Operator: Greetings and welcome to the FirstEnergy Corp. Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Meghan Beringer, Director of Investor Relations for FirstEnergy Corp. Thank you, Ms Beringer. You may begin.
Meghan Beringer - Director of Investor Relations: Thank you and good afternoon. During this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the business of FirstEnergy Corp. are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements.
Please read the Safe Harbor statement contained in the consolidated report to the financial community, which was released earlier today and is also available on our website under the Earnings Release link. Reconciliations to GAAP for the non-GAAP earnings measures we will be referring to today are also contained in that report, as well as on the Investor Information section on our website at www.firstenergycorp.com/ir.
Participating in today's call are Tony Alexander, President and Chief Executive Officer; Leila Vespoli, Executive Vice President and General Counsel; Jim Pearson, Senior Vice President and Chief Financial Officer; Donald Schneider, President of FirstEnergy Solutions; Harvey Wagner, Vice President, Controller and Chief Accounting Officer; Steven Staub, Vice President and Treasurer; and Irene Prezelj, Vice President, Investor Relations.
I'll now turn the call over to Tony.
Anthony J. Alexander - President and CEO: Thanks, Meghan, and good afternoon, everyone. Thank you for joining us. Today, I'll provide a general overview of last year's results and accomplishments before moving to some of our key areas of focus for 2013. Leila will join us for a brief regulatory overview and finally, Jim will join the call for the first time in his new capacity as CFO. Jim will take a look back at the fourth quarter, and the full year of 2012 and provide a preview of our 2013 financial objectives. I'm sure most of you already know Jim from his tenure as Treasurer. So, we expect this transition to be quite smooth and of course, Mark Clark remains involved in key company projects in his new role as Executive Vice President of Finance and Strategy.
I would also like to take a moment here to thank Harvey Wagner for his exceptional guidance and oversight as our Vice President, Controller and Chief Accounting Officer and I wish him best in his upcoming retirement. Okay, let's get started.
Today, we announced full year non-GAAP earnings of $3.34 per share in line with our guidance. Despite the absence of a meaningful rebound in the regional economy and energy markets, we accomplished much in 2012 and I'll start by walking through some of the highlights.
First, we maintained our dividend which is supported by a solid and stable return from a regulated distribution and transmission business segments and we maintained our credit ratings through very challenging economic conditions. Our competitive strategy at FirstEnergy Solutions continues to produce significant growth. FES now serves 2.6 million retail customers, which is an increase of 42% compared to the end of 2011 and FES grew direct retail sales by 18% during the year.
Our nuclear fleet achieved strong safety and operational performance. This includes the industry's lowest worker dose exposure at our Beaver Valley Unit and our best-ever fleet forced lost rates. Forced lost rates were industry top decile at Beaver Valley Unit and top quartile at Beaver Valley Unit 2 and Davis-Besse.
At our fossil fleet we deactivated units at seven of our older coal-fired plants in response to MATS and other environmental regulations that made these plants even less likely to be dispatched. We also plan to deactivate several additional units in early 2015 at the conclusion of reliability must-run arrangements.
At our remaining fossil units we have taken an aggressive look at the capital investment required to comply with these environmental standards. After a rigorous analysis of the necessary environmental controls, we have reduced our projected spend to $200 million to $975 million, down from an original estimate of $2 billion to $3 billion.
We also took proactive measures to implement more efficient fuel and dispatch strategies, trim maintenance costs, enhance operational flexibility, and reorganize certain areas of business to ensure more appropriate staffing levels and reduce costs in light of the economy.
On the regulatory front, the Public Utilities Commission of Ohio approved our Electric Security Plan. This new ESP, which takes us through May 31, 2016, is essentially an extension of our existing plan. Our ESP has been widely considered a success in terms of its ability to produce competitively priced electricity for customers who remain with the utility for generation service as well as creating a level playing field among suppliers competing to serve customers who choose to shop.
On the financial side, we made a $600 million contribution to the pension plan in early 2012 and pursued an early buyout of the Bruce Mansfield sale-leasebacks taking future obligations off the table. And finally, today marks the two years since we closed our merger with Allegheny. We remained very pleased with this combination. It has produced cost savings and increased our operating flexibility while also expanding our pool of leadership talent.
I'm very proud of these achievements. Our focus on our three core business segments, generation distribution and transmission offers greater flexibility and more growth opportunities and financial stability than anyone business could provide on a standalone basis and our strategy remains unchanged. We are prepared to meet the economic and regulatory challenges of 2013 while positioning our Company for long-term growth. Our plan includes a focus on controlling costs, continuing to improve our operational performance and exploring opportunities to grow our regulated and competitive businesses.
