FirstEnergy (FE) 23 Jul 212021 Q2 Earnings call transcript

Greetings and welcome to the FirstEnergy Corp Second Quarter 2021 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. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Irene Prezelj, Vice President, Investor Relations for FirstEnergy Corp. Ms. you Thank Prezelj. Please begin.

These our various will earnings filings. those subject forward-looking prospects other on to quarter the call. and performance, to Factors SEC welcome the on and in earnings based second statements matters. risks we and of website and under make Today, you from Investors information strategies, current cause Thank expectations are are statements regarding these link statements our to differ actual section uncertainties. by results can earnings and could materially that indicated be found our revenues,

strategic Investors certain We about financial will information todays also between financial highlights discuss that and measures. discussion non-GAAP the financial quarter and and Participants document The Chairperson supports and presentation and Strah; GAAP the Vice non-GAAP Steve can detailed call reconciliations of in be Executive and other Somerhalder measures, the Vice in Chief President Officer, found section Taylor. website. John today's Senior Chief Director, our our include Jon Officer, Financial President and Executive on

also available us session. the Q&A to several executives We for join other have

Now, to Steve. I'll the turn call over

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Thanks, Steve.

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Steve. to turn I'll Now, back it

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to representing million collected interest. the mechanism the $XX July, customers, approved previously plus revenues filing utility were Ohio in to PUCO First, through our approximately all decoupling our that return

supplemental Our our of have utilities testimony Ohio in review quadrennial the filed IV. ESP

We We working here. still range with are are to a collaborative in have resolve Ohio that meeting parties held March to further range broad the feedback XX participants. issues our and since full-scale received first pending from of of committed on

next We for in collaborative are the another preparing meeting few weeks.

through regulatory and FERC. New audits Pennsylvania Jersey, working Ohio, also in are We the

ability costs, and the revenues. energy Finally, lost well year in to New the conservation distribution return Jersey on which million approved April, as $XXX as a certain recover plan, JCP&L's three BPU efficiency includes

year. the first pleased As financial of we're strong the results, in half per our with performance our

We earnings $X.XX half $X.XX and share per we to reaffirming our to of are at the that expect XXXX of range. be guidance top operating

per positive on $X.XX plans, We focused are $X.XX executing on and momentum. our We costs our also third introducing building remain to quarter guidance this of maintaining share.

now progress FirstEnergy substantial transform value you I'll and review quarter update. of our live to and Thank your over of values second financial long-term results deliver making the for are call all Taylor and stakeholders. Jon to the to our time for up We turn to

and per share quarter we of of $X.XX and operating share. Thanks, Steve announced XXXX for morning, good earnings of GAAP the everyone. per second earnings Yesterday, $X.XX

this increased were quarter both include state our second pandemic partially reflect absence of well when last to expenses, the quarter XXXX, of related full growth year, other in prosecution of In XXXX the quarter to from the our of on expenses quarter legislative the second in related as and Steve range. of compared an primarily by distribution XXXX revenues investigation exceeded second from agreement, changes. of As XXXX restrictions absence items as impact related of second the Special costs, second and the incurred we Ohio related this XXXX stopped of investment in earlier tax which offset Total as mentioned, weather-adjusted and decoupling top include deliveries end year. basis charges deferred and guidance lower pandemic lost capital results to the distribution the collecting which increases effect. the many our and regulatory we distribution quarter actual in programs, compared business, the rate

However, usage year-over-year in the a mix flat impact. of earnings resulted customer

Second year quarter of at when XXXX home sales many strict weather-adjusted period lower X% customers under residential orders. than were stay our last the were same

levels pre-pandemic X%. Despite impact closely initiatives in we the average second been higher quarter structural an continues commercial we permanent has look continues. residential customer weather-adjusted quarter in pre-pandemic load customers this weather-adjusted think to average forecast on if about the X% commercial increased to deliveries class longer-term X% in watching and by class was increased to than see usage home of of over load of the second activity and as year higher saw However, from second shift we quarters XXXX. few to be spring, close We lag the industrial the X% this in the past of residential this in XXXX. compared customer trends, about will usage more our could work our fact, at and as Weather-adjusted to increase weather-adjusted XX% quarter levels demand than

in Looking encouraged past recovery demand over industrial are we at class, the steady the the by year.

