Firstenergy Corp. · NYSE:FE
Firstenergy — Q1 2018 Earnings Presentation
34 slides from Firstenergy's earnings presentation, Apr 23, 2018
Slide 1: 1Q 2018 Earnings Call
1Q 2018 Earnings Call Charles E. Jones, President and CEO Steven E. Strah, SVP and CFO Exhibit 99.3
Slide 2: Forward-Looking Statements
Forward-Looking Statements April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 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 subjec
Slide 3: Non-GAAP Financial Matters
Non-GAAP Financial Matters April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 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 b
Slide 4: Financial Highlights
Financial Highlights ■ 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 associated with the decons
Slide 5: Agreement-in-Principle
Agreement-in-Principle April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 5 ■ 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
Slide 6: Guidance and Business Updates
Guidance and Business Updates April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call * Per share amounts are based on the number of shares outstanding assuming full impact of dilution from the $2.5 billion equity issuance in January 2018 (538M fully diluted shares). Refer to the appendix (sli
Slide 7: Business Updates
Business Updates April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call ■ 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
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 Earnings Results Quarter-over-Quarter (Basic EPS / Operating EPS*) ■ Reported 1Q 2018 GAAP earnings of $2.55 per basic share – Results include a $1.2B gain from the deconsolidation of FES, its subsidiaries and FENOC ■ Reported 1Q 2018 Operating (non-GAAP) earnings* of $0.67 per share – Refle
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 April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 11
Slide 12: Earnings (Loss) Per Share – 1Q 2018 and 1Q 2017
Earnings (Loss) Per Share – 1Q 2018 and 1Q 2017 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call Per share amounts for the special items and earnings drivers above and throughout this report
Slide 13: Earnings (Loss) Per Share – 1Q 2017 vs. Previously Reported 1Q 2017
April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 13 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)
Slide 14: FE Corp. Income Statements – 1Q 2018 and 1Q 2017
April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call FE Corp. Income Statements – 1Q 2018 and 1Q 2017 Consolidated GAAP and Special Items (In millions, except per share amounts) 14
Slide 15: Earnings (Loss) Per Share – Forecast for 2018
April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call Earnings (Loss) Per Share – Forecast for 2018 Reconciliation of GAAP to Operating (Non-GAAP) Earnings (In millions, except per share amounts) 15
Slide 16: Federal – Tax Reform
Federal – Tax Reform April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call Past Activities Future Activities OH • Effective January 1, 2018: Ohio Companies established a regulatory liability for the estimated reduction in federal income tax resulting from the Tax Act • January 10, 2018: PUCO
Slide 17: Federal – Tax Reform
Federal – Tax Reform April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call 17 Past Activities Future Activities WV • Effective January 1, 2018: MP and PE established a regulatory liability for the estimated reduction in federal income tax resulting from the Tax Act • January 3, 2018: WVPSC i
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 OH: Significantly Excessive Earnings Test filed with 12/31/16 ROE NJ: Base rate case update filed with 6/30/16 ROE PA: PA PUC Bureau of the Technical Utility Services Report filed with 12/31/17 ROE WV: Quarterly reports filed with 12/31/17 ROE MD: Quarterly reports filed with 12/31
Slide 22: Significantly Excessive Earnings Test (SEET)
Significantly Excessive Earnings Test (SEET) square4 PUCO is required to evaluate the earnings of each electric utility’s approved ESP to determine whether the plan produces significantly excessive earnings square4 Calculated pursuant to Ohio statute square4 Modified analysis of FERC Form 1 data; ad
Slide 23: Quarterly Earnings Reports
Quarterly Earnings Reports square4 FERC Form 1 with adjustments/considerations including: square4 Eliminate impact of Generation and Transmission square4 Eliminate all non-operating expenses square4 Make certain normalizations for regulatory purposes (i.e. pension expense, OPEB expense, interest on
Slide 24: New Jersey
New Jersey 2015 2017 2018 Future January 1, 2017: Approved rates effective ($80M annual revenue increase) Rate case must be filed no later than 5 years after approval of IIP Riders that Recover Incremental Capital Spend Between Rate Cases Include square4 Non-Utility Generation (Rider NGC) square4 Am
Slide 25: West Virginia
Quarterly Earnings Reports square4 Vertically integrated state; earnings reports reflect distribution, generation and transmission square4 Modified regulatory analysis of FERC Form 1 data with adjustments including: square4 Pension and OPEB normalization square4 Removes impact of securitized polluti
Slide 26: Maryland
Maryland 1993 2018 Rate case to be filed 3Q18 Riders that Recover Incremental Spend Between Rate Cases Include square4 EmPower Surcharge square4 Surcharge recovery of Company-sponsored energy efficiency and conservation programs square4 Costs consist of O&M but recovered subject to a 5-year amortiza
Slide 27: FE Tomorrow Overview
FE Tomorrow Overview April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call Transition Services Objective: Implement and manage transition services throughout the transition period Current shared services agreement in place through December 31, 2018 Engaged in discussions with FES and FENOC r
Slide 28: Financial – Liquidity
Available Liquidity ($M) Financial – Liquidity FET FEU FE Corp. FEConsolidated 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 C
Slide 29: FE Obligations Resulting from FES / FENOC Chapter Filing
FE Obligations Resulting from FES / FENOC Chapter 11 Filing April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call Pension / OPEB / Other Benefits Surety Bond Support Rail Settlements Secured Credit Facility Energy Contracts & Other Guarantees / Assurances ($M) On March 9, 2018, FES borrowed
Slide 30: Financial – Potential Collateral Requirements
Financial – Potential Collateral Requirements April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call (1) Surety Bonds are not tied to a credit rating. Surety Bonds’ impact assumes maximum contractual obligations (typical obligations require 30 days to cure). FE Corp. provides $200 million cre
Slide 31: Financial – Consolidated Long-Term Debt Maturities
0 400 800 1,200 1,600 2,000 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054 2056 Financial – Consolidated Long-Term Debt Maturities April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call FE Corp. FEU FET Excludes securitization bonds As of March
Slide 32: Financial – Outstanding Debt by Legal Entity
Financial – Outstanding Debt by Legal Entity Totals may not foot due to rounding April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call ($M) 32 Short-term Debt 1,200$ -$ 27$ Long-term Debt 5,350 521 100 Debt Subtotal 6,550 521 127 - - Discounts (16) (26) - Unamortized Issuance Costs (30) - -
Slide 33: Financial – Credit Ratings
Financial – Credit Ratings April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call (1) Ratings shown for AES reflect Moody’s “Corporate Family Rating” (CFR) which are employed for speculative grade issuers On April 2, 2018, S&P Global Ratings affirmed FE Corp's ratings (BBB- issuer, BB+ unsecu
Slide 34: Financial – Credit Providers
Financial – Credit Providers April 23, 2018Quarterly Highlights – FE 1Q 2018 Earnings Call $5,000Revolving Credit Facilities $5,154TOTAL 154Vehicle Leases ($M) Bank of AmericaBank of New York Mellon Bank of Nova Scotia Barclays Bank CIBC Citibank Citizens Bank CoBank Fifth Third Bank First National