FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to __________
Commission Registrant; State of Incorporation; I.R.S.
File Number Address; and Telephone Number Employer
Identification
No.
- ----------- ---------------------------------- --------------
333-21011 FIRSTENERGY CORP. 34-1843785
(An Ohio Corporation)
76 South Main Street
Akron, Ohio 44308
Telephone (800)736-3402
1-2578 OHIO EDISON COMPANY 34-0437786
(An Ohio Corporation)
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-2323 THE CLEVELAND ELECTRIC 34-0150020
ILLUMINATING COMPANY
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3491 PENNSYLVANIA POWER COMPANY 25-0718810
(A Pennsylvania Corporation)
1 East Washington Street
P. O. Box 891
New Castle, Pennsylvania 16103
Telephone (412)652-5531
Indicate by check mark whether each of the registrants
(1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date:
OUTSTANDING
CLASS AS OF MAY 13, 1998
----- ------------------
FirstEnergy Corp., $.10 par value 230,625,566
Ohio Edison Company, $9 par value 100
The Cleveland Electric Illuminating
Company, no par value 79,590,689
The Toledo Edison Company, $5 par value 39,133,887
Pennsylvania Power Company, $30 par value 6,290,000
FirstEnergy Corp. is the sole holder of Ohio Edison Company, The
Cleveland Electric Illuminating Company and The Toledo Edison
Company common stock; Ohio Edison Company is the sole holder of
Pennsylvania Power Company common stock.
This combined Form 10-Q is separately filed by
FirstEnergy Corp., Ohio Edison Company, Pennsylvania Power
Company, The Cleveland Electric Illuminating Company and The
Toledo Edison Company. Information contained herein relating to
any individual registrant is filed by such registrant on its own
behalf. No registrant makes any representation as to information
relating to any other registrant, except that information
relating to any of the four FirstEnergy subsidiaries is also
attributed to FirstEnergy.
This Form 10-Q includes forward looking statements based
on information currently available to management. Such statements
are subject to certain risks and uncertainties. These statements
typically contain, but are not limited to, the terms "anticipate",
"potential", "expect", "believe", "estimate" and similar words.
Actual results may differ materially due to the speed and nature of
increased competition and deregulation in the electric utility
industry, economic or weather conditions affecting future sales and
margins, changes in markets for energy services, changing energy
market prices, legislative and regulatory changes (including
revised environmental requirements), availability and cost of
capital and other similar factors.
TABLE OF CONTENTS
Pages
Part I. Financial Information
Notes to Financial Statements (Unaudited) 1-3
FirstEnergy Corp.
Consolidated Statements of Income 4
Consolidated Balance Sheets 5-6
Consolidated Statements of Cash Flows 7
Report of Independent Public Accountants 8
Management's Discussion and Analysis of
Results of Operations and Financial Condition 9-11
Ohio Edison Company
Consolidated Statements of Income 12
Consolidated Balance Sheets 13-14
Consolidated Statements of Cash Flows 15
Report of Independent Public Accountants 16
Management's Discussion and Analysis of
Results of Operations and Financial Condition 17-18
The Cleveland Electric Illuminating Company
Consolidated Statements of Income 19
Consolidated Balance Sheets 20-21
Consolidated Statements of Cash Flows 22
Report of Independent Public Accountants 23
Management's Discussion and Analysis of
Results of Operations and Financial Condition 24-25
The Toledo Edison Company
Consolidated Statements of Income 26
Consolidated Balance Sheets 27-28
Consolidated Statements of Cash Flows 29
Report of Independent Public Accountants 30
Management's Discussion and Analysis of
Results of Operations and Financial Condition 31-32
Pennsylvania Power Company
Statements of Income 33
Balance Sheets 34-45
Statements of Cash Flows 36
Report of Independent Public Accountants 37
Management's Discussion and Analysis of
Results of Operations and Financial Condition 38
Part II. Other Information
PART I. FINANCIAL INFORMATION
- ------------------------------
FIRSTENERGY CORP. AND SUBSIDIARIES
OHIO EDISON COMPANY AND SUBSIDIARIES
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARY
THE TOLEDO EDISON COMPANY AND SUBSIDIARY
PENNSYLVANIA POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1 - FINANCIAL STATEMENTS:
FirstEnergy Corp. (FirstEnergy) became a holding
company on November 8, 1997, in connection with the merger of
Ohio Edison Company (OE) and Centerior Energy Corporation
(Centerior). FirstEnergy's principal business is the holding,
directly or indirectly, of all of the outstanding common stock of
its four principal electric utility operating subsidiaries, OE,
The Cleveland Electric Illuminating Company (CEI), The Toledo
Edison Company (TE) and Pennsylvania Power Company (Penn). These
utility subsidiaries are referred to throughout as "Companies."
Penn is a wholly owned subsidiary of OE. Prior to the merger in
November 1997, CEI and TE were the principal operating
subsidiaries of Centerior. The merger was accounted for using the
purchase method of accounting in accordance with generally
accepted accounting principles, and the applicable effects were
reflected on CEI's and TE's financial statements as of the merger
date. Accordingly, the post-merger financial statements reflect a
new basis of accounting, and pre-merger period and post-merger
period financial results of CEI and TE (separated by a heavy
black line) are presented.
The condensed financial statements of FirstEnergy and
each of the Companies reflect all normal recurring adjustments
that, in the opinion of management, are necessary to fairly
present results of operations for the interim periods. These
statements should be read in connection with the financial
statements and notes included in the combined Annual Report on
Form 10-K for the year ended December 31, 1997 for FirstEnergy
and the Companies. The reported results of operations are not
indicative of results of operations for any future period.
The sole assets of the subsidiary trust that is the
obligor on the preferred securities included in FirstEnergy's and
OE's capitalization are $123,711,350 principal amount of 9%
Junior Subordinated Debentures of OE due December 31, 2025.
2 - COMMITMENTS, GUARANTEES AND CONTINGENCIES:
CAPITAL EXPENDITURES-
FirstEnergy's current forecast reflects expenditures of
approximately $1.2 billion (OE-$510 million, CEI-$430 million,
TE-$200 million and Penn-$90 million) for property additions and
improvements related to its regulated businesses from 1998-2002,
of which approximately $320 million (OE-$147 million, CEI-$105
million, TE-$50 million and Penn-$18 million) is applicable to
1998. Investments for additional nuclear fuel during the 1998-
2002 period are estimated to be approximately $518 million (OE-
$169 million, CEI-$172 million, TE-$140 million and Penn-$37
million), of which approximately $85 million (OE-$24 million,
CEI-$32 million, TE-$27 million and Penn-$2 million) applies to
1998. FirstEnergy also expects to invest approximately $300
million during 1998-2002 relating to various nonregulated
business ventures.
- 1 -
GUARANTEES-
The Companies and Duquesne Light Company have each
severally guaranteed certain debt and lease obligations in
connection with a coal supply contract for the Bruce Mansfield
Plant. As of March 31, 1998, the Companies' share of the
guarantees was $46.6 million (OE-$26.9 million, CEI-$10.0
million, TE-$5.8 million and Penn-$3.9 million). The price under
the coal supply contract, which includes certain minimum
payments, has been determined to be sufficient to satisfy the
debt and lease obligations.
ENVIRONMENTAL MATTERS-
Various federal, state and local authorities regulate
the Companies with regard to air and water quality and other
environmental matters. The Companies estimate additional capital
expenditures for environmental compliance of approximately $50
million (OE-$25 million, CEI-$12 million, TE-$11 million and
Penn-$2 million), which is included in the construction forecast
for their regulated businesses provided under "Capital
Expenditures" for 1998 through 2002.
The Companies are in compliance with the current sulfur
dioxide (SO2) and nitrogen oxides (NOx) reduction requirements
under the Clean Air Act Amendments of 1990. SO2 reductions
through the year 1999 will be achieved by burning lower-sulfur
fuel, generating more electricity from lower-emitting plants,
and/or purchasing emission allowances. Plans for complying with
reductions required for the year 2000 and thereafter have not
been finalized. The Environmental Protection Agency (EPA) is
conducting additional studies which could indicate the need for
additional NOx reductions from the Companies' Pennsylvania
facilities by the year 2003. In addition, the EPA is also
considering the need for additional NOx reductions from the
Companies' Ohio facilities. On November 7, 1997, the EPA proposed
uniform reductions of NOx emissions across a region of twenty-two
states, including Ohio and the District of Columbia (NOx
Transport Rule) after determining that such NOx emissions are
contributing significantly to ozone pollution in the eastern
United States. In a separate but related action, eight states
filed petitions with the EPA under Section 126 of the Clean Air
Act seeking reductions of NOx emissions which are alleged to
contribute to ozone pollution in the eight petitioning states. A
December 1997 EPA Memorandum of Agreement proposes to finalize
the NOx Transport Rule by September 30, 1998 and establishes a
schedule for EPA action on the Section 126 petitions. The cost of
NOx reductions, if required, may be substantial. The Companies
continue to evaluate their compliance plans and other compliance
options.
The Companies are required to meet federally approved
SO2 regulations. Violations of such regulations can result in
shutdown of the generating unit involved and/or civil or criminal
penalties of up to $25,000 for each day the unit is in violation.
The EPA has an interim enforcement policy for SO2 regulations in
Ohio that allows for compliance based on a 30-day averaging
period. The Companies cannot predict what action the EPA may take
in the future with respect to the interim enforcement policy.
In July 1997, the EPA promulgated changes in the
National Ambient Air Quality Standard (NAAQS) for ozone and
proposed a new NAAQS for previously unregulated ultra-fine
particulate matter. The cost of compliance with these regulations
may be substantial and depends on the manner in which they are
implemented by the states in which the Companies operate affected
facilities.
