Executive Summary / Key Takeaways

• Strategic Transformation Fuels Growth: FirstEnergy has successfully de-risked its business, exiting non-core assets like Signal Peak and resolving legacy regulatory issues, to focus entirely on its regulated utility operations. This strategic pivot, coupled with a refreshed leadership team, is driving a robust capital investment program.
• Accelerated Capital Deployment: The company has significantly increased its 2025 capital investment plan by 10% to $5.5 billion and projects a 30% increase in transmission investments for the 2026-2030 period, targeting an impressive 18% compound annual growth rate in transmission rate base through 2030.
• Data Centers Drive Unprecedented Demand: FirstEnergy is exceptionally well-positioned to capitalize on surging data center demand, with its system peak load projected to increase by nearly 50% (15 gigawatts) by 2035. This demand underpins substantial, recurring transmission investment opportunities.
• Strong Financial Discipline and Outlook: The company is reaffirming its 6% to 8% core earnings compound annual growth rate through 2029, targeting the upper half of this range, supported by strong O&M discipline and constructive regulatory outcomes across its diverse footprint.
• New Generation Opportunities in West Virginia: FirstEnergy is actively pursuing the addition of 1.2 gigawatts of dispatchable natural gas combined-cycle generation and 70 megawatts of solar in West Virginia by 2031, representing a significant $2.5 billion investment opportunity in a supportive regulatory environment.

A Regulated Powerhouse Forges Ahead

FirstEnergy Corp. ($FE), incorporated in Ohio in 1996, has evolved into one of the nation's largest investor-owned electric systems, serving over 6 million customers across Ohio, Pennsylvania, New Jersey, West Virginia, Maryland, and New York. The company's core business is the generation, distribution, and transmission of electricity, underpinned by an extensive network of over 24,000 miles of transmission lines. This foundational infrastructure and its regulated business model are central to FirstEnergy's strategy, emphasizing customer-focused investments, operational excellence, and financial discipline.

The company's history includes significant structural changes that have shaped its current strategic direction. A multi-year effort culminated in March 2024 with the sale of an incremental 30% equity interest in FirstEnergy Transmission (FET), a transformative milestone that de-risked the balance sheet and restored investment-grade credit ratings across all three major agencies. This financial strengthening has been critical in enabling the company's ambitious capital investment plans. Further streamlining its portfolio, FirstEnergy Ventures Corp. exited its non-core Signal Peak mining operations in July 2025, eliminating associated financial and operational liabilities. These actions underscore a clear commitment to a fully regulated, lower-risk business model.

The utility sector is currently undergoing a profound transformation, primarily driven by unprecedented load growth from data centers and the broader push towards electrification. FirstEnergy's service territory, strategically located in the heart of PJM, is ideally positioned to support this demand. The company projects its system peak load to increase by 15 gigawatts, or nearly 50%, from 33.5 gigawatts this year to 48.5 gigawatts in 2035, solely from contracted and pipeline data center customers. This surge in demand necessitates substantial investments in transmission and distribution infrastructure, presenting a recurring growth opportunity for FirstEnergy.

Technological Edge and Infrastructure Modernization

FirstEnergy's operational strategy is deeply intertwined with its commitment to modernizing its electric infrastructure. While the company does not highlight a single, proprietary "core differentiated technology" in the manner of a specialized manufacturing firm, its technological differentiation lies in the strategic deployment and integration of advanced grid technologies across its vast network. Despite lacking proprietary, quantifiable technology differentiators, this approach ensures a robust and responsive infrastructure. This includes Advanced Metering Infrastructure (AMI) for enhanced data collection and customer engagement, smart grid technologies for automated outage detection and restoration, and robust transmission systems designed for reliability and capacity.

For instance, the Grid Mod II settlement in Ohio, approved in December 2024, allocates over $400 million to bring smart meter technology to all Ohio customers. Similarly, the EnergizeNJ program, approved in April 2025, commits $339 million to grid modernization, system resiliency, and substation upgrades in New Jersey, expanding smart grid technology in targeted neighborhoods. These initiatives enable more efficient power delivery, reduce outage times, and enhance system resilience. The Klecknersville Substation in Northampton County, Pennsylvania, a new Met-Ed facility, exemplifies this, providing a new power source for over 5,000 customers and incorporating smart technology to automatically reroute power during outages.

