AKRON, Ohio, Feb. 20, 2018 /PRNewswire/ -- FirstEnergy
Corp. (NYSE: FE) today reported full-year 2017 GAAP losses of
$(1.7) billion, or $(3.88) per basic and diluted share of common
stock on revenues of $14 billion.
In 2016, the company recorded GAAP losses of $(6.2) billion, or $(14.49) per basic and diluted share of common
stock, on revenue of $14.6 billion.
Results for both periods primarily reflect the impact of
non-cash asset impairment and plant exit costs related to the
company's competitive generation fleet, and 2017 results also
include a charge related to the Tax Cuts and Jobs Act.
Operating (non-GAAP) earnings* for 2017 were $3.07 per basic share of common stock, which was
at the upper end of the company's most recent guidance. In
2016, operating (non-GAAP) earnings were $2.63 per basic share of common stock.
"Throughout the past year, our company has made important
progress in our transition to a fully regulated utility," said
Charles E. Jones, FirstEnergy
president and chief executive officer. "This strategy and the
opportunities for growth in our regulated businesses earned the
confidence of prominent investors. With their equity
investment earlier this year, we began 2018 with stronger corporate
financial metrics, and we are well positioned to accelerate growth
in our transmission and distribution businesses, as we continue our
exit from competitive generation."
The company is introducing 2018 regulated operating (non-GAAP)
earnings** guidance of $2.25 to
$2.55 per diluted share, representing
operating earnings from the regulated distribution and transmission
businesses, net of the corporate segment. The company also
announced a compound annual growth rate projection for its
regulated operations, excluding the Ohio DMR and offset by the
corporate segment, of 6 to 8 percent through 2021, which includes
more than $10 billion in regulated
capital investments planned over that time period.
Fourth Quarter Results
For the fourth quarter of 2017, the company reported a GAAP loss
of $(2.5) billion or $(5.62) per basic and diluted share of common
stock, on revenue of $3.4
billion. In the fourth quarter of 2016, the company
reported a GAAP loss of $(5.8)
billion, or $(13.44) per basic
and diluted share of common stock, on revenue of $3.4 billion. Results for both periods
primarily reflect the impact of impairments and plant exit costs
related to the company's competitive generation fleet, and 2017
results also include charges related to the Tax Cuts and Jobs Act
as described below.
Operating (non-GAAP) earnings* for the fourth quarter of 2017
were $0.71 per basic share of common
stock. In the fourth quarter of 2016, operating (non-GAAP) earnings
were $0.38 per basic share of common
stock.
In FirstEnergy's Regulated Distribution business, fourth quarter
2017 earnings increased compared to the same period in 2016
primarily as a result of rates that went into effect in
Ohio, Pennsylvania and New
Jersey in January 2017, as
well as higher weather-related usage in the fourth quarter of
2017.
Fourth quarter total distribution deliveries increased
1.6 percent compared to the same period in 2016.
Residential sales increased 3.9 percent as a result of heating
degree days that were 9 percent above the same period of 2016,
while sales to commercial customers decreased 3.2 percent.
Deliveries to industrial customers increased 3.2 percent, primarily
due to higher usage in the shale gas and steel sectors. This
marked the sixth consecutive quarterly increase in the company's
industrial distribution sales.
In the Regulated Transmission business, fourth quarter earnings
benefited from a higher rate base associated with the company's
Energizing the Future transmission program and higher revenues for
JCP&L's transmission assets.
In the Competitive Energy Services segment, lower depreciation
expense and general taxes were offset by a decrease in commodity
margin related to lower contract sales and higher operating
expenses.
In the Corporate/Other segment, operating expenses decreased
compared to the fourth quarter of 2016, but this was offset by
higher net financing costs.
Full Year 2017 Segment Results
For the full year of 2017, earnings increased in the Regulated
Distribution business as a result of the rates that went into
effect in Ohio, Pennsylvania and New
Jersey in January 2017. These rates more than offset
the effect of significantly milder weather in 2017 and higher
depreciation expense.
In the Regulated Transmission business, full-year 2017 results
benefited from the company's continued investments in the
Energizing the Future initiative, partially offset by higher
operating expenses, depreciation and general taxes.
Full year results in the Competitive Energy Services segment
primarily reflect a decrease in commodity margin related to lower
contract sales and higher operating expenses, partially offset by
lower depreciation expense and general taxes.
Results from the Corporate/Other segment decreased full year
2017 earnings due primarily to higher interest expense.
Impairment of Competitive Assets and Impact of Tax
Reform
During the fourth quarter of 2017, FirstEnergy recorded
non-cash, pre-tax asset impairment and plant exit costs of
$2.4 billion, or $3.38 per share, primarily to fully impair the
carrying value of its nuclear generating assets, increase the
nuclear asset retirement obligations, and reduce the carrying
value of the Pleasants Power Station. In addition, the
company recognized a fourth quarter non-cash charge to income tax
expense of $1.2 billion, or
$2.68 per share, related to the Tax
Cuts and Jobs Act.
