FirstEnergy Corp. · NYSE:FE
FirstEnergy — Q1 2018 Earnings Presentation
34 slides from FirstEnergy's earnings presentation, April 2018
Slide 1: 1Q 2018 Earnings Call
1Q 2018 Earnings Call Charles E. Jones, President and CEO Steven E. Strah, SVP and CFO
Slide 2: 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 uncertainties and readers are cautioned
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). In addition, Operating earnings (loss) per share and Operating earnings (loss) per share by segment are also non-GAAP financial measures. Generally, a n
Slide 4: Financial Highlights
Financial Highlights 1Q 2018 Financial Results ■ Reported 1Q 2018 GAAP earnings of $2.55 per basic share and Operating (non-GAAP) earnings* of $0.67 per share – Reporting earnings for the first time that represent FE as a fully regulated company – GAAP earnings benefited from a $1.2B after-tax gain
Slide 5: Agreement-in-Principle
Agreement-in-Principle ■ On April 23, 2018, FE announced an agreement-in-principle with ad hoc groups of key FES creditors representing (1) a majority of all outstanding secured and unsecured funded debt at FES and its subsidiaries and (2) a majority of Bruce Mansfield certificate holders ■ Agreemen
Slide 6: Guidance and Business Updates
Guidance and Business Updates Guidance Updates ■ Raised our 2018 GAAP earnings forecast to $3.61 - $3.91 per basic share and affirmed 2018 operating (non-GAAP) earnings guidance range of $2.25 to $2.55 per share* ■ Affirmed our long-term operating (non-GAAP) EPS CAGR** projection of 6 to 8 percent t
Slide 7: Business Updates
Business Updates Storm Impacts ■ During March, several Nor'easters caused extensive damage to the eastern portion of our system – A total of 1.2M FE utility customers experienced outages, with JCP&L and Met-Ed service territories hardest hit – Working with utility commissions in New Jersey and Penns
Slide 8: Presentation of Results
Presentation of Results ■ Substantially all operations that previously comprised our CES segment are now presented as discontinued operations in our Corporate/Other segment for 2018 and 2017 – Excluded from Operating (non-GAAP) earnings as a special item ■ Resulted from the deconsolidation of FES an
Slide 9: 1Q 2018 Earnings Results
1Q 2018 vs. 1Q 2017 EPS Variance Basic EPS Operating EPS* 1Q 2018 Earnings Results Regulated Distribution Regulated Transmission +$0.15 +$0.01 +$0.15 +$0.02 Quarter-over-Quarter (Basic EPS / Operating EPS*) Corporate / Other +$1.93 ($0.02) FE Consolidated +$2.09 +$0.15 ■ Reported 1Q 2018 GAAP earnin
Slide 10: Tax Reform Updates
Tax Reform Updates ■ Guidance for 2018 does not include any benefit from tax reform – On January 1, 2018, began deferring these amounts as a regulatory liability until we work through the regulatory process in each jurisdiction ■ This is a complex issue that will be addressed uniquely in each regula
Slide 11: Appendix
Appendix Quarterly Highlights – FE 1Q 2018 Earnings Call April 23, 2018 11
Slide 12: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings (Loss) Per Share – 1Q 2018 and 1Q 2017 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
Slide 13: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings (Loss) Per Share – 1Q 2017 vs. Previously Reported 1Q 2017 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) Quarterly Highlights – FE 1Q 2018 Earnings Call April 23, 2018 13
Slide 14: Consolidated GAAP and Special Items
FE Corp. Income Statements – 1Q 2018 and 1Q 2017 Consolidated GAAP and Special Items (In millions, except per share amounts) Quarterly Highlights – FE 1Q 2018 Earnings Call April 23, 2018 14
Slide 15: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings (Loss) Per Share – Forecast for 2018 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) Quarterly Highlights – FE 1Q 2018 Earnings Call April 23, 2018 15
Slide 16: Federal – Tax Reform
Federal – Tax Reform Past Activities Future Activities • Effective January 1, 2018: Ohio Companies established a regulatory liability for the estimated reduction in federal income tax • No current procedural resulting from the Tax Act schedule • January 10, 2018: PUCO opened a case to consider the i
Slide 17: Federal – Tax Reform
Federal – Tax Reform Past Activities Future Activities • Effective January 1, 2018: MP and PE established a regulatory liability for the estimated reduction in federal income tax resulting • May 30, 2018: Utilities from the Tax Act testimony due • January 3, 2018: WVPSC initiated a proceeding to inv
Slide 18: Pennsylvania – Regulatory Update
Pennsylvania – Regulatory Update ■ Distribution System Improvement Charge Rider (DSIC Rider) – Rider was set to zero when new rates were implemented on January 27, 2017 – Expected to restart when costs exceeded the amount recovered in base rates – If reported ROE exceeds the benchmark of 9.55%, a ut
Slide 19: New Jersey – Regulatory Update
New Jersey – Regulatory Update ■ Consolidated Tax Adjustment (CTA) – In 2014, the New Jersey Board of Public Utilities (BPU) issued an order (Docket No. EO12121072), revising its policy for calculating the CTA: – The time period for the calculation of the savings would look back five years from the
