance SAIDI and top-decile in TOF
Achieve top-quartile total spend per customer
2007F 2008F 2011 Target
3Energy Delivery
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Capital Planning Enhancements
Benchmarked leading performers in the area of capital allocation
Selected Navigant to help develop capital allocation tool based on fundamental engineering economics (quantified benefits)
E-CAT provides the granularity which drives our ability to prioritize thousands of projects based on predicted benefits
Energy Delivery Capital Allocation Tool (E-CAT)
Capital planning has undergone a fundamental change to Capital planning has undergone a fundamental change to enhance our financial discipline enhance our financial discipline
Game Plan:
Target spend with an emphasis on improving reliability
Continued focus on operational improvements
4Energy Delivery
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Workforce Management
Power Systems Institute (PSI)– Started in 2000; partnered with two colleges in Ohio to offer
lineworker training– Currently, partnerships with 11 local community colleges
and universities across OH, PA and NJ
Enrollment/Hires 2000–2007
Started Program Graduated Hired
Line Workers 276 236 214Substation Electricians 110 87 82
Total 386 323 296
2008F 2009F
123 177
31 60
154 237
5Energy Delivery
Regulatory Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Ohio Edison, CEI and Toledo EdisonCase detail– Request: $332M increase (7% on overall rates)
– Distribution revenue requirements: $212M– Deferral recovery: $120M
Case schedule– Filed June 2007, with 2008 test period and
date certain of May 31, 2007– PUCO Staff report issued December 4, 2007– Hearings expected 1st quarter 2008– 275-day timeline reached in March 2008– Rates to be effective January 2009 (CEI in May 2009)
Ohio Regulatory UpdateDistribution Rate Requests
Regulatory Matters
2
OH
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
* Assumes current Generation & Transmission rates
Proposed Changes in Revenues ($ millions) TotalCurrent "Distribution" Revenues $1,118Proposed Increase:
Associated with RCP Fuel Expense Deferrals 34Associated with RCP Infrastructure Expense Deferrals 40Associated with RCP DSM Deferrals (through a rider) 4Associated with ETP & Ohio Line Extension Deferrals 42"Base" Revenue Requirement Increases 212
Total Proposed Increase to "Distribution" Revenues $332Proposed "Distribution" Revenues $1,450Offsetting RTC Decrease ($594)Net Decrease, Including Offsets * ($262)% Decrease, Including Offsets to Total Current Revenues * -5.7%
Ohio Regulatory MattersDistribution Rate Requests (as filed)
Regulatory Matters
3
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Ohio Edison, CEI and Toledo EdisonOn July 10, 2007, filed a comprehensive supply plan for competitively priced generation service to implement market provisions of S.B. 3 effective January 1, 2009
Proposal includes:– Option to phase in generation price increases for residential
tariff groups that experience > 15% increase in avg. total price– Time-of-day and hourly pricing options– Renewable energy component
Competitive bid process (CBP) alternatives– By Customer Class, or– Slice of System
Ohio Regulatory UpdateCompetitive Generation Procurement Proposal
4Regulatory Matters
OH
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
CBP process– Descending clock bidding format– Full requirements product (energy, capacity, transmission)– Individual bidders limited to 75% of total customer load– Multiple solicitations; three-year ladder
Bids secured in 2008 would be for service beginning January 1, 2009, and ending:– May 31, 2010 (17-month)– May 31, 2011 (29-month)– May 31, 2012 (41-month)
Subsequent annual bids for 1/3 of load (3-year supply)
Ohio Regulatory UpdateCompetitive Generation Procurement Proposal (continued)