was quarter XXXX. In the second fact, slightly this compared industrial down of load quarter, to only

credit from was such lower recovered see load Transmission Regulated auto shale In sectors by but in Future revolving related higher more segment, gas other costs the of continue of by the investment higher MAIT We to our quarter the XXXX, which higher not our were steel, offset related net fully financing and to primarily at program. industry, offset in and as transmission that levels. impact our second have load than mining, to to facility borrowings ATSI the industrial Energizing pre-pandemic

Our drove of quarter Corporate in in absence expense. reflect interest our And the tax XXXX, recognized rate investments benefits base of as discrete of results year-over-year higher X%. growth as second transmission the well segment

distribution transmission more operating weather-related This systems, share in recognized earnings the continued share first For consistent drivers XXXX. decoupling the distribution XXXX, first and of offset this $X.XX half were per of half first for to lower in second place expenses year. and investments with half the quarter half that lost the longer our $X.XX year and per are of and result of of the the increase $X.XX in absence this no compared of first was than in the results, sales of that revenues our were XXXX positive

from financial strong year, results improvements helped quarter $XXX on discipline earnings plan $XXX focus the call. adjusted our months with on we our versus million above a last building together noted internal financial million Additionally, and six of operations continued the increase first a increase in on cash our drive first

making our to And debt million issued issued markets in six priced a senior at at at X.XX% all notes respectively. $XXX similar complete, in in and MAIT senior and JCP&L June, plan financing pricing on May, activity, grade In with good year's with progress of this pricing with X.XX%. we at notes Toledo $XXX we Edison million As companies. transactions five X.XX% that debt we continue investment per capital

addition, $XXX million to million week, of credit down commitment quarter In revolving bringing to facilities. earlier during by these remaining our as facilities the borrowings million under we $XXX debt reduce XX. made And the second repaid on June progress our this our $XXX short-term repaying we under

waiver our as this done was voluntary we and historically. We utilize repayment obtain plan going on we facilities the credit bank to needed by While required a DPA, related did operate normal we course credit on basis as for to group. and the not the revolving a have an forward facilities

revolving XXXX. both FET December two we one facilities, FE and utility shared for for in one know, Corp, you our of have expiring As which credit companies is with

with we initiative to our with goal And bank year. months, evaluate to few of consider group to alternatives refinance the and our plan the next of bank before these this work needs. end facilities the equity completing finally, continue Over to we the

distribution to all raise balance and funding that think include non-SIP on emerging options which electric improvement the support an in minority through a fourth of timeframe, the capex We our equity to Based update expect the current would continue grid. in and of quarter. and/or provide sheet expected execution our needs, for we that of to our provide sale ensure cleaner plans substantial assets, proceeds you strategic technologies customer-focused eliminate a transition with transmission

FirstEnergy. time thank your your in interest you take happy always, and to I'd for your As be questions.

the with your from Shahriar Please comes question. line with Guggenheim Partners. question first Our Instructions] [Operator of Pourreza proceed

it have multiple infrastructure the sort kind sale. here, as various increased. many to needs And media assets expected is Mon with out of is consideration been and sort of paper Obviously, mean, equity has it step litigation, just DPA than sale some the So exploring is is figure just base, kind shareholder that strategic the have a main - follow-up, though I then capture mentioned, moving lighter of it asset trying recently. you're in of option. still on you the - the to potential just guess, even came I opportunities potential I'm options, Power Is reported your arbitrage what of the expected.

stage enterprise. as of Power a how confirm stake And see like maybe about we So Mon JCP&L optimization just non-core versus overall can as smaller you a larger versus minority like maybe saying you example? just sizing to the utility a an what potential should think potential

John. is this Shar,

But that our to Steve So, as well. I'll ensuring on, think I that the achieve happy around us do we to if and add balance sheet metrics. for that priority take wants is I'd

of is XX%. We at to will Ohio providing of priority. to of in not the to we've different cost litigation. need We number into you respect made face XX% efficient since balance progress but support the that additional an I sheet have likely We goals we some an tell With with assets, that one and headwinds the get cooking so quarter. tremendous specifics, I'm types with different deal things a got first amount going to would

our that's the a sheet, equity funding around have significant headwinds going we're additional for all priorities it to face. forward. way can We opportunities, a would to acknowledging that are fact We right we're more shareholders, the a amount limits sale think path the capex this additional with provide minority dilution balance current would do fairly and our more in comfortable but confident and achieve getting raise capital needs, we in interest of eliminate assets that that one that of that can we all of our

it. Got

term earnings near accretive credit So and transaction?