OE, CEI and TE have been named as "potentially
responsible parties" (PRPs) at waste disposal sites which may
require cleanup under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. Allegations that the
Companies disposed of hazardous substances at historical sites
and the liability involved, are often unsubstantiated and subject
to dispute. Federal law provides that all PRPs for a particular
site be held liable on a joint and several basis. CEI and TE have
- 2 -
accrued a liability of $4.8 million and $1.1 million,
respectively, as of March 31, 1998, based on estimates of the
costs of cleanup and the proportionate responsibility of other
PRPs for such costs. OE, CEI and TE believe that waste disposal
costs will not have a material adverse effect on their financial
condition, cash flows or results of operations.
Legislative, administrative and judicial actions will
continue to change the way that the Companies must operate in
order to comply with environmental laws and regulations. With
respect to any such changes and to the environmental matters
described above, the Companies expect that any resulting
additional capital costs which may be required, as well as any
required increase in operating costs, would ultimately be
recovered from their customers.
REGULATORY ACCOUNTING-
Based on the current regulatory environment and the
Companies' respective regulatory plans, the Companies believe
they will continue to be able to bill and collect cost-based
rates relating to CEI's and TE's nonnuclear operations and all of
OE's and Penn's operations; accordingly, it is appropriate that
the Companies continue the application of Statement of Financial
Accounting Standards No. 71 "Accounting for the Effects of
Certain Types of Regulation" (SFAS 71). With respect to the
changing Pennsylvania regulatory environment, Penn is expected to
discontinue its application of SFAS 71 for its generation
operations, possibly as early as 1998. The impact of Penn
discontinuing SFAS 71 is not expected to be material.
3. PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME:
The following pro forma statements of income for
FirstEnergy, CEI and TE for the three months ended March 31,
1997, give effect to the OE-Centerior merger as if it had been
consummated on January 1, 1997, with the purchase accounting
adjustments actually recognized in the business combination.
FE CEI TE
-- --- --
(In millions, except per share amounts)
Operating Revenues $1,210 $ 432 $ 217
Operating Expenses and Taxes 966 349 181
------ ----- -----
Operating Income 244 83 36
Other Income 14 (1) 1
Net Interest Charges 154 53 22
------ ----- -----
Net Income $ 104 $ 29 $ 15
====== ===== =====
Earnings per Share of Common Stock $ .47
======
Pro forma adjustments reflected above include: (1) adjusting CEI
and TE nuclear generating units to fair value based upon
independent appraisals and estimated discounted future cash flows
based on management's current view of cost recovery; (2) the
effect of discontinuing SFAS 71 for CEI's and TE's nuclear
operations; (3) amortization of the fair value adjustment for
long-term debt; (4) goodwill recognized representing the excess
of CEI's and TE's portion of the purchase price over the
respective company's adjusted net assets; (5) the elimination of
merger costs; and (6) adjustments for estimated tax effects of
the above adjustments.
- 3 -
<TABLE>
FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
---------- --------
(In thousands, except per share amounts)
<S> <C> <C>
OPERATING REVENUES $1,199,993 $604,774
---------- --------
OPERATING EXPENSES AND TAXES:
Fuel and purchased power 209,693 109,101
Nuclear operating costs 130,062 68,523
Other operating costs 211,820 87,990
---------- --------
Total operation and maintenance
expenses 551,575 265,614
Provision for depreciation and
amortization 167,573 99,958
Amortization of net regulatory assets 21,857 7,420
General taxes 136,374 61,537
Income taxes 76,891 43,896
---------- --------
Total operating expenses and taxes 954,270 478,425
---------- --------
OPERATING INCOME 245,723 126,349
OTHER INCOME 21,563 13,495
---------- --------
INCOME BEFORE NET INTEREST CHARGES 267,286 139,844
---------- --------
NET INTEREST CHARGES:
Interest on long-term debt 129,614 52,625
Allowance for borrowed funds used during
construction and capitalized interest (1,481) (380)
Other interest expense 6,173 7,718
Subsidiaries' preferred stock dividend
requirements 9,328 6,981
---------- --------
Net interest charges 143,634 66,944
---------- --------
NET INCOME $ 123,652 $ 72,900
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 222,407 144,345
========== ========
BASIC AND DILUTED EARNINGS PER SHARE OF
COMMON STOCK $ .56 $ .51
===== =====
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $.375 $.375
===== =====
<FN>
The preceding Notes to Financial Statements as they relate to
FirstEnergy Corp. are an integral part of these statements.
</TABLE>
- 4 -
<TABLE>
FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
ASSETS
------
<S> <C> <C>
UTILITY PLANT:
In service $14,950,675 $15,008,448
Less--Accumulated provision for
depreciation 5,701,339 5,635,900
----------- -----------
9,249,336 9,372,548
----------- -----------
Construction work in progress-
Electric plant 191,326 165,837
Nuclear fuel 62,809 34,825
----------- -----------
254,135 200,662
----------- -----------
9,503,471 9,573,210
----------- -----------
OTHER PROPERTY AND INVESTMENTS:
Capital trust investments 1,335,489 1,370,177
Nuclear plant decommissioning trusts 317,596 301,173
Letter of credit collateralization 277,763 277,763
Other. 524,752 357,989
----------- -----------
2,455,600 2,307,102
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 48,845 98,237
Receivables-
Customers (less accumulated
provisions of $5,941,000 and
$5,618,000, respectively, for
uncollectible accounts) 233,378 284,162
Other 229,825 219,106
Materials and supplies, at average
cost-
Owned 168,270 154,961
Under consignment 79,524 82,839
Prepayments and other 188,848 163,686
----------- -----------
948,690 1,002,991
----------- -----------
DEFERRED CHARGES:
Regulatory assets 2,583,661 2,624,144
Goodwill 2,095,217 2,107,795
Property taxes 270,230 270,585
Other 193,115 194,968
----------- -----------
5,142,223 5,197,492
----------- -----------
$18,049,984 $18,080,795
=========== ===========
</TABLE>
- 5 -
<TABLE>
FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common stockholders' equity-
Common stock, $.10 par value,
authorized 300,000,000 shares -
230,207,141 shares outstanding $ 23,021 $ 23,021
Other paid-in capital 3,636,845 3,636,908
Retained earnings 686,907 646,646
Unallocated employee stock
ownership plan common stock -
7,760,215 and 7,829,538 shares,
respectively (145,675) (146,977)
----------- -----------
Total common stockholders'
equity 4,201,098 4,159,598
Preferred stock of consolidated
subsidiaries-
Not subject to mandatory
redemption 660,195 660,195
Subject to mandatory redemption 214,864 214,864
Ohio Edison obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
Ohio Edison subordinated debentures 120,000 120,000
Long-term debt 7,148,956 6,969,835
----------- -----------
12,345,113 12,124,492
----------- -----------
CURRENT LIABILITIES:
Currently payable long-term debt
and preferred stock 319,208 470,436
Short-term borrowings 281,385 302,229
Accounts payable 271,866 312,690
Accrued taxes 391,864 381,937
Accrued interest 144,580 147,694
Other 192,003 193,850
----------- -----------
1,600,906 1,808,836
----------- -----------
DEFERRED CREDITS:
Accumulated deferred income taxes 2,298,655 2,304,305
Accumulated deferred investment
tax credits 318,429 324,200
Pensions and other postretirement
benefits 499,319 492,425
Other 987,562 1,026,537
----------- -----------
4,103,965 4,147,467
----------- -----------
COMMITMENTS, GUARANTEES AND
CONTINGENCIES (Note 2) ----------- -----------
$18,049,984 $18,080,795
=========== ===========
<FN>
The preceding Notes to Financial Statements as they relate to
FirstEnergy Corp. are an integral part of these balance sheets.
</TABLE>
- 6 -
<TABLE>
FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
----------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 123,652 $ 72,900
Adjustments to reconcile net income
to net cash from operating
activities-
Provision for depreciation and
amortization 167,573 99,958
Nuclear fuel and lease
amortization 24,313 14,345
Other amortization, net 21,585 7,110
Deferred income taxes, net 9,702 (8,441)
Investment tax credits, net (5,771) (3,826)
Receivables 40,065 17,352
Materials and supplies (9,994) 1,052
Accounts payable (36,675) (3,864)
Other (80,938) 17,209
-------- --------
Net cash provided from
operating activities 253,512 213,795
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt 148,119 29,205
Redemptions and Repayments-
Long-term debt 159,981 112,487
Short-term borrowings, net 20,844 29,507
Common stock dividend payments 83,391 53,541
-------- --------
Net cash used for financing
activities 116,097 166,330
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions 64,104 34,381
Bay Shore investment 145,505 -
Capital trust investments (33,961) -
Other 11,159 3,050
-------- --------
Net cash used for investing
activities 186,807 37,431
-------- --------
Net increase (decrease) in cash and
cash equivalents (49,392) 10,034
Cash and cash equivalents at beginning
of period 98,237 5,253
-------- --------
Cash and cash equivalents at end of
period $ 48,845 $ 15,287
======== ========
<FN>
The preceding Notes to Financial Statements as they relate
to FirstEnergy Corp. are an integral part of these statements.
</TABLE>
- 7 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To FirstEnergy Corp.:
We have reviewed the accompanying consolidated balance sheet of
FirstEnergy Corp. (an Ohio corporation) and subsidiaries as of
March 31, 1998, and the related consolidated statements of income
and cash flows for the three-month period then ended. These
financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of FirstEnergy
Corp. and subsidiaries as of December 31, 1997, and, in our
report dated February 13, 1998, we expressed an unqualified
opinion on that statement. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 8 -
FIRSTENERGY CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Earnings on common stock increased to $.56 per share in
the first quarter of 1998 compared to $.51 per share for the same
period last year. Current financial results reflect the merger of
OE and Centerior, which was completed November 8, 1997. The
former Centerior companies, which include CEI and TE, have been
included in first quarter 1998 results. Results reported for the
1997 first quarter are for OE and Penn only (OE companies).
