Allegheny Power 2010 Annual Report Download - page 25

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10
Financial Outlook
We remain committed to managing our operating and capital costs in order to achieve our financial goals and
commitment to shareholders.
Our liquidity position remains strong, with access to more than $3.2 billion of liquidity, of which approximately $3.1 billion
was available as of January 31, 2011.
Capital expenditures in 2011 are projected to be $1.4 billion, compared to $1.8 billion in 2010. We intend to continue to
fund our capital requirements through cash generated from operations.
Positive earnings drivers for 2011 are expected to include:
Increased retail revenues associated with FES POLR, governmental aggregation and direct sales;
Reduced fuel expenses; and
Increased margin from Signal Peak.
Negative earnings drivers for 2011 are expected to include:
Decreased revenues associated with the expiration of the Met Ed/Penelec partial requirements agreement with
FES;
Increase in net ancillary, congestion, and capacity expenses;
Increased purchased power expenses;
Additional planned nuclear outage for Davis-Besse’s reactor head replacement; and
Increased depreciation expenses and reduced capitalized interest, primarily associated with the Sammis plant
environmental project.
Distribution deliveries and non-fuel, non-outage O&M expenses including employee benefits are expected to be
essentially flat in 2011 compared to 2010.
FirstEnergy’s $2.75 billion revolving credit facility matures in August 2012. We intend to review our revolving credit
facility needs post-merger and at a minimum anticipate pursuing renewal of the existing facility during the first half of
2011.
In December 2010, a new federal income tax law became effective that provides for bonus depreciation tax benefits.
This new law is expected to provide approximately $500 million in additional cash to FirstEnergy through 2012.
We remain focused on liquidity and a strong balance sheet, as well as maintaining investment grade credit ratings. Our
financial plan accelerates our goal of improving our financial strength and flexibility by significantly reducing debt by the
end of 2012. In addition to cash generated from operations, we expect to deploy cash received through bonus
depreciation tax benefits, as well as cash from the future sale of certain non-core assets, to this debt reduction initiative.
These actions are expected to improve our credit metrics over the next several years.
Capital Expenditures Outlook
Our capital expenditure forecast for 2011 is projected to be $1.4 billion, which represents a $393 million decrease from
2010.
The main drivers of this decrease are the 2010 completion of the $1.8 billion Sammis AQC environmental compliance
project and reduced spending for the Fremont facility, scheduled for completion in 2011.
Capital expenditures for our competitive energy services business (excluding the AQC project and Fremont facility) are
expected to increase slightly in 2011. The primary cause is the previously announced decision to accelerate the
replacement of the Davis-Besse nuclear reactor vessel head. This initiative began in 2010 and is expected to be
completed in 2011. Other planned generation investments provide for maintenance of critical generation assets, deliver
operational improvements to enhance reliability, and support our generation to market strategy.