I'll discuss these opportunities in more detail starting with utilities, where we are working to promote growth on several fronts. For example, we have joined an industry electrification effort that is offering electric power at truck stops as an alternative to running diesel engines overnight. This is a particularly attractive alternative in areas that are not meeting Clean Air Act quality standards.
We are also very active in economic development efforts related to the Utica and Marcellus Shale boom in New York, Pennsylvania West Virginia and Ohio service territories. This includes initiatives like building a new Black River Substation that is about to go online in Lorain, Ohio. Our facility will support a major steel manufacturer it is expanding in response to the growth of the natural gas industry.
In our transmission business, we expect our investments within the FirstEnergy footprint to continue providing growth and stable returns. In 2012, we consolidated ATSI and TrAIL under a large stand-alone transmission subsidiary holding company, and put in place a $1 billion credit facility.
We also formulated a long-term plan for the ATSI region that includes a significant number of projects designed to support reliability in the Northern Ohio area, primarily in response to the plant deactivations put on by MATS and other environmental regulations. On a related note, we continue moving forward with American Municipal Power.
On the potential project announced in November to develop peaking capacity at our Eastlake Plant near Cleveland. This project, which is subject to, among other things, regulatory approval could reduce our need for some of the previously announced transmission projects and extend the timeframe for others.
Finally we're also building a new transmission control center in the Akron area that will include advanced technology to enhance service reliability across our entire footprint. Turning now to FirstEnergy Solutions, our focus remains on expanding our retail business and strengthening our brand among customers in both new and existing targeted markets. Governmental aggregation is an area where we've had tremendous success, and it will remain a priority in 2013.
Last year FirstEnergy Solutions signed contracts with 160 communities including more than 100 in Illinois. Today FES serves this sales channel with more than 17 million megawatt hours a 10% increase over 2011 and we continue to see potential for more growth both in Southern Ohio and Illinois.
We project annual FES sales growth of about 3% to 5% over the next few years. In 2013 we expect continued benefits from our strategy of first mover advantage and shifting megawatt hours between sales channels as we remain focused on low volume and margin. As you've heard us say over the years we operate in many ways like a traditional utility, but without the geographic restrictions. By design our customer portfolio continues to look a lot like that of a Midwestern utility, that’s the type of load our plants were originally built to serve. And we continue to leverage our generation assets selling the power that we produce through our end use retail customers.
Our approach is much different from others in the electric retail market space. We have fully implemented a multi-channel sales approach which means we go deep and wide in the territories we target. We strongly believe that this approach is far less risky and more profitable than simply focusing on one segment of the market and it's allowing us to significantly grow our customer base in a cost-effective fashion while also taking advantage of opportunities to increase our profitability. In addition our balanced portfolio provides greater stability over the long term and diversifies our risk and our integrated asset-backed strategy offers flexibility as we work to reduce costs and maximize margins.
Finally, as our competitive sales continue to grow over time and markets begin to improve, we plan to reinvest or revisit our fleet investment strategy that we call mining our assets. This approach focuses on improving efficiencies, lowering forced loss rates and upgrading equipment at existing plants as markets justify, instead of making investments in costly new generation. In the past, this successful strategy allowed us to add more than 600 megawatts of capacity with far less risk and at a fraction of the cost of building a new plant.
Combining our asset approach provides an incremental platform for our generation capabilities to support sales growth. We will take a very competitive minded approach to these investments, spending capital on improvement only after sales have been committed to support them. In doing so, we expect the timing of these investments to be linked closely to the growth of our retail business. These plans represent short and long-term examples of how we are managing our business for the current market conditions while preparing for the eventual economic improvement. As more generating units are deactivated due to environmental regulations and natural gas and power prices rise, we would expect to improve supply demand balance, and at that point, the groundwork we are laying today should help accelerate our growth.
We have a strong track record of delivering on our plans and that is how we are approaching 2013. We expect this to be a year of executing on our strategies and implementing the plans we have described and we believe this approach will result in an even stronger Company that is well positioned for the future. Now I'll turn it over to Leila for a look at our regulatory priorities for 2013. Leila?
Leila L. Vespoli - EVP and General Counsel: Thanks, Tony. We have a full plate of regulatory and legislative issues before us this year, with significant activity in four states. I'll go through the agenda state-by-state starting with Pennsylvania.
