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FirstEnergy Corp.
CEO : Mr. John William Somerhalder II

Quarterly earnings growth(YoY,%)

Jon Taylor says,

Regulatory Priorities and Business Updates

• Several regulatory filings planned for 2023, including new distribution rate filings in New Jersey and Maryland, a rate case in West Virginia, and an electric security plan and infrastructure investment program in Ohio and New Jersey
• Rate cases will address investments made since last rate cases, aim to bring distribution equity returns in line with industry average, and support reliability, resiliency, and smart grid improvements
• Consolidation of Pennsylvania legal entities to simplify legal structure and increase financing efficiency

Financial Matters and Investment Plans

• Agreement with Brookfield for $3.5 billion transaction to improve credit metrics and balance sheet, support capital investment plans, and offset taxable gain with NOLs and tax credits
• 2024 and 2025 capital investment plan increased by 10% to approximately $18 billion with 75% formula rate investments and more than 7% average annual rate base growth beginning in 2024
• Full year 2022 operating earnings were $2.41 per share, slightly above the midpoint of guidance, achieving 12% year-over-year growth on an adjusted basis excluding unique drivers

2023 Financial Outlook and Dividend Policy

• 2023 earnings guidance of $2.44 to $2.64 per share reflects overcoming pension challenge and accelerating O&M into 2022, with focus on strong regulated earnings growth for long-term 6% to 8% growth outlook
• New dividend policy raises targeted payout ratio to 60% to 70% and expects to resume dividend growth subject to Board approval for dividends payable late this year

John Somerhalder says,

2022 Financial Performance

• Full year 2022 GAAP earnings are $0.71 per share and operating earnings are $2.41 per share, which is slightly above the midpoint of their guidance range.
• Lowered holding company debt as a percentage of total debt to 24% from 33% at the end of 2021.

Operational Improvements

• Transitioned to a new five-state operating model and engaged in more than 175 projects across the Company to modernize the way they work and deliver a superior customer experience as part of their FE Forward program.
• Enriched their culture with an unwavering commitment to their core values.

2023 Guidance

• Introduced 2023 guidance of $2.44 to $2.64 per share, representing a 6% growth from their original 2022 midpoint of $2.40 per share.
• Introduced first quarter 2023 guidance of $0.56 to $0.66 per share.

CEO Search Process

• Criteria for the new CEO includes a strong track record of executive leadership within the utility industry, demonstrated ability to execute on the regulatory front, leading operational and financial discipline, and impeccable credibility with external stakeholders.
• The process has been quite active since the beginning of the year, and discussions among the Board and select candidates continue.
• The Board is committed to selecting the right individual to lead their talented team, and they trust that the new CEO will be committed to the path and strategy already in place.

Brookfield’s Super-Core Infrastructure Partners Transaction

• Announced agreement to sell an additional 30% interest in FirstEnergy Transmission LLC to Brookfield’s Super-Core Infrastructure Partners for $3.5 billion, expected to close in early 2024.
• This transaction supports their plans to improve their balance sheet and for approximately $1 billion of incremental capital investments, which they believe will drive long-term value for all stakeholders.

Q & A sessions,

Expected Impact on Stock Movement

• The company is expected to experience significant improvement in earnings year-over-year in 2023 due to cost controls and continued growth in transmission business.
• The reduction in Signal Peak and pension earnings is projected to be offset by above-average growth in the business ex-pension, ex-Signal Peak from new base rates and formula program capital spend in the distribution companies.
• The $3.5 billion transaction with Brookfield is expected to deliver highly attractive, efficient equity financing and support more than 10% increase in the company’s 2024 and 2025 capital investment plans.
• The company plans to file for new distribution rates in New Jersey, Maryland, and West Virginia, consolidate their Pennsylvania legal entities and advance the Ohio grid mod Phase 2 capital investment plan.
• The company’s 2023 earnings guidance of $2.44 to $2.64 per share reflects overcoming the challenge faced related to the pension, and the focus is executing the plan to drive strong regulated earnings growth anchored by increasing transmission business.