Firstenergy Corp. · NYSE:FE
Firstenergy — EEI Financial Conference 2018
35 slides from Firstenergy's conference presentation, Nov 9, 2018
Slide 1: A Renewed and Regulated Focus
Exhibit 99.1 FirstEnergy A Renewed and Regulated Focus Charles E. Jones, President and CEO EEI Financial Conference San Francisco, CA November 2018
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), Operating earnings (loss) per share, Operating earnings (loss) per share by segment, funds from operations and free cash flow. Generally, a non-GAAP fin
Slide 4: Agenda
Agenda ■ FirstEnergy Overview ■ 2018 Achievements CUSTOMERS 6M 6M ORGANIC ■ Regulated Investments GROWTH RESILIENCY OPPORTUNITIES ETF D&I STRATEGY SAFETY FIRST – Transmission INVESTMENT GRADE EXECUTION RELIABILITY TRANSMISSION – Distribution R E G UCAGR L AT E D DIVIDEND FORMULA RATES ■ EmT and ESG
Slide 5: FirstEnergy Overview
FirstEnergy Overview OUR MISSION We are a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger. Regulated Plants 230, 345 and 500 kV Transmission Lines Utility footprint $39B ~6 Mil
Slide 6: 2018 Achievements
2018 Achievements JANUARY JULY SEPTEMBER $2.5B equity issuance and Filed JCP&L Reliability Plus Announced new organizational Restructuring Working Group infrastructure investment plan structure (FE Tomorrow) AUGUST NOVEMBER FEBRUARY Grid Mod (DPM)/TCJA Published 2018-2021 Financial Filed distributio
Slide 7: Investing for Growth in Transmission
Investing for Growth in Transmission $ Planned capital investment of $ 4.7 up to $1.2B per year 2018 thru 2021 20B+ BILLION FUTURE Expected rate base CAGR (2018-2021) at OPPORTUNITIES our three formula rate transmission beyond 2021… 11% companies (ATSI, TrAIL, MAIT) Of our planned transmission inves
Slide 8: Energizing the Future Facts and Customer Benefits
Energizing the Future Facts and Customer Benefits EEI Financial Conference November 2018 8
Slide 9: Investing for Growth in Distribution
Investing for Growth in Distribution Planned capital investment of $1.6B in 2018 and up to $1.7B per $6.2-$6.7 BILLION CUSTOMER year, 2019 thru 2021 SERVICE ORIENTED GROWTH Expected rate base CAGR (2018-2021) for our regulated distribution utilities 5% Of our planned distribution investment is recov
Slide 10: Emerging Technologies (EmT)
Emerging Technologies (EmT) Focused on our Customers, Energized by Our Employees Empower: Customers through personalized solutions ■ Limited initial investments ■ Services focused OPPORTUNITIES: Your FirstEnergy As a Service, Distributed Energy Resource Aggregator Expand: Sustainable solutions for a
Slide 11: Environmental, Social, Governance (ESG)
Environmental, Social, Governance (ESG) We are a forward-thinking electric utility powered by a diverse team of employees committed to making customers’ lives brighter, the environment better and our communities stronger. Build a sustainable business with… FE has a strong Diverse Team of Customers’
Slide 12: FE Tomorrow Update
FE Tomorrow Update Right-sizing Shared Service Organization Incremental Shared Service Savings ■ Cost reductions ~$300M related to the ■ Identified ~$85M of savings in 2019 support of the competitive business – ~$50M reduction of O&M and Interest – Reduces 1/3 of Shared Services costs – ~$35M reduct
Slide 13: 2018-2019 Operating EPS Guidance
2018-2019 Operating EPS Guidance + Increased wires revenues + Transmission rate base growth + FE Tomorrow savings + Lower effective tax rate $2.60/sh $2.55/sh + 2019 midpoint 2018 revised midpoint $2.45 – $2.75 $2.50 – $2.60 range (1) range (2) - – Higher depreciation – Higher general taxes +8% $2.4