Operating revenues were up $595.2 million in the first
quarter of 1998, compared to the same period of 1997. Excluding
the contribution of the former Centerior companies, operating
revenues were down slightly due to mild weather conditions. For
the OE companies, retail kilowatt-hour sales decreased 2.5% from
1997 levels. Contributing to the decline were reduced residential
and commercial sales of 3.8% and 2.0%, respectively. First
quarter industrial sales decreased 1.8% from comparable 1997
levels as a result of reduced sales to primary metal
manufacturers. Sales to other utilities were down slightly.
Overall, total kilowatt-hour sales for the first quarter of 1998
declined 2.3%, compared to the first quarter of 1997.
Due to the inclusion of the former Centerior companies
in 1998, all operation and maintenance expense categories
increased substantially in the first quarter of 1998, compared to
the same period last year. Including only the costs of OE
companies in first quarter 1998 results yields the following
expense comparisons. Fuel and purchased power expenses for the
first quarter of 1998 were up $4.8 million due to an increase in
purchased power costs resulting principally from unplanned
outages at Beaver Valley Units 1 and 2. Nuclear operating costs
increased $3.2 million for the first quarter of 1998, compared to
the same period last year, due to increased outage-related costs
at Beaver Valley Units 1 and 2 offset in part by reduced
operating expenses at the Perry Plant. Other operating costs
increased $4.3 million in the first quarter of 1998 over the same
period of 1997; last year's costs included credits from the sale
of emission allowances, resulting in the reported increase in
1998 costs compared to 1997.
Due primarily to the inclusion of the former Centerior
companies in 1998, first quarter 1998 cost comparisons with 1997
for the provision for depreciation and amortization, amortization
of net regulatory assets and general taxes show increases. Other
sources of differences are not material.
Other income and net interest charges increased in the
first quarter of 1998 from the same quarter of 1997. Excluding
the impact of the merger, other income decreased slightly in the
first quarter. For the OE companies, total interest costs were
$4.2 million lower in the first quarter of 1998, than for the
same period of 1997. Interest on long-term debt decreased due to
redemptions of long-term debt totaling $249.8 million, since
March 1997, while other interest expense increased as a result of
increased short-term borrowing.
- 9 -
Capital Resources and Liquidity
The Companies have continuing cash requirements for
planned capital expenditures and debt maturities. During the last
three quarters of 1998, capital requirements for property
additions and capital leases are expected to be about $318
million, including $35 million for nuclear fuel. The Companies
have additional cash requirements of approximately $135 million
to meet sinking fund requirements for preferred stock and
maturing long-term debt during the remainder of 1998. These cash
requirements are expected to be satisfied with internal cash
and/or short-term credit arrangements.
As of March 31, 1998, the Companies had about $48.8
million of cash and temporary investments. The Companies also had
$281.4 million of short-term indebtedness. In addition, the
Companies' unused borrowing capability included $202 million
under revolving lines of credit and $50 million of bank
facilities that provide for borrowings on a short-term basis at
the banks' discretion.
In May 1998, FirstEnergy arranged a $100 million
revolving credit facility until May 6, 1999 to replace an
expiring $125 million facility. Terms are similar to the previous
agreement. FirstEnergy's borrowings under the facility will be
jointly and severally guaranteed by CEI and TE. FirstEnergy plans
to transfer any borrowed funds under this facility to CEI and TE
based on their respective cash requirements.
During the first quarter of 1998, the Bay Shore Power
Company (a FirstEnergy subsidiary) issued $147.5 million of solid
waste-disposal revenue bonds in conjunction with the Bay Shore
Power Project. The project represents an alliance between
FirstEnergy and British Petroleum (BP). Bay Shore Power will
build a new state-of-the-art, steam-generating plant fueled by a
waste by-product from a new lower cost refinery process at BP's
Oregon, Ohio facility. Steam from the plant will supply both the
refinery and TE's Bay Shore Unit 1. The project is expected to
ensure the long-term viability of BP's refinery.
On March 5, 1998, NP Energy Inc. and Ohio National
Energy LLC, a joint venture between FirstEnergy Ventures Corp., a
wholly owned subsidiary of FirstEnergy, and National Power
Partners, an independent power developer located in San Mateo,
California, announced a 15-year marketing agreement for the
output of a planned 280 megawatt merchant plant in Ohio. The
contract is expected to provide $700 million or more in revenue
over the 15-year period. The agreement represents an important
milestone for this project; however, resolution of several other
major factors are required before the project can go forward. The
project will use clean coal technology to burn waste coal at OE's
R. E. Burger Power Station. Ohio National Energy LLC will begin
construction on the $230 million merchant plant in 1998 or in
early 1999 if other factors resolve favorably.
On March 19, 1998, FirstEnergy and Belden & Blake Corp.
announced an agreement in principle to create a joint venture
called FE Holdings, LLC, to acquire natural gas properties. Under
the joint venture, Belden & Blake, an independent natural gas
company based in North Canton, Ohio, would provide FE Holdings
with its trading and operational expertise. Under the joint
venture agreement, the Company will be the exclusive sales agent
for FE Holdings, as well as for sales to end-use customers of
Belden & Blake. Formation of the joint venture is subject to the
negotiation and execution of a definitive joint venture
- 10 -
agreement. FE Holdings has entered into an agreement to purchase
the privately held Marbel Energy Corporation, a fully integrated
natural gas company. This acquisition, which is subject to
regulatory approval and due diligence, is not contingent upon
completion of the joint venture agreement with Belden & Blake.
Marbel owns interests in more than 1,800 gas and oil wells and
holds interests in more than 200,000 undeveloped acres in eastern
and central Ohio. Marbel's subsidiaries include MB Operating
Company, Inc., a natural gas exploration and production company,
and Northeast Ohio Operating Companies, Inc. (NOOC). NOOC owns
and operates over 1,300 miles of gas gathering lines and natural
gas pipeline companies which serve industrial customers in
eastern and central Ohio.
On April 30, 1998, FirstEnergy Services Corp., a wholly
owned subsidiary of FirstEnergy, acquired Colonial Mechanical
Corporation, a leading provider of commercial and industrial
heating, ventilating, air conditioning, plumbing, and process
piping construction and service. Colonial Mechanical Corporation,
headquartered in Richmond, Virginia, is that state's largest
mechanical supplier. In combination with FirstEnergy Services'
subsidiaries Roth Bros., Inc. and RPC Mechanical, Inc., it
becomes a part of one of the nation's largest providers of
engineered heating, ventilating and air-conditioning equipment
and energy-management systems.
On March 26, 1998, Ohio legislation was introduced
which is designed to bring competition to the State's retail
electric industry. The legislation was introduced by the co-
chairs of the Ohio General Assembly's Joint Select Committee and
is consistent with recommendations contained in their draft
report to the Select Committee. House and Senate hearings are
expected to begin in May 1998; passage of any restructuring bill
in 1998 appears unlikely.
The Pennsylvania Public Utility Commission is expected
to issue its final order for Penn's rate restructuring plan in
July 1998. The plan, which Penn filed on September 30, 1997,
calls for restructuring customer rates and providing customers
with direct access to alternative energy suppliers. Customer
choice is to be phased in over three years beginning January 1,
1999.
- 11 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
---------- --------
(In thousands)
<S> <C> <C>
OPERATING REVENUES $597,865 $604,774
-------- --------
OPERATING EXPENSES AND TAXES:
Fuel and purchased power 113,915 109,101
Nuclear operating costs 71,766 68,523
Other operating costs 92,273 87,990
-------- --------
Total operation and maintenance
expenses 277,954 265,614
Provision for depreciation 100,843 99,958
Amortization of net regulatory assets 11,287 7,420
General taxes 59,525 61,537
Income taxes 37,123 43,896
-------- --------
Total operating expenses and taxes 486,732 478,425
-------- --------
OPERATING INCOME 111,133 126,349
OTHER INCOME 12,502 13,495
-------- --------
INCOME BEFORE NET INTEREST CHARGES 123,635 139,844
-------- --------
NET INTEREST CHARGES:
Interest on long-term debt 46,668 52,625
Allowance for borrowed funds used
during construction and capitalized
interest (660) (380)
Other interest expense 9,494 7,718
Subsidiaries' preferred stock dividend
requirements 3,857 3,857
-------- --------
Net interest charges 59,359 63,820
-------- --------
NET INCOME 64,276 76,024
PREFERRED STOCK DIVIDEND REQUIREMENTS 3,019 3,124
-------- --------
EARNINGS ON COMMON STOCK $ 61,257 $ 72,900
======== ========
<FN>
The preceding Notes to Financial Statements as they relate to
Ohio Edison Company are an integral part of these statements.
