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FirstEnergy Corp. (NYSE:FE)

Q1 2007 Earnings Call

May 3, 2007 1:00 pm ET

Executives:

Kurt E. Turosky - Director, Investor Relations

Anthony J. Alexander - President, Chief Executive Officer, Director

Richard H. Marsh - Chief Financial Officer, Senior Vice President

Harvey L. Wagner - Vice President and Controller

James F. Pearson – Vice President and Treasurer

Analysts:

Paul Patterson - Glenrock Associates

Paul Fremont – Jefferies & Co.

Craig Huber - Lehman Brothers

Daniele Seitz - Dahlman Rose

Paul Ridzon – Keybank

Dan Jenkins – State of Wisconsin

Presentation

Operator

At this time, I would like to welcome everyone to the FirstEnergy Corp. first quarter earnings conference call. All the lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer period. If you would like to pose a question during that time, please press Star and then the number One on your keypad. If you would like to withdraw your question, you may press the pound key.

It is now my pleasure to turn the floor over to your host, Kurt Turosky, Director of Investor Relations. Sir, you may begin.

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Kurt E. Turosky

Thank you Janelle. During this conference call, we will make very 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 with such forward looking statements with respect to revenues, earnings, performance strategies, process, and other aspects of the business of FirstEnergy Corp. are based on current expectations that are subject to risks and uncertainties. The number of factors could cause actual results or outcomes to differ materially from those indicated from 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. Reconciliation gap from various non-GAAP financial measures that we will be referring to today are also contained in that report as well as on the investor relations section of our website at www.firstenergycorp.com/ir.

Participating in today’s call are Tony Alexander, President and Chief Executive Officer, Rick Marsh, Senior Vice President and Chief Financial Officer, Harvey Wagner, Vice President and Controller, and Jim Pearson, Vice President and Treasurer. I’ll now turn the call over to Tony Alexander.

Anthony J. Alexander

Thanks Kurt and good afternoon everyone. I’ll begin the call by highlighting our performance during the first quarter and then I’ll ask Rick to review our financial results and provide an update on regulatory matters.

We’re off to a good start in 2007, and we made continued progress in achieving our key goals for the year, which include maximizing generation output, currently improving our distribution reliability, attaining a vital higher in safety goals, pursuing continuous improvement in all aspects of our business, and achieving targeted earnings growth.

We recorded earnings on a GAAP basis of $0.92 per share in first quarter and our normalized non-GAAP earnings of $0.88 cents per share were 31% higher than in the same period last year. During the quarter, we also completed the accelerated repurchase of 14.4 million shares of common stock and attained investment grade credit ratings on our unregulated subsidiary First Energy Solutions.

Our generation fleet demonstrated strong performance overall during the period. Our nuclear units operated at a 99% capacity factor and achieved their second highest quarterly output total of 8.3 million megawatt hours. We continue to expand our generation capacity to maximize the potential of our assets, and expect to bring up to 500 megawatts online over the 2007 and 2008 period through upgrades at existing units and renewable energy projects.

As part of this effort, Beaver Valley Unit One completed the final phase of a power upgrade project in March. This is the second upgrade at Beaver Valley One in the past 12 months. We expect they will add approximately 43 megawatts to our system upon final verification later this year. Also during March, a selective non-catalytic reduction system was placed in service at our East Lake Five unit following a scheduled maintenance outage. The installation is part of our air quality compliance strategy and we will reduce NOx emissions and achieve reductions required by the EPA’s NOx transport rule. Another key operational achievement during the quarter was the return of the Perry Nuclear Power Plant to routine NRC oversight as a result of the corrective actions that we’ve successfully implemented over the past 2.5 years.

The capital investments we’ve made in our utility distribution system continue to result in improved reliability for our customers. During 2006, a half a million fewer customers experience outages than in 2005 and the average outage duration dropped by nearly 20%. This trend continued during the first quarter of this year with a 27% reduction in the number of customer outages, compared to the first quarter of 2006 and a 43% decrease in outage duration. We also continued to achieve outstanding results regarding the safety of our employees. In the first quarter, we remained on pace to meet or exceed our recording breaking performance in 2006 when we achieved an OSHA rate of 0.96. That represents less than one incident per 200,000 hours work placing us in the top decimal of our industry.

Now, I’ll turn the call over to Rick to discuss the first quarter financial results. Rick?