In December we filed a Smart Meter deployment plan with the Pennsylvania Public Utilities Commission or PUC. Hearings have been scheduled for May and I would anticipate final approval by September. The plan calls for deployment over the period 2013 through 2019 with an estimated cost of a completion of about $1.25 billion. Cost recovery is expected to occur through the existing Smart Meter Technology surcharge. We also filed a change to our Default Service Supply plan in Pennsylvania which shifted procurement to two options per year from 4. The 2013 auction was completed on February 12th. FirstEngery Solutions participated and won 24 out of 75 tranches.
In response to the PUC's guidance in its retail market investigation, last year we adopted elements of the PUC's earlier recommendations in our default service plan for the period June 2013 through May 2015. We will continue working with the PUC and other stakeholders to rollout a fair and robust competitive market. Our retail market investigation has also been launched by the Public Utilities Commission of Ohio. While we do not anticipate significant changes to the Ohio market rules, we share the Commissions objective to expand retail contribution throughout Ohio. Currently 77% of our Ohio utility load has selected an alternative supplier and in Ohio competitive markets have developed well despite being hindered by some lingering subsidies.
A three-year auction for generation supply for our Ohio utility customers was conducted on January 22, resulting in a price of $59.17 per megawatt hour. FirstEnergy Solutions participated and won five of the 17 tranches available for bid, very much consistent with FES's business plan. The next auction is scheduled for October 2013.
Also in Ohio, we have an asset case with respect to an audit of the alternative energy writer, which recovers costs associated with procurement of renewable energy credit. As you recall, our Ohio utilities purchased these recs at market prices in 2009 through 2010 to comply with the State's alternative energy law. Now, certain parties have suggested that we should have rejected available recs and instead either paid a penalty or otherwise petition the Commission for relief.
However Ohio law does not give the Commission the authority to relieve us from our statutory requirements when recs are available. We will continue to participate in these proceedings, which include a public hearing that commenced on February 19, with a decision expected later second or early third quarter. As of July 31, 2013, we will have collected all but $4.9 million of the costs at issue.
I'll take a moment here to discuss Hurricane Sandy which affected practically our entire service area. The total costs associated with restoring service and rebuilding damaged part of our system in five states is approximately $860 million. A state-by-state breakdown of the capital, expense and cost deferral is available on the consolidated report to the financial community, which was posted to our website this morning.
In New Jersey, where the damage from Hurricane Sandy was the most devastating, our costs were about $630 million. As you know, we filed a base rare case for JCP&L in November as required by the New Jersey Board of Public Utilities. On February 22, we amended the case to include $603 million of the distribution costs related to Hurricane Sandy, including approximately $345 million for capital expenditures incurred while restoring service as well as $258 million in deferred expenses that we proposed to recover over a six-year period.
Despite the massive damage in spending on restoring power to JCP&L customers after this historic storm. The impact on our customer rates is still in the single-digits and JCP&L rate remained the lowest among New Jersey utilities regulated by the BPU.
Let's look now at West Virginia. The proposed transaction to transfer full ownership of the Harrison plant to our Mon Power subsidiary is important both for the State and the Company. We discussed last quarter; this transfer is a part of a resource plan to address the capacity shortfall related to the deactivation of more than 600 megawatts of older regulated generating capacity due to environmental regulation. It is expected to help ensure reliable power for our Mon Power and Potomac Edison customers in West Virginia for many years to come. The Harrison facility is equipped with modern emission control and it produces electricity with coal-mine in the state. We believe that this transaction is very positive for the economy of West Virginia.
Under the proposed terms, Mon Power would require the remaining 80% of the Harrison plant giving us the utility sell ownership of the 1,984 megawatt facility. In addition, Mon Power would sell its 8% minority interest or about 100 megawatts in the Pleasants Power Station to Allegheny Energy Supply.
The proposed asset transfer requires approval of the West Virginia Public Service Commission and the Federal Energy Regulatory Commission. We are well along in the discovery process and the West Virginia Coal Association and the IBEW have gone on record with the PUC in support of the transaction. Early this month, we received a procedural schedule that set hearings in the case for May 29 through May 31.
Finally, we have announced that the temporary surcharge that will be used to recover transaction-related expenses once the transfer is approved will have a price tag of less than $1 per month for typical residential customers compared to the prices they were paying in 2012. Mon Power and Potomac Edison have also agreed to file a base rate case no later than six months after the transaction closes. They hope to find the end of that surcharge. We would expect the rate case proceeding to take about 12 months to complete.
Thank you for your time. Now, I will hand over the call to Jim for a review of the fourth quarter result and our 2013 financial objectives.
