Firstenergy Corp. · NYSE:FE
Firstenergy — Q3 2021 Earnings Presentation
39 slides from Firstenergy's earnings presentation, Oct 28, 2021
Slide 1: Focused on Our Future: 3Q 2021 Strategic & Financial Highlights
Focused on Our Future 3Q 2021 Strategic & Financial Highlights Steven E. Strah, President and CEO K. Jon Taylor, SVP and CFO
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements: This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Such statements are subject to certain risks and uncertainti
Slide 3: Non-GAAP Financial Matters
Non-GAAP Financial Matters This presentation contains references to non-GAAP financial measures including, among others, Operating earnings (loss), Operating earnings (loss) per share (EPS), Operating earnings (loss) per share (EPS) by segment, Free Cash Flow (FCF), and Adjusted Cash from Operations
Slide 4: 3Q 2021 Strategic & Financial Highlights
3Q 2021 Strategic & Financial Highlights Steve Strah, President and CEO Strategic & Financial Highlights – Published October 28, 20214 ■ Ohio regulatory update ■ Remediation of material weakness ■ Transition to a cleaner energy future ■ Strong YTD financial & operating results ■ FET, LLC minority as
Slide 5: Ohio Regulatory Update
Ohio Regulatory Update Steve Strah, President and CEO Strategic & Financial Highlights – Published October 28, 20215 ■ We continue to take a collaborative approach in Ohio ■ Currently engaged in settlement discussions with a broad range of parties to resolve several of our pending cases before the P
Slide 6: Compliance & Governance Updates
Compliance & Governance Updates Steve Strah, President and CEO Strategic & Financial Highlights – Published October 28, 20216 ■ We continue to take additional steps to strengthen our compliance program and instill a culture focused on ethics, integrity, and accountability across our organization – A
Slide 7: Additional Updates
■ On October 28, announced the hiring of Camilo Serna as Vice President of Rates and Regulatory Affairs ■ We are focused on building a smarter electric grid and supporting the transition to a cleaner energy future – RT: Robust pipeline of work to modernize our transmission network and to continue em
Slide 8: Moving FE Forward
Moving FE Forward Steve Strah, President and CEO Strategic & Financial Highlights – Published October 28, 20218 ■ Our customer-focused strategies continue to produce strong financial and operational results ■ Furthermore, I’m proud of our progress to resolve important legacy issues, better support o
Slide 9: 3Q 2021 Earnings Summary
3Q 2021 Earnings Summary Jon Taylor, SVP and CFO Strategic & Financial Highlights – Published October 28, 20219 ■ Reported 3Q 2021 GAAP earnings of $0.85 per share vs. $0.84 per share in 3Q20 – 3Q 2021 results include $0.03 of special items, including exit of generation +$0.11, regulatory charges ($
Slide 10: YTD September 2021 Earnings Summary
YTD September 2021 Earnings Summary Jon Taylor, SVP and CFO Strategic & Financial Highlights – Published October 28, 202110 RD: $1.77 RT: $0.64 Corp: ($0.34) RD: $1.85 RT: $0.63 Corp: ($0.38) Includes ($0.03) from RCF Borrowings ■ Reported YTD 2021 GAAP earnings of $1.57 per share vs. $1.54 per shar
Slide 11: Cash & Credit Facility Updates
Cash & Credit Facility Updates Jon Taylor, SVP and CFO ■ Our strong results and financial discipline has resulted in adjusted cash from operations of $2.4B – ~$500M favorable vs. internal plan and ~$600M favorable vs. YTD 2020 ■ While we expect a few offsets in 4Q, we increased 2021 Cash from Operat
Slide 12: Financial Strategy Updates
■ Raising our FFO-to-Debt target to 13%; this will provide an ample cushion to the new Moody’s upgrade threshold of 12% – Expect to set the company on a firm glide path to mid-teens ■ As we consider alternatives to raise equity capital, we are currently engaged in a process to sell a minority intere
Slide 13: Earnings Supplement to the Financial Community
Earnings Supplement to the Financial Community Strategic & Financial Highlights – Published October 28, 2021 14. 3Q Earnings Summary and Reconciliation 15. 3Q Earnings Drivers by Segment 16. YTD Earnings Summary and Reconciliation 17. YTD Earnings Drivers by Segment 18. Special Items Descriptions 19
Slide 14: EPS Variance Analysis
EPS Variance Analysis Regulated Regulated Corporate / FirstEnergy Corp. (in millions, except per share amounts) Distribution Transmission Other Consolidated 3Q 2020 Net Income (Loss) (GAAP) $413 $115 $(74) $454 3Q 2020 Basic Earnings (Loss) Per Share (avg. shares outstanding 542M) $0.76 $0.21 $(0.13
Slide 15: Earnings Drivers: 3Q 2021 vs. 3Q 2020
Earnings Drivers: 3Q 2021 vs. 3Q 2020 Regulated Distribution (RD) ▪ Rates & Investments: The implementation of the NJ distribution base rate case and higher rider revenues from capital investment programs in Ohio increased earnings by $0.04 per share. ▪ Weather Demand: Lower weather-related usage de
Slide 16: EPS Variance Analysis
EPS Variance Analysis FirstEnergy Regulated Regulated Corporate / Corp. (in millions, except per share amounts) Distribution Transmission Other Consolidated 2020 Net Income (Loss) (GAAP) $800 $346 $(309) $837 2020 Basic Earnings (Loss) Per Share (avg. shares outstanding 542M) $1.48 $0.64 $(0.58) $1.