</TABLE>
- 12 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
<S> <C> <C>
ASSETS
------
UTILITY PLANT:
In service, at original cost $8,660,349 $8,666,272
Less--Accumulated provision for
depreciation 3,614,777 3,546,594
---------- ----------
5,045,572 5,119,678
---------- ----------
Construction work in progress-
Electric plant 120,039 99,158
Nuclear fuel 7,175 21,360
---------- ----------
127,214 120,518
---------- ----------
5,172,786 5,240,196
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
PNBV Capital Trust 481,493 482,220
Nuclear plant decommissioning trusts 119,319 109,883
Letter of credit collateralization 277,763 277,763
Other. 299,485 419,525
---------- ----------
1,178,060 1,289,391
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 11,655 4,680
Receivables-
Customers (less accumulated
provisions of $5,941,000 and
$5,618,000, respectively, for
uncollectible accounts) 210,169 235,332
Associated companies 197,756 25,348
Other 54,129 87,566
Materials and supplies, at average
cost-
Owned 76,503 75,580
Under consignment 47,141 47,890
Prepayments and other 93,442 78,348
---------- ----------
690,795 554,744
---------- ----------
DEFERRED CHARGES:
Regulatory assets 1,574,546 1,601,709
Property taxes 100,461 100,043
Unamortized sale and leaseback
costs 93,846 95,096
Other 54,374 96,276
---------- -----------
1,823,227 1,893,124
---------- ----------
$8,864,868 $8,977,455
========== ==========
</TABLE>
- 13 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common stockholder's equity-
Common stock, $9 par value,
authorized 175,000,000 shares -
100 shares outstanding $ 1 $ 1
Other paid-in capital 2,104,116 2,102,644
Retained earnings 513,310 621,674
---------- ----------
Total common stockholder's
equity 2,617,427 2,724,319
Preferred stock-
Not subject to mandatory
redemption 160,965 160,965
Subject to mandatory redemption 15,000 15,000
Preferred stock of consolidated
subsidiary-
Not subject to mandatory
redemption 50,905 50,905
Subject to mandatory redemption 15,000 15,000
Company obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
Company subordinated debentures 120,000 120,000
Long-term debt 2,584,091 2,569,802
---------- ----------
5,563,388 5,655,991
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt
and preferred stock 127,481 278,492
Short-term borrowings-
Associated companies 120,000 -
Other 281,385 302,229
Accounts payable-
Associated companies 42,392 -
Other 86,470 115,836
Accrued taxes 179,366 157,095
Accrued interest 43,644 53,165
Other 131,113 115,256
---------- ----------
1,011,851 1,022,073
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 1,674,359 1,698,354
Accumulated deferred investment
tax credits 180,978 184,804
Pensions and other postretirement
benefits 163,339 158,038
Other 270,953 258,195
---------- ----------
2,289,629 2,299,391
---------- ----------
COMMITMENTS, GUARANTEES AND
CONTINGENCIES (Note 2) ---------- ----------
$8,864,868 $8,977,455
========== ==========
<FN>
The preceding Notes to Financial Statements as they relate to
Ohio Edison Company are an integral part of these balance sheets.
</TABLE>
- 14 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 64,276 $ 76,024
Adjustments to reconcile net income
to net
cash from operating activities-
Provision for depreciation 100,843 99,958
Nuclear fuel and lease
amortization 6,783 14,345
Other amortization, net 11,015 7,110
Deferred income taxes, net (13,913) (8,441)
Investment tax credits, net (3,826) (3,826)
Receivables 31,868 17,352
Materials and supplies (175) 1,052
Accounts payable 17,175 (3,864)
Other 49,904 17,181
-------- --------
Net cash provided from operating
activities 263,950 216,891
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt 2,638 29,205
Short-term borrowings, net 99,156 -
Redemptions and Repayments-
Long-term debt 139,861 112,487
Short-term borrowings, net - 29,507
Dividend Payments-
Common stock 169,898 53,541
Preferred stock 3,025 3,096
-------- --------
Net cash used for financing
activities 210,990 169,426
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions 41,016 34,381
Other 4,969 3,050
-------- --------
Net cash used for investing
activities 45,985 37,431
-------- --------
Net increase in cash and cash equivalents 6,975 10,034
Cash and cash equivalents at beginning of
period 4,680 5,253
-------- --------
Cash and cash equivalents at end of
period $ 11,655 $ 15,287
======== ========
<FN>
The preceding Notes to Financial Statements as they relate to
Ohio Edison Company are an integral part of these statements.
</TABLE>
- 15 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Ohio Edison Company:
We have reviewed the accompanying consolidated balance sheet of
Ohio Edison Company (an Ohio corporation and wholly owned
subsidiary of FirstEnergy Corp.) and subsidiaries as of March 31,
1998, and the related consolidated statements of income and cash
flows for the three-month period then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Ohio Edison
Company and subsidiaries as of December 31, 1997, and, in our
report dated February 13, 1998, we expressed an unqualified
opinion on that statement. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 16 -
OHIO EDISON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Earnings on common stock decreased 16.0% in the first
quarter of 1998, compared to the first quarter of 1997. The
decrease reflects higher operation and maintenance expenses
resulting from unplanned outages at Beaver Valley Units 1 and 2,
and the absence in 1998 of substantial credits from the sale of
emission allowances in 1997.
Operating revenues were down slightly due to mild
weather conditions. Retail kilowatt-hour sales decreased 2.5%
from 1997 levels. Contributing to the decline were reduced
residential and commercial sales of 3.8% and 2.0%, respectively.
First quarter industrial sales decreased 1.8% from comparable
1997 levels as a result of reduced sales to primary metal
manufacturers. Sales to other utilities were down slightly.
Overall, total kilowatt-hour sales for the first quarter of 1998
declined 2.3%, compared to the first quarter of 1997.
Fuel and purchased power expenses for the first quarter
of 1998 were up $4.8 million due to an increase in purchased
power costs resulting principally from unplanned outages at
Beaver Valley Units 1 and 2. Nuclear operating costs increased
$3.2 million for the first quarter of 1998, compared to the same
period last year, due to increased outage-related costs at Beaver
Valley Units 1 and 2 offset in part by reduced operating expenses
at the Perry Plant. Other operating costs increased $4.3 million
in the first quarter of 1998 over the same period of 1997; last
year's costs included credits from the sale of emission
allowances, resulting in the reported increase in 1998 costs
compared to 1997.
Total interest costs were $4.2 million lower in the
first quarter of 1998, than for the same period of 1997. Interest
on long-term debt decreased due to redemptions of long-term debt
totaling $249.8 million since March 1997, while other interest
expense increased as a result of increased short-term borrowing.
Capital Resources and Liquidity
Ohio Edison Company and its subsidiaries (OE companies)
have continuing cash requirements for planned capital
expenditures and debt maturities. During the last three quarters
of 1998, capital requirements for property additions and capital
leases are expected to be about $141 million, including $19
million for nuclear fuel. The OE companies have additional cash
requirements of approximately $14 million to meet sinking fund
requirements for preferred stock and maturing long-term debt
during the remainder of 1998. These cash requirements are
expected to be satisfied with internal cash and/or short-term
credit arrangements.
As of March 31, 1998, the OE companies had about $11.7
million of cash and temporary investments. The OE companies also
had $401.4 million of short-term indebtedness, of which $120
million was to associated companies. In addition, the OE
companies' unused borrowing capability included $77 million under
revolving lines of credit and $50 million of bank facilities that
provide for borrowings on a short-term basis at the banks'
discretion.
- 17 -
On March 26, 1998, Ohio legislation was introduced
which is designed to bring competition to the State's retail
electric industry. The legislation was introduced by the co-
chairs of the Ohio General Assembly's Joint Select Committee and
is consistent with recommendations contained in their draft
report to the Select Committee. House and Senate hearings are
expected to begin in May 1998; passage of a restructuring bill in
1998 appears unlikely.
The Pennsylvania Public Utility Commission is expected
to issue its final order for Penn's rate restructuring plan in
July 1998. The plan, which Penn filed on September 30, 1997,
calls for restructuring customer rates and providing customers
with direct access to alternative energy suppliers. Customer
choice is to be phased in over three years beginning January 1,
1999.
- 18 -
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
---------- --------
(In thousands)
<S> <C> <C>
OPERATING REVENUES $415,027 | $431,627
-------- | --------
|
OPERATING EXPENSES AND TAXES: |
Fuel and purchased power 88,977 | 110,530
Nuclear operating costs 22,085 | 21,096
Other operating costs 79,586 | 84,243
-------- | --------
Total operation and maintenance |
expenses 190,648 | 215,869
Provision for depreciation and |
amortization 48,183 | 55,298
Amortization of net regulatory assets 6,567 | 6,567
General taxes 54,511 | 56,686
Income taxes 24,422 | 17,202
-------- | --------
Total operating expenses and taxes 324,331 | 351,622
-------- | --------
|
OPERATING INCOME 90,696 | 80,005
|
OTHER INCOME (LOSS) 7,593 | (3,664)
-------- | --------
|
INCOME BEFORE NET INTEREST CHARGES 98,289 | 76,341
-------- | --------
|
NET INTEREST CHARGES: |
Interest on long-term debt 60,060 | 52,881
Allowance for borrowed funds used during |
construction (552) | (459)
Other interest expense (credit) (844) | 3,689
-------- | --------
Net interest charges 58,664 | 56,111
-------- | --------
|
NET INCOME 39,625 | 20,230
|
PREFERRED STOCK DIVIDEND REQUIREMENTS 1,068 | 9,315
-------- | --------
|
EARNINGS ON COMMON STOCK $ 38,557 | $ 10,915
======== | ========
<FN>
The preceding Notes to Financial Statements as they relate to The
Cleveland Electric Illuminating Company are an integral part of
these statements.