Correct. Yes. Correct.

curious you with I'll is signal of it I'm relates construct about it findings. someone can starting PUCO specifically? be do - great, in mean, have which to to agreement a had even and think of place, the following Correct. past pass I statement the more the revisited of this just as move in but if DPA the off Ohio? maybe you this, we to rate light conversations have here. in for overall mean, glad, facts I any great, DPA lastly else, we're How And great the a moving clearly all then we're me

is this Thanks Shar, Steve. question. the for

of with humbling that just took few This company to and think DPA truly DPA, is we I and the our stepped move a moment Ohio. up a the I'm on for quickly start as accountability then company. to comments going terms a in the

a compliant with general. trust. that. humbled not DPA for me penalty the on fully more we're a as DPA, our believe cooperation remain obviously, view the So, requirements positive by confidence very, and to Along with those an DOJ. and steps to leader to the continue as company step team but this we be many only to the as it, very of significant that very it fulfilling for for I and and restore a path down will also the important we the We're accountability acknowledge going well within of Globally, but as as with take requirements us, we way, organization, point, continued very for the do paid all focused is company for really inflection in the the stay

a much have we We at a walk great better forward. create through this challenge, opportunity can much as that show to a better really path we company

do that see ethics center, at looking really will we're added to be this organization. forward change within every that it and integrity level and you having So, and will

I wanted DPA. make in those statements to So, just the

it's As a it Ohio, to good question. pertains

another weeks. hoping We within one We're several right We've the meeting have a next underway had now. to collaborative meeting. organize

much, to terms restoring want significant make too and process. speculate and of we're in we process not can confidence respect So, that but trust progress the that regulatory we in confident

hope for we everything So, that's collaborative. put collective it's the that agenda can our the on

would with base also come have distribution I we our believe able to a deal back to with a ESP be we rate time, one those table it bit, elements I Relative and of to to very that that point the are not what pursuing On revenue, around in the refund accomplished little we're case of question from it, discuss willing reasonable to are the lost with Ohio decoupling. time table, the our up Shar, that just discuss. solution. get to IV, regard

for DPA, rate think now pathway open it's more the forward us, opportunities case up that will reestablishment the a Ohio. of base the behind have and requirement I in We XXXX

best actually next it. luck, appreciate and Terrific. Thank much the so you I Steve, in trying to through phase. of get Thank you.

Shar. you, Thank

of next with Jeremy question JP question. Tonet from your line comes proceed Please Morgan. the with Our

just to that is follow-up that is guess the - it clarify have difficulty] [technical it's seems want is quarter the bit here, during with want of to fourth or updated fourth that while quarter I quarter update, just a earnings fourth off. a I is that, quarter and like

So, everything valuation if about does just wondering, interest formal announcement is at we've book accomplishes last a minority think these like of - kind there. great point? modernizations this And that ending that and guess part seen markers here you I out potential

you? there Just here including all much wondering if is just you'd solving equity shortfalls, have is - it needs how pension what pursue whether

So, Jeremy. This is Jon.

so respect have $X in our 'XX of quarter, fourth update to we'll on now, have and non-SIP plan call, equity in we'll fourth right an not quarter billion financing would for to 'XX. the and fourth So a see, we tell quantum, quarter, the provide with this, so you equity sometime I

