Slide 1: 3Q 2016 Earnings Call
3Q 2016 Earnings Call Charles E. Jones, President and CEO James F. Pearson, EVP and CFO November 4, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements 2 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call 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. Thes
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 and Basic EPS-Operating, each calculated on a segment basis, are also non-GAAP financial measures. Generally, a
Slide 4: Financial Highlights
Financial Highlights ■ Reported 3Q16 GAAP earnings of $0.89 per basic share ■ Reported 3Q16 Operating (non-GAAP) earnings* of $0.90 per basic share 3Q16 Earnings Results * Refer to the appendix (pg.10-14) for reconciliations between GAAP and Operating (non-GAAP) earnings 2016 Earnings Guidance ■ 201
Slide 5: Quarterly Highlights
Quarterly Highlights Regulatory Updates ■ Pennsylvania Rate Case: Filed settlements with PA PUC, which allows for incremental revenue of ~$291M across our four PA utilities; rates are expected to be effective January 27, 2017 ■ New Jersey Rate Case: Reached settlement-in-principle with Rate Counsel
Slide 6: Quarterly Highlights
Quarterly Highlights ■ An accelerated timeframe is necessary so that we can remove lingering uncertainty and ensure that our company is fully focused on the transition to becoming a fully regulated company ■ CES segment to remain cash flow positive each year in 2017 and 2018 Competitive Updates Fina
Slide 7: 3Q 2016 Earnings Summary
3Q 2016 Earnings Summary ■ Reported 3Q16 GAAP earnings of $0.89 per share compared to GAAP earnings of $0.94 per share in 3Q15 – 3Q16 GAAP results include special items totaling $0.01 per share, which includes mark-to-market adjustments, merger accounting for commodity contracts and regulatory charg
Slide 8: 3Q 2016 Earnings Drivers
3Q 2016 Earnings Drivers Quarter-over-Quarter (Basic EPS / Operating*) 3Q16 vs. 3Q15 Earnings Per Share Variance Basic EPS Operating* Regulated Distribution +$0.10 +$0.09 Regulated Transmission +$0.01 +$0.01 Competitive Energy Services ($0.14) ($0.15) Corp/Other ($0.02) ($0.03) FE Consolidated ($0.0
Slide 9: Appendix
Appendix 9 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call
Slide 10: Earnings Per Share (EPS) – 3Q 2016 and 3Q 2015
Earnings Per Share (EPS) – 3Q 2016 and 3Q 2015 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) 10 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call Per share amounts for the special items and earnings drivers above and throughout this re
Slide 11: Earnings Per Share (EPS) – YTD 2016 and YTD 2015
Earnings Per Share (EPS) – YTD 2016 and YTD 2015 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) 11 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call Per share amounts for the special items and earnings drivers above and throughout this
Slide 12: Earnings Per Share (EPS) – Forecast for 2016
12 Earnings Per Share (EPS) – Forecast for 2016 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) 1 Based on current discount rates ranging from 4.00% to 3.75% for the pension plans and 3.75% to 3.50% for the OPEB plans and actual gains on plan assets th
Slide 13: FE Corp. Income Statements – 3Q 2016 and 3Q 2015
November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call 13 FE Corp. Income Statements – 3Q 2016 and 3Q 2015 Consolidated GAAP and Special Items (In millions, except per share amounts)
Slide 14: FE Corp. Income Statements – YTD 2016 and YTD 2015
November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call 14 FE Corp. Income Statements – YTD 2016 and YTD 2015 Consolidated GAAP and Special Items (In millions, except per share amounts)
Slide 15: Ohio – Regulatory Update
Ohio – Regulatory Update ESP IV – Powering Ohio’s Progress ■ Implemented ESP IV on June 1, 2016 ■ ESP IV term is June 1, 2016, through May 31, 2024 – Contemplates base distribution rate freeze for the term of ESP IV – Continues Delivery Capital Recovery Rider, with increases in annual revenue caps t
Slide 16: Ohio – Regulatory Update
Ohio – Regulatory Update ESP IV – Powering Ohio’s Progress ■ PUCO issued its Entry on Rehearing on October 12, 2016 – Denies the Ohio Utilities’ modified Rider RRS proposal – Adopts the PUCO Staff’s recommendation of Rider DMR with modifications – Rider DMR should be grossed up for taxes to the prev
