FirstEnergy Corp. (NYSE: FE), a leading electric utility company, has demonstrated its unwavering commitment to enhancing reliability, modernizing the grid, and supporting the clean energy transition. With a strong financial position, strategic investments, and constructive regulatory outcomes, FirstEnergy is poised to deliver sustainable growth and value for its shareholders.
Financial Highlights
In the fiscal year 2023, FirstEnergy reported annual net income of $1,102 million and annual revenue of $12,870 million. The company's annual operating cash flow stood at $1,387 million, while its annual free cash flow was -$1,969 million, reflecting the company's substantial investments in its infrastructure.For the first quarter of 2024, FirstEnergy delivered GAAP earnings of $0.44 per share, compared to $0.51 per share in the same period of 2023. Operating earnings were $0.55 per share, above the midpoint of the company's guidance, despite the impact of mild winter temperatures on customer usage and demand. FirstEnergy is affirming its full-year 2024 operating earnings guidance range of $2.61 to $2.81 per share, representing a 7% increase over the midpoint of its 2023 guidance.
Business Overview
FirstEnergy is a diversified utility company with operations across the Midwest and Mid-Atlantic regions. The company's core business segments include Distribution, Integrated, and Stand-Alone Transmission, each playing a vital role in serving its customer base of over 6 million across Ohio, Pennsylvania, New Jersey, West Virginia, Maryland, and New York.The Distribution segment, comprising the Ohio Companies and FE PA, represents a rate base of $10.9 billion and serves approximately 4.2 million customers. The Integrated segment, including JCP&L, MP, and PE, has a rate base of $8.7 billion and serves around 2 million customers, while also operating 3,599 MW of regulated generation capacity.
The Stand-Alone Transmission segment, consisting of FET and KATCo, has a rate base of $7.7 billion and owns and operates transmission infrastructure used to transmit electricity across the Midwest and Mid-Atlantic regions.
Regulatory Achievements and Outlook
FirstEnergy has demonstrated its ability to navigate the regulatory landscape and secure constructive outcomes across its service territories. During the first quarter of 2024, the company received approval of a rate case settlement in New Jersey, authorizing a 9.6% ROE and a 52% equity capitalization ratio for JCP&L. In West Virginia, the company received a final order on its base rate case, resulting in a $105 million rate adjustment on a rate base of $3.2 billion, an allowed ROE of 9.8%, and a 49.6% equity ratio.Looking ahead, FirstEnergy has an active regulatory calendar, including the filing of a base rate case in Pennsylvania, seeking an 11.3% ROE and a 53.8% equity ratio, as well as the anticipated filing of a base rate case in Ohio later this year. The company is also seeking approval for the second phase of its distribution grid modernization plan in Ohio, which includes a $421 million, 4-year capital investment program to complete the deployment of 1.4 million smart meters.
Strategic Investments and the Energy Transition
FirstEnergy's $26 billion Energize365 investment program is a key component of its strategy to enhance reliability, modernize the grid, and support the clean energy transition. This multi-year plan includes investments in grid modernization, transmission infrastructure, and renewable energy projects, such as the company's 50 MW solar generation initiative in West Virginia.The company is also actively engaged in enabling the growth of data centers within its service territories, with ongoing dialogues with major players like Quantum Loophole. FirstEnergy's service area offers ample brownfield sites and connectivity to the high-voltage transmission system, positioning it well to support the expanding data center industry.
Furthermore, FirstEnergy is committed to addressing climate change and has pledged to achieve carbon neutrality by 2050 in its Scope 1 emissions. The company's strategy includes reducing sulfur hexafluoride emissions, electrifying its vehicle fleet, and supporting the integration of renewable energy sources through its transmission and distribution investments.
Balance Sheet Strength and Financial Flexibility
FirstEnergy has made significant strides in strengthening its balance sheet and financial position. The company recently completed the $7 billion equity raise, including the $3.5 billion FET Equity Interest Sale to Brookfield, which has resulted in a 25% increase in total equity on the balance sheet as of March 31, 2024.This enhanced financial flexibility enables FirstEnergy to fund its $26 billion Energize365 investment program through organic internal cash flows and utility debt, without the need for additional equity issuances. The company's investment-grade credit ratings from Moody's and S&P further underscore its financial stability and access to capital markets.
Risks and Challenges
While FirstEnergy has demonstrated its ability to navigate the regulatory landscape and execute on its strategic initiatives, the company faces several risks and challenges. These include the ongoing government investigations and legal proceedings related to the HB 6 matter, potential changes in climate change policies and regulations, and the ability to recover costs associated with the retirement of its coal-fired generation assets in West Virginia.Additionally, the company's operations are subject to various environmental regulations, such as the Clean Air Act and the Clean Water Act, which could require additional capital expenditures or changes in operations to ensure compliance.