Jim Pearson - SVP and CFO: Thank you, Leila. I'm pleased to be here today. I have enjoyed getting to know many of you over the past several years and I look forward to meeting more of you in my new role. Today, I will review the fourth quarter and full year 2012 results, then close with a discussion of our 2013 financial plan. Before I move on to our 2012 results, I want to reaffirm our non-GAAP earnings guidance for 2013, up $2.85 to $3.15 per share.
Let's turn now to the consolidated report as I walk through our results. Looking at fourth quarter of 2012 non-GAAP earnings were $0.80 per share, while GAAP results were a loss of $0.35 per share. As I will discuss in a moment, our fourth quarter and full-year GAAP results were significantly impacted by pension accounting. In the fourth quarter of 2011 non-GAAP earnings were $0.77 per share, while GAAP earnings were $0.23 per share.
For the year our non-GAAP earnings are $3.34 per share and, as Tony said, that is in line with our 2012 guidance. Full year 2012 GAAP earnings are $1.85 per share. These results compare to 2011 non-GAAP earnings of $3.64 per share and GAAP earnings of $2.22 per share.
On Pages 4 and 20 of the consolidated report you can find the list of special items that make up the difference between the GAAP and non-GAAP results. As I mentioned, the largest of these special items is the mark-to-market adjustment for pension and OPEB accounting, which was a negative $0.91 per share in the fourth quarter, primarily related to a reduction in the discount rate. As you may recall, last year, we adopted a change in accounting where we will annually recognize any adjustments from deviations in actuarial assumptions in the year incurred versus amortizing them over a number of years. In 2011 this adjustment was $0.74 per share, but it was more than offset by a one-time gain from the sale of non-core assets.
Other special items for the fourth quarter of 2012 include plant deactivation cost, which decreased GAAP earnings by $0.12 per share, a decrease of $0.04 per share from impacts of the sale or impairment of non-core assets, other mark-to-market gains of $0.03 per share, a decrease of $0.03 per share related to merger accounting for commodity contracts, and $0.02 per share in merger-related cost, a decrease of $0.02 per share related to tax legislative changes, regulatory charges of $0.02 per share, trust securities impairment of $0.01 per share, and a charge of $0.01 per share for restructuring costs.
Moving now to the drivers of our ongoing results, clearly Hurricane Sandy had a significant impact on our Company during the quarter. Approximately, 10,000 employees from across the Company were dedicated to storm restoration efforts from late October through mid-November, redeploying them to capital work instead of O&M. Regulated distribution O&M expense, net of storm deferrals, decreased in the quarter as a result of this mass redeployment of the workforce. O&M also benefited from lower expenses related to our fossil and nuclear plants as well as the coal units, we deactivated in the third quarter. These items in total increased earnings by $0.08 per share.
Let's turn now to distribution deliveries, which increased earnings by $0.04 per share. Overall deliveries increased 252,000 megawatt hours or about 1%, commercial deliveries were essentially flat, while industrial deliveries were down 3% compared to the fourth quarter of 2011, largely due to reduced operations by many of our large steel, automotive and refinery customers. Residential deliveries increased by 5% quarter-over-quarter influenced by cold weather versus the same period in 2011.
With regard to economic recovery on our service territory, we still have ways to go. Full year 2012 sales adjusted for weather show that residential volumes are now on par with the levels we experienced in 2007. However, commercial sales remained down 5% and industrial sales are still 8% below pre-recession levels. Further, while industrial sales have improved versus their 2009 low point, they have been basically stagnant for the past three years.
Moving back to the fourth quarter drivers, 2012 earnings also benefited by total of $0.04 primarily as a result of investment income, as we rebalanced our nuclear decommissioning trust portfolio and general taxes. Commodity margin reduced earnings by $0.08 per share in the quarter.
Looking at commodity margin from a high level, the execution of our retail strategy resulted in a sales gain of $0.11 per share, but this was offset by $0.19 per share decrease in capacity revenues due to lower capacity prices. It should be noted that capacity prices in PJM during the June 2012 through May 2013 and June 2013 through May 2014 planning years are at historic lows in the range of $16 to $28 per megawatt day. Primarily as a result of auctions in the 2009 and 2010 periods that were at the depths of our recession.
Further the June 2014 through May 2016 planning years as a result of auctions conducted in 2011 and 2012 prices are substantially higher in the $100 plus per megawatt day range. On a more granular scale overall contract sales increased 10% or $0.07 per share and once again the volume gains in contract sales offset the impact of lower market prices. Governmental aggregation sales increased 29% in the quarter driven primarily by new contracts in Illinois.
