Greetings and welcome to the FirstEnergy Corp. Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Meghan Beringer, Director of Investor Relations.

Thank you, Roya, and good afternoon. Welcome to FirstEnergy’s second quarter earnings call. First, please be reminded that during this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provision 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 Information link. Today, we will be referring to operating earnings, operating earnings per share, operating earnings per share by segment and EBITDA which are non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are contained in the consolidated report, as well as on the investor information section on our website at www.firstenergycorp.com/ir. We also posted an updated backlog to our website earlier today. Participating in today’s call are Tony Alexander, President and Chief Executive Officer; Leila Vespoli, Executive Vice President, Markets and Chief Legal Officer; Jim Pearson, Senior Vice President and Chief Financial Officer; Donny Schneider, President of FirstEnergy Solutions; Jon Taylor, Vice President, Controller and Chief Accounting Officer; Steve Staub, Vice President and Treasurer; and Irene Prezelj, Vice President, Investor Relations. Now I will turn the call over to Tony Alexander.

Thanks, Meghan. Good afternoon, everyone, and thanks for joining us. Since our last earnings call, we have made significant progress on the plans we have outlined to execute a regulated growth strategy, implement additional cost reductions and further reduce risk in our competitive business. We have several positive developments to discuss today, including the two rate filings in our distribution business that were announced yesterday and a shift in our competitive sales strategy as well as progress report on the transmission growth initiatives that are well underway. We have a lot of ground to cover today, so let’s get started. I’ll begin by taking a few minutes to discuss key developments in our transmission business. As you know, our energizing the Future transmission expansion program is designed to modernize our grid, reinforce the current system in light of expected plant deactivations and handle load growth primarily related to shale gas development. This year alone, we are on course to complete $1.3 billion in investments, spanning more than 1,300 projects. These include replacing equipment with advanced technology, reinforcing substation facilities with advanced surveillance and security technologies and rebuilding 234 miles of transmission line. In addition to these projects, we are on track to build a new 138 kV substation near Clarksburg, West Virginia and an 18-mile connecting project to support load growth in that area. We have also completed more than one-third of the nearly 100 projects associated with plant deactivations. These include the Eastlake 4 and 5 synchronous condensers, a new 345 kV to 138 kV substation and a 59-mile 345 line in Northwest Ohio. Currently, we have nearly 1,500 workers engaged to support the engineering, procurement and construction of these Energizing the Future initiatives. Our management processors are in place to sustain the growth targets we’ve previously identified as…

Thanks, Tony and good afternoon everyone. Let’s start with a deeper dive into our competitive generation strategy. The strategy we are laying out today is straightforward. We will pursue the effective hedging of the majority of our generation resources with reduced risk, at the highest possible margins possible while leaving a portion of generation available to capture market opportunities. We have already taken action to mitigate risks and create length in our portfolio by purchasing additional power and auctions during peak period as well as by buying outage insurance this summer, all of which we spoke about at our last earnings call. Since then, we have allowed some attrition or our customer base and returned selected customers to polar service. Going forward, we intend to serve all existing customers through their contract term. But as Tony outlined, we will eliminate our selling and renewal efforts in MCI and mass market channel and to certain LCI customers. We plan to maintain our sales efforts and government aggregation primarily in Ohio through a polar load and focus on selective, strategic sales to LCI customers. Looking at each of those channels, we intend to continue sales to government aggregation communities primarily when contract prices move with the market at the percent of the price to compare. These sales also have relatively low acquisition cost and margins are generally attractive. With the polar channel, we have virtually no acquisition cost. We have the flexibility to make decisions at the time of each of auction as to the value of the loan. We also plan to continue selling to strategic large commercial and industrial customers where we have a significant relationship or where the customer had a very high load factor that is not weather sensitive. Basically, these customers represent a wholesale type load, but…

