Allegheny Power 2013 Annual Report Download - page 20

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5
OVERVIEW
Earnings available to FirstEnergy Corp. in 2013 were $392 million, or basic earnings of $0.94 per share of common stock ($0.94
diluted), compared with $770 million, or basic earnings of $1.85 per share of common stock ($1.84 diluted) in 2012 and $885 million,
or $2.22 per basic share ($2.21 diluted), in 2011. The principal reasons for the changes in basic earnings per share are summarized
below:
Change In Basic Earnings Per Share From Prior Year 2013 2012
Basic Earnings Per Share - Prior Year $ 1.85 $ 2.22
Segment operating results(1) -
Regulated Distribution 0.06 (0.05)
Regulated Transmission (0.03) —
Competitive Energy Services (0.45) (0.21)
Regulatory charges (0.46) (0.03)
Non-core asset sales/impairments — (0.78)
Merger-related costs 0.03 0.36
Merger accounting — commodity contracts 0.05 0.11
Net merger accretion(1)(2) — 0.01
Trust securities impairments (0.09) 0.01
Mark-to-market adjustments-
Pension and OPEB actuarial assumptions 1.29 (0.17)
All other (0.07) 0.13
Plant deactivation costs (0.74) 0.20
West Virginia asset transfer charges (0.51) —
Litigation resolution — 0.06
Debt redemption costs (0.20) —
Restructuring costs 0.01 (0.02)
Interest expense, net of amounts capitalized (0.01) 0.04
Investment income — (0.01)
Income tax legislative changes 0.08 (0.02)
Change in effective tax rate 0.11 (0.09)
Settlement of uncertain tax positions — 0.06
Discontinued operations — 0.01
Other 0.02 0.02
Basic Earnings Per Share $ 0.94 $ 1.85
(1) Excludes amounts that are shown separately.
(2) Includes dilutive effect of shares issued in connection with the Allegheny merger.
FirstEnergy continued to be exposed to weak economic conditions across its multi-state utility service territory throughout 2013,
as evidenced by relatively flat distribution sales over the last three years. This prolonged decrease in demand, coupled with excess
generation supply in the region, has caused a period of protracted low power and capacity prices. Further, the PJM RPM Auction
for 2016/2017 capacity that was conducted in May 2013 produced prices in the regions served by FirstEnergy's Competitive Energy
Services segment that were lower than expected. This result is a broader indication of an underlying supply/demand imbalance
that is expected to continue to affect power producers in this region, adding pressure on already depressed energy prices and
potentially pushing any significant power price recovery further into the future than FirstEnergy, or the industry at large, previously
expected.
Over the course of 2013, FirstEnergy took a number of actions designed to reposition the Competitive Energy Services segment,
including adjusting its hedging strategy by slowing forward sales in order to capture any potential future improvements in power
prices, being more selective in the customers targeted and focusing more on customers with higher profit margins. With the
deactivation of the Hatfield’s Ferry and Mitchell plants and the Harrison/Pleasants asset transfer in October of 2013, as well as the
sale of 527 MW of hydro assets on February 12, 2014, FirstEnergy has reduced the size of the competitive fleet and changed the