Mass market sales rose 72% with much of that growth in Pennsylvania and sales through large commercial and industrial customers increased 6% as new customers in Southern Ohio offset lower use by some of our large commercial customers in our Ohio and Pennsylvania utility service territory. Finally POLR sales continue to decrease consistent with our retail strategy to realign our sales portfolio.
I'll mention here that FirstEnergy Solutions hedge position for the balance of 2013 is currently at 96%. Commodity margin in the fourth quarter also benefited from lower capacity expense, lower fuel expense related to increased nuclear output in the generation mix, and gains from net financial sales and purchases. These were offset by lower PJM capacity revenues as I mentioned earlier, a decrease in wholesale sales due to higher contract sales and lower generation output, higher purchased power costs mainly related to having Sammis temporarily offline and serving more customers, higher transmission expense and lower sales of renewable energy credits.
While 2012 commodity margin was negatively impacted by lower capacity revenues and a lower average rate of $56 per megawatt hour, we are pleased with the progress that FirstEnergy Solutions is making. We ended the year with 100 million megawatt hours in competitive sales, a 10% increase compared to 2011, and we grew our retail customer base by 42% through the continued success of our multichannel strategy.
Respecting our 2012 financial plan, we funded the Bruce Mansfield sale leaseback repurchase and took out additional nuclear sale leasebacks. We also contributed $600 million to the pension fund, putting the pension plan in a position to be fully funded once the discount rate returns to more historic levels, for example, like those adopted by Congress for determining funding obligations. And while we remain generally on track to achieve our overall goals, the cash requirements from the ratio and hurricane Sandy put some additional pressure on our balance sheet.
Looking now at 2013, our financial plan is structured to improve the balance sheet, enhance liquidity and maintain investment grade credit metrics. The plan initially focuses on reducing debt at our competitive companies, primarily FES and Allegheny supply by at least $1.5 billion. The proceeds of the Harrison Pleasants transaction at West Virginia combined with asset sales are expected to be sufficient to fund the debt reduction.
The assets we intend to sell are primarily our competitive hybrid fleet, which includes nearly 1,180 megawatts that were initially in our plans to be sold in 2015. We're expecting to retire a combination of both tax exempt bonds and taxable debt to achieve these debt reductions. While we have not looked to target taxable debt in recent years it is now on our list of potential actions as we weigh the redemption costs against the benefits of future interest savings from the current low interest environment.
On the liquidity front, we are also working to refinance short-term borrowings with long-term debt as appropriate at our utilities and possibly at the corporate level. This refinancing activity would term out some of our revolver borrowings and again, take advantage of today's historically low interest rates to position ourselves for the future. We are also working with our banks to extend the maturity of existing credit facilities totaling $5.5 billion for an additional year to 2018.
We believe this is a comprehensive plan that moves us where we would like to be in terms of our credit metrics, and once completed, would significantly improve the balance sheet especially at our competitive operations. As Tony outlined, we are focused on growth across each of our businesses, including investments in new transmission projects and growing our competitive business.
As we address these opportunities, we believe a modest amount of equity late this year of up to $300 million subject to market and other conditions will help to further strengthen our balance sheet and investment grade metrics and support our growth initiatives. We will explore options which may include implementing (accrual) program late this year to effectively address these ongoing requirements. Importantly, this level of equity will not take us off course from the guidance we've reaffirmed for 2013.
Finally while it is always subject to Board approval I will reiterate that we expect to maintain our dividend. Our regulated operations, distribution and transmission provide a strong foundation of earnings and cash, which support the dividend and our competitive businesses further support the payout. As we move forward we will continue to assess our operations and look for additional opportunities to reduce our costs. Most importantly, we remain well positioned to take advantage of opportunities created by expanded competitive markets and improved economic conditions.
Now I'll ask the operator to open up the call for questions.
Operator: Dan Eggers, Credit Suisse.
Dan Eggers - Credit Suisse: Jim, just kind of following maybe on where you left off on your comments just with the fund raising options between the Harrison transfer that nearly 1,200 megawatts of hydro sale and the $300 million of equity. Even using pretty conservative assumptions, it seems like you'll get well past the $1.5 billion debt pay-down targets you guys talked about. How do we put that level of fund raising in context with the strategy of getting now to $1.5 billion? What happens with the excess money?