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Consolidated GAAP
EPS to Operating (Non-GAAP) EPS* Reconciliation
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Fourth
Quarter
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Full
Year
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2017
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2016
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2017
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2016
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Basic Earnings
(Loss) Per Share (GAAP)
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$(5.62)
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$(13.44)
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$(3.88)
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$(14.49)
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Excluding Special
Items*:
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Mark-to-market
adjustments
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Pension/OPEB
actuarial assumptions
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0.19
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0.21
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0.19
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0.21
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Other
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0.03
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0.03
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0.12
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0.01
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Regulatory
charges
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0.05
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0.01
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0.10
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0.13
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Asset
impairment/Plant exit costs
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3.38
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13.54
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3.83
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16.67
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Debt redemption
costs
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—
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0.01
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0.01
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0.02
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Trust securities
impairment
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—
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0.01
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0.02
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0.03
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Tax reform
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2.68
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—
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2.68
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—
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Merger accounting –
commodity contracts
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—
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0.01
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—
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0.05
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Total Special
Items*
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6.33
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13.82
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6.95
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17.12
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Basic EPS -
Operating (Non-GAAP)
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$0.71
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$0.38
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$3.07
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$2.63
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* Per share amounts for the special items and earnings drivers
above are based on the after-tax effect of each item divided by
forecasted weighted average basic shares outstanding for the
period. The current and deferred income tax effect was calculated
by applying the subsidiaries' statutory tax rate to the pretax
amount with the exception of the 2016 Asset impairment/Plant exit
costs that included an impairment of goodwill, of which $433
million of the $800 million pre-tax impairment was non-deductible
for tax purposes, and the 2016 valuation allowances recorded
against state and local NOL carryforwards of $159 million. With the
exception of these items included in Asset impairment/Plant exit
costs, the income tax rates range from 35% to 42% for the 2016 and
2017 periods.
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Non-GAAP financial measures
*Operating (non-GAAP)
earnings (losses) exclude "special items" as described herein, and
is a non-GAAP financial measure. Regulated operating (non-GAAP)
earnings (losses) per share is also a non-GAAP financial measure
that excludes the CES segment and to the extent it excludes
"special items." Special items represent charges incurred or
benefits realized that management believes are not indicative of,
or may obscure trends useful in evaluating the company's ongoing
core activities and results of operations or otherwise warrant
separate classification. Special items are not necessarily
non-recurring. The Company's management cannot estimate on a
forward-looking basis the impact of these items because these
items, which could be significant, are difficult to predict and may
be highly variable. Regulated Operating (non-GAAP) earnings per
share are calculated based on the regulated distribution and
regulated transmission segments, and including the corporate
segment, divided by the basic weighted average shares outstanding
for the period. Management uses operating (non-GAAP) earnings
(losses), operating (non-GAAP) earnings (losses) by segment, and
Regulated Operating (non-GAAP) earnings per share to evaluate the
company's performance and manage its operations and frequently
references these non-GAAP financial measures in its decision
making, using them to facilitate historical and ongoing performance
comparisons. Management believes that the non-GAAP financial
measure of operating (non-GAAP) earnings (losses) and Regulated
Operating (non-GAAP) earnings per share provide consistent and
comparable measures of performance of its businesses on an ongoing
basis. Management also believes that such measures are useful
to shareholders and other interested parties to understand
performance trends and evaluate the company against its peer group
by presenting period-over-period operating results without the
effect of certain charges or benefits that may not be consistent or
comparable across periods or across the company's peer group.
Generally, a non-GAAP financial measure is a numerical measure of a
company's historical or future financial performance, financial
position, or cash flows that either excludes or includes amounts
that are not normally excluded or included in the most directly
comparable measure calculated and presented in accordance with
accounting principles generally accepted in the United States (GAAP). These non-GAAP
financial measures are intended to complement, and are not
considered as alternatives to, the most directly comparable GAAP
financial measures. Also, the non-GAAP financial measures may not
be comparable to similarly titled measures used by other
entities.
** Does not include Competitive Energy Services segment. Special
items in 2018 cannot be reasonably estimated at this time. 2018
operating (non-GAAP) earnings guidance of $2.25 to $2.55 per
diluted share is based on forecasted GAAP net income for Regulated
Distribution, Regulated Transmission, less the Corporate/Other
segment of $1,205 million to
$1,365 million and weighted average
diluted shares outstanding of 536 million. Forecasted net
income (loss) ranges by segment are as follows; $1,130 million to $1,240
million for Regulated Distribution, $370 million - $410
million for Regulated Transmission, and ($295) million - ($285)
million at Corporate/Other. 1Q 2018 regulated
operating (non-GAAP) earnings guidance of $0.60 to $0.70 per
diluted share is based on forecasted GAAP net income for Regulated
Distribution, Regulated Transmission, less the Corporate/Other
segment of $320 million to
$375
million.
