FirstEnergy to change accounting method for pensions, post-retirement benefits

January 26, 2012

AKRON, Ohio — FirstEnergy Corp., which on Thursday announced it would retire six older coal-fired power plants, announced in a separate email a new policy it said changes the method of accounting for pensions and other post-retirement benefits (OPEB).

The company also provided a preview of 2011 earnings.

Fourth quarter and full-year 2011 results are scheduled to be reported on Feb. 28.

The new pension and OPEB accounting method, which FirstEnergy said in the release is preferable under U.S. Generally Accepted Accounting Principles (GAAP), recognizes gains and losses in the year they are incurred, instead of amortizing them over time.

The accounting change will be effective for 2011, and does not affect FirstEnergy’s cash flow, pension funding requirements, or its pension and OPEB liabilities.

“With this more transparent approach to financial reporting, our normalized earnings will more clearly reflect the ongoing operational performance of our business,” Mark T. Clark, FirstEnergy executive vice president and chief financial officer, said in the release.

FirstEnergy also made a voluntary contribution to its pension plan of $600 million earlier this month. The plan’s current funded status is 90 percent on an accumulated benefit obligation basis.

FirstEnergy said it expects to report full-year 2011 basic non-GAAP earnings of $3.63 to $3.65 per share of common stock, up from its previous guidance of $3.30 to $3.50 per share. On a GAAP basis, the company expects full-year 2011 basic earnings of $2.44 to $2.46 per share.

These 2011 GAAP and non-GAAP earnings expectations include a 22 cents per share benefit as a result of the pension and OPEB accounting change, the release says.

GAAP earnings expectations for 2011 also include a 73 cents per share decrease due to the mark-to-
market impact of the new accounting method, and a charge of 38 cents per share related to the plant retirements that were announced earlier Thursday, the release says.

Year-end 2011 common shareholders’ equity is expected to increase by approximately $530 million as a result of the pension and OPEB accounting change.

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