Jim Pearson - SVP and CFO: Well, Dan, as Tony alluded to, we're in the midst of a growth program also. We're investing in our transmission facilities. In conjunction with the Harrison asset transfer, we're going to have an equity infusion down into the Mon Power level. We're also growing our competitive business. As we said, we believe the finance plan, we have laid out with the asset transfer as well as the asset sales will more than cover the $1.5 billion, but with our focus on growth we thought it would be prudent to add a bit of equity to the mix.
Dan Eggers - Credit Suisse: I guess if you look out to '14 and beyond, do you see the need to continue raising equity at that kind of rate to support the growth program or is it just a rebalancing option in your mind?
Jim Pearson - SVP and CFO: At this point, Dan, I would consider a rebalancing, but as we go out into the future and continue to look at our growth opportunities, we'll always consider equity in the mix.
Dan Eggers - Credit Suisse: I guess, if Donny is on the phone, Donny, can you talk a little bit about with 96% hedge for '13, how the volume targets have matched off against what you guys provided at EEI, and if there's any customer segments that are doing better or worse than what you thought you're going to be doing?
Jim Pearson - SVP and CFO: Sure Dan. So our target hasn’t changed. I think, at EEI we said 104 terawatt hours. I would tell you have I have a boss that continually challenges me to exceed that, so we'll see how the year progresses. The 94% is against that original target though.
Dan Eggers - Credit Suisse: I know you've seen kind of customer cost mix consistent with the original expectations or has there been some movement?
Jim Pearson - SVP and CFO: No, it's still pretty much in line with – we've really done well in our mass market sales. We've just recently launched our customer choice campaign and we would see that bringing in additional mass market customers along with continuing to push on (indiscernible).
Operator: Julien Dumoulin-Smith, UBS.
Julien Dumoulin-Smith - UBS: So just following up on Dan's last question there, with respect to asset sales, etcetera, how does the $300 million kind of jive against expectations there, if you could kind of just be a little bit more explicit?
Anthony J. Alexander - President and CEO: I'll just give you my perspective on it. I think the transactions we otherwise have laid out for the asset sales in Harrison will be more than adequate to carry out the game plan that we've laid out for debt reduction. The $300 million we talk in terms of equity is going to help support some of the growth initiatives that we have going on throughout the Company including the transmission expansion plans that we have, several plans to increase the capacity at some of our nuclear plants through new turbines and things of that nature that are beginning to position the Company for longer-term growth as this economy improves.
Julien Dumoulin-Smith - UBS: Could you speak to the timing of asset sales just, is it this year event or is this kind of over the next couple years or what have you?
Anthony J. Alexander - President and CEO: I think the key one that we're talking about at this point, there's always an opportunity for asset sales as you guys well know from what we've done over the last several years, but the key one being the hydro sale we would like to complete this year and that's what we are targeting to accomplish.
Julien Dumoulin-Smith - UBS: Okay, and then perhaps going back broadly and tying retail back into this, as I heard your comments, you described growing retail broadly speaking. How does that jive with asset sales here? I mean are we talking about potentially adding selective assets in markets where perhaps you might want to serve more from your generation, i.e. eastern PJM or something?
Anthony J. Alexander - President and CEO: Well, not at this point. I think at this point what we're looking at is allowing sales to drive generation investment and I have confidence in Donny and his team to drive retail sales to the levels beyond where we're at today, such that beginning to reinvest in our power plants to reduce forced loss rates, make them more efficient, so we can get more kilowatt hours out of the same machines will be where most our investment is targeted. In the near term much of that investment is being targeted towards the nuclear upgrades in the – not only at Beaver Valley in 2012, but 2013 we have upgrades at both Perry and Beaver Valley 2 or Beaver Valley 1 for new turbines, but we have some major investments in the nuclear fleet with respect to steam generator replacements, which will reduce our long-term O&M costs and in addition give us shorter outages, which will create more kilowatt hours from that fleet to be used and deployed in the retail strategy. So, there is a lot of activity going on and there is a lot of opportunities yet inside the fleet to expand and become more effective with the machines we have before we look outside.
Julien Dumoulin-Smith - UBS: Just a real quick clarification, given pension mark-to-market et cetera pension funding plans as it stands today, there are no contributions projected for '13 or beyond?
Leila L. Vespoli - EVP and General Counsel: That's correct, Julian. Probably, the first time that we would make a contribution would be 2016 for the 2015 plan, that's just based on current rate. So, we don't have any expectation or making a contribution over the next several years.
Operator: Stephen Byrd, Morgan Stanley.
