didn't have enough to worry about being held responsible by many for last week's blackout, now the company must deal with repercussions of a complicated earnings restatement disclosed in a series of
The earnings adjustments relate to accounting decisions dating to the formation of the company in 1997 through the merger of Centerior and Ohio Energy. FirstEnergy essentially decided it must apply an extended amortization schedule to liabilities that stem from "above market" lease rates at two of its power plants.
As a result, earnings in the company's year-ago first quarter were cut by about $77 million to $553 million, while earnings in this year's first quarter dropped by $23 million to $218.5 million, or 74 cents a share. The restatement will boost results in future periods, adding $380 million to earnings over a 15-year period.
The rationale is complex and involves the discontinuation of rules applying to both public regulation of utilities and the treatment of balance-sheet goodwill. The net effect is that $722 million of above-market lease liability at its Beaver Valley Unit 2 plant and $755 million of liability at its Bruce Mansfield plant will now be written down over periods ending in 2017 and 2016, respectively. The company's previous accounting had the period ending later this decade.
The company also used the filing to repeat its company line on the blackout, saying the problem went well beyond its system and is a "very complex situation" that requires more investigation.
FirstEnergy's shares closed at $27.96 Tuesday after ending last Thursday at $31.01.