Skip to content
    FE
    Earnings call· Mar 2025(Q1 FY25)

    FIRSTENERGY CORP FE

    Apr 24, 2025 Source

    Executive summary

    FirstEnergy Corp. Q1 FY25 — Strong Start with Solid Execution and Reaffirmed Guidance

    FirstEnergy delivered a strong Q1 FY25, driven by solid execution in its regulated businesses, robust capital investments, and financial discipline, leading to a 37% increase in core EPS. The company reaffirmed its FY25 core EPS guidance, targeting the top half of the range, and its multi-year EPS CAGR, supported by a significant capital investment program. Management is actively navigating regulatory changes in Ohio and addressing PJM capacity cost concerns, while pursuing growth opportunities in data centers and new generation.

    Highlights

    5

    • Core earnings increased 37% to $0.67 per share in Q1 FY25, compared to $0.49 in Q1 FY24, driven by regulated business execution and normal weather.

    • Invested over $1 billion in the Energize365 capital program in Q1 FY25, a 15% increase year-over-year, keeping the $5 billion FY25 plan on track.

    • Board approved a 4.7% increase in the quarterly dividend to $0.445 per share, equating to an annual rate of $1.78 per share.

    • Reaffirmed FY25 core EPS guidance of $2.40 to $2.60 per share, targeting the top half of the range, and 6% to 8% core earnings CAGR through 2029.

    • Secured $800 million in new total company investment opportunity from the PJM Valley Link joint venture and other approved projects.

    Concerns

    3

    • Industrial sales volume decreased 3% in Q1 FY25, primarily due to a slowdown in the steel sector tied to automotive demand.

    • PJM capacity auction price increases are a concern for customer affordability, with the New Jersey commission asking for mitigation efforts.

    • Potential for regulatory lag in Ohio if the ESP IV cap is not lifted and a new base rate case is required under the new framework, though management expects it to be manageable.

    Guidance & targets

    8
    CategoryTargetConfidence
    Core EPS
    $2.40 to $2.60 per share, targeting the upper half
    high materiality
    High
    Core earnings compound annual growth rate
    6% to 8%
    high materiality
    High
    Capital investment program
    $5 billion
    high materiality
    High
    Capital investment program
    $28 billion
    high materiality
    High
    Quarterly dividend per share
    $0.445 per share
    medium materiality
    High
    Annual dividend per share
    $1.78 per share
    medium materiality
    High
    Valley Link Transmission Rate ROE
    10.9% base ROE with a 50 basis point incentive
    medium materiality
    Medium
    Valley Link Transmission Rate Equity Target
    60% equity
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Distribution
    Core earnings increased due to new rates in Pennsylvania and stronger customer demand.
    Core earnings increase: $0.10 per share
    		————
    Integrated
    Core earnings increased due to approved base rates in New Jersey and West Virginia (Q1 last year), strong rate base growth in formula rate transmission programs, higher customer demand, and lower O&M.
    Core earnings increase: $0.10 per shareRate base growth: 19% in formula rate transmission programs
    		————
    Stand-alone Transmission
    Core earnings decreased year-over-year due to the final quarter of dilution from the 30% interest sale of FirstEnergy Transmission to Brookfield, despite a 10% rate base increase.
    Core earnings: $0.14 per share (Q1 FY25)Core earnings: $0.18 per share (Q1 FY24)Rate base increase: 10% year-over-year
    		————
    Corporate
    Results improved due to lower financing costs from reduced holding company long-term debt and lower average revolver borrowings.
    Results improved: $0.02 per share
    		————

    Operational metrics

    17
    GAAP EPS
    $0.62vs. $0.44 in Q1 FY24
    Q1 FY25

    Reported GAAP earnings for the quarter.

    Core EPS
    $0.67vs. $0.49 in Q1 FY24
    Q1 FY25

    Significant improvement driven by regulated business execution and normal weather.

    Operating expenses (O&M)
    3.5% lowerYoY
    Q1 FY25

    In line with plan, largely due to continuous improvement and cost-saving initiatives.

    Total customer demand
    more than 4%YoY
    Q1 FY25

    Stronger customer demand compared to last year due to normal winter weather.