Thanks, Leila. As I discuss our financial results, it may be helpful for you to refer to the consolidated report which was issued this morning as in available on our website. Our second quarter operating earnings of $0.49 per share were in line with our expectations. These results compared to second quarter 2013 operating earnings of $0.59 per share. While I will walk through the drivers of each of our business units in a minute, the major drivers included lower commodity margin at our competitive business and higher operating expense in our distribution business primarily due to increased maintenance and vegetation management cost. On a GAAP basis, second quarter earnings were $0.16 per basic share compared to a loss of $0.39 per basic share in the second quarter of 2013. The special items that make up the $0.32 difference between GAAP and operating earnings can be found on page 2 of the consolidated report. Let’s turn to a review of the key drivers of operating earnings across each of our business segments starting with distribution. During the second quarter, operating earnings for our distribution business were $0.39 per share which compares to $0.45 per share in the second quarter of 2013. The decrease is largely due to our enhanced focus on maintenance and vegetation management work in the second quarter of this year. These activities together with a 56-day outage at Fort Martin Unit 1 resulted in a $0.05 per share in operating expenses compared to the same period in 2013. Distribution operating earnings were also impacted by higher depreciation, pension expense and interest expenses compared to second quarter of 2013. The Harrison/Pleasants asset transfer increased earnings by $0.01 per share and a lower effective tax rate resulting from changes in state apportionment factors, increased earnings by $0.02 per share.…

Thank you. We will now be conducting our question-and-answer session. (Operator instructions) Thank you. Our first question comes from the line of Jonathan Arnold with Deutsche Bank. Please proceed with your question. Jonathan Arnold – Deutsche Bank: Hi, good afternoon.

Hello, Jonathan. Jonathan Arnold – Deutsche Bank: Hi. Just on the transition of the portfolio, the retail portfolio, can you give us a sense of how quickly you think you’ll arrive at sort of the optimal shape because obviously the sales ratchet down but you’re saying you want to basically be out of MCI and mass market. So when the sort of FirstEnergy, new FirstEnergy retail book – when do we see that book?

Jonathan, this is Donny. You probably haven’t had a chance to look at the fact book yet, but when you get a chance if you look at Slide 102, it will show a buy channel as those sales turn them out. Jonathan Arnold – Deutsche Bank: Okay, so we can – so there’s a slide in that. I haven’t seen that, you’re right. So there’s a slide in there which will kind of answer my question.

Yes, it’s a good slide. It will show channel by channel, so you’ll be able to see the MCI and the LCI, et cetera. Kind of generally speaking, maybe we’ll probably hit our target volumes about first quarter of second quarter of ‘16. Jonathan Arnold – Deutsche Bank: Okay. And then is it correct that given what you’ve said that you’re going into this coming winter that you are still probably short in the same amount that you were going into last winter, but you purchased protection. Do I understand that correctly?

No, not at all, Jonathan. Again, I apologize that you haven’t had the chance to look at the fact book, but you’ll see a real good slide on Slide 101 that shows our length. We’re actually about 500 megawatts long going into the winter. And that excludes our peaking capacity. So the simple cycle CTs and the oil CTs would lie on top of the 500 megawatt that we’re already long. So we’re in pretty good shape for the winter. Jonathan Arnold – Deutsche Bank: So I see, that one’s like – that’s a monthly look rather than an aggregate annual look?

Yes, that’s month by month. And it reflects any outages and whatnot to fit our plan. Jonathan Arnold – Deutsche Bank: I see that. Very helpful. On a slightly different topic that I did – I think I had the number correctly that you thought you would have in aggregate $425 million capital savings over the next several years.

Yes, that’s basically 2015 to 2018. Jonathan Arnold – Deutsche Bank: Okay. Is that savings of the money that you’re just not going to spend because you found ways not to spend it or is this some of it saving and some of it deferral.

Well, some of it obviously is deferral especially that related to the Beaver Valley Steam Generator and replacement project. Now that will move into the – probably a little probably a little in ‘18, more in ‘19 and 2020 when the project is that fully undertaken. The MATS savings are in fact real. They’re not moved around and much of it depends on what the nature of the other capital investments are. Some will be as you call permanent, some will be just moved depending on when outages are scheduled. Jonathan Arnold – Deutsche Bank: How would the $425 million bread down between permanent and deferrals roughly?