Slide 20: MAIT and JCP&L Transmission – Regulatory Update
MAIT and JCP&L Transmission – Regulatory Update ■ On October 13, 2017, MAIT and certain parties filed a settlement agreement with FERC; agreement is pending approval at FERC – Provides for certain changes to MAIT's formula rate template and protocols – Sets ROE to 10.3% through period ending Decembe
Slide 21: Distribution ROEs
Distribution ROEs 15% 2016 SEET Threshold: 14.8% 11.9% Stipulated Revenue Requirement 12% 10.5% 10.5% 10.5% 9.6% 9% 6% 11.7% 10.9% 10.2% 9.1% 9.1% 9.1% 8.2% 6.8% 3% 4.4% 3.4% 2.1% 0% OE CEI TE JC PP ME PN WPP MP PE-WV PE-MD Earned ROE Allowed ROE Most Recent Public Filings: OH: Significantly Excessi
Slide 22: Ohio
Ohio SEET Filing Summary Riders that Recover Incremental Capital Average Company Net Income ROE Spend Between Rate Cases Include Equity OE $114M $1,116M 10.2% Delivery Capital Recovery (DCR) CEI $42M $1,243M 3.4% Recovers return on and of incremental TE $25M $560M 4.4% investment since last rate
Slide 23: Pennsylvania
Pennsylvania Last Approved Rate Case Statistics(1) Quarterly Earnings Reports Summary YE 2017 Filed Company Allowed ROE Company Rate Base Debt / Equity ROE Rate Base Debt / Equity PN $1,614M 47.4% / 52.6% PN $1,607M 47.9% / 52.1% 10.93% ME $1,386M 48.8% / 51.2% ME $1,412M 47.7% / 52.3% 11.67% Settle
Slide 24: New Jersey
New Jersey Last Approved Rate Case Statistics Allowed Company Rate Base Allowed ROE Debt / Equity JCP&L $2,217M 55% / 45% 9.6% Riders that Recover Incremental Capital Spend Between Rate Cases Include Regulatory Earnings Reports Non-Utility Generation (Rider NGC) Current requirement: None Among
Slide 25: West Virginia
West Virginia Last Approved Rate Case Statistics(1) Quarterly Earnings Report Summary Allowed Company Rate Base Allowed ROE Company Rate Base Debt / Equity ROE Debt / Equity MP MP $2,326M 51.9% / 48.1% 9.1% $2,476M 53.5% / 46.5% Settled PE-WV PE-WV $359M 48.2% / 51.8% 9.1% (1) Reflects assumed rate
Slide 26: Maryland
Maryland Last Approved Rate Case Statistics Quarterly Earnings Report Summary Rate Base Allowed Rate Base Company Allowed ROE Company Debt / Equity ROE G+T+D Debt / Equity D Only PE-MD $581M 48% / 52% 11.9% PE-MD $451M 48% / 52% 6.8% Source: Quarterly Report for twelve months ended December 31, 2017
Slide 27: FE Tomorrow Overview
FE Tomorrow Overview ■ FE Tomorrow will define FirstEnergy’s future organization to support the regulated growth strategy Shared Services Transition Services Objective: Identify the appropriate levels of support for Objective: Implement and manage transition services the regulated business and devel
Slide 28: Financial – Liquidity
Financial – Liquidity Available Liquidity ($M) FE FET FEU FE Corp. Consolidated Revolving Credit Facility $ 1,000 $ 4,000 $ 5,000 Short-Term Borrowings – – (1,200) (1,200) Letters of Credit (LOC) – – (10) (10) Total Utilization – $ (1,210) $ (1,210) Available Credit Capacity $ 1,000 $ 2,790 $ 3,790
Slide 29: FE Obligations
FE Obligations Resulting from FES / FENOC Chapter 11 Filing On March 9, 2018, ($M) FES borrowed the On March 31, 2018, full amount On April 6, 2018, As of March 31, 2018, FE recorded FE paid the full amount pledged, obligations for the On March 31, 2018, remaining but currently not guarantees / FE r
Slide 30: Financial – Potential Collateral Requirements
Financial – Potential Collateral Requirements ($M) Contractual Obligations for Additional Credit AES Regulated FE Corp Total As of March 31, 2018 At Current Credit Rating $1 – – $1 Upon Further Downgrade – $46 – $46 Surety Bonds(1) $1 $109 $236 $346 Maximum Potential $2 $155 $236 $393 (1) Surety Bon
Slide 31: Financial – Consolidated Long-Term Debt Maturities
Financial – Consolidated Long-Term Debt Maturities ($M) FE Corp. FEU FET AE Supply 2,000 1,600 1,200 800 400 0 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 Weighted 7.56 7.09 5.54 5.82 4.06 4.05 4.70 4.08 4.23 3.85 3.38 7.38 3.66 6.44 5.93 7.25
Slide 32: Financial – Outstanding Debt by Legal Entity
Financial – Outstanding Debt by Legal Entity ($M) Hold Co. FE AE Supply Allegheny Allegheny At 3/31/2018 Hold Co. At 3/31/2018 Energy Supply Generating Short-term Debt $ 1,200 Short-term Debt $ - $ 27 Long-term Debt 5,350 Long-term Debt 521 100 Debt Subtotal 6,550 Debt Subtotal 521 127 - - Discounts
Slide 33: Financial – Credit Ratings
Financial – Credit Ratings Corporate Credit Rating (S&P) / Issuer Rating (Moody's) (1) / Issuer Senior Secured Senior Unsecured Outlook As of 4/23/2018 Default (Fitch) S&P Moody's Fitch S&P Moody's Fitch S&P Moody's Fitch S&P Moody's Fitch FirstEnergy Corp. BBB- Baa3 BBB- - - - BB+ Baa3 BBB- stable
Slide 34: Financial – Credit Providers
Financial – Credit Providers 24 financial institutions provide ~$5.2B aggregate credit commitment Bank of America Ind & Comm Bank of China ($M) Bank of New York Mellon JP Morgan Chase Bank of Nova Scotia KeyBank Revolving Credit Facilities $5,000 Barclays Bank Mizuho CIBC Morgan Stanley Vehicle Leas