Consolidated Report and Teleconference
FirstEnergy's Consolidated Report to the Financial
Community, which provides highlights on company developments
and financial results for the fourth quarter and full year, is
posted on the company's Investor Information website –
www.firstenergycorp.com/ir. To access the report, click on
Fourth Quarter 2017 Consolidated Report to the Financial
Community.
The company invites investors, customers and other interested
parties to listen to a live Internet webcast of its teleconference
for financial analysts and view slides associated with the
presentation at 10:00 a.m. EST
tomorrow. FirstEnergy management will present an
overview of the company's financial results, followed by a
question-and-answer session. The teleconference and
presentation can be accessed on the website by selecting the Fourth
Quarter 2017 Earnings Conference Call link. The webcast and
presentation will be archived on the website.
FirstEnergy is dedicated to safety, reliability and operational
excellence. Its 10 electric distribution companies form one
of the nation's largest investor-owned electric systems, serving
customers in Ohio, Pennsylvania, New
Jersey, West Virginia,
Maryland and New York. The
company's transmission subsidiaries operate more than 24,000 miles
of transmission lines that connect the Midwest and Mid-Atlantic
regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online
at www.firstenergycorp.com.
Forward-Looking Statements: This news release includes
forward-looking statements based on information currently available
to management. Such statements are subject to certain risks and
uncertainties and readers are cautioned not to place undue reliance
on these forward-looking statements. These statements include
declarations regarding management's intents, beliefs and current
expectations. These statements typically contain, but are not
limited to, the terms "anticipate," "potential," "expect,"
"forecast," "target," "will," "intend," "believe," "project,"
"estimate," "plan" and similar words. Forward-looking statements
involve estimates, assumptions, known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements, which may include the following:
the ability to experience growth in the Regulated Distribution and
Regulated Transmission segments and the effectiveness of our
strategy to transition to a fully regulated business profile; the
accomplishment of our regulatory and operational goals in
connection with our transmission and distribution investment plans,
including, but not limited to, our planned transition to
forward-looking formula rates; changes in assumptions regarding
economic conditions within our territories, assessment of the
reliability of our transmission system, or the availability of
capital or other resources supporting identified transmission
investment opportunities; the ability to accomplish or realize
anticipated benefits from strategic and financial goals, including,
but not limited to, the ability to continue to reduce costs and to
successfully execute our financial plans designed to improve our
credit metrics and strengthen our balance sheet; success of
legislative and regulatory solutions for generation assets that
recognize their environmental or energy security benefits; the
risks and uncertainties associated with the lack of viable
alternative strategies regarding the Competitive Energy Services
(CES) segment, thereby causing FirstEnergy Solutions Corp. (FES) to
restructure its substantial debt and other financial obligations
with its creditors or seek protection under United States bankruptcy laws (which filing
would include FirstEnergy Nuclear Operating Company (FENOC)) and
the losses, liabilities and claims arising from such bankruptcy
proceeding, including any obligations at FirstEnergy Corp.; the
risks and uncertainties at the CES segment, including FES, its
subsidiaries, and FENOC, related to wholesale energy and capacity
markets, and the viability and/or success of strategic business
alternatives, such as pending and potential CES generating unit
asset sales or the potential need to deactivate additional
generating units, which could result in further substantial
write-downs and impairments of assets; the substantial uncertainty
as to FES' ability to continue as a going concern and substantial
risk that it may be necessary for FES and FENOC to seek protection
under United States bankruptcy
laws; the risks and uncertainties associated with litigation,
arbitration, mediation and like proceedings, including, but not
limited to, any such proceedings related to vendor commitments,
such as long-term fuel and transportation agreements; the
uncertainties associated with the deactivation of older regulated
and competitive units, including the impact on vendor commitments,
such as long-term fuel and transportation agreements, and as it
relates to the reliability of the transmission grid, the timing
thereof; the impact of other future changes to the operational
status or availability of our generating units and any capacity
performance charges associated with unit unavailability; changing
energy, capacity and commodity market prices including, but not
limited to, coal, natural gas and oil prices, and their
availability and impact on margins; costs being higher than
anticipated and the success of our policies to control costs and to
mitigate low energy, capacity and market prices; replacement power
costs being higher than anticipated or not fully hedged; our
ability to improve electric commodity margins and the impact of,
among other factors, the increased cost of fuel and fuel
transportation on such margins; the uncertainty of the timing and
amounts of the capital expenditures that may arise in connection
with any litigation, including New Source Review litigation, or
potential regulatory initiatives or rulemakings (including that
such initiatives or rulemakings could result in our decision to
deactivate or idle certain generating units); changes in customers'
demand for power, including, but not limited to, changes resulting