$X about dilution. If $X.XX that's you earnings just multiple XX would in regulated $XX assume, I proceeds. a about sold be at and If in that billion share, $X.XX

shifting different guess And the things out on just then possibly bit, federal FERC if some of infrastructure and kind plan, you here gears thoughts had wondering transmission, I some towards a there. coming of

audit see you set that transmission possibly about point, on you there? what what a how happens wondering opportunity see this side kind few the at Just and expanding of on things depending

on This the I've based an good see represents company been you. what our it very Thank opportunity would for say, is from I question. able administration. Steve. current Well, to

the and the value true have can and developed that We now course six to to grid core be through I plan terms construct Congress. and transmission last needed a core the to to that's administration over unleashed support projects approved developed be with seven of infrastructure competency able that is a years competency any of being extract in think reliable and able the

as a good very see company. opportunity So, I for that our

question line of your Stanley. Our next with from Please question. with comes Stephen the proceed Morgan Byrd

just of on been thinking in this know a business so, I rightly just potential of at transmission need a talk a addressing lot grid on, the high terms your at just to but wanted the and you're upgrades, we're how high there's level, spend, excited for you to level improvements, position for are additional what investigation, about DOJ areas focus I adding able that maybe now might we sort in over a terms growth base most to the see or be the forward to areas do of of of growth plan? look in potential hopefully time? a you What bit, of see as particularly

excellent Well, we think I Steve, plan. business we - have have a an base

Let's just start there.

if spend, pipeline very year, per the billion a billion next a transmission to $X $X.X you needed decade call period. a Our it sustainable that's that of two work will span

other particularly with to the and build programs. on So, grid, excited can for central We're technologies. smart the the we our of of some emerging that system house. distribution a and believe about infrastructure well electric about programs relative the as vehicles, that the infrastructure key excited we're opportunity right I renewables transmission as out coming and be excited leveraging going meter I'm might play have battery as program the utility about on also the embracing that storage company forward. they industry approach side smart system our as now an role

all a So, that I center opportunity I think that keep represent to also the in us. equation. great customer the for of try

I to value a the at company install a in best system their as maximize again, technologies on possible that's technologies lowering for low these the So, I ours could are customers think way costs, and T&D think like cost. good in emerging these once

on about those additional reassess As types go and would process from to the sort plans in thinking of of you're is So, of year for followed of a there an through sort process FirstEnergy some sort you growth sort the your of growth in of here could from terms fall here, just thinking your just update a we where of from expect example, next is there natural perspective? go a by continuing planning need? degree

Yes, Steven.

Jon. is this So

we in there's to we have some we work guidance. need need resolve we So, think to through a Obviously, things of before move providing that to Ohio. I that couple issues long-term

We working proceedings, we have through. different five that collaborative to we're the got probably six

clarity So, need to two bit clarity to more we of some once have plan. things, think get a have then can we need a we utilities. for range I And really we you. little have Ohio then long-term more And around think our also to those I providing around certainty in guidance our equity and

compensation as Very things just types fair changes sort you back commitments types of you how Last expect of might to comp, I a to was maybe curious backed into real about these of like factored into agreement. be these the out There's that of compensation point. deferred impacts lot just here. we commitments commitments executive? to of better lay question, executive going prosecution executive think factoring goals to by

don't we've acknowledge compliance for look program for incentive up. talked speaking Stephen, of integrated all already behaviors through. Well, folks a into I that issues are compensation done, this positive What employees. year, we've that to Right? example, we terms acknowledge and So, we've think want goal our raising in

parts in to from at get want other of which integrity challenged we our or ethics an company also be We might view.

and going our company. in in the And to at and moment. as to is we've this each every our to only opening and every puts comments, right every underway day, top each us this as focus company make safety for is stated, important work that integrity of So, openness, it very that, bit it already and is ethics, not but we're prior that

in and compensation ourselves truly company future, every So, make I'm for through propels challenge goals to forward. really while does, sure additional that in like performance a difference the you we will talk matters,

our John a just also and program. out of new best-in-class of very, then very that build really are We Code Conduct ethics the compliance and implementing on mentioned focused

Bank comes your with proceed Our the Julien with America. question of Please next from Dumolin-Smith of line question.

for the the Thank you opportunity. time and

amenable, to O&M a something if if in should will. underway extent past. should addressed affirmed outlook, in forward the and So, the try an the you this ESP restate the of conceivably shot you'll updated you or are re-baseline specifically you the sale year-end, which where you if in minority we're this right, hearing to to you like. outlook a clean a I place provide needs little aspirationally ultimately keep equity within when you'll would if rehash the next just of the have or can to that resolved a of already an at kind or we XX% mean, you to as process single talked and you've here mean, with have conceivably debt differently. some you thought and FFO stakeholders think about bit Ohio turn? including about When be by be Can of be think about could effective program a I effectively, in EPS I