Stephen Byrd - Morgan Stanley: I wanted to just get your general thoughts on low growth outlook. I know there is a lot of unusual weather activity and for the year, total load was up 70 basis points from last year, but you as you mentioned in your sort of prepared remarks, there was certainly a lot of movement within the investment classes. Could you just talk a little bit further about three customer classes and your general views on the outlook for load growth amongst those classes?
Jim Pearson - SVP and CFO: Stephen, this is Jim. We are looking at load growth of about a 0.5% to 0.6% next year. What we see the residential and commercial areas just growing ever so slightly and the industrial sector has been sluggish over the last three years. It's remained fairly stagnant. Now, we are seeing some positive signs such as Ford they are opening up a new engine plant and we expect ultimately that we will start seeing industrial and commercial activity coming from the Marcellus and the Utica shale that we have in our area, but I don't see that as active in 2013 as maybe it will be when we get out in '14 and beyond.
Anthony J. Alexander - President and CEO: I think that's right Steve. I'm being a little cautious in terms of how fast this economy will turn around. I think this area's poised to grow and grow at rates that are potentially far greater than what we've seen in the past because of the economic development potential for the Marcellus and Utica shale. We're all looking, if you take a look across the area of Pennsylvania, West Virginia, Ohio, it basically sits under our service territory and there's a lot of expectations right now, in terms of a manufacturing renaissance taking advantage of the locational advantage they would have for energy and we'd hope to see this as a catalyst or of much more significant and much more sustained growth not only in the manufacturing and industrial sector segments, but the fallout of that through the commercial and the residential market. So, so much depends on, what happens to the economy in general in terms of, are we going to be growing or continuing to stagnate, and are we going to begin to use the resources we have as a country to really reposition the economic capability and potential, particularly of this region to take advantage of it.
Stephen Byrd - Morgan Stanley: Then just one follow-up for Jim on the equity side of things. As you think about funding growth, you'd mentioned up to $300 million to fund some of your growth objectives. Would you envision that very helpful and just open all on the on the equity something that you think about funding growth you mentioned in three up to 300 million to fund some of your growth objectives. Would you envision the dribbles between the primary method to achieve that.
Anthony J. Alexander - President and CEO: There are various methods out there Stephen at this point the dribble method is one that we'd like.
Operator: Jonathan Arnold, Deutsche Bank.
Jonathan Arnold - Deutsche Bank: Just quickly on the asset sales are you looking, Tony, I want to make sure I had this correctly exclusively at the hydro asset. So are there other things you potentially on the table should we just really be focused on that.
Anthony J. Alexander - President and CEO: I think that’s the primary one Jonathan. There's always assets moving around in this company because just because of our location for example we have lots of resources and lots of land that sits above Marcellus and Utica Shale. I suspect there'll be some transactions like that they'll typically be one off. I think the real game here is going to be played on the hydro assets.
Jonathan Arnold - Deutsche Bank: Have you disclosed kind of what book value is on those assets or anything other than just the megawatts.
Anthony J. Alexander - President and CEO: I don't plan on telling anybody what the book value is.
Jonathan Arnold - Deutsche Bank: If I may just on another front there is obviously a lot of talk around EPA planning to regulate how to move forward on regulating carbon can you just talk about how that’s factoring into your thought process around investment in the coal fleet what are you thinking comes out of that process on what sort of timeframe do you get enough clarity to sort of be certain what you are doing on your existing plants will sort of survive future regulation on the CO2 front, anything you can tell us there?
Jim Pearson - SVP and CFO: I guess, Jonathan if I had all those answers, I'd feel really good about it. All I can tell you is, I think preparing ourselves to deal with these issues as best we can. And if you take a look at our fleet and you compare for example going back in time to either 1990 or 2005 which are the kind of dates that have been thrown around to measure, we will have reduced our carbon footprint in our fleet significantly beyond what any expectations were at either the Kyoto Protocol of 1990 or in the 2005 baselines that we've used before. So we've done a lot. A lot of the plants as they get shut down, repositioning, the investing in the nuclear fleet to produce more out of that side of the house has done – has improved significantly and reduced significantly the amount of CO2 that our fleet produces. So on balance, lot of it depends on what the rules are and what the baseline is in terms of what the expectations are going forward. We all know that there is no technology today that's commercially available to address this issue in our major coal-fired facility. So, there has to a transition period, there has to be recognized -- somehow, we have to recognize the timeframe associated with it and quite frankly, I think our fleet is in pretty good position.
Operator: Neel Mitra, Tudor, Pickering.