Richard H. Marsh

Thank you Tony and good afternoon everyone. As I review our results today, it might be helpful to refer to our consolidated report to the financial community that was issued this morning. As you review our financials, you’ll note that we’ve revised the segment reporting to provide more clarity regarding the results of our regulated and competitive business units.

As illustrated on pages 4-6 of the consolidated report, this breakdown includes a energy delivery services segment, competitive energy services segment, and an Ohio transition generational services segment. A description of each of these is included in the footnotes and if you have any questions regarding the segment breakdown, I encourage you to contact our Investor Relations team after the call today.

Let’s get started with our results in the first quarter. Earnings on a GAAP basis in the first quarter were $0.92 per share compared to GAAP earnings of $0.67 per share in the same period last year. Normalized non-GAAP earnings were $0.88 per share excluding the effect of two special items that increased earnings by $0.04 per share. The first of these resulted from a Pennsylvania public utility commission order authorizing Med-Ed and Penelec to create a new regulatory asset for costs incurred in prior years.

We laid it to the decommissioning of the (inaudible), an experimental nuclear reactor, decided increased earnings about $0.05 per share, and that partially offset by $0.01 per share charge from the securities held in trust for future nuclear decommissioning activities. The improvement in this quarter’s non-GAAP earnings result from continued favorable operational performance, the execution of several enhancement initiatives highlighted at our analysts meeting on February 1st and some quarterly timing differences.

Positive earnings drivers included an $0.18 per share improvement related to higher generation revenues, spending from a 3% increase in generation sales as well as higher wholesale and retail market prices, and a $0.05 per share increase in distribution delivery routing reflecting heating degree days that were 15% higher than in the same period last year as well as normal sales growth.

A $0.06 reduction per share reduction in generation O&M expense driven by the absence of nuclear outages in the first quarter of this year, compared to two re-fueling outages in the first quarter of 2006, a $0.06 per share reduction in other post-retirement benefit costs due to retiree health care design changes, and lower pension expense following the $300 million contribution to the plan that we made at the beginning of the year.

In a $0.05 per share benefit related to deferral and recovery of incremental transmission expenses, in our Med-Ed and Penelec subsidiaries. The benefit for the first quarter of 2006 wasn’t recognized until the second quarter of last year due to the timing of the Pennsylvania commission decision authorizing the deferral accounting.

In addition, production and (inaudible) outstanding from the accelerated share repurchases of 10.6 million shares in August of 2006 and 14.4 million in March of this year, enhanced earnings by $0.03 per share during the quarter. Factors that partially offset these favorable trends included a cent per share increase in fuel on purchase power expense, primarily driven by higher purchase costs to support the 3% increase in generation sales and a 3% decline in total generation output. This reduced output stump from the heavy planned maintenance schedule at our East Lake and (inaudible0 units, as well as unscheduled outages at Mansfield One and Two during the period.

Our first cent per share reduction in earnings during the implementation of lower distribution rates at our Med-Ed and Penelec subsidiaries in January following the Pennsylvania commission’s decisions in our rate cases, the $0.02 per share increase in depreciation expense resulting from our growing asset base, a $0.02 per share increase in general taxes due to higher gross taxes as well as higher property taxes and a $0.03 per share increase from our new decommissioning trusts and corporate on life insurance. And a $0.04 per share increase in financing costs primarily attributable to higher per term borrowing levels related to the interim funding of the accelerated repurchase programs and the $300 million pre tax pension contribution.

Let me touch on a few important financial activities during the quarter. As I mentioned on March 2nd we repurchased approximately 14.4 million shares, 4.5% of our common total stock outstanding. Under an accelerated share repurchase program with an affiliate of Morgan Stanley. The initial purchase price was $900 million or $62.63 per share and it was funded on an interim basis to short term debt. The final purchase price will be adjusted to reflect volume, weighted average price of the stock during the time Morgan Stanley acquires the shares which may take up to one year.

Coupled with the prior accelerated repurchase program executed in August 2006 we’ve now repurchased about 25 million common shares or 8% of the total shares outstanding as of July 2006.

During the quarter both Standard & Poor’s and Moody’s assigned investment grade credit ratings to our unregulated subsidiary, First Energy Solutions. FES is the holding company of First Energy Generation Corp and First Energy Nuclear Generating Corp, the owners of our fossils and nuclear assets respectively. To provide additional transparency we recently furnished FES’s audited financial statements for the years 2004 to 2006 and 10K filing and we expect FES to become a stand alone FES registrar later this year.