5Regulatory Matters
OH
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Ohio Edison, CEI and Toledo EdisonAugust 29: Supreme Court of Ohio remanded recovery of deferred fuel costs in distribution rates to PUCO for further consideration
The Court reaffirmed all other aspects of the Rate Certainty Plan
September 10: Companies filed a Remand Application with the PUCO seeking generation-related fuel cost recovery rider
– Remand remains at PUCO
OH
Ohio Regulatory UpdateSupreme Court of Ohio Remand on Rate Certainty Plan
6Regulatory Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
PAMet-Ed and Penelec
Commonwealth Court appeals of rate cases– $109M net increase effective January 2007– Pending appeals to Commonwealth Court
– ME & PN - denial of generation relief and tax expense adjustment– Industrials & OCA - transmission recovery– Oral arguments expected late 4Q or early 2008– Decision expected in 2008
Generation procurement filing plan– ME & PN transition to competitive generation market prices
on January 1, 2011– Plan to submit generation procurement proposal in 2008
Pennsylvania Regulatory UpdateCommonwealth Court Appeals & Generation Procurement Filing
7Regulatory Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Penn Power successfully transitioned to competitive generation market prices on January 1, 2007– POLR I RFPs implemented for January 2007–May 2008– POLR II multiple RFP’s with staggered delivery
June 2008 through May 2011– Proposed full requirements product by class– Settlement Agreement filed in September 2007– Favorable ALJ Recommended Decision received in October 2007– Anticipate Commission Order in December 2007
– Industrial customers on hourly priced default service
RFP Tranches (50 MW)Group Term Jan 08 Mar 08 Oct 08 Jan 09 Oct 09 Jan 10Residential 1 year 2 2 0 0 2 2Residential 2 year 2 2 2 2 0 0Commercial 1 year 3 4 3 4 3 4
Pennsylvania Regulatory UpdatePenn Power POLR II Case
8Regulatory Matters
PA
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
NJNew Jersey Energy Master Plan – State goals
– Reduce total projected electricity demand by 20% by 2020– Meet 22.5% of electricity needs with renewable energy– Reduce air pollution and energy use– Encourage and maintain economic development– Achieve a 20% reduction in CAIDI and SAIFI by 2020– Unit prices at no more than +5% of the regional price level– Eliminate transmission congestion by 2020
– Detailed draft plan expected by year end 2007– JCP&L focus: Peak demand management and cost recovery
Regulatory MattersJersey Central Power & Light
9Regulatory Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Retail Regulatory Structure
1 CEI fixed through April 2009.2 NUG recovery thru 2020.
Ohio Edison Stable ratesthru 2008“g + RSC”
RTC thru2008 – OE, TE2010 – CEI
Fixed ratesthru 20081
Pass thruMISO costs
Penn Power Market in2007
POLR ratesthru 2010
GenerationGeneration TransmissionTransmission DistributionDistribution Transition CostTransition Cost
Norestriction
JCP&L BGS Supply MTC thru 2018Norestriction
Met-Ed
Penelec
Toledo Edison
CEI
CTC endedJan. 2006
CTC thru 20102
CTC thru 20092
Pass thruPJM costs
Norestriction
InGeneration
10Regulatory Matters
Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
2007 – Key Financial Accomplishments
Consistent financial results– Narrowed Non-GAAP 2007 earnings guidance to $4.15 to $4.25*,
the top half of original guidance range
Continued strong cash flow– Expect net cash from operating activities of $1.7B
– Includes pension contribution of $300M
Enhanced capital structure– Transferred $427M of tax-exempt pollution control debt from utilities to
unregulated Gencos– Issued approximately $1.1B of operating company debt
Strengthened pension fund– Voluntary $300M contribution– Plan well funded
Financial Matters
* See GAAP to Non-GAAP reconciliations in the Appendix.