This this is Yes, Jon. Julien, is Jon.

for So, equity I around will clarity think the we plan our fourth quarter. sure, in have

the best resolution a the do get to cash long-term time know don't in at something will And if our that's end year I be with take, provide absolute a I work flow. there. some to including how fantastic. outlook think get position long we you we in parties and to to that of but Columbus down that would point we going be by the earnings would in could

would determined just in I collaborative. the sure, am one year for I here. in Jon's a it points it but way pleased Steve. underscore Ohio resolve is I this to of would end, to be which by do truly issues And Yes. is very

not do but the end the up progress everybody a rush to to true something my with So, that's we minds. and openness that going are process will come is to their table to going hope in unnecessarily, on be

could And balance this not are much equity sure need re-baseline you about as updated sizing just the such of articulated we're baseline Right? here I you solving just the balance needs. and previously to but to in I if debt this? sheet forecast obviously, triangulate appreciate XX% I period otherwise you're created you sheet the want achieve the this to to Ohio here, needs decisions the on you XX% if poised what very we think incrementally. any sure I today, I make for resolution from already overall in clarify to really regulatory want need want make the to from Right? or through just the that mean, Yes, same incremental that commentary be should period, it. FFO understand that's

makes That Yes. sense.

hold year, performing that had plan or somewhat had base probably we plan, go-forward debt our is plan $XXX billion of pension a adjusted our remember, you to levels given debt which our us flat growing million million, our FFO If where $XXX financing going really levels $X financing the a was and included equity.

So, for to headwinds in the Ohio, we'll that extent right. that solving we face be

previously or described? It's otherwise equity base deferred then absolutely. your Yes, with and Right. anything as Ohio ultimately the prosecution,

Correct.

Excellent. All right.

at I'm it a Just jurisdictions high corporate, be mean, Forward, speak clarification FE curious? actually delineating just and steps next just what you but if can that to that all, I level may on just just quick

companies, the way No, business. our mean, centers. from I to it's across our utility all it's entire the corporate

process on the the in different all they're initiatives. executing of today So,

all fourth these into we our will some are and quarter We plan of things assuming our resolved. that that go-forward in part get uploading of the financial that of be plan

with next Research. of line Wolfe comes Please question. Fleishman Our from your proceed the question Steve with

that the in laid about to Jon, equity issuing I just have to that the your ask sales. plan you equation asset in out relative

you like is assets in think that saying multiple, be as of range interest these potentially mentioned kind some use assets? that of XX I a there might the selling

got XX on we Well, think got Puget real XX times I got think transaction, XX in have Duke experience times. CenterPoint that their I times, just

range So, in industry. the I we've what it's in seen the mean of

given on is you And gains tax likely then it I against situation, whatever think of any you there on selling, end kind potential a shields your just up be that confirm taxes, sale? can

billion working to we $X the we're do that. would manner. tax you can't we and that efficient tell We we have that to would extent structure But in could of through utilize. I like it NOLs a

that but we're So, still TBD working something through. that, on

Okay.

I the two, be whether So, between taxes the sales transaction meant itself limited I guess are? should it's there totally or the they NOLs on whatever potential

that's Yes, correct.

Okay.

That's correct.

more Okay. just sale guess aspect. And asset on the question I one

I sold that impact in DPA, So, any change or the is guess, on any kind corporate all? structure. provision with Does in at there of, tracking are that process obviously DPA a assets the your sale asset

Steve, no, to provision the ask Hyun comment DPA. that But in maybe I'm doesn't. to it going on

Steve, FirstEnergy. is the Hyun at CLOs Yes, this here Park,

we're - provision the trigger We Assistant minority transactions U.S. nature. in the of this. the the So, performance would interest a think like of there sure be changing on provision with sale transactions don't don't and triggered same to something that is on that just a that page. a speak are that But a subsidiary Attorneys core probably that like We make by would think would contemplated I that. there, mergers

the proceed Evercore comes Durgesh of with question from with your next Please Our question. ISI. Chopra line

kind are that Thank asset taking you entities, questions. strategic in of for the private these share these could what peer sort advanced who utilities or seeing, looks like having please? you process, you buyers, you my stages, could for Thank it or discussions Maybe highlight were on you. us just you of interest maybe there, sale you're any with just i.e., color

