FirstEnergy Solutions Reports Improved Retail Margins, Continues to Shift Sales Channels

FirstEnergy Solutions says that it has been able to improve retail margins versus the year-ago, and is continuing to focus on higher-margin sales channels.

Executives said that, in general, FirstEnergy Solutions has sold about 75 TWh forward for 2014, and is seeing an aggregate rate about $1/MWh better than what it is receiving in 2013. Specifically, FES' aggregate 2013 rate is $53/MWh, and is projecting a rate of $54/MWh for 2014, based on booked sales to date.

Asked by an analyst whether the increased rate would translate into higher margins, executives confirmed that this improved pricing will translate into higher margin, saying that the shifting of sales channels has not appreciably raised aggregate SG&A expense.

Executives cited, in particular, FirstEnergy Solutions' 7-year product (often priced at about 7¢/kWh) as a product paying "very nice" margins.

FirstEnergy Solutions' focus on higher-margin customers has led to "selected" customer retention.

Executives said that FES is seeing improved margin in its recent contracts and overall margin improvement by not pursuing renewal of some customer load.

Executives said that FirstEnergy Solutions continues its asset-backed retail sales strategy, with an objective to sell up to 25% more than FES can produce.

Although FES has recently announced deactivations of two plants (and is transferring others out of the FES business), executives believe that future retail sales may only be slightly less than current levels

FirstEnergy Solutions' total number of retail customers increased by approximately 700,000 in the past 12 months to 2.7 million by the end of the second quarter of 2013

Governmental aggregation sales increased 31% (or 1.1 million MWh) for the quarter, versus the year-ago, as a result of the continued successful expansion into Illinois.

FES achieved 35% growth in mass market sales versus the year-ago (385,000 MWh), largely as a result of successful marketing campaigns in Pennsylvania and Ohio.

Direct sales to large and medium-sized commercial and industrial customers increased 1% versus the year-ago.

A breakdown of sales volumes by channel and by state can be found on page 16 of FirstEnergy's investor report.

FirstEnergy's investor report, on page 15, also includes aggregate shopping data for each of its regulated distribution companies