FirstEnergy(FE) - 2024 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics - FirstEnergy reported 2024 GAAP earnings of $1.70 per share, with operating earnings at$ 2.63 per share, benefiting from new rates and investments in regulated businesses [9][10] - The company faced headwinds including lower sales volumes due to mild weather and storm activity, impacting overall performance [10][11] - The financial and regulatory milestones achieved in 2024 have strengthened the company's foundation and reduced its risk profile [12][18] Business Line Performance - In the distribution segment, earnings increased by $0.04 per share year-over-year, driven by higher weather-related distribution sales and lower Ohio rate credits [45] - The integrated segment saw earnings rise by$ 0.29 per share, primarily due to new base rates in New Jersey, West Virginia, and Maryland [46] - Standalone transmission business earnings declined by $0.12 per share, impacted by dilution from the sale of a 30% interest in FirstEnergy Transmission [47] Market Data and Key Metrics - The company achieved a consolidated return on equity of 9.4% on a rate base of$ 25.9 billion, an increase from 8.8% in 2023 [54] - The Pennsylvania Commission approved a $225 million base rate case settlement, effective January 1, 2025, enhancing service reliability [14] - The company anticipates investing$ 5 billion in regulated properties in 2025, an increase of approximately 11% over 2024 [36] Company Strategy and Industry Competition - FirstEnergy's strategy focuses on modernizing electric infrastructure and enhancing customer experience while maintaining financial discipline [61] - The Energize365 capital investment program is set at $28 billion through 2029, representing an 8% increase from the previous five-year plan [37][51] - The company aims to maintain its investment-grade credit ratings while exploring a range of financing options for future investments [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a core earnings growth rate of 6% to 8% through 2029, with a focus on regulatory outcomes and operational efficiency [37][58] - The company is addressing challenges related to higher financing costs and regulatory changes, which may impact future earnings guidance [33][57] - Management emphasized the importance of maintaining affordability for customers while investing in infrastructure [120] Other Important Information - The company introduced core earnings as a measure to better reflect the performance of its regulated utilities, excluding volatile components [29][41] - FirstEnergy's pension plan ended the year at approximately 84% funded, with ongoing efforts to mitigate associated risks [126] - The company is actively pursuing opportunities in data center demand, which is expected to contribute significantly to future growth [56] Q&A Session Summary Question: Insights on 2025 guidance and O&M pressures - Management anticipates being within the 6% to 8% growth range for core earnings, with O&M changes primarily related to the Pennsylvania base rate case [72][74] Question: Balance sheet and FFO to debt targets - The company aims to return to a 14% FFO to debt ratio by stripping out unique items from 2024 and benefiting from new rates in Pennsylvania [82][83] Question: Ohio rate case and potential settlements - Management is open to settling cases but anticipates the current Ohio rate case will be fully adjudicated due to its complexity [91][92] Question: ROE assumptions in earnings growth - The forecast assumes a consolidated ROE of 9.5% to 10%, with Ohio expected to contribute similarly [102] Question: Dispatchable generation opportunities in West Virginia - Potential investments in dispatchable generation could range from$ 3 billion to $6 billion over the next 12 to 15 years [106] Question: Pension funding status - The pension plan ended the year at about 84% funded, with rates expected to positively impact future funding [126]