FirstEnergy(FE) - 2024 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics - The company 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][12] - The company faced headwinds including lower sales volumes due to mild weather and storm activity, impacting Ohio revenues [10][11] - The company achieved a total of 40 ratings upgrades in 2024, marking a return to investment grade status across all subsidiaries [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 the dilution from the sale of a 30% interest in FirstEnergy Transmission [47] Market Data and Key Metrics - The company completed rate reviews in four of five states, derisking 83% of its rate base, resulting in a net annual revenue increase of approximately $450 million [13] - 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 - The company is focused on a comprehensive capital investment program, Energize365, with a total investment of $28 billion through 2029 [37][38] - The new leadership team is implementing an operating model that emphasizes accountability and operational excellence [21][22] - The company aims to maintain a low-risk investment proposition with an attractive total return opportunity of 10% to 12% [39] Management Commentary 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 [51][57] - The company is addressing challenges related to higher financing costs and regulatory changes, particularly in Ohio [33][57] - Management highlighted 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, with core earnings growing by 33% from 2022 to 2024 [29] - The company plans to provide guidance for core earnings and growth rates starting in 2025, with a range of $2.40 to $2.60 per share [31] Q&A Session Summary Question: Insights on the 2025 guidance and O&M pressures - Management anticipates being in the 6% to 8% growth range for 2025, with O&M changes primarily related to the Pennsylvania base rate case settlement [72][74] Question: Thoughts on the Ohio audit report and its implications - Management noted the audit report's focus on capital structure and ROE, indicating a need to reconcile findings in upcoming filings [77][78] Question: Path to achieving the target FFO to debt ratio - Management expects to reach a sustainable FFO to debt ratio of slightly above 14% in 2025, aided by new rates from the Pennsylvania rate case [83] Question: Update on transmission projects and their financial implications - Management anticipates a share of approximately $675 million from selected projects, with financing handled off-balance sheet [85][86] Question: ROE assumptions in the context of core EPS CAGR - Management assumes a consolidated ROE of 9.5% to 10% during the forecast period, with Ohio expected to contribute similarly [102] Question: Update on pension funding status - The company ended the year with a pension funded status of about 84%, slightly down from the previous year [126] Question: Schedule for the Ohio rate case - Management expects to respond to the audit report within 30 days and anticipates a constructive outcome by the end of the year [130]