Well, one of the largest portions of the $425 million would be the Beaver Valley movement. And I think that was about $270 million of the $425 million. Jonathan Arnold – Deutsche Bank: Great. Thank you, Tony. And if I could just one final thing, did I hear right, you said, you would expect it to give at 2016 EBITDA guidance for the EI [ph]. Is the implication that you might go out further?

I think that’s the only way you can think about it. But right now – Jonathan Arnold – Deutsche Bank: No, I just want to make sure I heard that right.

In focus [ph], I’m trying to give you at least ‘16. Jonathan Arnold – Deutsche Bank: Okay.

Okay. Jonathan Arnold – Deutsche Bank: And then can you give us any sense at all of what the – I think you talked about the implication for residential customer would be of the ESP of $3.50 for a month which I guess one could calculate a net revenue uplift, but then there’s obviously commercial and industrial as well. How does the ESP change your look? Can you give us any aggregate sense of that?

I do not have that really handy. It would be a kilowatt an hour charge, so over an average customer’s usage. But I really can get that, but I don’t have that readily hand now. I’m sorry, Jonathan. Jonathan Arnold – Deutsche Bank: All right. Thank you. I’m sorry for too many questions.

Thank you. Our next question comes from the line of Paul Fremont with Jefferies, please proceed with your question. Paul Fremont – Jefferies: Hi. Thank you very much. I was hoping that we could get you to elaborate a little bit on the sale of the generation from FES to the regulated companies. For instance, when we think about the revenue requirements, should we tie to sort of a book value number for those assets. And what would be the book value?

So the way to think about it is kind of – if you go back in time, a regulated rate of return on rate base and O&M, so how one would have traditionally done it in Ohio. And that then is compared to what the market produces and net difference is either a credit of charge to customers. And that information is contained in the filing, although, I believe under confidentially. Paul Fremont – Jefferies: Do you have like a book value number for those megawatts?

No. Again, it’s – if you think about it in terms of evidence in the case, it is evidence in the case but it is under confidentially agreement. Paul Fremont – Jefferies: Okay. And then in terms of the customers that are opting for this, do you need enough customers to sign up for all the generation output of these units in order for all of this to qualify? Or would this amount of generation be dedicated irrespective of the customer sign up?

Okay. So it is a non-bypassable charge. So if you think of it, what’s actually happening is the FES side of the house is selling all the output from these three plants to the utilities. The utilities are taking the output and selling it into the marketplace. They are paying the competitive side of the house, the cost base kind of the traditional rate base kind of return. And they are taking the money they get from the marketplace again netting it against what they paid the FES side of the house and would either be a charge or credit to customers. So the power itself is not actually going to serve customers directly. It is acting as a rate stabilization mechanism. And over the 15-year term, it is predicted to produce savings for customers at $2 billion or $800 million net present value. So over the 15-year term, it will be a huge savings to customers. And if you think about it from a competitive standpoint for something in Ohio, Ohio looks to be a competitive state. It does not at all harm competition in Ohio because the Ohio polar auctions will go forward just as they had in the past. They will procure exactly the same amount of power and suppliers can compete for customers in the same exact way they’ve competed for them in the past. So again, I don’t believe it is going to affect competition or ability of suppliers to compete either retail or at the wholesale polar level, but it is giving customers $2 billion and stability going forward. Paul Fremont – Jefferies: And then can you remind us who are the key parties that you would look to – if you were to try and settle in Ohio, who are the key parties that you would need in the settlement?

So in the past, we have been very successful in getting quite diverse support around our settlements. Industrial customers are generally the most knowledgeable about markets and have been the ones in the past who have been interested in this kind of thing. So we’ll be looking to them. Staff in the past had something – I wouldn’t say it’s entirely similar to what we were putting on the table with respect to AP. I think there’s very significant differences. What we have in our Powering Ohio’s Progress and in particular the economic stability program that is very different from that which is in the AP case for one thing, the Powering Ohio’s Progress deals with the economic vitality of the state, the jobs, the taxes in Ohio, these were plants that were originally built to serve Ohio customers. And if market revenues didn’t prove to be sufficient to keep these plants around, the transmission that would be needed to compensate for that would especially be allocated to the after loan [ph]. So it’s something that needs to be thought of in terms of the overall dynamic. So I think while I mentioned the staff and they might have had some concerns about remotely similar kind of agreements in the past, I think we bring something different here and I would look to them as a settling partly. Retail suppliers is another entity. And again, since I don’t believe this affects them, I would be hopeful that we could have positive discussion with them and then obviously, the Office of Consumers Counsel. Paul Fremont – Jefferies: Okay. And my last question is, can you update us on the status of the nuclear sound leasebacks and are you including in your capital requirements a potential buyout of the nuclear leases when they come to you?

