FIRSTENERGY CORP Q4 FY2024 earnings call

• 2024 was a year of structural change, de-risking the business from financial and regulatory perspectives.
• Achieved regulatory milestones: completed rate reviews in four of five states, derisking 83% of rate base; Pennsylvania Commission approved $225 million base rate case settlement; approved LTIP 3 in Pennsylvania and Grid Mod II in Ohio; New Jersey BPU approved energy efficiency plan.
• Balance sheet strengthened by selling 30% of FirstEnergy Transmission's equity interest, leading to 40 ratings upgrades in 2024.
• Invested $4.5 billion in 2024 through Energize365, surpassing original plan by 5%.
• Transformed organization, placed 24 individuals in VP level and above roles, built high-performance culture.

In 2024, the Distribution segment saw earnings increase $0.04 year-over-year, primarily from higher weather-related distribution sales and revenues from the Pennsylvania DIS program, but was offset by the Ohio ESP-5 order and higher non-deferred storm costs. The Integrated segment had earnings increase $0.29 per share due to new base rates in New Jersey, West Virginia, and Maryland, and higher weather-related distribution sales, partially offset by a higher effective income tax rate. The Standalone Transmission segment saw earnings decline $0.12 per share, with investment programs increasing earnings by $0.07 per share but offset by dilution from the 30% interest sale of FET. The Corporate segment had losses increase $0.04 per share year-over-year, largely due to the absence of a state tax benefit recognized in 2023, partially offset by lower interest expense.

• 2025 core earnings guidance range: $2.40 per share to $2.60 per share, midpoint at $2.50 per share, representing 5.5% growth from 2024's $2.37 per share.
• Anticipate investing $5 billion in regulated properties in 2025, an increase of ~11% over 2024.
• 2025-2029 core earnings compounded annual growth rate forecast: 6% to 8%.
• Anticipate annual dividend declarations totaling $1.78 per share in 2025, payout ratio 60% to 70% of core earnings.

• Volatility in pension and Signal Peak earnings, which are outside management's control.
• Higher than anticipated financing costs, including significantly higher interest rates.
• Regulatory outcomes such as Ohio DCR revenue caps frozen and removal of a 50-basis point incentive from ATSI transmission rates.
• Weather-related impacts on sales volumes, like mild weather conditions and storm activity not meeting deferral requirements.

Q: Shar Pourreza asked about the 6% to 8% core EPS CAGR and O&M pressure.

A: Brian Tierney responded that they anticipate being in the 6% to 8% range, much of the O&M change is from the Pennsylvania base rate case settlement, and they're focused on O&M discipline.

Q: Carly Davenport asked about balance sheet and transmission projects.

A: Jon Taylor responded that they strip out unique items to get close to the 14% target, and transmission projects' CapEx is in the plan with some off-balance sheet financing.

Q: Nick Campanella asked about Ohio rate case and 6% to 8% CAGR.

A: Brian Tierney responded they anticipate constructive outcomes, and tailwinds like data center impacts could push to upper end of range.

Q: Michael Lonegan asked about dispatchable generation in West Virginia and equity funding.

A: Brian Tierney discussed potential spend in West Virginia and that financing would use cash flow, debt, and equity-like instruments.

Q: Jeremy Tonet asked about bill headroom and pension funding.

A: Brian Tierney said they're at a relative strength in bill headroom, and Jon Taylor mentioned pension ended 2024 at ~84% funded.

Q: Steve Fleishman asked about pension funding update.

A: Jon Taylor said pension ended 2024 at ~84% funded, flat to slightly down from previous year.

Q: Andrew Weisel asked about demand trends and dividend.

A: Jon Taylor discussed residential trends and Brian Tierney said dividend likely grows with core earnings near the 60%-70% payout ratio range.

Q: Anthony Crowdell asked about Ohio legislation and ESPs.

A: Brian Tierney and Jon Taylor discussed moving items from ESP to general rate case and revenue collection through ESP.