FirstEnergy Corp. · NYSE:FE
FirstEnergy — Q1 2017 Earnings Presentation
28 slides from FirstEnergy's earnings presentation, 2017
Slide 1: 1Q 2017 Earnings Call
1Q 2017 Earnings Call Charles E. Jones, President and CEO James F. Pearson, EVP and CFO
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements: This presentation includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management's intents, b
Slide 3: Non-GAAP Financial Matters
Non-GAAP Financial Matters This presentation contains references to non-GAAP financial measures including, among others, Operating earnings and CES Adjusted EBITDA. In addition, Basic EPS-Operating, calculated on a segment basis, is also a non-GAAP financial measure. Generally, a non-GAAP financial
Slide 4: 1Q 2017 Results Summary
1Q 2017 Results Summary 1Q17 in Review ■ Excellent operational performance across the company ■ Continue to execute regulated growth initiatives ■ Encouraged by recent energy policy discussions 1Q17 Earnings Summary ■ Reported 1Q17 GAAP earnings of $0.46 per basic share ■ Reported 1Q17 Operating (no
Slide 5: 1Q 2017 Earnings Drivers
1Q 2017 Earnings Drivers 1Q17 vs. 1Q16 EPS Variance Regulated Distribution Regulated Transmission Basic EPS +$0.15 +$0.01 Operating* +$0.08 +$0.01 Quarter-over-Quarter (Basic EPS / Operating*) Corporate / Other +$0.01 +$0.01 Competitive Energy Services ($0.49) ($0.12) ■ Regulated Distribution +$0.15
Slide 6: Financial Guidance Updates
Financial Guidance Updates CES Guidance Updates ■ 2017 CES Adjusted EBITDA* guidance affirmed at $405M - $475M ■ 2018 CES Adjusted EBITDA* guidance increased to $130M - $250M 2Q17 Earnings Guidance ■ 2Q17 GAAP earnings forecasted to be $0.54 - $0.64 per basic share ■ 2Q17 Operating (Non-GAAP) earnin
Slide 7: Strategic Updates
Strategic Updates FES Updates ■ Our goal remains to complete our transformation into a fully regulated company by mid-2018 ■ Earlier this week, announced the outcome of the arbitration decision in one of FES’ coal transportation contract disputes – Reached a settlement in principle for $109M with BN
Slide 8: Strategic Updates (Continued)
Strategic Updates (Continued) Competitive Updates ■ In January, entered agreement to sell 1,572 MW of AE Supply’s gas and hydro assets for $925M – Transaction expected to close in 3Q17 ■ In April, entered into a $40M agreement to sell a portion of AE Supply’s property and certain assets at the Hatfi
Slide 9: Strategic Updates (Continued)
Strategic Updates (Continued) Legislative Updates ■ In April, bills introduced in the Ohio House and Senate for a proposed Zero-Emission Nuclear (ZEN) resource program – Initial hearing held in the House this week; hopeful that legislation will reach the Governor’s desk before the end of June ■ In A
Slide 10: Appendix
Appendix Quarterly Highlights – FE 1Q 2017 Earnings Call April 28, 2017 10
Slide 11: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings Per Share (EPS) – 1Q 2017 and 1Q 2016 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the w
Slide 12: Consolidated GAAP and Special Items
FE Corp. Income Statements – 1Q 2017 and 1Q 2016 Consolidated GAAP and Special Items (In millions, except per share amounts) Quarterly Highlights – FE 1Q 2017 Earnings Call April 28, 2017 12
Slide 13: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings Per Share (EPS) – Forecast for 2017 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) Quarterly Highlights – FE 1Q 2017 Earnings Call April 28, 2017 13
Slide 14: Ohio – ZEN Legislation
Ohio – ZEN Legislation Perry Davis-Besse The Zero-Emissions Nuclear Resource (ZEN) Program is designed to value the environment, fuel diversity and other benefits that nuclear resources provide. ■ Senate Bill 128 introduced on April 6, 2017; House Bill 178 introduced on April 10, 2017 ■ Term: The pr
Slide 15: West Virginia – Regulatory Update
West Virginia – Regulatory Update ■ Mon Power issued an RFP in December to address its capacity shortfall identified in its 2015 Integrated Resource Plan (IRP) for the combined Mon Power and Potomac Edison-WV jurisdictions – Updated its load forecast from the 2015 IRP and sought to satisfy its capac
Slide 16: MAIT and JCP&L Transmission – Regulatory Update