Slide 14: 2018-2021 Operating EPS CAGR
2018-2021 Operating EPS CAGR Affirming our 6% - 8% operating EPS CAGR target 6% - 8% Growth (excludes Ohio DMR) $2.15 + T&D growth opportunities + Organic utility growth + FE Tomorrow initiatives 2018F Original – Depreciation and general taxes 2021F Guidance Midpoint Load growth (excluding Ohio DMR)
Slide 15: Dividend Policy
Dividend Policy ■ On November 9, 2018, The Board of Directors approved a dividend policy ■ Effective beginning with the March 1, 2019 dividend: – A $0.02 per share increase; quarterly dividend will be $0.38 per share or $1.52 annualized per share in 2019 (1) $0.38 + 55-65% per share 6% Resuming divi
Slide 16: FE's Value Proposition
FE’s Value Proposition Ticker: FE A premier customer-focused, pure-play regulated utility Driving sustainable, long-term regulated Improving balance sheet with investment-grade earnings growth and a competitive dividend credit ratings 10 distribution utilities, Proven track record of 6M customers, 6
Slide 17: Appendix
Appendix EEI Financial Conference November 2018 17
Slide 18: 2019 Operating EPS Guidance
2019 Operating EPS(1) Guidance Projecting 8% weather-adjusted, year-over-year Operating EPS growth 2019 Operating EPS Guidance Range Regulated Distribution $2.16 – $2.36 Regulated Transmission $0.81 – $0.89 $2.60 Corp / Other ($0.52) – ($0.50) $2.55 $2.45 – $2.75 $0.85 $0.75 Transmission +$0.10 Rate
Slide 19: 2018F GAAP to Operating (Non-GAAP) Earnings Reconciliation
2018F GAAP to Operating (Non-GAAP) Earnings(1) Reconciliation 2018 Forecast Regulated Regulated Corporate/ FirstEnergy (In $M, except per share amounts) Distribution Transmission Other Consolidated 2018F Net Income (Loss) attributable to Common Stockholders (GAAP) $1,150 – $1,445 $400 – $410 ($725)
Slide 20: 2019 FFO and FCF Forecast
2019 FFO and FCF Forecast FE Consolidated ($ Millions) 2019F Cash from Operations (GAAP) $2,590 – $2,790 Working Capital (1) (25) – (55) Pension Contributions – Funds From Operations (FFO) (Non-GAAP) $2,565 – $2,735 Capital Expenditures (2,850) – (2,950) Cash Before Other Items ($285) – ($215) Worki
Slide 21: Financing Plan (2018-2021)
Financing Plan (2018-2021) Committed to maintaining investment-grade credit ratings FE Corp Regulated Distribution Year Entity Amount Purpose Year Entity Amount Purpose FE Corp Up to $628M New tax notes to FES creditors 2018F ME Up to $500M $300M at 7.7% maturing 1/15/19 2019F FE Corp Up to $1.25B $
Slide 22: Pension/OPEB Overview
Pension/OPEB Overview Significant improvement in funded status projected through 2021 Qualified Pension Plan Projected Funding Status – Qualified Pension Plan ■ 2018 investment return of 0.1% (YTD 9/30/18) PBO Plan Assets 10,000 9,747 9,762 9,759 9,733 9,679 ■ $1,250M cash contributions in Jan. 2018
Slide 23: Capital Expenditures Forecast Summary
Capital Expenditures Forecast Summary $11B – $12B in capital investments 2018-2021 ~55% based on formula rates Annually 2018F 2019F – 2021F FE Consolidated Total $2.9B $2.8B - $3.0B ($ Millions) 2018F 2019F 2020F 2021F Regulated Distribution $1,600 $1,600-$1,700 $1,500-$1,700 $1,500-$1,700 (~40% for
Slide 24: Regulated Distribution Capital Plan (2018-2021)
Regulated Distribution Capital Plan (2018-2021) $6.2B – $6.7B in capital investments 2018-2021 $ Millions 2018F 2019F 2020F 2021F Ohio $355 $505 - $510 $480 - $545 $490 - $555 Stated 70 70 70 70 Formula 285 435 - 440 410 - 475 420 - 485 Pennsylvania $640 $590 - $595 $500 - $515 $485 - $495 Stated 40
Slide 25: Regulated Distribution Rate Base Growth (2018-2021)