Slide 17: Base Rate Case Filings – Regulatory Update
Base Rate Case Filings – Regulatory Update ■ Pennsylvania – On April 28, 2016, each of the PA Utilities filed tariffs with the PPUC proposing general rate increases associated with their distribution operations based upon a fully projected future test year for the 12 months ending December 31, 2017
Slide 18: MAIT Transmission – Regulatory Update
MAIT Transmission – Regulatory Update ■ On June 19, 2015, Met-Ed, Penelec, JCP&L, FET and MAIT made filings with FERC, the NJBPU and the PPUC requesting authorization for Met-Ed, Penelec and JCP&L to contribute their transmission assets to MAIT, a subsidiary of FET – FERC – FERC order issued Februar
Slide 19: 2016F Adjusted EBITDA Competitive Energy Services
2016F Adjusted EBITDA Competitive Energy Services November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call Closed Q1-Q3 Contract Sales: 41m MWh $825 $90 - $100 $815 $920 - $950 CES 2016F Adjusted EBITDA(2) Closed Q1-Q3 Wholesale: 10m MWh(1) $175 Committed Q4 Contract Sales: 12m MWh $210 - $2
Slide 20: Notes on 2016F Adjusted EBITDA Competitive Energy Services
Notes on 2016F Adjusted EBITDA Competitive Energy Services 20 Closed Q1- Q3 Contract Sales: Includes actual physical volume of contract sales through 09/30/2016. Contract Rate represents average realized rate based on actual committed contract prices and customer usage. Supply Cost rate repres
Slide 21: Net Income (Loss) to Adjusted EBITDA Reconciliation
Net Income (Loss) to Adjusted EBITDA1 Reconciliation Competitive Energy Services 21 ($ Millions) 2016F Net Income (Loss) – GAAP $(1,200) - $(1,125) Special Items (after tax)1 1,425 – 1,375 Operating Earnings (Loss) $225 - $250 Income Taxes2 130 – 145 Interest Expense, Net 150 – 145 Depreciation 390
Slide 22: Financial – Liquidity
Available Liquidity ($M) Financial – Liquidity CES FET FEU FE Corp. FE Consolidated Revolving Credit Facility $ 1,500 $ 1,000 $ 3,500 $ 6,000 Short-Term borrowings – (250) – (2,250) (2,500) Letters of Credit (LOC) – – – (9) (9) Total Utilization – $ (250) $ (2,259) $ (2,509) Available External Credi
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 $28 2017-2030 – – – – Deferred Compensation Arrangements $136 – $179 – $229 – Other $4 2016-2017 $4 2030 $4 – Total FE Corp. Guarantee
Slide 24: Financial – Potential Collateral Requirements
Financial – Potential Collateral Requirements November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call 24 ($M) Note: Surety Bonds are not tied to a credit rating. Surety Bonds impact assumes maximum contractual obligations (typical obligations require 30 days to cure). As of September 30, 20
Slide 25: Financial – Consolidated Long-Term Debt Maturities
Financial – Consolidated Long-Term Debt Maturities FEGEN / FENUGEN FE Corp. FEU FES / AE Supply FET Excludes securitization bonds As of September 30, 2016 ($M) 25 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call 0 400 800 1,200 1,600 2,000 2,400 2016 2018 2020 2022 2024 2026 2028 203
Slide 26: Financial – Outstanding Debt by Legal Entity
Financial – Outstanding Debt by Legal Entity ($M) Totals may not foot due to rounding 26 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call Short-term Debt 2,725 Long-term Debt 4,200 Debt Subtotal 6,925 Premiums 4 Unamortized Issuance Costs (9) Total Balance Sheet Debt 6,920 Short-term
Slide 27: Financial – Credit Ratings
Financial – Credit Ratings 27 November 4, 2016 Quarterly HighLIGHTS – FE 3Q 2016 Earnings Call Corporate Credit Rating (S&P) / Issuer Rating (Moody's) (1) / Issuer Default (Fitch) Senior Secured Senior Unsecured Outlook S&P Moody's Fitch S&P Moody's Fitch S&P Moody's Fitch S&P Moody's Fitch FirstEne
Slide 28: Financial – Credit Providers
Financial – Credit Providers $6,000 Revolving Credit Facilities Term Loans $7,449 TOTAL 158 Vehicle Leases 87 Letters of Credit (LOC) $7,200 SUB-TOTAL 1,200 Sale Leaseback LOC 4 ($M) Bank of America Bank of New York Mellon Bank of Nova Scotia Barclays Bank BBVA BNP Paribas CIBC Citibank Citizens Ban