</TABLE>
- 19 -
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
ASSETS
------
<S> <C> <C>
UTILITY PLANT:
In service $4,547,021 $4,578,649
Less--Accumulated provision for
depreciation 1,471,114 1,470,084
---------- ----------
3,075,907 3,108,565
---------- ----------
Construction work in progress-
Electric plant 42,060 41,261
Nuclear fuel 28,905 6,833
---------- ----------
70,965 48,094
---------- ----------
3,146,872 3,156,659
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Shippingport Capital Trust 543,126 575,084
Nuclear plant decommissioning
trusts 108,409 105,334
Other. 18,149 21,482
---------- ----------
669,684 701,900
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 13,550 33,775
Receivables-
Customers 14,692 29,759
Associated companies 9,047 8,695
Other 123,475 98,077
Notes receivable from associated
companies 77,000 -
Materials and supplies, at average
cost-
Owned 53,086 47,489
Under consignment 24,162 25,411
Prepayments and other 63,480 57,763
---------- ----------
378,492 300,969
---------- ----------
DEFERRED CHARGES:
Regulatory assets 572,571 579,711
Goodwill 1,542,767 1,552,483
Property taxes 126,414 125,204
Other 11,946 23,358
---------- ----------
2,253,698 2,280,756
---------- ----------
$6,448,746 $6,440,284
========== ==========
</TABLE>
- 20 -
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
CAPITALIZATION AND LIABILITIES
------------------------------
<S> <C> <C>
CAPITALIZATION:
Common stockholder's equity-
Common stock, without par value,
authorized 105,000,000 shares -
79,590,689 shares outstanding $ 931,614 $ 931,614
Retained earnings 58,915 19,290
---------- ----------
Total common stockholder's
equity 990,529 950,904
Preferred stock-
Not subject to mandatory redemption 238,325 238,325
Subject to mandatory redemption 183,174 183,174
Long-term debt 3,196,328 3,189,590
---------- ----------
4,608,356 4,561,993
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt and
preferred stock 122,241 121,965
Accounts payable-
Associated companies 68,261 56,109
Other 59,782 90,737
Notes payable to associated companies 75,600 56,802
Accrued taxes 185,148 194,394
Accrued interest 73,681 67,896
Other 38,448 52,297
---------- ----------
623,161 640,200
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 507,903 496,437
Accumulated deferred investment tax
credits 94,835 96,131
Pensions and other postretirement
benefits 199,617 198,642
Other 414,874 446,881
---------- ----------
1,217,229 1,238,091
---------- ----------
COMMITMENTS, GUARANTEES AND
CONTINGENCIES (Note 2) ---------- ----------
$6,448,746 $6,440,284
========== ==========
<FN>
The preceding Notes to Financial Statements as they relate to The
Cleveland Electric Illuminating Company are an integral part of
these balance sheets.
</TABLE>
- 21 -
<TABLE>
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> | <C>
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income $ 39,625 | $ 20,230
Adjustments to reconcile net income |
to net cash from operating activities- |
Provision for depreciation and |
amortization 48,183 | 55,298
Nuclear fuel and lease amortization 10,229 | 13,411
Amortization of net regulatory assets 6,567 | 6,567
Deferred income taxes, net 14,215 | 10,736
Investment tax credits, net (1,296) | (2,001)
Allowance for equity funds used during |
construction - | (327)
Receivables (10,331) | 43,360
Materials and supplies (4,348) | 1,067
Accounts payable (30,955) | (25,602)
Other (25,929) | (17,257)
-------- | --------
Net cash provided from operating |
activities 45,960 | 105,482
-------- | --------
CASH FLOWS FROM FINANCING ACTIVITIES: |
New Financing- |
Short-term borrowings, net 18,798 | 2,781
Redemptions and Repayments- |
Preferred stock - | 15,000
Long-term debt 11,552 | 12,450
Dividend Payments- |
Common stock - | 29,605
Preferred stock 8,871 | 9,536
-------- | --------
Net cash used for financing |
activities 1,625 | 63,810
-------- | --------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Property additions 15,334 | 33,271
Loans to associated companies 77,000 | -
Capital trust investments (31,958) | -
Other 4,184 | 11,976
-------- | --------
Net cash used for investing |
activities 64,560 | 45,247
-------- | --------
Net decrease in cash and cash equivalents (20,225) | (3,575)
Cash and cash equivalents at beginning of |
period 33,775 | 30,273
-------- | --------
Cash and cash equivalents at end of |
period $ 13,550 | $ 26,698
======== | ========
<FN>
The preceding Notes to Financial Statements as they relate to The
Cleveland Electric Illuminating Company are an integral part of
these statements.
</TABLE>
- 22 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Cleveland Electric Illuminating Company:
We have reviewed the accompanying consolidated balance sheet of
The Cleveland Electric Illuminating Company (an Ohio corporation
and wholly owned subsidiary of FirstEnergy Corp.) and subsidiary
as of March 31, 1998, and the related consolidated statements of
income and cash flows for the three-month period then ended.
These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of The
Cleveland Electric Illuminating Company and subsidiary as of
December 31, 1997, and, in our report dated February 13, 1998, we
expressed an unqualified opinion on that statement. In our
opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1997, is fairly
stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 23 -
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Financial results reflect the application of purchase
accounting to the merger of CEI's former parent company,
Centerior, with OE to form FirstEnergy on November 8, 1997. The
application of this accounting resulted in fair value adjustments
which were "pushed down" or reflected on the separate financial
statements of Centerior's direct subsidiaries as of the merger
date, including CEI's financial statements. Accordingly, the
post-merger financial statements for the first quarter of 1998
and the December 31, 1997 Consolidated Balance Sheet reflect a
new basis of accounting. Material effects of this new basis of
accounting are identified below.
Earnings on common stock increased to $38.6 million in
the first quarter of 1998 from $10.9 million in the 1997 first
quarter. The increase reflects benefits provided by the Bruce
Mansfield Plant lease refinancing and lower operating expenses.
Retail kilowatt-hour sales decreased 2.4% from 1997
levels due to weak residential sales. Residential sales decreased
8.2% in the first quarter of 1998 from the same quarter of 1997
due to milder weather conditions. Commercial sales in the first
quarter of 1998 increased 0.5% from the same period last year.
Sales to industrial customers declined 0.7% in the first quarter
of 1998 compared to the same period of 1997. Sales to other
utilities decreased 57.9%, due in part to an unplanned outage of
the Beaver Valley Plant which reduced available energy for sale.
Reduced sales to other utilities was the primary factor resulting
in 10.8% lower total kilowatt-hour sales this year compared to
the first quarter of 1997.
Fuel and purchased power decreased in the first quarter
of 1998 compared to the same period last year primarily due to
the initiation of a revised fuel recovery method under the
FirstEnergy Rate Reduction and Economic Development Plan. As a
transition step, fuel revenues collected from customers in prior
periods are being refunded in 1998, which effectively reduces
reported fuel costs during the refund period. Fuel costs also
decreased due to lower fuel prices and reduced consumption. Lower
rent expense as a result of the refinancing of the Mansfield
Plant lease contributed to a reduction in other operating costs
for the first quarter of 1998.
Lower depreciable asset balances resulting from the
purchase accounting adjustments reduced the provision for
depreciation in the first quarter of 1998 compared to the same
quarter last year. This reduction was partially offset by the
amortization of goodwill recognized with the application of
purchase accounting.
Interest income from investments related to the
refinancing of the Mansfield Plant lease increased other income
compared to the first quarter of 1997. Total interest charges
were also higher due to secured notes issued in connection with
the refinancing of the Mansfield Plant lease. Partially
offsetting the increased interest charges was the amortization of
net premiums associated with the revaluation of long-term debt in
connection with the merger.
- 24 -
Capital Resources and Liquidity
CEI has continuing cash requirements for planned
capital expenditures and debt maturities. During the last three
quarters of 1998, capital requirements for property additions and
capital leases are expected to be about $90 million, including
$10 million for nuclear fuel. CEI has additional cash
requirements of approximately $81.5 million to meet sinking fund
requirements for preferred stock and maturing long-term debt
during the remainder of 1998. These cash requirements are
expected to be satisfied with internal cash and/or short-term
credit arrangements.
As of March 31, 1998, CEI had approximately $90.6
million of cash and temporary investments and $75.6 million of
short-term indebtedness to an associated company. In May 1998,
FirstEnergy arranged a $100 million revolving line of credit
until May 6, 1999 to replace an expiring $125 million facility.
FirstEnergy's borrowings under this facility will be jointly and
severally guaranteed by CEI and TE. FirstEnergy plans to transfer
any borrowed funds under this facility to CEI and TE based on
their respective cash requirements.
On March 26, 1998, Ohio legislation was introduced
which is designed to bring competition to the State's retail
electric industry. The legislation was introduced by the co-
chairs of the Ohio General Assembly's Joint Select Committee and
is consistent with their recommendations in response to the
bipartisan committee's final report. House and Senate hearings
are expected to begin in May 1998; passage of any restructuring
bill in 1998 appears unlikely.
- 25 -
<TABLE>
THE TOLEDO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
---------- --------
(In thousands)
<S> <C> <C>
OPERATING REVENUES $221,103 | $217,060
-------- | --------
OPERATING EXPENSES AND TAXES: |
Fuel and purchased power 32,407 | 43,314
Nuclear operating costs 36,210 | 39,901
Other operating costs 36,992 | 42,377
-------- | --------
Total operation and maintenance |
expenses 105,609 | 125,592
Provision for depreciation and |
amortization 18,547 | 24,894
Amortization of net regulatory assets 4,003 | 4,291
General taxes 21,030 | 22,794
Income taxes 19,948 | 7,132
-------- | --------
Total operating expenses and taxes 169,137 | 184,703
-------- | --------
OPERATING INCOME 51,966 | 32,357
|
OTHER INCOME (LOSS) 3,842 | (320)
-------- | --------
INCOME BEFORE NET INTEREST CHARGES 55,808 | 32,037
-------- | --------
NET INTEREST CHARGES: |
Interest on long-term debt 22,886 | 20,834
Allowance for borrowed funds used during |
construction (269) | (104)
Other interest expense (credit) (814) | 2,467
-------- | --------
Net interest charges 21,803 | 23,197
-------- | --------
NET INCOME 34,005 | 8,840
|
PREFERRED STOCK DIVIDEND REQUIREMENTS 1,385 | 4,194
-------- | --------
EARNINGS ON COMMON STOCK $ 32,620 | $ 4,646
======== | ========
<FN>
The preceding Notes to Financial Statements as they relate to The
Toledo Edison Company are an integral part of these statements.