    Residential customer demand
    10%YoY
    Q1 FY25

    Led the increase in total customer demand.

    Consolidated ROE
    9.8%up 40 bps since Q4
    Trailing 12-month

    Improved due to strong execution against the plan.

    Holding company long-term debt reduction
    approximately $760 million
    Q1 FY25

    Contributed to lower financing costs.

    Average revolver borrowings reduction
    $450 million
    Q1 FY25

    Contributed to lower financing costs.

    Capital deployment
    over $1 billion15% above last year
    Q1 FY25

    On track with the $5 billion annual investment plan, with majority in formula rate programs.

    Debt issuance plan
    approximately $3.6 billion
    FY25

    Planned to fund capital programs, with $600 million already priced for TRAIL.

    TRAIL senior unsecured notes
    $600 million
    Q1 FY25

    First transaction completed for FY25 debt issuance plan.

    Base O&M
    $340 millionimprovement to Q1 last year
    Q1 FY25

    Reflects strong financial discipline and is in line with plan.

    Cash flow
    $637 millionsignificantly better than Q1 2024
    Q1 FY25

    Better than plan, supporting the value proposition.

    Large load study requests
    15
    Q1 FY25

    Indicates continued strong data center interest.

    Industrial sales volume
    down 3%YoY
    Q1 FY25

    Impacted by macro factors, but management notes industrial load is a smaller portion of margin.

    Dividend increase
    4.7%
    Q1 FY25

    Board approved increase in quarterly dividend.

    Annual declared dividends increase
    11%
    Since 2023

    Total increase in annual declared dividends since 2023.

    Industry KPIs

    5
    MetricValueDetails
    Retail sales growthmore than 4%%
    Regulatory rate base growth19%%
    Rto market structure reviewPJM capacity auction
    New gas generation builds upgrades1 to 4 combined cycle plantsplants
    Contracted large load capacity esas loas2.6 GWGW

    Orderbook & backlog

    2
    Data center demand (active or contracted)2.6 GWQ1 FY25

    Included in plan through 2029; more in project pipeline is incremental to base plan.

    Large load study requests (data centers)9 GWQ1 FY25

    From 15 study requests received in Q1 FY25; 11 of these are for locations in Pennsylvania and Ohio.

    Deals & partnerships

    2
    MetaInvestment to build a new data centermore than $800 million

    Meta announced an investment to build their new Bowling Green Data center in FirstEnergy's Toledo Edison service territory, optimized for AI workloads.

    AEP and DominionValley Link joint venture for transmission investmentapproximately $3 billion (total JV investment)

    PJM Board approved the Valley Link joint venture, which will enhance competitiveness in future open windows. FirstEnergy's investment will be owned by FirstEnergy Transmission.

    Capital programs

    4
    Energize365 capital programunderway
    Period spend: more than $1 billion

    Benefit: system reliability and resiliency improvements

    Invested in Q1 FY25, representing a 15% increase compared to last year, on track with the $5 billion annual plan.

    Multi-year capital investment planunderway$28 billion

    Long-term investment plan supporting 6-8% core earnings CAGR.

    Energize New Jersey infrastructure investment programapproved$335 million

    Benefit: grid modernization, system resiliency, substation modernization

    Settlement reached and approved by BPU, with approximately $202 million having formula rate treatment.

    Valley Link joint venture investment (FirstEnergy share)approvedapproximately $800 million

    Benefit: enhanced competitiveness in future open windows, transmission investment

    PJM Board approved approximately $3 billion for the Valley Link JV (FirstEnergy, AEP, Dominion), with FirstEnergy's share being $800 million when combined with another $300 million for FirstEnergy subsidiaries.

    Risks & headwinds

    4
    Regulatory lag in Ohiobetween May 31, 2024, and new rates in effect (potentially 1/1/27)

    incremental 15 months or so on the regulatory lag

    Mitigation: Opportunities to shift CapEx around both within Ohio and other jurisdictions; going in for a new base rate case under the new framework as early as Q1 2026 for rates in effect 1/1/27.

    PJM capacity auction price increasescoming price increases

    extremely high-priced capacity auctions

    Mitigation: Working with New Jersey BPU and in-state peers to postpone impact for the first 4 months; advocating for solutions that bring new capacity to market.