The tangible benefits of these technological deployments are quantifiable in terms of improved reliability metrics, faster restoration times, and increased grid capacity to support growing demand. The strategic intent behind these investments is to build a smarter, more secure grid that meets current customer needs and facilitates future growth, including the significant influx of data centers. For investors, this focus on advanced infrastructure translates into a stable, rate-base driven growth profile, with a high percentage of investments recoverable through formula rates, minimizing regulatory lag and enhancing financial predictability.

Competitive Positioning in a Dynamic Market

FirstEnergy operates in a highly competitive utility landscape, facing both direct and indirect rivals. Its direct competitors, such as Duke Energy (DUK), Southern Company (SO), American Electric Power (AEP), and Exelon Corporation (EXC), are large, diversified utilities with significant footprints in the eastern and midwestern U.S. FirstEnergy's market positioning is characterized by its extensive transmission network and deep regional expertise, particularly in Ohio and Pennsylvania.

Compared to its peers, FirstEnergy's customer bills are, on average, 19% below its in-state peers, and represent only 2.5% of its customers' share of wallet, indicating a strong competitive position in terms of affordability. While direct quantitative comparisons of all competitor financial performance metrics are not publicly detailed, FirstEnergy's stability in regulated markets aligns with the general trends seen in DUK, SO, AEP, and EXC. However, FirstEnergy's historical reliance on fossil fuels has presented vulnerabilities compared to companies like Exelon, which has a strong nuclear focus, or Duke Energy, with its more diversified energy portfolio.

FirstEnergy is actively addressing these competitive dynamics. Its strategic emphasis on transmission infrastructure, particularly through participation in PJM's Regional Transmission Expansion Plan (RTEP) open windows, allows it to leverage its geographic advantage in the middle of PJM. The Valley Link joint venture, formed with AEP and Dominion (D), secured approximately $3 billion in transmission projects from PJM in February 2025, with FirstEnergy's estimated share at $1 billion. This collaboration enhances FirstEnergy's competitiveness in securing future regional network upgrades. The company's proactive management of its supply chain since COVID-19 has also resulted in a diversified supplier base, reducing exposure to single-source risks and enhancing operational resilience.

Indirect competitors include renewable energy developers and technology firms building their own energy solutions. While these entities can erode traditional utility market share, the massive energy demands of AI-driven data centers also create opportunities for FirstEnergy's transmission services. The company's strategy of engaging with data center developers through volumetric commitments and customer credit support aims to protect existing customers while accommodating new load growth.

Financial Performance and Operational Strength

FirstEnergy's financial performance in 2025 demonstrates strong execution of its regulated strategies. For the third quarter of 2025, GAAP earnings were $0.76 per share, and Core Earnings (non-GAAP) reached $0.83 per share, marking a 9% improvement over the same period in 2024. Year-to-date, Core Earnings stood at $2.02 per share, a 15% increase from 2024. This growth was primarily driven by new distribution base rates in Pennsylvania, effective January 1, 2025, which contributed a $225 million annual rate adjustment, and robust transmission rate base growth of 11% overall.

The company's consolidated return on equity (ROE) on a trailing 12-month basis reached 10.1% as of September 30, 2025, exceeding its target range of 9.5% to 10% and representing a 70 basis point improvement from 2024. This reflects effective capital deployment and disciplined management of operating expenses. Through the first nine months of 2025, FirstEnergy invested $4 billion in its regulated utilities, a 30% increase year-over-year. This significant capital expenditure is supported by strong cash flow from operations, which was $2.6 billion for the first nine months of 2025, an increase of over $700 million compared to the prior year.

Liquidity remains robust, with available external liquidity, including cash and cash equivalents, totaling $6.242 billion as of October 27, 2025. The company successfully completed its 2025 financing plan, issuing nearly $6 billion in debt, including $2.5 billion in convertible notes at FE Corp. and $1.35 billion at JCP&L, all significantly oversubscribed. This demonstrates the attractive credit profile of FirstEnergy's utilities and its business mix. The consolidated interest coverage ratio was approximately 5.10 times as of September 30, 2025, well above the covenant requirement.