Neel Mitra - Tudor, Pickering: Just a quick question. Can you give us a rough sense of what your earned ROEs were in 2012 and just what opportunities or whether you'd be in the rate case arena besides in New Jersey and Mon Power for the asset swap in the coming years?
Leila L. Vespoli - EVP and General Counsel: This is Leila. We do provide information regarding our ROEs on an ongoing basis with our state utility commissions, majority of which is publicly available, and what we're going to be doing, we're going to be pulling together our latest filings and hope to make them available in our investor presentation materials at a conference next week. But I think that the long and the short of it is, we believe that our utilities are earning a fair return as permitted by state law.
Neel Mitra - Tudor, Pickering: Second question on the generation side, how willing are you to rely on the purchase power market to fund I guess, the retail sales? I know now that you are running generation less, you're relying more on the purchase power market and how far are you willing to go on that just in terms of how risky that is?
Anthony J. Alexander - President and CEO: Well, obviously when we think those issues through, the risk is associated with the – more with the creditworthiness of the person that you are buying from and we will close positions against the sales that we make and then essentially reclose those positions using our own assets once we determine that the sale was sustainable and if we can increase the margin associated with that sale by essentially producing it ourselves.
Operator: Paul Patterson, Glenrock Associates.
Paul Patterson - Glenrock Associates: You mentioned the manufacturing – there's also been a bunch of new power plants that have been announced in Ohio and Pennsylvania some of them are merchant. And I'm just wondering any thoughts about what that presents in terms of an opportunity to you or competitive threat or just what do you make of that?
Anthony J. Alexander - President and CEO: Well, my own sense is that the market today has sufficient capacity in it. So, the investments in new generation of significant amounts -- it could be a problem for the investors.
Paul Patterson - Glenrock Associates: The hydro asset it doesn't sound like you guys are talking much about the book value or anything. Can you give us a sense of what the capacity factor is on those plans?
Anthony J. Alexander - President and CEO: Well, we probably could, I don't think we have it with us. But you got to remember you can't look at capacity factor for some of these plants who are pump storage to become relatively meaningless, because while they really run during the day and they are pumped up at night. Then run a river kinds of facilities, the rest of them are I mean I'm not sure capacity factor is particularly relevant.
Paul Patterson - Glenrock Associates: But I guess you know where I'm coming from, I'm trying to figure out the margin if you can tell us that sort of a sense as to what might be going away as you sell those?
Anthony J. Alexander - President and CEO: We're not particularly concerned about it on our fleet. Again, because of the other options we have.
Paul Patterson - Glenrock Associates: In terms of the Harrison plant, you guys mentioned in the December letter that if you didn't have 100% plant you may not be able to offer into the RPM auction at a price that would clear. Given now where the procedural schedule is, it looks like I mean the approval is going to happen after the auction. How should we think about that?
Donald R. Schneider - President, FirstEnergy Solutions: Paul, this is Donny. We'll bid the Harrison plant into the auction in May from FES' side of the equation.
Paul Patterson - Glenrock Associates: But we should expect it to clear.
Donald R. Schneider - President, FirstEnergy Solutions: Well, it looks really like any other generator that we'd bid in Paul.
Anthony J. Alexander - President and CEO: The assets could be bid in I guess by two entities, one would be utility they will choose what to bid and the other will the FES on their ownership and they will choose what to bid.
Paul Patterson - Glenrock Associates: Then just finally on the POLR and the PUC in Pennsylvania, it seems like they have changed the rules and I am just wondering is that a lot more opportunity – does that give you guys more opportunity on the retail side there?
Anthony J. Alexander - President and CEO: You're talking about where they go with the shorter-term bids, Paul?
Paul Patterson - Glenrock Associates: It sounds like they want to create more volatility almost they like they want to sort of force people to shop or encourage them to shop, I guess is the better way to put it.
Anthony J. Alexander - President and CEO: Well, clearly that’s – Pennsylvania has an objective. They would love to see a 100% of the customers shop. I think that those auctions are designed to do that. We've participated in in those processes and we're very comfortable competing both in the POLR auction as well as the retail front.
Jim Pearson - SVP and CFO: Thank you, Paul. I'd like to thank everyone for joining us on the call today. Tony, Leila and I will be in New York Next week for a conference and we look forward to seeing many of you there. As always we appreciate your support and your interest in FirstEnergy. Thank you.
Anthony J. Alexander - President and CEO: Thanks everyone.
Operator: This does conclude today's teleconference. You may disconnect you lines at this time. Have a wonderful day. We thank you for your participation today.