2
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
2007 – Key Financial Accomplishments (continued)
Positioned FirstEnergy Solutions (FES) as an independent capital raising entity– Investment grade credit ratings (BBB/Baa2) received in March 2007– Completed $1.3B sale and leaseback transaction on 779 MW portion
of Unit 1 of the Bruce Mansfield Plant– Captured benefit of $752M of expiring tax capital loss carryforwards– Equivalent to borrowing at 3.6% for a term of 33 years
– Upsized FES’ borrowing capacity under FirstEnergy’s revolver to $1.0B
Increased shareholder value– Year-to-date stock price appreciation of 13.7% (through Nov. 2007)– Three year annualized TSR of 21.5% (through Nov. 2007)– Dividend increase of 11.1% (March 2007)– Accelerated repurchase of approx. 14.4 million shares (March 2007)
3Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Projected 2008 – 2011 Capital Expenditures
($ millions) 2008F 2009F – 2011F Average
$730 $730
260
155
75
$1,220
131
96
Corporate 86
$1,043
Energy Delivery
FENOC
Fossil
Subtotal without AQC
($ millions) 2008F 2009F 2010F 2011F
$650$261
$11$500($150) ($145)
$156($344)
AQCChange from Prior Year
4Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Finance Plans: 2008 and Beyond
Maintain financial flexibility– Investment grade credit metrics at all entities
– Metrics maintained over near-term – Metrics improved as AQC capital spend winds down post-2009
– Maintain substantial liquidity– $3.4B total capacity
Reduce holding company debt while appropriately capitalizing operating companies and FirstEnergy Solutions– Utility debt maturities of only $685M over 2008 – 2011 period– Opportunistically transfer remaining $263M of utility tax-
exempt debt to Generating Companies– $1.9B already transferred
– $1.5B, 6.45% Series B FE Notes due November 2011
5Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Finance Plans: 2008 and Beyond (continued)
Efficient funding of capital program – Capital expenditures financed largely through internal cash
flow, even during peak AQC spend– New tax-exempt financings of approximately $200M planned to
support Sammis AQC project
Potential uses of substantial growth in free cash following completion of AQC projects– Dividend growth– Potential for share repurchases– Invest for future growth– Ability to take advantage of strategic opportunities
6Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Share Repurchase Summary
2006 2007F Cumulative
Beginning Shares 329.8 319.2 329.8
Shares Repurchased 10.6 14.4 25.0
Ending Shares 319.2 304.8 304.8
% Reduction 3.2% 4.5% 7.7%
Cost ($ millions) $627 $940* $1,567*
Avg. Price per Share $58.99 $65.39* $62.68*
Annual EPS Benefit $0.13 $0.19* $0.32*
(Shares in millions)
* Estimate subject to settlement
7Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
FirstEnergy Credit Ratings
On October 18, S&P revised the outlook of FE and its subsidiaries to negative from stable
On November 2, Moody’s revised the outlook of FE and its subsidiaries to stable from positive
Corporate Credit Rating (S&P) / Issuer Rating
(Moody's)
Senior Secured Senior Unsecured
S&P Moodys S&P Moodys S&P MoodysFirstEnergy Corp. BBB Baa3 - - BBB- Baa3
FirstEnergy Solutions BBB Baa2 - - BBB Baa2
Ohio Edison BBB Baa2 BBB+ Baa1 BBB- Baa2
Cleveland Electric Illuminating BBB Baa3 BBB+ Baa2 BBB- Baa3
Toledo Edison BBB Baa3 BBB Baa2 BBB- Baa3
Pennsylvania Power BBB Baa2 A- Baa1 BBB- Baa2
Jersey Central Power & Light BBB Baa2 BBB+ Baa1 BBB Baa2
Metropolitan Edison BBB Baa2 BBB+ Baa1 BBB Baa2
Pennsylvania Electric BBB Baa2 BBB+ Baa1 BBB Baa2
As of December 6, 2007As of November 30, 2007
8Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
Strong Liquidity Position
Substantial liquidity available– $3.1B available borrowing capacity at November 30, 2007
Company Type Term Maturity Amount ($M)
Aug. 2011 $ 2,750
120
550
$ 3,420
Various
Various
Total
FirstEnergy Corp. RCA* 5-year
FirstEnergy Corp. Bank Lines Various
OH & PA Utilities A/R Fin. 1-year
* Revolving Credit Agreement
9Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
2007 Non-GAAP Earnings Per Share GuidanceReconciliation GAAP to Non-GAAP
10
Affirmed on December 5, 2007
2007 EPS
Basic EPS (GAAP basis) $4.21 – $4.31Excluding Special Items:
New Regulatory AssetAuthorized by PPUC (0.05)Gain on sale of non-core assets (0.04)Trust Securities Impairment 0.03
Basic EPS (Non-GAAP basis) $4.15 – $4.25
Financial Matters
Wall Street AccessLas Vegas, NV ▪ December 14, 2007
2008 Non-GAAP Earnings Per Share GuidanceReconciliation GAAP to Non-GAAP
11
Issued on December 5, 2007
2008 EPSBasic EPS (GAAP basis) $4.23 – $4.43Excluding Special Items:
Gain on sale of non-core assets (0.08)Basic EPS (Non-GAAP basis) $4.15 – $4.35
Financial Matters