Slide 17: Earnings Drivers: YTD September 2021 vs. YTD September 2020
Earnings Drivers: YTD September 2021 vs. YTD September 2020 Regulated Distribution (RD) ▪ Rates & Investments: Higher rider revenues from capital investment programs in OH and PA, and implementation of the NJ distribution base rate case, increased earnings by $0.09 per share. ▪ Weather-Adjusted Dema
Slide 18: Special Items Descriptions
Special Items Descriptions ▪ Regulatory charges: Primarily reflects the impact of regulatory agreements, concessions or orders requiring certain commitments and/or disallowing the recoverability of costs, net of related credits. ▪ Asset impairments: Primarily reflects charges resulting from non-cash
Slide 19: 3rd Quarter 2021 Earnings Results
3rd Quarter 2021 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 2,705 $ 411 $ (33) $ 3,083 $ 1 (a) $ — $ — $ 1 $ 2,706 $ 411 $ (33) $ 3,084 (2) Other 54 4 (17) 41 — — — — 54 4 (17) 41 (3) Total Revenu
Slide 20: 3rd Quarter 2020 Earnings Results
3rd Quarter 2020 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 2,600 $ 408 $ (35) $ 2,973 $ — $ — $ — $ — $ 2,600 $ 408 $ (35) $ 2,973 (2) Other 61 5 (17) 49 — — — — 61 5 (17) 49 (3) Total Revenues 2
Slide 21: 3rd Quarter 2021 vs 3rd Quarter 2020
3rd Quarter 2021 vs 3rd Quarter 2020 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 105 $ 3 $ 2 $ 110 $ 1 $ — $ — $ 1 $ 106 $ 3 $ 2 $ 111 (2) Other (7) (1) — (8) — — — — (7) (1) — (8) (3) Total Revenu
Slide 22: YTD September 2021 Earnings Results
YTD September 2021 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 7,230 $ 1,223 $ (103) $ 8,350 $ 28 (a) $ — $ — $ 28 $ 7,258 $ 1,223 $ (103) $ 8,378 (2) Other 157 10 (45) 122 — — — — 157 10 (45) 122
Slide 23: YTD September 2020 Earnings Results
YTD September 2020 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 7,031 $ 1,185 $ (105) $ 8,111 $ — $ — $ — $ — $ 7,031 $ 1,185 $ (105) $ 8,111 (2) Other 176 13 (47) 142 — — — — 176 13 (47) 142 (3) To
Slide 24: YTD September 2021 vs YTD September 2020
YTD September 2021 vs YTD September 2020 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 199 $ 38 $ 2 $ 239 $ 28 $ — $ — $ 28 $ 227 $ 38 $ 2 $ 267 (2) Other (19) (3) 2 (20) — — — — (19) (3) 2 (20) (3)
Slide 25: Appendix Table of Contents
Appendix TABLE OF CONTENTS Strategic & Financial Highlights – Published October 28, 2021 QUARTERLY SALES INFORMATION 26. TTM Actual Sales by Class 27. TTM Weather-Adjusted Sales 28. TTM Weather Impacts 29. TTM RD ROEs – by State QUARTERLY FINANCIAL INFORMATION 30. 2021 Financial Plan 31. 2021 Financ
Slide 26: Sales by Class
(MWh in thousands) 4Q19 4Q20 1Q20 1Q21 2Q20 2Q21 3Q20 3Q21 TTM 3Q20 TTM 3Q21 Residential 12,848 12,919 13,204 14,890 12,764 12,347 16,091 15,652 54,907 55,808 Commercial 8,978 8,495 8,903 8,630 7,824 8,590 9,589 9,785 35,294 35,500 Industrial 13,616 12,916 13,548 13,258 12,010 13,384 13,560 14,018 5
Slide 27: Weather-Adjusted Sales by Class
Weather-Adjusted Sales by Class Percent change vs. prior year Strategic & Financial Highlights – Published October 28, 2021 (MWh in thousands) 4Q19 4Q20 1Q20 1Q21 2Q20 2Q21 3Q20 3Q21 TTM 3Q20 TTM 3Q21 Residential 12,921 13,418 14,899 15,397 12,669 11,861 15,157 15,200 55,646 55,876 Commercial 9,001
Slide 28: Weather Impacts
Weather Impacts Strategic & Financial Highlights – Published October 28, 2021 OH PA NJ WV MD Total Days % Days % Days % Days % Days % Days % 3Q21 CDD vs Normal 100 17% 32 5% 121 13% 47 8% 104 13% 77 11% CDD vs 3Q20 -22 -3% -94 -12% 31 3% -118 -15% -25 -3% -45 -6% 1,250 1,000 750 500 250 0 Oct-20 Nov
Slide 29: RD Segment – State ROEs