    Macroeconomic uncertainty and tariffsnear term

    fair amount of uncertainty

    Mitigation: Industrial load is a much smaller portion of margin; demand-type pricing on industrial load mitigates significant income impact.

    Slowdown in steel sectorQ1 FY25

    industrial group was down 3%

    Mitigation: Industrial load is a smaller portion of margin; demand-type pricing; anticipation of some industrial growth towards the back end of 2025.

    What to watch in Q2 FY25

    5

    Ohio Base Rate Case Outcome

    Next quarter
    CurrentSettlement discussions ongoing, hearings begin May 5
    TargetSettlement reached or progress towards an expeditious outcome

    Why it matters

    The outcome will determine the regulatory framework and financial stability for FirstEnergy's Ohio operations.

    We initiated settlement discussions in the base rate case and hope to continue those through the pendency of the case. Hearings are scheduled to begin on May 5, and we look forward to the case proceeding expeditiously.

    Q&A highlights

    6

    Characterize the Ohio settlement discussions, proximity to agreement, and key remaining debate areas.

    Discussions are productive and constructive, focusing on typical issues like capital structure and ROE. They will continue through the hearings starting May 5, aiming for an expeditious outcome.

    “I'd characterize the settlement discussions as productive and constructive. We began them. We had a number of parties who are engaged. The key parties were engaged in the discussions. Those discussions will continue.”

    asked by Michael Lonegan · answered by Brian Tierney

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 Financial Performance and O&M Management

    FirstEnergy reported strong Q1 FY25 core earnings of $0.67 per share, a 37% increase year-over-year, driven by regulated business execution, new base rates in Pennsylvania, New Jersey, and West Virginia, and a return to normal weather. The company successfully managed operating expenses, with O&M 3.5% lower than last year and in line with its plan, reflecting continuous improvement and cost-saving initiatives. Organizational design changes were implemented to flatten management layers and consolidate functions, aiming for a more efficient operating structure.

    02

    Regulatory and Legislative Updates

    In Ohio, the base rate case is progressing with settlement discussions underway and hearings scheduled for May 5. Legislative efforts (HB 15 and SB 2) are expected to establish multi-year rate plans with forward test years, which FirstEnergy views as constructive, focusing on a smooth transition to the new framework. In New Jersey, a settlement for the Energize New Jersey infrastructure investment program, totaling $335 million over 3.5 years (with $202 million having formula rate treatment), was approved, focusing on grid modernization and resiliency.

    03

    Growth Opportunities in Data Centers and Generation

    FirstEnergy's plan through 2029 includes 2.6 GW of active or contracted data center demand, with an additional 9 GW in project pipeline from 15 large load study requests in Q1 FY25, primarily in Pennsylvania and Ohio. Meta's $800 million AI-optimized data center in Toledo Edison's territory is expected online by year-end. In West Virginia, the company is preparing an Integrated Resource Plan (IRP) due by year-end, exploring options to build new dispatchable generation, potentially 1 to 4 combined cycle plants of 1,000 MW each, to support economic development.

    04

    Transmission Investment and PJM Initiatives

    The PJM Board approved approximately $3 billion for the Valley Link joint venture (FirstEnergy, AEP, Dominion), representing an $800 million total company investment opportunity for FirstEnergy when combined with other approved projects. FirstEnergy Transmission filed for a forward-looking transmission rate at FERC for Valley Link, requesting a 10.9% base ROE and 60% equity target. The company is also actively engaged in discussions regarding PJM capacity auction price increases, advocating for solutions that bring new capacity to market without harmful impacts on customers.

    05

    Shareholder Value Proposition and Capital Funding

    FirstEnergy reaffirmed its FY25 core EPS guidance of $2.40 to $2.60 per share, targeting the top half, and a 6% to 8% core earnings CAGR through 2029, representing a 10% to 12% total annual shareholder return. The $28 billion capital investment program through 2029 is funded by internally generated cash flow and utility debt issuances, with plans to issue approximately $3.6 billion of debt in FY25, including $2 billion of new money. The company successfully priced $600 million of 5-year senior unsecured notes at a 5% coupon for TRAIL.

    AI-generated summary of the company’s earnings call. Not investment advice.