Allegheny Power 2011 Annual Report Download - page 25

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Other/Corporate contains corporate items and other businesses that are below the quantifiable threshold for separate disclosure
as a reportable segment. (See Note 19, Segment Information of the Combined Notes to the Consolidated Financial Statements for
further information on FirstEnergy's reportable operating segments.)
STRATEGY AND OUTLOOK
FirstEnergy's vision is to be a leading regional energy provider, recognized for operational excellence, outstanding customer service
and our commitment to safety; the choice for long-term growth, investment value and financial strength; and a company driven by
the leadership, skills, diversity and character of our employees.
FirstEnergy has grown over the last 15 years through several strategic mergers and asset transactions. Our most recent merger
with Allegheny was completed in February 2011, significantly increasing our customer base and generating capacity and accelerating
our movement further into eastern competitive markets. Also during 2011, we completed the transition to competitive markets in
Pennsylvania and moved our ATSI assets into PJM, so that we now operate within a single regional transmission system.
FirstEnergy is uniquely positioned as the nation's largest contiguous electric system, with complementary assets across our
generation, transmission and distribution delivery operations. These assets are in a prime location of PJM's competitive markets.
Our substantial regulated operations include 10 distribution utilities serving a balanced base of nearly 6 million customers across
5 states. We are also one of the largest owners of transmission assets in PJM with nearly 20,000 miles of high-voltage lines,
including two independent transmission companies with significant assets. Combined, our utilities and transmission operations
provide financial stability with strong cash flow and dividend support to FirstEnergy.
Our market-focused business model integrates more than 17,000 MWs of competitive generation, excluding approximately 2,700
MWs from unregulated plants expected to be closed by September 1, 2012, and are subject to review by PJM for reliability impacts
(see Note 16, Commitment, Guarantees and Contingencies, regarding PJM's review of the our plans), with a multi-channel retail
sales platform, providing a higher value for every MWH we generate. We primarily target customers in competitive markets close
to our generation assets.
We believe we are well-positioned for upcoming environmental changes due to the considerable investments we have made in
recent years to diversify our generation fleet and improve its environmental performance. As a result of the MATS rules recently
finalized by the EPA, and other previously announced environmental regulations, FirstEnergy announced in early 2012 its intent to
retire nine older coal-fired power plants, totaling 3,349 MW, located in Ohio, Pennsylvania, Maryland and West Virginia by September
1, 2012. When the retired fossil plants are removed from our fleet, nearly 100% percent of our generation output will be from either
low or non-emitting facilities, including nuclear, hydro, natural gas and scrubbed coal units. This further positions our fleet to deliver
superior value in the future.
We continue to face challenges related to macro-economic factors. These include slow economic recovery across portions of our
service territory, which affect our distribution deliveries volumes to residential, commercial and industrial customers, and depressed
natural gas and wholesale electricity prices, which affect revenues from our competitive retail business and generation fleet. However,
we believe we are one of the better positioned companies in our industry to benefit from eventual increases in energy and capacity
prices as economic conditions improve.
Financial Outlook
We intend to manage our operating and capital costs in order to achieve our financial goals and commitment to shareholders.
Our liquidity position remains strong, with approximately $49 million of short-term cash investments and over $4.3 billion of available
liquidity as of January 31, 2012.
Positive earnings drivers for 2012 are expected to include:
A full year contribution from the Allegheny merger;
Higher competitive retail revenues as a result of continued growth in the business;
Lower fuel and operation and maintenance expenses due to the retirement of certain coal-fired plants in 2012 and from
a continued focus on controlling our costs; and
Reduced interest expense as a result of debt redemptions during 2011.
Negative earnings drivers for 2012 are expected to include:
Lower margins for our competitive energy service business from depressed market prices of power and lower capacity
prices resulting from the PJM RPM auction beginning June 1, 2012;