Also during the quarter the Cleveland Electric Illuminating Company issued $250 million of 5.7% senior notes due 2017. The proceeds from this transaction will be used to meet CEI’s 2007 maturing long term debt obligations of $120 million and to repay short term borrowings. Yesterday we announced that Cleveland Electric will redeem all four million shares outstanding of its 9% trust preferred securities on June 1st at a price of $25 per share plus (inaudible) distribution from the date of redemption.

Over the remainder of the year our financing plan will focus on completing the sale and lease back of the own portion of Mansfield unit one which we continue to expect closed during the second quarter, issuance of about $1 billion long term unsecured debt at our New Jersey and Pennsylvania subsidiaries, primarily to fund debt maturities and to repay short term debt. And opportunistically transfer a portion of the remaining pollution control debt from our regulated utilities to our generating companies.

Let me conclude this afternoon with a brief update regarding regular matters in Pennsylvania. Following the January decision of the Pennsylvania PUC in our Med-Ed and Penelec transition cases, several parties including the companies filed appeals of the decision with the Pennsylvanian commonwealth report. The companies have appealed the denial of generation (inaudible) relief and a consolidated income tax adjustment related to the cost of capital. Other parties have appealed the recovery of certain transmission costs of universal service program costs to a surcharge mechanism assessed to residential customers. All the appeals are pending before the commonwealth court.

In a separate proceeding to address Med-Ex and Penelec request to retroactively correct the nug accounting issue, an evidentiary was held in late February. The companies are seeking to modify the accounting methodology for no extra costs to eliminate reductions of the first cost balance during the first periods in which market prices exceed net payments. The value in this request is estimated to be about $40 million for the period 1999 to 2006. Legal briefs were filed in March and the companies are awaiting the administrative law judges recommended decision.

And on May 2nd our Pennsylvanian power subsidiary made a filing with Pennsylvanian commission to propose a mechanism to procure power for default service customers beginning June 1st 2008. Our Penn power customers’ transition to competitive generation market on January 1st of this year and the default service plan previously approved by the commission covered the 17th month period, ending May 31st 2008. We’ve formed this filing with the commission’s proposed service rules and incorporated input from other parties. The filing proposes procurement of our full requirements product by class through multiple RFP’s with staggered delivery periods extending through May 2011. It also proposes a three year phase out of promotional generation rates. We expect the commission to address our filing later this year.

In closing, let me just say we’re gratified by our good start to the year and we’re looking forward to continuing operational and financial performance over the remaining quarters. We are affirming our non-GAAP earnings guidance for the year of $4.05 to $4.25 per share. As always we appreciate your time and interest in First Energy and now I will ask Jeanette, our operator to open the calls to questions from analysts.

Question-and-Answer Session

Operator

Thank you. At this time I would like to remind everyone if you would like to ask a question, please press Star, then the number One on your telephone keypad. (Operator instructions). We’ll pause for just a moment to compile the Q&A roster. Thank you. Our first question is coming from Paul Patterson of Glenrock Associates.

Paul Patterson - Glenrock Associates

Good afternoon guys. I was wondering if you could, now that we’ve had the RPM auction and it’s a little bit more complicated with the set up that you have in multiple states but I was wondering if just in sort of an aggregate way you could tell us what you think about that auction and what the impact might be for the rest of the year and going to ’08 and maybe further than that.

Anthony J. Alexander

Yeah, I’d be glad to take a shot at that, Paul. As you know RPM is being implemented on June 1st of this year and there’s a series of options associated with that. We have three companies, three operating companies in the PGM region, JCP&L, Med-Ed and Penelec. The impact is a little different for those companies. Let’s focus first on JCP&L. That company has about 900 megawatts capacity to bid into RPM but at JCP&L generation revenues both energy and capacity are used to reduce nug deferral balances.

OK, so that means there’s not going to be any earnings impact. There will be in essence an acceleration of cash flow from this though Paul. Basically it accelerates receipt of cash under the deferred nug balance. So we recover those costs faster so an acceleration of cash, no earnings impact at JCP&L. For Med-Ed and Penelec, those two companies have a total capacity of about 2,300 megawatts and since the capacities they need to meet their load occupations are greater than their own generation we of course also have third party contracts for energy capacity of just capacity. And over the coming several years we’re well hedged for capacity so there’s really a negligible impact at those companies. So no earnings impact for any of the companies, slight acceleration of cash flow at JCP&L and that’s about the impact of RPM on our PGM companies.

