FirstEnergy Corp. · NYSE:FE
FirstEnergy — Q4 2016 Earnings Presentation
29 slides from FirstEnergy's earnings presentation, Feb 22, 2017
Slide 1: 4Q 2016 Earnings Call
4Q 2016 Earnings Call Charles E. Jones, President and CEO James F. Pearson, EVP and CFO February 22, 2017
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, CES Adjusted EBITDA, funds from operations and free cash flow. In addition, Basic EPS-Operating, calculated on a segment basis, is also a non- GAAP financial m
Slide 4: 2016 Highlights
2016 Highlights Financial Summary ■ Reported 2016 GAAP loss of ($14.49) per basic share ■ Reported 2016 Operating (non-GAAP) earnings* of $2.63 per basic share – Difference between GAAP and operating earnings primarily reflect asset impairment/plant exit costs at Competitive Energy Services (CES) se
Slide 5: Strategic Updates
Strategic Updates Regulated Updates ■ Received FERC and PPUC approval to transfer the transmission assets of Penelec and Met-Ed into MAIT ■ On track in 2017 for ~$1 billion in investments through Energizing the Future – Plan to fund future investments through a combination of debt and up to $500M of
Slide 6: Strategic Updates (continued)
Strategic Updates (continued) Competitive Updates ■ Assessing several strategic alternatives to exit competitive markets by mid-2018 – Could include legislative or regulatory solutions, asset sales and/or plant deactivations, alternatives for our retail business, and financial restructuring ■ Announ
Slide 7: Financial Guidance Updates
Financial Guidance Updates 2017 Earnings Guidance ■ 2017 GAAP earnings forecasted to be $2.47 - $2.77 per basic share ■ Increasing 2017 Operating (Non-GAAP) earnings* guidance range to $2.70 - $3.00 per basic share – Increase primarily resulting from competitive operations exit strategy – Lower depr
Slide 8: 4Q 2016 & 2016 Earnings Summary
4Q 2016 & 2016 Earnings Summary ■ Reported 4Q16 GAAP loss of ($13.44) per share and 2016 GAAP loss of ($14.49) per share – Results include special items related to CES asset impairment/plant exit costs resulting primarily from FE’s plan to exit competitive operations by mid-2018 as well as from mark
Slide 9: 4Q 2016 Earnings Drivers
4Q 2016 Earnings Drivers Quarter-over-Quarter (Basic EPS / Operating*) ■ Regulated Distribution +$0.15 / +$0.04: – Results impacted primarily by higher weather-related revenues, partially offset by higher pension/OPEB expense, depreciation and general taxes – Total distribution deliveries increased
Slide 10: Impacts of Potential Tax Reform
Impacts of Potential Tax Reform ■ Too early to speculate on the details of an eventual tax reform proposal, but based on the blueprint released by the House last year, our sense of the impact of potential tax reforms include: – A lower effective tax rate at the utilities could result in lower custom
Slide 11: Appendix
Appendix Quarterly Highlights – FE 4Q 2016 Earnings Call February 22, 2017 11
Slide 12: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings Per Share (EPS) – 4Q 2016 and 4Q 2015 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 13: Reconciliation of GAAP to Operating (Non-GAAP) Earnings
Earnings Per Share (EPS) – 2016 and 2015 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 weighte
Slide 14: Consolidated GAAP and Special Items
FE Corp. Income Statements – 4Q 2016 and 4Q 2015 Consolidated GAAP and Special Items (In millions, except per share amounts) Quarterly Highlights – FE 4Q 2016 Earnings Call February 22, 2017 14
Slide 15: Consolidated GAAP and Special Items
FE Corp. Income Statements – 2016 and 2015 Consolidated GAAP and Special Items (In millions, except per share amounts) Quarterly Highlights – FE 4Q 2016 Earnings Call February 22, 2017 15
Slide 16: 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) * Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by the weighted average basic share
Slide 17: 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 18: 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 19: 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 20: Base Rate Case Filings – Regulatory Update
Base Rate Case Filings – Regulatory Update ■ New Jersey – On April 28, 2016, JCP&L filed tariffs with the NJBPU proposing a general rate increase associated with its distribution operations, which requested approval to increase operating revenues by approximately $142M with a hybrid test year for 12
Slide 21: West Virginia – Regulatory Update
West Virginia – Regulatory Update ■ Mon Power RFP – Mon Power identified a capacity shortfall in its 2015 Integrated Resource Plan – Mon Power has updated its load forecast from the 2015 IRP and seeks to satisfy its capacity shortfall through a combination of approximately 1,300 MW (UCAP) of generat
Slide 22: MAIT Transmission – Regulatory Update
MAIT Transmission – Regulatory Update ■ MAIT and JCP&L to update their respective transmission rates – On October 28, 2016, MAIT and JCP&L filed under Federal Power Act section 205 a “forward-looking” formula rate for recovery of MAIT’s and JCP&L’s transmission costs; requested that rates become eff
Slide 23: Financial – Liquidity
Financial – Liquidity Available Liquidity ($M) FE FES FET FEU FE Corp. Consolidated1 Revolving Credit Facility $ 500 $ 1,000 $ 4,000 $ 5,000 Short-Term borrowings – – – (2,650) (2,650) Letters of Credit (LOC) – – – (9) (9) Total Utilization – – $ (2,659) $ (2,659) Available Credit Capacity $ 500 $ 1
Slide 24: Financial – Parental Guarantees
Financial – Parental Guarantees FirstEnergy Corp. (Parent) Competitive Regulated Corp/Other $M Expiration $M Expiration $M Expiration Energy-Related & Retail Contracts $12 2017 – – – – Deferred Compensation Arrangements $139 – $184 – $236 – Other1 $3 2016-2017 $4 2030 $3 – Total FE Corp. Guarantees
Slide 25: Financial – Potential Collateral Requirements
Financial – Potential Collateral Requirements ($M) As of December 31, 2016 Competitive Utilities Total At Current Credit Rating $10 $0 $10 Upon Further Downgrade $0 $48 $48 Surety Bonds1 $265 $102 $367 Maximum Potential $275 $150 $425 1 Surety Bonds are not tied to a credit rating. Surety Bonds impa
Slide 26: Financial – Consolidated Long-Term Debt Maturities
Financial – Consolidated Long-Term Debt Maturities FE Corp. FEU FET FES AE Supply FEGEN / FENUGEN ($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 5.90 4.53 6.15 4.61 3.47 4.85 4.
Slide 27: Financial – Outstanding Debt by Legal Entity
Financial – Outstanding Debt by Legal Entity ($M) Hold Co. FE At 12/31/2016 Hold Co. Short-term Debt 2,675 Long-term Debt 4,200 Debt Subtotal 6,875 Premiums 2 Unamortized Issuance Costs (11) Total Balance Sheet Debt 6,866 Utilities Ohio Cleveland Toledo Penn Metropolitan Pennsylvania Jersey Mon Poto
Slide 28: 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 On 02/03/2017 Moody’s upgraded the issuer and senior unsecured ratings of: - West Penn Power Company to A3 from Baa1; the senior secured ratin
Slide 29: Financial – Credit Providers
Financial – Credit Providers 24 financial institutions provide ~$6.4B aggregate credit commitment Bank of America Ind & Comm Bank of China ($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 Term Loans 1