</TABLE>
- 26 -
<TABLE>
THE TOLEDO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
<S> <C> <C>
ASSETS
------
UTILITY PLANT:
In service $1,743,265 $1,763,495
Less--Accumulated provision for
depreciation 615,448 619,222
---------- ----------
1,127,817 1,144,273
---------- ----------
Construction work in progress-
Electric plant 22,510 19,901
Nuclear fuel 26,729 6,632
---------- ----------
49,239 26,533
---------- ----------
1,177,056 1,170,806
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Shippingport Capital Trust 310,870 312,873
Nuclear plant decommissioning
trusts 89,868 85,956
Other. 3,684 3,164
---------- ----------
404,422 401,993
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 373 22,170
Receivables-
Associated companies 16,366 15,199
Other 3,463 21,664
Notes receivable from associated
companies 118,600 40,802
Materials and supplies, at average
cost-
Owned 36,189 31,892
Under consignment 8,221 9,538
Prepayments and other 28,682 26,437
---------- ----------
211,894 167,702
---------- ----------
DEFERRED CHARGES:
Regulatory assets 436,544 442,724
Goodwill 511,291 514,462
Property taxes 43,355 45,338
Other 7,226 15,127
---------- ----------
998,416 1,017,651
---------- ----------
$2,791,788 $2,758,152
========== ==========
</TABLE>
- 27 -
<TABLE>
THE TOLEDO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
CAPITALIZATION AND LIABILITIES
------------------------------
<S> <C> <C>
CAPITALIZATION:
Common stockholder's equity-
Common stock, $5 par value,
authorized 60,000,000 shares -
39,133,887 shares outstanding $ 195,670 $ 195,670
Other paid-in capital 328,364 328,364
Retained earnings 41,621 7,616
---------- ----------
Total common stockholder's
equity 565,655 531,650
Preferred stock-
Not subject to mandatory redemption 210,000 210,000
Subject to mandatory redemption 1,690 1,690
Long-term debt 1,220,364 1,210,190
---------- ----------
1,997,709 1,953,530
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt and
preferred stock 69,486 69,979
Accounts payable-
Associated companies 31,453 21,173
Other 64,437 60,756
Accrued taxes 34,795 34,441
Accrued interest 27,022 26,633
Other 14,884 22,603
---------- ----------
242,077 235,585
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 111,744 104,543
Accumulated deferred investment tax
credits 42,616 43,265
Pensions and other postretirement
benefits 113,731 113,254
Other 283,911 307,975
---------- ----------
552,002 569,037
---------- ----------
COMMITMENTS, GUARANTEES AND
CONTINGENCIES (Note 2) ---------- ----------
$2,791,788 $2,758,152
========== ==========
<FN>
The preceding Notes to Financial Statements as they relate to The
Toledo Edison Company are an integral part of these balance
sheets.
</TABLE>
- 28 -
<TABLE>
THE TOLEDO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,005 | $ 8,840
Adjustments to reconcile net income |
to net cash from operating activities- |
Provision for depreciation and |
amortization 18,547 | 24,894
Nuclear fuel and lease amortization 7,301 | 9,442
Amortization of net regulatory assets 4,003 | 4,291
Deferred income taxes, net 9,453 | (269)
Investment tax credits, net (649) | (1,080)
Allowance for equity funds used during |
construction - | (332)
Receivables 18,201 | 360
Materials and supplies (2,980) | 422
Accounts payable 3,681 | 6,491
Other (13,584) | (7,935)
-------- |--------
Net cash provided from operating |
activities 77,978 | 45,124
-------- |--------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Redemptions and Repayments- |
Long-term debt 8,568 | 16,617
Dividend Payments- |
Preferred stock 4,127 | 4,193
-------- |--------
Net cash used for financing |
activities 12,695 | 20,810
-------- |--------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Property additions 7,749 | 10,253
Loans to associated companies 77,798 | 32,582
Capital trust investments (2,003) | -
Other 3,536 | (483)
-------- |--------
Net cash used for investing |
activities 87,080 | 42,352
-------- |--------
Net decrease in cash and cash equivalents (21,797) | (18,038)
Cash and cash equivalents at beginning of |
period 22,170 | 81,454
-------- |--------
Cash and cash equivalents at end of period $ 373 |$ 63,416
======== |========
<FN>
The preceding Notes to Financial Statements as they relate to The
Toledo Edison Company are an integral part of these statements.
</TABLE>
- 29 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Toledo Edison Company:
We have reviewed the accompanying consolidated balance sheet of
The Toledo Edison Company (an Ohio corporation and wholly owned
subsidiary of FirstEnergy Corp.) and subsidiary as of March 31,
1998, and the related consolidated statements of income and cash
flows for the three-month period then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of The Toledo
Edison Company and subsidiary as of December 31, 1997, and, in
our report dated February 13, 1998, we expressed an unqualified
opinion on that statement. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 30 -
THE TOLEDO EDISON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Financial results reflect the application of purchase
accounting to the merger of TE's former parent company,
Centerior, with OE to form FirstEnergy on November 8, 1997. The
application of this accounting resulted in fair value adjustments
which were "pushed down" or reflected on the separate financial
statements of Centerior's direct subsidiaries as of the merger
date, including TE's financial statements. Accordingly, the post-
merger financial statements for the first quarter of 1998 and the
December 31, 1997 Consolidated Balance Sheet reflect a new basis
of accounting. Material effects of this new basis of accounting
are identified below.
Earnings on common stock increased to $32.6 million in
the first quarter of 1998 from $4.6 million in the 1997 first
quarter. The increase reflects benefits provided by the Bruce
Mansfield Plant lease refinancing and lower operating expenses.
Retail kilowatt-hour sales increased 6.8% from 1997
levels due to strong industrial sales. Residential sales
decreased 1.9% in the first quarter of 1998 from the same quarter
of 1997 due to milder weather conditions. Commercial sales in the
first quarter of 1998 increased 1.2% from the same period last
year. Expanded production at the North Star BHP Steel facility
was the primary factor in a 14.0% increase in industrial sales in
the first quarter of 1998 from last year's level. Excluding North
Star demand, industrial sales increased 3.4% from the first
quarter of 1997. Sales to other utilities decreased 34.9%, due in
part to an unplanned outage at the Beaver Valley Plant which
reduced available energy for sale, resulting in a 6.9% reduction
in total kilowatt-hour sales for the first quarter of 1998
compared to the first quarter of 1997.
Fuel and purchased power decreased in the first quarter
of 1998 compared to the same period last year primarily from the
initiation of a revised fuel recovery method under the
FirstEnergy Rate Reduction and Economic Development Plan. As a
transition step, fuel revenues collected from customers in prior
periods are being refunded in 1998, which effectively reduces
reported fuel costs during the refund period. Nuclear operating
costs were also lower in the current quarter than in the first
quarter of 1997, with reduced costs at the Davis-Besse and Perry
Plants partially offset by higher costs at Beaver Valley Unit 2.
Lower rent expense as a result of the refinancing of the
Mansfield Plant lease contributed to a reduction in other
operating costs for the first quarter of 1998.
Lower depreciable asset balances resulting from the
purchase accounting adjustments reduced the provision for
depreciation in the first quarter of 1998 compared to the same
quarter last year. This reduction was partially offset by the
amortization of goodwill recognized with the application of
purchase accounting.
Interest income from investments related to the
refinancing of the Mansfield Plant lease increased other income
compared to the first quarter of 1997. Total interest charges
were also higher due to secured notes issued in connection with
the refinancing of the Mansfield Plant lease. Partially
offsetting the increased interest charges was the amortization of
net premiums associated with the revaluation of long-term debt in
connection with the merger.
- 31 -
Capital Resources and Liquidity
TE has continuing cash requirements for planned capital
expenditures and debt maturities. During the last three quarters
of 1998, capital requirements for property additions and capital
leases are expected to be about $44 million, including $7 million
for nuclear fuel. TE has additional cash requirements of
approximately $40.6 million to meet sinking fund requirements for
preferred stock and maturing long-term debt during the remainder
of 1998. These cash requirements are expected to be satisfied
with internal cash and/or short-term credit arrangements.
As of March 31, 1998, TE had approximately $119.0
million of cash and temporary investments and no short-term
indebtedness. In May 1998, FirstEnergy arranged a $100 million
revolving line of credit until May 6, 1999 to replace an expiring
$125 million facility. FirstEnergy's borrowings under this
facility will be jointly and severally guaranteed by TE and CEI.
FirstEnergy plans to transfer any borrowed funds under this
facility to TE and CEI based on their respective cash
requirements.
On March 26, 1998, Ohio legislation was introduced
which is designed to bring competition to the State's retail
electric industry. The legislation was introduced by the co-
chairs of the Ohio General Assembly's Joint Select Committee and
is consistent with recommendations contained in their draft
report to the Select Committee. House and Senate hearings are
expected to begin in May 1998; passage of any restructuring bill
in 1998 appears unlikely.
- 32 -
<TABLE>
PENNSYLVANIA POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
---------- --------
(In thousands)
<S> <C> <C>
OPERATING REVENUES $78,576 $78,977
------- -------
OPERATING EXPENSES AND TAXES:
Fuel and purchased power 17,798 15,897
Nuclear operating costs 7,027 6,473
Other operating costs 12,269 13,588
------- -------
Total operation and maintenance
expenses 37,094 35,958
Provision for depreciation 14,653 14,291
Amortization of net regulatory assets 1,845 1,845
General taxes 5,779 6,299
Income taxes 6,566 6,951
------- -------
Total operating expenses and taxes 65,937 65,344
------- -------
OPERATING INCOME 12,639 13,633
OTHER INCOME 739 670
INCOME BEFORE NET INTEREST CHARGES 13,378 14,303
------- -------
NET INTEREST CHARGES:
Interest expense 5,494 5,756
Allowance for borrowed funds used during
construction (82) (47)
------- -------
Net interest charges 5,412 5,709
------- -------
NET INCOME 7,966 8,594
PREFERRED STOCK DIVIDEND REQUIREMENTS 1,157 1,157
------- -------
EARNINGS ON COMMON STOCK $ 6,809 $ 7,437
======= =======
<FN>
The preceding Notes to Financial Statements as they relate to
Pennsylvania Power Company are an integral part of these
statements.