Paul Patterson - Glenrock Associates

OK, great. And then on the stock buyback that you guys implemented with Morgan Stanley, do we have an idea about where Morgan Stanley is in that buyback yet?

Anthony J. Alexander

No.

Paul Patterson - Glenrock Associates

We don’t? OK. And then…OK that’s it. Thank you very much.

Anthony J. Alexander

Thanks Paul.

Operator

Thank you. Our next question is coming from Paul Fremont of Jefferies and Company

Paul Fremont – Jefferies & Co.

Thank you very much. Really two questions. One, with respect to the deferral benefit that you reported in the fourth quarter, will that be, should we think of that as a nickel drag in the second quarter since you reported two quarters at once last year?

Richard H. Marsh

No. It’s not going to be a drag in the second quarter. It’s a flip actually is what it is. So in the first quarter of 2006 there was no deferral. There was two quarters in the second quarter of 2006.

Paul Fremont - Jefferies and Company

Right. So in other words the net comparison then would be, wouldn’t that be still a negative comparison for quarter over quarter?

Richard H. Marsh

Comparative quarter over quarter, yes.

Paul Fremont - Jefferies & Co.

Yeah. That’s what I meant.

Richard H. Marsh

OK. Sorry, yes.

Paul Fremont - Jefferies & Co.

OK and then the second question is with First Energy Solutions, are you going to switch ultimately your segment? Reporting so that we’re the legal entities as opposed to the break outs that you’re giving us now, which are more accounting break outs.

Harvey L. Wagner

Paul this is Harvey Wagner. The segment is going to be very close to what you see in the financial statements for First Energy Solutions as a legal entity. There are a few things that are included in that, that are competitive businesses that aren’t really part of the legal entity itself but are managed that way, and that’s how we’re reporting our segments.

Paul Fremont - Jefferies & Co.

And the Ohio transition segment would that be in the regulated operation?

Harvey L. Wagner

That's carved out of the regulated operation, just to isolate the generation portion of that that's remaining in transition.

Paul Fremont - Jefferies & Co.

Thank you.

Operator

Thank you. Our next question is coming from Craig Huber with Lehman Brothers.

Craig Huber - Lehman Brothers

Thanks very much. Given where the stock has moved and the view of the value of the company. Would there be a potential to re-cut the incentive structure around the buyback?

Anthony J. Alexander

What do you mean, “the incentive structure”, Craig?

Craig Huber - Lehman Brothers

The incentives for your executor Morgan Stanley.

Anthony J. Alexander

I wouldn't use the term “incentives”. I think there's a pricing grid embedded in the contract, such that more shares are purchased as the stock price decreases. I wouldn't call that an incentive per se. We do the option, if we wish, we could redo that grid at some point, however. Does that answer your question, Craig?

Craig Huber - Lehman Brothers

I guess if you thought the stock was still going to be improving, you might like to look at doing that.

Anthony J. Alexander

Right, right. And certainly the stocks had a nice run since we've started the program earlier in the year or so. So that's something we're keeping on our possibilities list.

Craig Huber - Lehman Brothers

OK, great.

Anthony J. Alexander

Thanks Craig.

Operator

Thank you. Our next question is coming from Daniele Seitz of Dahlman Rose.

Daniele Seitz - Dahlman Rose

Hi. Could you bring us up to date on the developments in Ohio, and it looked like the governor there was somewhat more vocal about his position, but was really not really defining how he felt, and the transition to market-based rate should take place. Could you give us some behind-the-scene look at how you see this developing?

Anthony J. Alexander

Sure Daniele. Like we've said before, there is some discussion, and I believe the governor's recent speech, in which he identified several areas that he'd like the General Assembly and the parties in Ohio that are typically engaged in these kinds of discussions to try to work through. They had to do with renewable energy, they had to do with energy efficiency, they had to do with infrastructure improvement, both on the wire side of the business as well as the potential for building new generation Ohio. And he expressed in that speech, as you well know, his opinion that you can't put the genie back in the bottle with respect to market-based, or deregulation if you will.

