FirstEnergy Corp. Q2 FY2025 earnings call

• Second quarter GAAP earnings and core earnings performance, with core earnings on track to be in the upper half of the full year 2025 guidance range.
• Through the first 6 months of 2025, $2.5 billion invested in infrastructure through Energize 365, on pace to deploy $5 billion in capital this year, and confident in the $28 billion capital investment plan through 2029 to improve system resiliency and reliability.
• Severe weather in summer strained the system, with commitment to resolving issues quickly and making long-term investments to prevent outages.
• Addressed the Pennsylvania Energy and Innovation Summit, highlighting significant investments in and commitment to Pennsylvania, with $15 billion expected to be invested in the Commonwealth through 2029.
• Transmission system represents a significant growth opportunity, with organic investments expected to drive rate base growth at a 15% compound annual growth rate between now and 2029, and annual transmission CapEx expected to grow from $2.4 billion to $3.4 billion.
• Regulatory and legislative updates in Ohio, West Virginia, and PJM, including progress in Ohio rate case, preparation for West Virginia's 10-year integrated resource plan, and concerns about PJM capacity auction construct.
• Optimization of FirstEnergy for performance, growth, and financial strength, with financial discipline driving cost structure efficiencies and an agile workforce.

In the second quarter, GAAP earnings were $0.46 per share compared to $0.08 in the second quarter of 2024. Core earnings were $0.52 per share for the quarter compared to $0.51 in the second quarter of last year. Through the first 6 months of 2025, core earnings were $1.19 per share, reflecting a strong growth of 19% versus the first half of 2024. Pennsylvania represents approximately 35% of the total rate base and earnings, with FirstEnergy Pennsylvania being the largest utility subsidiary. Since February of this year, the long-term pipeline for data center load has increased over 80% to 11.1 gigawatts from 6.1 gigawatts, and contracted data center load through 2029 has increased approximately 25% since February of this year to 2.7 gigawatts from 2.2 gigawatts.

• Reaffirming 2025 core earnings guidance range of $2.40 to $2.60 per share and on track to deliver results in the upper half of the range.
• Reiterating the 5-year $28 billion base capital investment program with no incremental equity needs in the plan, targeting a compound annual growth rate of 6% to 8% through 2029.
• Offering shareholders a compelling value proposition with a strong growth outlook, demonstrated financial discipline, attractive risk profile, and a targeted shareholder return opportunity of 10% to 12% with upside potential.

• PJM capacity auction construct does not provide the incentives necessary to finance and build the much-needed dispatchable generation in deregulated states.
• Uncertainties in regulatory and legislative processes in states like Ohio and West Virginia that could impact investment and earnings.

Q: Just wanted to kind of clarify on the transmission CapEx upside. Certainly, a lot coming here. Just the 20% increase that you have visibility to in the plan, is that net or gross of the minority interest ownership? And maybe you could just clarify just from an FE shareholder perspective. Just how much CapEx is going to identified that's kind of upside to your 5-year plan today? Is it roughly $2 billion? Or is it more than that?

A: Jon Taylor said CapEx is shown gross, and Brian Tierney said incrementally, it could be $2.3 billion to almost $4 billion.

Q: Just want to dig in on the data center pipeline a little bit more, if you could. Just want to kind of understand what drives the pace of negotiations there? Are there any blocking items to getting capacity online sooner or anything left to do for the contracts to get more of those to go up. Just wondering what drives the pace of conversions?

A: Brian Tierney said it's really customer demand and how quickly people are willing to put their dollars to work that's allowing to move as fast as they are.

Q: Maybe just to start on results, you're tracking ahead of the plan on a number of key items here. Just curious if you can flesh out what is driving that upside versus the plan? And then curious if you'd revisit the guidance range as we get through 3Q or ship that target within the range given the strong results thus far?

A: K. Jon Taylor said most of the favorability to the plan year-to-date is just discipline around operating expenses, and as we get out to the third quarter call, we'll look at where we are for the year and then if it makes sense, we'll adjust the guidance range at that time.

Q: Just on that same transmission CapEx topic, signaling the up to 20% increase. We're only halfway through the year, and it seems like the data center load conversations are progressing fairly rapidly anyway. I'm just wondering could there be further opportunities for upside as you get closer to your roll-forward period could that CapEx outlook rise further in the coming months essentially?

A: Brian Tierney said yes, there could be further opportunities for upside as we go forward in time, but they won't be frivolous in putting upside that they don't see line of sight to in the plan.

Q: A lot of my questions have been asked, but maybe we could just cycle back to or circle back to Ohio regulation for a minute. So you're in this process with the PUCO for a forward test year. We're thinking about affordability pressures with PJM also coming through the system. As you move from the ESP and as you go into the forward test year, maybe 1 piece is what intervenors seem most concerned about through that process? And how would that shift your ability to have an opportunity to earn your allowed ROE and think about regulatory lag?

A: Brian Tierney said they're in the midst of the current base rate case, and he anticipates the new regime will be constructive and look forward to transitioning to that as quickly as possible.

Q: Had another one on the West Virginia generation plans. Are you mainly looking at building new dispatchable generation yourself? Or would you consider buying something that someone else may be developing? I think one of your peers is doing that?

A: Brian Tierney said they're going to look at everything, and select the outcome that makes the most sense for West Virginia for the long term.

Q: First question on data centers, a lot of new disclosures. I appreciate all the details. On Slide 7, can you tell us what's the current level of data center demand you're seeing today? And then it looks like a pretty substantial step-up in the blue bar from 2025 to 2026. Is that a specific customer ramping up? And can you give us a little more detail even around who the customer is or where in terms of which service territory?

A: K. Jon Taylor said active customers today are probably 400 megawatts, and most of this is happening in Ohio, Maryland and West Virginia, with a lot of interest in Pennsylvania.

Q: I have a follow-up on Ohio. Could you talk a little bit about how -- what your strategy is going to be in Ohio regulatory strategy following the conclusion of the current rate case? Kind of like when do you plan to file under the new framework? Will that depend on the certain outcomes in the existing rate case and et cetera?

A: Brian Tierney said it will depend on outcomes in the existing rate case, and K. Jon Taylor said they'll look to have a final decision on the existing base rate case before filing the new rate case and anticipate getting an outcome sometime in the fourth quarter.

Q: I want to follow up on one of David or Carly's questions. Brian, I think you're very clear and you had said, and I hope I heard it correctly, that if you think the solution for the PJM capacity issues or the higher prices are likely to be solved at the state level. If that's correct and my understanding is correct, which state that's in the FE footprint do you think is maybe in the leader or going to be one of the first to solve that problem?

A: Brian Tierney said he doesn't want to pick one, but Pennsylvania has been very active in demonstrating leadership, Ohio relies on the PJM capacity construct, and other states are somewhere in between.