</TABLE>
- 33 -
<TABLE>
PENNSYLVANIA POWER COMPANY
BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
ASSETS
------
<S> <C> <C>
UTILITY PLANT:
In service, at original cost $1,234,114 $1,237,562
Less--Accumulated provision for
depreciation 511,863 508,981
---------- ----------
722,251 728,581
---------- ----------
Construction work in progress-
Electric plant 9,337 7,427
Nuclear fuel - 6,788
---------- ----------
9,337 14,215
---------- ----------
731,588 742,796
---------- ----------
OTHER PROPERTY AND INVESTMENTS 29,468 26,157
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 3,197 660
Notes receivable from parent company 16,500 17,500
Receivables-
Customers (less accumulated
provisions of $3,672,000 and
$3,609,000, respectively, for
uncollectible accounts) 31,923 33,934
Associated companies 16,256 12,599
Other 11,818 14,426
Materials and supplies, at average
cost 15,349 14,973
Prepayments 10,347 1,707
---------- ----------
105,390 95,799
---------- ----------
DEFERRED CHARGES:
Regulatory assets 159,795 162,966
Other 6,641 6,739
---------- ----------
166,436 169,705
---------- ----------
$1,032,882 $1,034,457
========== ==========
</TABLE>
- 34 -
<TABLE>
PENNSYLVANIA POWER COMPANY
BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
CAPITALIZATION AND LIABILITIES
------------------------------
<S> <C> <C>
CAPITALIZATION:
Common stockholder's equity-
Common stock, $30 par value,
authorized 6,500,000 shares -
6,290,000 shares outstanding $ 188,700 $ 188,700
Other paid-in capital (400) (400)
Retained earnings 105,140 103,677
---------- ----------
Total common stockholder's
equity 293,440 291,977
Preferred stock-
Not subject to mandatory redemption 50,905 50,905
Subject to mandatory redemption 15,000 15,000
Long-term debt-
Associated companies 8,031 9,231
Other 280,037 280,074
---------- ----------
647,413 647,187
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt-
Associated companies 7,470 6,958
Other 573 1,443
Accounts payable-
Associated companies 6,471 6,788
Other 24,231 22,751
Accrued taxes 18,202 12,332
Accrued interest 3,856 6,588
Other 11,810 14,746
---------- ----------
72,613 71,606
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 235,245 239,952
Accumulated deferred investment tax
credits 25,480 26,052
Other 52,131 49,660
---------- ----------
312,856 315,664
---------- ----------
COMMITMENTS, GUARANTEES AND
CONTINGENCIES (Note 2) ---------- ----------
$1,032,882 $1,034,457
========== ==========
<FN>
The preceding Notes to Financial Statements as they relate to
Pennsylvania Power Company are an integral part of these balance
sheets.
</TABLE>
- 35 -
<TABLE>
PENNSYLVANIA POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,966 $ 8,594
Adjustments to reconcile net income to net
cash from operating activities-
Provision for depreciation 14,653 14,291
Nuclear fuel and lease amortization 940 2,489
Other amortization, net 1,572 1,535
Deferred income taxes, net (2,812) (3,141)
Investment tax credits, net (572) (582)
Receivables 962 486
Materials and supplies (376) (375)
Accounts payable 1,164 (21)
Other (9,601) (8,128)
-------- --------
Net cash provided from operating
activities 13,896 15,148
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Notes payable, net - 5,000
Redemptions and Repayments-
Long-term debt 1,760 12,023
Dividend Payments-
Common stock 5,346 5,346
Preferred stock 1,157 1,157
-------- --------
Net cash used for financing
activities 8,263 13,526
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions 3,284 3,331
Loan payment from parent (1,000) (2,500)
Other 812 1,703
-------- --------
Net cash used for investing
activities 3,096 2,534
-------- --------
Net increase (decrease) in cash and cash
equivalents 2,537 (912)
Cash and cash equivalents at beginning of
period 660 1,387
-------- --------
Cash and cash equivalents at end of period $ 3,197 $ 475
======== ========
<FN>
The preceding Notes to Financial Statements as they relate to
Pennsylvania Power Company are an integral part of these
statements.
</TABLE>
- 36 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Power Company:
We have reviewed the accompanying balance sheet of Pennsylvania
Power Company (a Pennsylvania corporation and a wholly owned
subsidiary of Ohio Edison Company) as of March 31, 1998, and the
related statements of income and cash flows for the three-month
period then ended. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of Pennsylvania Power
Company as of December 31, 1997, and, in our report dated
February 13, 1998, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 1997, is fairly
stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 37 -
PENNSYLVANIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Retail kilowatt-hour sales decreased 2.9% in the first
quarter of 1998, compared with the first quarter of 1997, due to
a decline in industrial sales. Closure of an electric arc
facility at Caparo Steel Company in August 1997 was the cause of
reduced industrial sales. Excluding sales to Caparo, industrial
sales were up 6.2%. Despite mild weather conditions, residential
sales increased 2.5% during the first quarter of 1998 from the
same period of 1997 and commercial sales were also up 2.6% from
last year. Sales to other utilities declined 3.1% in the first
quarter from comparable 1997 levels, bringing the reduction in
total kilowatt-hour sales to 3.1% in the first quarter of 1998,
compared to the first quarter of 1997.
Fuel and purchased power expenses were up in the first
quarter of 1998, compared to last year, due to an increase in
purchased power costs resulting from an extended refueling outage
at Beaver Valley Unit 1 and the consequent loss of available Penn
generation. The extended outage at Beaver Valley Unit 1 also
contributed to higher nuclear operating costs in the first
quarter of 1998, compared to last year, with that increase
partially offset by lower costs at the Perry Plant. Other
operating costs were lower this year primarily due to lower
fossil-fueled plant outage expenses.
Capital Resources and Liquidity
Penn has continuing cash requirements for planned
capital expenditures. During the last three quarters of 1998,
capital requirements for property additions and capital leases
are expected to be about $16 million, including $2 million for
nuclear fuel. These requirements are expected to be satisfied
with internal cash.
As of March 31, 1998, Penn had approximately $19.7
million of cash and temporary investments and no short term
indebtedness. Penn had $2 million of unused short-term bank lines
of credit as of March 31, 1998, and $12 million of bank
facilities which may be borrowed for up to several days at the
banks' discretion.
The Pennsylvania Public Utility Commission is expected
to issue its final order for the Penn's rate restructuring plan
in July 1998. The plan, which Penn filed on September 30, 1997,
calls for restructuring customer rates and providing customers
with direct access to alternative energy suppliers. Customer
choice is to be phased in over three years beginning January 1,
1999.
- 38 -
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of FirstEnergy stockholders was
held on April 30, 1998.
(b) At this meeting the following persons were elected to
FirstEnergy's Board of Directors:
Number of Votes
---------------------------------
For Withheld
----------- ----------
R. L. Loughhead 188,836,922 5,396,454
G. H. Meadows 188,920,676 5,312,700
R. C. Savage 189,069,213 5,164,163
(c) At this meeting the appointment of Arthur Andersen
LLP, independent public accountants as auditors for
the year 1998 was ratified:
Number of Votes
-------------------------------------------
For Against Abstentions
----------- ----------- -----------
191,045,709 1,694,384 1,494,878
(d) At this meeting an Executive and Director Incentive
Compensation Plan was ratified:
Number of Votes
-------------------------------------------
For Against Abstentions
----------- ----------- -----------
166,915,328 22,899,159 4,420,484
(e) At this meeting a shareholder proposal to elect the
entire Board of Directors each year with an
independent lead director was rejected:
Number of Votes
------------------------------------------------------
Broker
For Against Abstentions Non-Votes
----------- --------- ------------- ----------
53,678,284 111,750,272 6,723,901 22,082,514
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit
Number
---------
FirstEnergy, OE, CEI and Penn
-----------------------------
15 Letter from independent public accountants.
- 39 -
Item 6. Exhibits and Reports on Form 8-K (Cont.)
-------------------------------
TE
--
None
Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of
Regulation S-K, FirstEnergy, or, respectively, any of the
Companies, has not filed as an exhibit to this Form 10-Q
any instrument with respect to long-term debt if the
respective total amount of securities authorized
thereunder does not exceed 10% of the total assets of
FirstEnergy and its subsidiaries on a consolidated basis,
or respectively, any of the Companies, but hereby agrees
to furnish to the Commission on request any such
documents.
(b) Reports on Form 8-K
FirstEnergy - FirstEnergy filed one report on Form 8-K
-----------
since December 31, 1997. A Form 8-K/A,
dated January 22, 1998 reported an
amendment to a Form 8-K which reported the
merger of Ohio Edison Company and
Centerior Energy Corporation to form
FirstEnergy effective November 8, 1997.
OE - OE filed one report on Form 8-K since December 31,
--
1997. A report dated March 23, 1998 reported audited
consolidated financial statements for the year ended
December 31, 1997, and related matters.
CEI - CEI filed one report on Form 8-K since December 31,
---
1997. A report dated March 16, 1998 reported audited
consolidated financial statements for the year ended
December 31, 1997, and related matters.
TE - None
--
Penn - None
----
- 40 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
May 14, 1998
FIRSTENERGY CORP.
-----------------
Registrant
OHIO EDISON COMPANY
-------------------
Registrant
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
----------------------
Registrant
THE TOLEDO EDISON COMPANY
-------------------------
Registrant
/s/ Harvey L. Wagner
------------------------
Harvey L. Wagner
Controller
Principal Accounting Officer
PENNSYLVANIA POWER COMPANY
--------------------------
Registrant
/s/ Harvey L. Wagner
-----------------------
Harvey L. Wagner
Comptroller
Principal Accounting Officer
- 41 -
EXHIBIT 15
FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Gentlemen:
We are aware that FirstEnergy Corp. has incorporated by
reference in its Registration Statements No. 333-48587 and
No. 333-48651 its Form 10-Q for the quarter ended March 31,
1998, which includes our report dated May 13, 1998 covering
the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered a part of the
registration statements prepared or certified by our firm or
a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 42 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
FORM 10-Q FINANCIAL STATEMENTS FOR FIRSTENERGY CORP. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (AMOUNTS IN 1,000'S, EXCEPT
EARNINGS PER SHARE). INCOME TAX EXPENSE INCLUDES $11,700,000 RELATED TO OTHER
INCOME.