So I think what you really have now is an additional data point out there, as far as I know there is still nothing pending or no legislation with the General Assembly that's been introduced, and the parties are still just generally discussing some of the issues that might arise at the next transition.

Daniele Seitz - Dahlman Rose

Do you anticipate that there will be proposals coming from the commission, and that the legislators will sort of agree on, and will be eventually passed as a new bill? Or do you see more the legislature actually handing that responsibility to the commission alone?

Anthony J. Alexander

I believe if there's going to be legislation, it's going to be driven by the decisions of our legislators here in the state of Ohio.

Daniele Seitz - Dahlman Rose

OK. And your sense of the timing for that, is it still not really easy to pinpoint at this time?

Anthony J. Alexander

I think that's a fair statement. There are varying games right now in the budget process which won't wrap up probably until the end of June. And I think that's where a lot of the attention seems to be by the members at this point. That doesn't meant they couldn't start discussions or ask for some additional information through hearings, but at least at this point they have not.

Daniele Seitz - Dahlman Rose

OK. So it sounds like it is more kind of a finalization in the fall instead of this summer?

Anthony J. Alexander

Danielle, I really couldn’t tell you how fast they would be willing to move on it, but the legislative process does take time, and when it gets started everyone will know that and that process will run however long it takes in order for the general assembly to be comfortable if they decide to make any changes.

Daniele Seitz - Dahlman Rose

Great, thank you.

Anthony J. Alexander

Thanks, Danielle.

Operator

Thank you. Our next question is coming from Paul Ridzon at Keybank

Paul Ridzon - Keybank

Actually my question was just asked and answered, thank you.

Anthony J. Alexander

OK, thanks.

Operator

Our next question is coming from Dan Jenkins of State of Wisconsin.

Dan Jenkins – State of Wisconsin

Hi good afternoon. A couple of things here. First I was wondering, I saw on page seven of your release, quite a bit of increase in the short term that.

Richard H. Marsh

I’m sorry Dan, I can understand what that is, is that’s the share repurchase in the pension contribution. Interim funding through short-term debt. We will, in the second quarter be closing the Mansfield sale lease back transaction. That will generate about $1.2 million after tax, cash for us, and that cash will be used to permanently fund the share repurchase. The stock buy back can also pay down short-term debt. So that’s just a temporary little glip and you will see that go away as we go through the year.

Dan Jenkins – State of Wisconsin

OK, that’s what I was going to ask, was if the proceeds were going to go to that. Then, given the all the activities you’ve done related to FirstEnergy Solutions, would it be reasonable to expect some sort of issue in some of them before the end of the year?

Richard H. Marsh

No, the sale lease back obligation that will be issued out of the foster generation company within IPF. But other than that we’re not expecting any other activity this year.

Dan Jenkins – State of Wisconsin

Then on the bounce sheet or the capitalization that you show on page seven there, would that already have reflected, you mention development, the April 7th common share acquisition, would that already be reflected in the figures on page seven or not?

Richard H. Marsh

No.

Dan Jenkins – State of Wisconsin

So what would the capitalization, the debt percentage or the equity percentage look like accounting for that April 7th transaction. Do you have a sense of that?

Richard H. Marsh

It really wouldn’t be anything significantly different, Dan.

Dan Jenkins – State of Wisconsin

OK. The other thing I was wondering, you mentioned that that part of the quarter over quarter earnings increase is due to the retiree health care design changes and the voluntary pension plan contribution. Is that something that would be expected to be carried forward into the future quarters?

Richard H. Marsh

Yes, it will. And future years actually.

Dan Jenkins – State of Wisconsin

And then I think the last thing I had, on page eight where you show the condensed consolidated cash flow statement, there’s about a $3 million decrease due to changes in working capital. I was wondering if you could give me a little color on what’s going on with that.

Harvey Wagner

Dan, this is Harvey Wagner again. Primarily it reflects an increase in receivables. If you take a look at our 4th quarter income statement compared to our 1st quarter of 2007 income statement, you’ll see the revenues were up about $300 million. So that just reflected a natural increase in the unbilled receivables, the uncollected receivables at the end of the quarter. Just a higher sales level.

Dan Jenkins – State of Wisconsin

So, should that reverse then as the year goes forward?

Harvey Wagner

We’d expect so, but although with a growth scenario I would hope not, actually.