from the implementation of state and federal energy efficiency and
peak demand reduction mandates; economic or weather conditions
affecting future sales, margins and operations such as a polar
vortex or other significant weather events, and all associated
regulatory events or actions; changes in national and regional
economic conditions affecting us, our subsidiaries and/or our major
industrial and commercial customers, and other counterparties with
which we do business, including fuel suppliers; the impact of labor
disruptions by our unionized workforce; the risks associated with
cyber-attacks and other disruptions to our information technology
system that may compromise our generation, transmission and/or
distribution services and data security breaches of sensitive data,
intellectual property and proprietary or personally identifiable
information regarding our business, employees, shareholders,
customers, suppliers, business partners and other individuals in
our data centers and on our networks; the impact of the regulatory
process and resulting outcomes on the matters at the federal level
and in the various states in which we do business including, but
not limited to, matters related to rates; the impact of the federal
regulatory process on Federal Energy Regulatory Commission
(FERC)-regulated entities and transactions, in particular FERC
regulation of wholesale energy and capacity markets, including PJM
Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional
wholesale transactions; FERC regulation of cost-of-service rates;
and FERC's compliance and enforcement activity, including
compliance and enforcement activity related to North American
Electric Reliability Corporation's mandatory reliability standards;
the uncertainties of various cost recovery and cost allocation
issues resulting from American Transmission Systems, Incorporated's
realignment into PJM; the ability to comply with applicable state
and federal reliability standards and energy efficiency and peak
demand reduction mandates; other legislative and regulatory
changes, including the federal administration's required review and
potential revision of environmental requirements, including, but
not limited to, the effects of the United States Environmental
Protection Agency's Clean Power Plan, Coal Combustion Residuals
regulations, Cross-State Air Pollution Rule and Mercury and Air
Toxics Standards programs, including our estimated costs of
compliance, Clean Water Act (CWA) waste water effluent limitations
for power plants, and CWA 316(b) water intake regulation; adverse
regulatory or legal decisions and outcomes with respect to our
nuclear operations (including, but not limited to, the revocation
or non-renewal of necessary licenses, approvals or operating
permits by the Nuclear Regulatory Commission; issues arising from
the indications of cracking in the shield building at Davis-Besse;
changing market conditions that could affect the measurement of
certain liabilities and the value of assets held in our Nuclear
Decommissioning Trusts, pension trusts and other trust funds, and
cause us and/or our subsidiaries to make additional contributions
sooner, or in amounts that are larger than currently anticipated;
the impact of changes to significant accounting policies; the
impact of any changes in tax laws or regulations, including the Tax
Cuts and Job Act, or adverse tax audit results or rulings; the
ability to access the public securities and other capital and
credit markets in accordance with our financial plans, the cost of
such capital and overall condition of the capital and credit
markets affecting us and our subsidiaries; further actions that may
be taken by credit rating agencies that could negatively affect us
and/or our subsidiaries' access to financing, increase the costs
thereof, increase requirements to post additional collateral to
support, or accelerate payments under outstanding commodity
positions, letters of credit and other financial guarantees, and
the impact of these events on the financial condition and liquidity
of FirstEnergy Corp. and/or its subsidiaries, specifically FES and
its subsidiaries; issues concerning the stability of domestic and
foreign financial institutions and counterparties with which we do
business; and the risks and other factors discussed from time to
time in our United States Securities and Exchange Commission (SEC)
filings, and other similar factors. Dividends declared from time to
time on FirstEnergy Corp.'s common stock and thereby on FirstEnergy
Corp.'s preferred stock, during any period may in the aggregate
vary from prior periods due to circumstances considered by
FirstEnergy Corp.'s Board of Directors at the time of the actual
declarations. A security rating is not a recommendation to buy or
hold securities and is subject to revision or withdrawal at any
time by the assigning rating agency. Each rating should be
evaluated independently of any other rating. These forward-looking
statements are also qualified by, and should be read in conjunction
with the other cautionary statements and risks that are included in
our filings with the SEC, including but not limited to the most
recent Annual Report on Form 10-K and any subsequent Quarterly
Reports on Form 10-Q. These risks, unless otherwise indicated, are
presented on a consolidated basis for FirstEnergy; if and to the
extent a deconsolidation occurs with respect to certain FirstEnergy
companies, the risks described herein may materially change. The
foregoing review of factors also should not be construed as
exhaustive. New factors emerge from time to time, and it is not
possible for management to predict all such factors, nor assess the
impact of any such factor on our business or the extent to which
any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statements.
We expressly disclaim any obligation to update or revise, except as
required by law, any forward-looking statements contained herein as
a result of new information, future events or otherwise.
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SOURCE FirstEnergy Corp.