</LEGEND>
<CIK> 0001031296
<NAME> FIRSTENERGY CORP.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 9,503,471
<OTHER-PROPERTY-AND-INVEST> 2,455,600
<TOTAL-CURRENT-ASSETS> 948,690
<TOTAL-DEFERRED-CHARGES> 5,142,223
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 18,049,984
<COMMON> 23,021
<CAPITAL-SURPLUS-PAID-IN> 3,491,170
<RETAINED-EARNINGS> 686,907
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,201,098
334,864
660,195
<LONG-TERM-DEBT-NET> 7,148,956
<SHORT-TERM-NOTES> 161,420
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 119,965
<LONG-TERM-DEBT-CURRENT-PORT> 223,765
21,379
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 74,064
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,104,278
<TOT-CAPITALIZATION-AND-LIAB> 18,049,984
<GROSS-OPERATING-REVENUE> 1,199,993
<INCOME-TAX-EXPENSE> 88,591
<OTHER-OPERATING-EXPENSES> 877,379
<TOTAL-OPERATING-EXPENSES> 954,270
<OPERATING-INCOME-LOSS> 245,723
<OTHER-INCOME-NET> 21,563
<INCOME-BEFORE-INTEREST-EXPEN> 267,286
<TOTAL-INTEREST-EXPENSE> 143,634
<NET-INCOME> 123,652
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 83,391
<TOTAL-INTEREST-ON-BONDS> 535,665
<CASH-FLOW-OPERATIONS> 253,512
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
EXHIBIT 15
Ohio Edison Company
76 South Main Street
Akron, OH 44308
Gentlemen:
We are aware that Ohio Edison Company has incorporated by
reference in its Registration Statements No. 33-49135, No.
33-49259, No. 33-49413, No. 33-51139, No. 333-01489 and
No. 333-05277 its Form 10-Q for the quarter ended March 31,
1998, which includes our report dated May 13, 1998 covering
the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered a part of the
registration statements prepared or certified by our firm or
a report prepared or certified by our firm within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 44 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
FORM 10-Q FINANCIAL STATEMENTS FOR OHIO EDISON COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (AMOUNTS IN 1,000'S).
INCOME TAX EXPENSE INCLUDES $5,422,000 RELATED TO OTHER INCOME.
</LEGEND>
<CIK> 0000073960
<NAME> OHIO EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,172,786
<OTHER-PROPERTY-AND-INVEST> 1,178,060
<TOTAL-CURRENT-ASSETS> 690,795
<TOTAL-DEFERRED-CHARGES> 1,823,227
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,864,868
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 2,104,116
<RETAINED-EARNINGS> 513,310
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,617,427
150,000
211,870
<LONG-TERM-DEBT-NET> 2,584,091
<SHORT-TERM-NOTES> 281,420
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 119,965
<LONG-TERM-DEBT-CURRENT-PORT> 117,985
5,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 4,496
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,772,614
<TOT-CAPITALIZATION-AND-LIAB> 8,864,868
<GROSS-OPERATING-REVENUE> 597,865
<INCOME-TAX-EXPENSE> 42,545
<OTHER-OPERATING-EXPENSES> 449,609
<TOTAL-OPERATING-EXPENSES> 486,732
<OPERATING-INCOME-LOSS> 111,133
<OTHER-INCOME-NET> 12,502
<INCOME-BEFORE-INTEREST-EXPEN> 123,635
<TOTAL-INTEREST-EXPENSE> 59,359
<NET-INCOME> 64,276
3,019
<EARNINGS-AVAILABLE-FOR-COMM> 61,257
<COMMON-STOCK-DIVIDENDS> 169,528
<TOTAL-INTEREST-ON-BONDS> 195,781
<CASH-FLOW-OPERATIONS> 263,950
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 15
The Cleveland Electric
Illuminating Company
76 South Main Street
Akron, OH 44308
Gentlemen:
We are aware that The Cleveland Electric Illuminating
Company has incorporated by reference in its Registration
Statements No. 33-55513 and No. 333-47651 its Form 10-Q for
the quarter ended March 31, 1998, which includes our report
dated May 13, 1998 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of
the Securities Act of 1933, that report is not considered a
part of the registration statements prepared or certified by
our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 46 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
FORM 10-Q FINANCIAL STATEMENTS FOR THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
INCOME TAX EXPENSE INCLUDES $4,072,000 RELATED TO OTHER INCOME.
</LEGEND>
<CIK> 0000020947
<NAME> THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,146,872
<OTHER-PROPERTY-AND-INVEST> 669,684
<TOTAL-CURRENT-ASSETS> 378,492
<TOTAL-DEFERRED-CHARGES> 2,253,698
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,448,746
<COMMON> 931,614
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 58,915
<TOTAL-COMMON-STOCKHOLDERS-EQ> 990,529
183,174
238,325
<LONG-TERM-DEBT-NET> 3,196,328
<SHORT-TERM-NOTES> 75,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 66,830
14,714
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 40,697
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,642,549
<TOT-CAPITALIZATION-AND-LIAB> 6,448,746
<GROSS-OPERATING-REVENUE> 415,027
<INCOME-TAX-EXPENSE> 28,494
<OTHER-OPERATING-EXPENSES> 299,909
<TOTAL-OPERATING-EXPENSES> 324,331
<OPERATING-INCOME-LOSS> 90,696
<OTHER-INCOME-NET> 7,593
<INCOME-BEFORE-INTEREST-EXPEN> 98,289
<TOTAL-INTEREST-EXPENSE> 58,664
<NET-INCOME> 39,625
1,068
<EARNINGS-AVAILABLE-FOR-COMM> 38,557
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 238,782
<CASH-FLOW-OPERATIONS> 45,960
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
FORM 10-Q FINANCIAL STATEMENTS FOR THE TOLEDO EDISON COMPANY AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (AMOUNTS IN 1,000'S).
INCOME TAX EXPENSE INCLUDES $2,119,000 RELATED TO OTHER INCOME.
</LEGEND>
<CIK> 0000352049
<NAME> THE TOLEDO EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,177,056
<OTHER-PROPERTY-AND-INVEST> 404,422
<TOTAL-CURRENT-ASSETS> 211,894
<TOTAL-DEFERRED-CHARGES> 998,416
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,791,788
<COMMON> 195,670
<CAPITAL-SURPLUS-PAID-IN> 328,364
<RETAINED-EARNINGS> 41,621
<TOTAL-COMMON-STOCKHOLDERS-EQ> 565,655
1,690
210,000
<LONG-TERM-DEBT-NET> 1,220,364
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 38,950
1,665
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 28,871
<OTHER-ITEMS-CAPITAL-AND-LIAB> 724,593
<TOT-CAPITALIZATION-AND-LIAB> 2,791,788
<GROSS-OPERATING-REVENUE> 221,103
<INCOME-TAX-EXPENSE> 22,067
<OTHER-OPERATING-EXPENSES> 149,189
<TOTAL-OPERATING-EXPENSES> 169,137
<OPERATING-INCOME-LOSS> 51,966
<OTHER-INCOME-NET> 3,842
<INCOME-BEFORE-INTEREST-EXPEN> 55,808
<TOTAL-INTEREST-EXPENSE> 21,803
<NET-INCOME> 34,005
1,385
<EARNINGS-AVAILABLE-FOR-COMM> 32,620
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 90,600
<CASH-FLOW-OPERATIONS> 77,978
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 15
Pennsylvania Power Company
1 E. Washington Street
P. O. Box 891
New Castle, PA 16103
Gentlemen:
We are aware that Pennsylvania Power Company has
incorporated by reference in its Registration Statements No.
33-47372, No. 33-62450 and No. 33-65156 its Form 10-Q for
the quarter ended March 31, 1998, which includes our report
dated May 13, 1998 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of
the Securities Act of 1933, that report is not considered a
part of the registration statements prepared or certified by
our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
Cleveland, Ohio
May 13, 1998
- 49 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
FORM 10-Q FINANCIAL STATEMENTS FOR PENNSYLVANIA POWER COMPANY AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (AMOUNTS IN
1,000'S). INCOME TAX EXPENSE INCLUDES $177,000 RELATED TO OTHER INCOME.
</LEGEND>
<CIK> 0000077278
<NAME> PENNSYLVANIA POWER COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 731,588
<OTHER-PROPERTY-AND-INVEST> 29,468
<TOTAL-CURRENT-ASSETS> 105,390
<TOTAL-DEFERRED-CHARGES> 166,436
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,032,882
<COMMON> 188,700
<CAPITAL-SURPLUS-PAID-IN> (400)
<RETAINED-EARNINGS> 105,140
<TOTAL-COMMON-STOCKHOLDERS-EQ> 293,440
15,000
50,905
<LONG-TERM-DEBT-NET> 288,068
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 8,043
<OTHER-ITEMS-CAPITAL-AND-LIAB> 377,426
<TOT-CAPITALIZATION-AND-LIAB> 1,032,882
<GROSS-OPERATING-REVENUE> 78,576
<INCOME-TAX-EXPENSE> 6,743
<OTHER-OPERATING-EXPENSES> 59,371
<TOTAL-OPERATING-EXPENSES> 65,937
<OPERATING-INCOME-LOSS> 12,639
<OTHER-INCOME-NET> 739
<INCOME-BEFORE-INTEREST-EXPEN> 13,378
<TOTAL-INTEREST-EXPENSE> 5,412
<NET-INCOME> 7,966
1,157
<EARNINGS-AVAILABLE-FOR-COMM> 6,809
<COMMON-STOCK-DIVIDENDS> 5,346
<TOTAL-INTEREST-ON-BONDS> 19,099
<CASH-FLOW-OPERATIONS> 13,896
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