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Right? few just then other And [technical and things. investigation Ohio you. and obviously, a Thank your The clarify There there. amongst are to issues Understood. discussions. difficulty]

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then are sort us these evolve - for as appreciate Steve. maybe discussions I timeline And and watch milestones on of for? some or from there point from that, for this just to investors,

that process. I I process and unfold respect to want to want the the next with meeting

make do want So, significant my to the something. to would hope end that of respect and by mandates simply be year, just but progress process I the the

Markets. Our next the question. your Sophie with with Karp proceed from KeyBanc question of Please line comes Capital

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about we've XX% think I no talked than later XXXX. Sophie, XX% to

over each which probably would I think is our business every improve capex knowing and of that to we from want time spend, in plan, current FFO formula there XX% provides our incremental rate year.

long XX% So, I to like we're and over the to improving XX% term. get spot to would a where

Thank follow-up if a you. it. may. And Got I then

you would So, transaction outlook. be mentioned on once that here, long-term have more the to potential you view in definitive a you a provide position

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can So, the to the extent then the we'll that that that clarity quarter provide around that timeframe. obviously in we fourth have were

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Paul Associates. line Glenrock the with of Please Our next comes proceed Patterson with question question. from your

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Yes. your question. appreciate I

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question, I want then to Okay early in with was clarity, just everything clear on I if the up too that what - case rate more or guys this, in any of just saying might understand you and DPA that respect of Shar's disclosures I make for just sure or and think and I there Ohio, just guess, in the it sort I I terms air how be so clarify, were was that? wasn't It's on clarity. proceed on you to is say actually the have until a you and PUCO to might proceeding the potential more of that basically get sort else, speak the fallout guys

Yes. Paul.

that's it If parties what it's to my point suggested. we early was say, So, would to too be open the but

Okay.

we part May our if we as a parties, other of be would So a file to open needed XX, with was discussions of case that the before that. collaborative there sense to

Have asked. one. a Thanks been so other for great have Okay, your much that thanks questions so much.

you. Thank

Thank with line Scotiabank. proceed question Weisel question. from you. with Please our your of Ladies the and Andrew today comes gentlemen, final

wanted last in things the the for short, Thank the congrats I'll up morning, and investigation identified of clarify, any internal I like minimal first cost call, hadn't outside sounded on indicated new to Ohio. just concern it you issues that on guys, the hour, on big we're milestone. covered so Good lot call and two it keep but certainly a A the you. and DPA,

revealed concern review other that With the that for been mean Is it at review so that to dissolution beyond - no there's of the it's committee, basically point? safe say causes far? is does what's this the done independent

to responsive by coordinate Somerhalder's - type we the we itself. inbound that stated will that think I of had with moved look, the dissolve dissolution really the kind or for maintain issue. he have and of Well, John that, in any reactive behave committee comments, SLC it capability But committee additional and

I really at it it's conclusion. think does represent that its

operations the costs, learned and maybe Forward, on pandemic more put the with FE you give and you FE Okay, so the more finding very as in also as for during cash some improvements permanent flow the me out Then great. O&M's the outlook and O&M broadly processes? expenses, remind thinking about under of particularly know efficiencies, can latest I on numbers capex operating far Forward much your impressive they're fall

Yes.

of absorb increases the goal foreseeable would future. Andrew, think the I the Forward So, part be process, FE inflationary as for any to

corporate spend would through So, to that billion right we and our through on that foreseeable future we utility flat and efforts identified our I'll O&M we between $X.XX different call hold program FE about now, group over efficiencies and what the base expect transformational Forward.

will Thank you, floor the comments. for question-and-answer Strah gentlemen, to ladies our and that turn Mr. concludes back I any final session.

being thanks Thank with today. you everyone very here for much us and

all today, employees to As deliver and that we described continue shareholders, our our we solid FirstEnergy to the to long-term stakeholders seek. transform value progress make

you. talk safe. again please well will Thank to be very soon. and we you So, be And

concludes conference. today’s This you. Thank

You may disconnect this time. lines at you for your your Thank participation.