Outlook and Strategic Growth Initiatives

FirstEnergy is poised for sustained growth, reaffirming its 6% to 8% compounded annual Core Earnings growth rate from 2025 through 2029. The company has narrowed its full-year 2025 Core Earnings guidance to $2.50 to $2.56 per share, targeting the upper half of this range. This outlook is underpinned by an expanded $28 billion Energize365 capital investment program through 2029, representing an 8% increase from its previous five-year plan and translating to a 9% compounded annual rate-based growth.

A significant portion of this growth will come from transmission investments. The company projects a 30% increase in planned transmission capital investments for the 2026-2030 period, which is expected to drive a compound transmission rate base growth of up to 18% per year through 2030, potentially more than doubling the total transmission rate base. These investments are largely in formula rate or formula-like recovery mechanisms, providing real-time returns.

In West Virginia, FirstEnergy is pursuing a substantial generation investment opportunity. Its Integrated Resource Plan, filed in October 2025, proposes adding 70 megawatts of utility-scale solar by 2028 and 1.2 gigawatts of dispatchable natural gas combined-cycle generation by 2031. This $2.5 billion project, if approved, would represent a 35% increase to the company's current regulated generation portfolio and aligns with West Virginia's "50 by 50" energy initiative. FirstEnergy plans to seek regulatory approval for the new gas generation in the first quarter of 2026.

The Ohio regulatory landscape is also evolving. An order on the Ohio base rate case is anticipated in November 2025, after which FirstEnergy plans to file a multiyear rate plan under the new framework established by Ohio House Bill 15. This legislation mandates triennial base rate cases with a three-year forecasted test period, which FirstEnergy views as constructive for capital recovery.

FirstEnergy's dividend policy remains attractive, with the board declaring a quarterly dividend of $0.45 per share payable December 1, 2025, and anticipating total annual declarations of $1.78 per share in 2025. The company targets a payout ratio of 60% to 70% of core earnings, with the dividend expected to grow in line with core earnings. Furthermore, FirstEnergy does not anticipate incremental equity needs for its base investment plan, with additional opportunities potentially funded through a broad range of financing options.

Key Risks and Challenges

Despite a strong outlook, FirstEnergy faces several risks. Economic conditions, including inflationary pressures and the imposition of tariffs, could lead to supply chain disruptions and impact financial performance. The ongoing litigation related to Ohio House Bill 6, despite the completion of DPA obligations, continues to pose reputational and financial risks, with potential adverse effects on cash flows and results of operations.

Environmental regulations, particularly concerning coal combustion residuals (CCR) and climate change policies, introduce uncertainty regarding future capital expenditures and operational changes at power stations. The ultimate impact of new EPA rules and ongoing litigation in this area remains unknown. Regulatory challenges, such as the FERC audit and the Sixth Circuit Court's ruling on the ATSI transmission ROE incentive, could also affect financial conditions.

The PJM capacity market construct, which recently cleared at administratively set caps without adding new dispatchable generation, poses a significant challenge to customer affordability in deregulated states. FirstEnergy is actively advocating for state-led solutions to address this issue, emphasizing the need for cost-effective generation that actually adds capacity.

Conclusion

FirstEnergy Corp. is undergoing a profound transformation, shedding non-core assets and focusing intently on its regulated utility businesses. The company's strategic pivot, combined with a robust capital investment program and a disciplined financial approach, positions it for sustained growth. The surging demand from data centers, particularly within its strategically located footprint, presents an unprecedented and recurring opportunity for transmission infrastructure investments. This, alongside significant new generation projects in West Virginia and constructive regulatory frameworks in key states, underpins a compelling investment thesis.

While challenges such as economic uncertainties, ongoing litigation, and evolving environmental regulations persist, FirstEnergy's commitment to operational excellence, financial discipline, and stakeholder engagement provides a solid foundation. The company's reaffirmed 6% to 8% core earnings CAGR and targeted upper-half performance for 2025, coupled with a strong dividend policy and no anticipated incremental equity needs for its base plan, highlight its potential for attractive total shareholder returns. FirstEnergy's future is energized by its strategic investments and its ability to adapt to a dynamic energy landscape, making it a noteworthy consideration for discerning investors.