Yes, Paul, this is Jim. We’ve reached agreement with a majority of our lessors. I think we only have 50 megawatts that we have not reached an agreement on. We have buyback of the significant portion of that already, so I think we only have about 150 megawatts left to repurchase. So we do have some anticipated capital outflow in the 2016-’17 timeframe for those outstanding megawatts. Paul Fremont – Jefferies: Thank you very much.

Okay, thanks Paul.

Thank you. Our next question comes from the line of Hugh Wynne with Sanford Bernstein. Please proceed with your question. Hugh Wynne – Sanford C. Bernstein & Company: Thank you very much. I was wondering if you might take us through the drop in guidance for GAAP earnings and the increase in excluded items from the operating earnings.

Yes, Hugh, this is Jim. Our GAAP earnings, it changed by about $0.34 and it was made up of first plant deactivation. That was $0.12 and that mostly is a contract termination, a fuel contract termination. Our retail repositioning, that’s about $0.11 which you saw some of that already incurred this quarter. $0.10 on mark-to-market which is just as positions expiring at this point and then we had $0.01 for trust impairments. So that’s what made up the change in our GAAP earnings of $0.34. Hugh Wynne – Sanford C. Bernstein & Company: And could you explain perhaps the plant deactivation? I didn’t quite catch that. So you had a fuel contract that’s made and that caused you to deactivate a plant or –?

Oh no, I’m sorry. That was just the termination of a fuel contract and it kind of relates to not eating as much of our fuel that we had under contract. Hugh Wynne – Sanford C. Bernstein & Company: Understood. Because of prior deactivations, you no longer needed the supply?

That’s correct. Hugh Wynne – Sanford C. Bernstein & Company: Right, okay. And then I also would like if you wouldn’t mind just a quick clarification of the comments around the Mansfield plant. I got a little bit confused there. I understood that the plant will continue to operate but that your minimized CapEx and in particular, you’re going to defer a water treatment upgrade but that’s not one of these do or die CapEx projects that would be required for continued operation or did I get that wrong?

I think – Hugh, this is Tony. Let me kind of walk you through that. With respect to Mansfield, we’re going to continue making the max spend that’s required for continued operation of that plant. That’s part of the game plan. At Mansfield, however, Mansfield needs a new water treatment facility. It’s about a $200 million facility. It will take about two years to construct that. Because the Mansfield ash disposal site closes on December 31, 2016, essentially that construction project must start no later than January 1, 2015 in order to assure us that we will have it available for continued operation of the plant beyond January 1, 2017. So if we delay that expenditure, it will require us to time differently how we take the Mansfield unit down and when we take it down to accomplish what needs to be done from a water treatment standpoint. Hugh Wynne – Sanford C. Bernstein & Company: Okay. But you would still be operating –

Does that help you? Hugh Wynne – Sanford C. Bernstein & Company: Yes, I believe it does. But you –

It cannot operate after December 31, 2016. Hugh Wynne – Sanford C. Bernstein & Company: Cannot operate but it –

Cannot operate without the water treatment facilities. Hugh Wynne – Sanford C. Bernstein & Company: Got it, okay, great. Thank you very much. That’s it.

Thank you. Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question. Paul Patterson – Glenrock Associates LLC: Good afternoon. Thanks for taking –

Hi, Paul. Paul Patterson – Glenrock Associates LLC: How are you doing?

Good. Paul Patterson – Glenrock Associates LLC: Just really quickly on the hedge change, it sounds like it was a $90 million benefit that you guys saw annually from that. Could you just elaborate a little bit more about what that is? Is that income, is that – did I get it right?