MAIT and JCP&L Transmission – Regulatory Update ■ MAIT and JCP&L filed to update their respective transmission rates – On October 28, 2016, MAIT and JCP&L filed under Federal Power Act section 205 a “forward-looking” formula rate for recovery of MAIT’s and JCP&L’s transmission costs; requested that
Slide 17: 2017F Adjusted EBITDA
2017F Adjusted EBITDA Competitive Energy Services 2017F ($M) Average $/MWH $51 Contract Rate Closed Q1 less ($19) Supply Cost Contract Sales: 11M MWH less ($10) Delivery Cost $240 $22 avg. net margin $51 Contract Rate Committed Q2-Q4 less ($18) Supply Cost Contract Sales: 26M MWH less ($14 – $15) De
Slide 18: Notes on 2017F Adjusted EBITDA
Notes on 2017F Adjusted EBITDA Competitive Energy Services Closed Q1 Includes actual physical volume of contract sales through 03/31/2017 Contract Sales: Contract Rate represents average realized rate based on actual committed contract prices & customer usage Supply Cost rate represents the ov
Slide 19: 2018F Adjusted EBITDA
2018F Adjusted EBITDA Competitive Energy Services Average $/MWH 2018F ($M) $50 Contract Rate Committed less ($17) Supply Cost Contract Sales: 21M MWH less ($15 - $16) Delivery Cost $360 - $380 $17 - $18 avg. net margin 2018 Open: 43M MWH $29 - $31 Wholesale Price 2018 Financially-Hedged: 1M MWH plus
Slide 20: Notes on 2018F Adjusted EBITDA
Notes on 2018F Adjusted EBITDA Competitive Energy Services Committed Includes expected physical volume of contract sales Contract Sales: Volume is subject to fluctuations due to weather and customer behavior Contract Rate represents average expected rate based on committed contract prices and
Slide 21: Net Income (Loss) to Adjusted EBITDA Reconciliation
Net Income (Loss) to Adjusted EBITDA1 Reconciliation Competitive Energy Services ($ Millions) 2017F 2018F Net Income (Loss) – GAAP ($130) – ($75) ($100) - $0 Special Items (after tax)(1) 220 – Operating Earnings (Loss) $90 - $145 ($100) - $0 Income Taxes(2) 45 - 75 (45) - (10) Interest Expense, Net
Slide 22: Financial – Liquidity
Financial – Liquidity Available Liquidity ($M) FE FES FET FEU FE Corp. Consolidated1 Revolving Credit Facility $ 500 $ 1,000 $ 4,000 $ 5,000 Short-Term borrowings – – – (2,750) (2,750) Letters of Credit (LOC) – – – (10) (10) Total Utilization – – $ (2,760) $ (2,760) Available Credit Capacity $ 500 $
Slide 23: Financial – Parental Guarantees
Financial – Parental Guarantees FirstEnergy Corp. Parent Competitive Regulated Corp/Other $M Expiration $M Expiration $M Expiration Energy-Related & Retail Contracts $5 2017 – – – – Deferred Compensation Arrangements $144 – $183 – $241 – Other $2 2017 $4 2030 $3 – Total FE Corp. Guarantees on behalf
Slide 24: Financial – Potential Collateral Requirements
Financial – Potential Collateral Requirements ($M) Contractual Obligations for Additional Credit FES AES Regulated FE Corp Total As of March 31, 2017 At Current Credit Rating $8 $3 – – $11 Upon Further Downgrade – – $50 – $50 Surety Bonds1 $233 $25 $93 $7 $358 Maximum Potential $241 $28 $143 $7 $419
Slide 25: Financial – Consolidated Long-Term Debt Maturities
Financial – Consolidated Long-Term Debt Maturities FE Corp. FEU FET FES AE Supply FEGEN / FENUGEN ($M) 2,400 2,000 1,600 1,200 800 400 0 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 2053 2055 Weighted Avg. Rate of Maturing 6.0 4.53 6.15 4.21 3.47 4.85 4.0
Slide 26: Financial – Outstanding Debt by Legal Entity
Financial – Outstanding Debt by Legal Entity ($M) Hold Co. FE At 3/31/2017 Hold Co. Short-term Debt 2,750 Long-term Debt 4,450 Debt Subtotal 7,200 Discounts - Unamortized Issuance Costs (10) Total Balance Sheet Debt 7,190 Utilities Ohio Cleveland Toledo Penn Metropolitan Pennsylvania Jersey Mon Poto
Slide 27: Financial – Credit Ratings
Financial – Credit Ratings (1) Ratings shown for FES and AES reflect Moody’s “Corporate Family Rating” (CFR) which are employed for speculative grade issuers Quarterly Highlights – FE 1Q 2017 Earnings Call April 28, 2017 27
Slide 28: Financial – Credit Providers
Financial – Credit Providers 26 financial institutions provide ~$6.6B aggregate credit commitment Bank of America JP Morgan Chase ($M) Bank of New York Mellon Keybank Bank of Nova Scotia Lord Abbett Revolving Credit Facilities $5,000 Barclays Bank Mizuho CIBC Morgan Stanley Term Loans 1,450 Citibank