Dan Jenkins – State of Wisconsin

Then the only other thing is, on the environmental CapEx, you mentioned you had some of that in the 1st quarter, but I guess what is the balance for the rest of the year for the environmental CapEx?

Harvey Wagner

I don’t have that exact number Dan. Our projects are progressing on schedule, the biggest obviously is the (inaudible) plan. I don’t how much is remaining in the remaining quarters, but we’re on track and on budget from our perspective in terms of completing those projects.

Dan Jenkins – State of Wisconsin

OK, thank you.

Operator

Thank you. Our next question is a follow up from Paul Patterson of Glenrock Associates

Paul Patterson - Glenrock Associates

Hi guys. I just wanted to go over the nuclear decommissioning trust funds, which seems to have been hit a little bit. As well as this impairment for the securities that were being held for future decommissioning activities. Can you just elaborate a little bit on what happened there?

Anthony J. Alexander

Well, I’ll try to. The impairment resulted from, I guess you could call it, a change in FEC interpretation. Right, and that impacts all utilities that have nuclear decommissioning trusts, and the way we used to do it is that the change in the value of the assets which in the nuclear decommissioning trust was not reflected in earnings. You would only see an earnings impact when gains or losses were realized when he sold the securities. The SEC interpretation said that in their view, the utilities were unable to demonstrate an ability to hold securities in an NDP until any such impairment might be resolved. The reason they said that Paul, is because those funds are managed by external investment managers, not directly under the control of the company. So in their view, the correct way to approach this is that is if at the end of any period, is that is an impairment, those assets are worth less than book value and then you reflect that in earnings. If at the end of the quarter, those assets are greater than book value, you don’t do anything. So it’s sort of an asymmetrical approach. But as the SEC interpretation change, that’s what was driving it impacts all companies within trust. Harvey, do you want to say anything else?

Harvey Wagner

No that’s it. Really 2007 is the last year that you’re going to see this kind of dichotomy, with the changing accounting rules with fair value accounting. Beginning in 2008, those unrealized gains will also be going through P&L. So it will at least be a levelized playing field on that.

Paul Patterson - Glenrock Associates

OK, and then the nuclear decommissioning, what happened there?

Anthony J. Alexander

That’s just a reflection of general capital market conditions.

Paul Patterson - Glenrock Associates

So, I guess the capital markets were down at the end of the quarter?

Anthony J. Alexander

I think the S&P 500 was up 1% for the quarter. Both of these are invested in various types of asset classes.

Richard H. Marsh

And remember that that is a comparison to last year.

Paul Patterson - Glenrock Associates

OK, then that explains it. Finally, when you guys mentioned the lease, the forced ends that was associated with the increased financing calls as being a one time kind of glitch, and that the lease was going to be replacing a lot of this short term borrowing. What’s the difference between the lease cost and the short term borrowing cost that we’re looking at here, do you follow me?

Richard H. Marsh

We haven’t finalized the lease. When we were at the January analysts meeting, I indicated that because of our ability to use that tax loss carry forward, we were able to in essence secure this $1.2 million after tax, and a low single digit sort of equivalent of that rate. Because of the use of that tax loss carry forward that became a very economic way to do it. In terms of our short term borrowing costs, Jim, I don’t know what we are averaging now?

James F. Pearson

We’re averaging about 5.8, 5.9% on our short term borrowing costs.

Paul Patterson - Glenrock Associates

I remember that it was an advantage for you guys to do it. What I’m wondering is that how much, from a quarter to quarter perspective, as this lease comes into play, should this $0.04 number be lower as result of…do you follow me?

James F. Pearson

We have to see when we finalize. There will be, there is, correct. It’ll be a little bit lower.

Anthony J. Alexander

One thing to remind you Paul, assuming that it is an operating lease, at the end of the day, that there would also be amortization of a rather sizable book gain from the sale.

Paul Patterson - Glenrock Associates

But we’ll have to see when you guys actually cut the deal, I guess. OK, great, thanks a lot guys.

Operator

Thank you, we have no further questions, I’d like to turn over the floor back over to Richard Marsh.

Richard H. Marsh

Well, I’d just like to thank everyone for being with us today. I know this is a very busy earnings release date. So we certainly appreciate your continued interest in first energy and look forward to seeing you at the various conferences that we’ll be appearing in over the next six weeks. Thank you for your time, if you have any follow up questions please contact our investor relations group, have a great day.

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