Yes, Paul, yes, you got that right. That would be income. Paul Patterson – Glenrock Associates LLC: Is that pretax or after tax? And when was that part –

Those are expenses. Paul Patterson – Glenrock Associates LLC: Okay, those are –

And what we’re really looking at, Paul, that would be reductions in agent fees, personnel, overall operating costs because you’re not running a retail operation any longer at the same extent that we are today. Paul Patterson – Glenrock Associates LLC: And when would that show up or to show up?

Probably in the latter part of this year. Paul Patterson – Glenrock Associates LLC: Okay.

As we wind down the operations, it will smooth out over time to – Paul Patterson – Glenrock Associates LLC: Is there –

So we’ll see some of it this year, most of it next year. Paul Patterson – Glenrock Associates LLC: Is there any decrease in margin because you guys are taking less risk it looks like instead of derisking the hedging. Is that correct? I mean, is there any other offset that we should think about that or – I mean you can get back – I’ll just follow up with you guys afterwards. The second one that I really have for you guys is, is as you know, there’s this thing called the Edgar principle when we have to deal with affiliated transactions. I know you guys know a lot more about it than I do. Does it apply to you, do you think in this case in the Ohio – the Power Ohio case? And if not, why not and if so, how do you solve it for it I guess?

So we have a market base rate authority and we believe that the PPA is covered under that. Paul Patterson – Glenrock Associates LLC: So as a result of long term contract would be seen as a market transaction, is that what you mean, I’m sorry?

That is correct. So we would not need to be filing at FERC, so we would not have that review process occur. Paul Patterson – Glenrock Associates LLC: Okay, so FERC would not be reviewing this under Edgar.

Right. Paul Patterson – Glenrock Associates LLC: Okay. And then just finally, with the $140 million decrease in FFO, it seems for 2014, we saw a decrease in the first quarter as well. Any trend there or is that just noise or what have you?

Paul, this is Jim. That decrease in FFO, that was attributable that fuel supply contract I talked about that we terminated. And the other portion was associated with the expenditures for our retail repositioning. Paul Patterson – Glenrock Associates LLC: Okay, thanks so much.

Operator, we’ll take one more question.

Certainly. Our final question will come from the line of Greg Orrill with Barclays. Please proceed with your question. Greg Orrill – Barclays Capital: Yes, thanks very much. Thank you for all the information. On Slide 106.

Okay, Greg. Now we’ll all be flipping pages there. Greg Orrill – Barclays Capital: Within the hedged EBITDA, the capacity expense is $150 million higher than the revenue. How much of that is offset in ‘16 if it’s possible to say?

Greg, this is Donny. I think the best way to think about capacity revenue and capacity expense as it’s laid out here is you really have to think about them as completely separate transactions almost. The capacity revenue that we get is a result of bidding our units into the BRAs and into the incremental auctions. We would get that capacity revenue regardless of what we’re doing on the retail side. The capacity expense on the other hand is tied directly to what we do on the retail side. And the revenue that offsets that capacity expense is built into our retail rates. Greg Orrill – Barclays Capital: Thank you.

Okay, Greg, thank you. I’d like thank everyone for joining us on the call today. If we didn’t get to you in the Q&A, please call our IR department and we’d be happy to get back with you. As you heard today, we’re making substantial progress towards our long-term regulated growth strategy in our transmission business. Our Energizing the Future transmission investment initiative is well underway and we are on track to complete the investments we have endebtified [ph] this year while laying the groundwork for future construction efforts. In our distribution business, we now have active rate cases in four states including our proposed plan in Ohio that would help protect customers in the State from both potential market volatility and retail price increases. At the same time in our competitive business, we are taking further steps designed to reduce overall risk while retaining the flexibility to capture future market opportunities. And we intend to continue to reduce our overall cost structure over the next several years. We believe that positive developments we discussed today together with our strong commitment to success, will help us provide long-term value and predictable, sustainable growth to our investors. Again, we appreciate your continued support. Thanks for joining in today.

Thanks everyone.

Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at time and thank you for your participation.