Regulated Distribution Rate Base Growth (2018-2021) $M $18,000 $16,000 $14,000 MD $12,000 WV $10,000 NJ $8,000 PA OH $6,000 $4,000 $2,000 $0 2018F 2019F 2020F 2021F EEI Financial Conference November 2018 25
Slide 26: Weather-Adjusted Distribution Deliveries 2018F-2021F
Weather-Adjusted Distribution Deliveries 2018F-2021F Total Deliveries M MWH 2018F 2019F 2020F 2021F CAGR % Sub-Total 53.4 53.3 52.7 52.4 -0.7% Residential OH 16.8 16.9 16.7 16.7 -0.3% PA 18.6 18.1 17.8 17.8 -1.5% 2018F-2021F WV 5.4 5.7 5.7 5.6 1.0% M MWH 2018F 2019F 2020F 2021F CAGR % NJ 9.3 9.3 9.2
Slide 27: Regulated Distribution Guidance Sensitivities
Regulated Distribution Guidance Sensitivities Estimated Impact of Annual Retail Sales Volumes + / - 1% Change in Residential Deliveries ~$0.03/share + / - 1% Change in Commercial Deliveries ~$0.01/share + / - 1% Change in Industrial Deliveries ~$0.004/share Weather Impact on Residential/Commercial S
Slide 28: Regulated Transmission Capital Deployment Plan
Regulated Transmission Capital Deployment Plan WPP, MP, PE $460M | ~10% JCP&L Tx $670M | ~14% ATSI $1,710M | ~37% $4.7B Up to $1,200M CapEx per year 2018-2021 MAIT $1,700M | ~36% TrAIL Co. $160M | ~3% $ FUTURE 20B+ OPPORTUNITIES beyond 2021… EEI Financial Conference November 2018 28
Slide 29: Regulated Transmission Capital Plan (2018-2021)
Regulated Transmission Capital Plan (2018-2021) Energizing the Future Plan – Phase 2 Up to $4.7B in capital investments $ Millions 2018F 2019F 2020F 2021F ATSI $440 $445 $390 $435 TrAIL Co. 35 65 30 30 MAIT 400 435 415 450 JCP&L 110 140 245 175 WPP, MP, PE 115 115 120 110 Regulated Transmission – To
Slide 30: Regulated Transmission Rate Base Growth (2018-2021)
Regulated Transmission Rate Base Growth (2018-2021) $M $9,000 $8,000 $7,000 $6,000 Stated TrAIL $5,000 MAIT ATSI $4,000 $3,000 $2,000 $1,000 $0 2018F 2019F 2020F 2021F EEI Financial Conference November 2018 30
Slide 31: Benchmarking – Shared Services
Benchmarking – Shared Services ■ Accenture benchmarked each FE Shared Service function across utility peers similar in geography, revenue, assets and customers (1) ■ Made further cost reductions by looking beyond utility peers for best practices, including: – Span of Control – Layers of Management –
Slide 32: Benchmarking – Distribution
Benchmarking – Distribution Distribution Capital Investment (1) Distribution O&M (1) Measure Rank Measure Rank Per Circuit Mile 4 / 15 Per Circuit Mile 4 / 15 Per Customer 5 / 15 Per Customer 7 / 15 Per Substation 2 / 15 Per Substation 2 / 15 Per Pole 4 / 15 Per Pole 4 / 15 FE continues to have sign
Slide 33: Tax Cuts & Jobs Act Status
Tax Cuts & Jobs Act Status Jurisdiction Change in Tax Rate Excess Deferred Income Taxes Ohio ✓ Stipulation filed with PUCO November 2018 Pennsylvania ✓ Order to pass on savings to customers Deferring impact while settlement New Jersey Awaiting final order; Interim rates in effect discussions in prog
Slide 34: Regulatory Calendar
Regulatory Calendar Jurisdiction Key Dates OHIO • PUCO decision on Grid Mod (DPM) /TCJA Settlement (expected)………………………….…………………4Q 2018/1Q 2019 • Distribution Modernization Rider extension filing…………………………………………................................. February 1, 2019 • Base Rate Case freeze ends……………………………
Slide 35: FirstEnergy Investor Relations Contacts
FirstEnergy Investor Relations Contacts Irene M. Prezelj, Vice President Gina E. Caskey, Senior Advisor prezelji@FirstEnergyCorp.com caskeyg@FirstEnergyCorp.com 330-384-3859 330-761-4185 Jake M. Mackin, Consultant mackinj@FirstEnergyCorp.com 330-384-4829 For our e-mail distribution list, please cont