RD Segment – State ROEs TTM 9/30/2021 Strategic & Financial Highlights – Published October 28, 2021 13.4% 10.7% 8.2% 10.4% 9.1% 0% 5% 10% 15% OH PA NJ WV MD Calculations based on: ■ Methodology used in last distribution rate case ■ Net income, adjusted for special and regulatory items consistent wit
Slide 30: 2021 Financial Plan
2021 Financial Plan ■ Raised and narrowed Operating Earnings guidance to $2.55-$2.65 per share ■ Continued annual dividend at $1.56 per share – Fourth quarter dividend declared on September 21, 2021 (payable December 1, 2021) ■ Reaffirmed Capital Expenditures of ~$2.9B – Nearly 2/3 based on formula
Slide 31: 2021 Financial Priorities 3Q21 Update
2021 Financial Priorities 3Q21 Update Strategic & Financial Highlights – Published October 28, 2021 2021 Accomplishments 3Q21 YTD Result Plan Result Plan Operating (Non-GAAP) EPS(1) ~8% above YTD plan ~9% above 2020 YTD actuals (excl. LDR) $0.82 $0.70-$0.80 $2.10 $1.80-$2.10 Adjusted Cash from O
Slide 32: 2021 Earnings Guidance
($0.57) $0.87 $2.20 ($0.53) $0.86 $2.06 Note: 2021F ETRs: RD 20-23%, RT 21-24%, Consolidated 20-23% 2020A ETRs: RD 21.0%, RT 22.9%, Consolidated 21.3% 2020A Operating EPS (2) (542M shares) Original Range: $2.40 - 2.60 2021F Original Operating EPS Midpoint (544M shares) (1) See Slide 3 for informatio
Slide 33: 2020-2021 CFO and Free Cash Flow
2020-2021 CFO and Free Cash Flow ($M) Strategic & Financial Highlights – Published October 28, 202133 (1) Includes settlement agreement and tax sharing payments to the FES Debtors of ($978M) upon their emergence from bankruptcy on February 27, 2020 (2) Includes the non-cash portion of Capital Expend
Slide 34: Credit Ratings
Credit Ratings As of October 28, 2021 Strategic & Financial Highlights – Published October 28, 2021 Most Recent Ratings Actions ■ On July 23, 2021, S&P revised the CreditWatch implications to Positive from Negative on the ratings of FE and its subsidiaries ■ On July 27, 2021, Moody’s revised the out
Slide 35: Consolidated Long-Term Debt Maturities
Consolidated Long-Term Debt Maturities Strategic & Financial Highlights – Published October 28, 2021 $23.3B FACE VALUE AVG RATES FEU FET CORP 4.50% 4.29% 4.50% AVG LENGTH FEU FET CORP 12yrs 11yrs 11yrs $M 74 20 0 30 0 1, 20 0 45 0 65 0 45 0 80 0 1, 00 5 30 0 70 0 15 0 12 5 85 0 60 0 52 5 10 0 60 0 2
Slide 36: Credit Profile
Credit Profile As of October 25, 2021 Strategic & Financial Highlights – Published October 28, 2021 6.5x FFO Leverage upgrade threshold ~35% Targeted FE Corp. HoldCo % of total debt $4.5B Revolving Credit Facilities (RCF) 12% CFO pre-WC/Debt upgrade threshold NA FFO/Debt upgrade threshold Fitch Rati
Slide 37: 2020 GAAP to Operating (Non-GAAP) Earnings Reconciliation
2020 GAAP to Operating (Non-GAAP) Earnings(1) Reconciliation Strategic & Financial Highlights – Published October 28, 2021 2020 Actual (In $M, except per share amounts) Regulated Distribution Regulated Transmission Corporate/ Other FirstEnergy Consolidated 2020A Net Income (Loss) attributable to Com
Slide 38: 2021F GAAP to Operating (Non-GAAP) Earnings Reconciliation
2021F GAAP to Operating (Non-GAAP) Earnings(1) Reconciliation Strategic & Financial Highlights – Published October 28, 2021 (1) Operating earnings exclude special items as described in the reconciliation table above and is a non-GAAP financial measure. (2) Estimate based on a discount rate of ~3% an
Slide 39: 2020 and 2021F Special Items
2020 and 2021F Special Items(1) ■ Regulatory Charges – Primarily reflects the impact of regulatory agreements, concessions or orders requiring certain commitments and/or disallowing the recoverability of costs, net of related credits. ■ Asset Impairments – Primarily reflects charges resulting from n