FIRSTENERGY Q1 FY26 earnings call FE

First quarter GAAP EPS was $0.70 versus $0.62 a year ago; core (non-GAAP) EPS was $0.72, up 7.5% from $0.67, with each regulated business up YoY. Roughly 75% of the capital program is under a formula rate, and consolidated ROE was 9.8% on a trailing-12-month basis, in line with targeted returns. Base O&M fell close to 5% in the quarter, extending a >$200M (15%) reduction since 2022 driven by a shift to integrated, analytical, risk-based decision-making and automation. Management characterized the savings as sustainable rather than timing-driven.

FE invested $1.4B in the quarter, a 33% increase over Q1 2025, with nearly all of the increase in formula-rate programs targeting reliability and resiliency. Transmission rate base rose 13% (integrated businesses +19%, stand-alone transmission +11%). Consolidated rate base is growing just over 10%, rising to just over 11% once the West Virginia gas facility is approved. The $6B 2026 capital plan was reaffirmed, and management flagged that substantial incremental transmission and generation investment above the current plan will be required as the energy landscape evolves.

FE filed a CPCN for a 1.2 GW combined-cycle gas facility (~$2.5B), with hearings mid-July and approval expected in H2 2026; equipment is on track for a 2031 online date. West Virginia data-center demand reached ~1.8 GW of highly credible projects, up 50% since February, with constructive dialogue on >6 GW more of load — aligned to Governor Morrisey's 50 GW-by-2050 initiative. Across all states, ~4 GW of pipeline is in final negotiations and expected to be contracted this quarter, nearly doubling contracted demand. FE is prepared to add incremental generation as large loads become contracted, subject to regulatory approval.

West Virginia base rate case to be filed in May (reflecting a ~$1B rate base increase since 2023, new rates Q1 2027). Ohio prefiling notices were made April 22 for a 3-year rate plan (formal filing next month), proposing a ~15% increase to ~$800M annual investment, <3% annual bill impact, and new rates mid-2027 after >$1.3B invested since 2024. In Pennsylvania, the approved infrastructure program now recovers nearly 50% of FE-PA's capital program through the DSIC. New Jersey and Maryland filings are being timed carefully given administration/legislative developments.

Management frames affordability as central to its regulatory strategy: FE's rates average 20% below in-state peers, with the T&D bill component 35% below peers. It attributes affordability pressure primarily to a demand-supply imbalance in the PJM capacity-market construct. Levers include the >$200M O&M reduction since 2022, alternative distribution rate designs, and a Pennsylvania default-service-program reform proposal that management said would have saved customers $80M in 2025 had it been in place. Comparable base O&M in each planned 2026 rate filing is below the level approved in the prior case.

FE is evaluating PJM's proposed reliability backstop-procurement auction as a possible step in the right direction but wants detail on procuring the right dispatchable generation at affordable rates; a capacity-auction cap (negotiated by Governor Shapiro) remains for the next two auctions through 2030. On FERC's NOPR and colocated-load order, FE filed a D.C. Circuit petition and argues large loads should pay the utility (which earns a return on the network investment) rather than route CIAC outside rate base — analogous to a gas-pipeline open season. Management stated it will not sign Phase 2 contracts that place generation/commodity risk on its regulated wires businesses, consistent with legislation in 4 of 5 states barring utility generation ownership.

In late March, Moody's raised its outlook on FE's senior-unsecured rating to positive, citing an improved credit profile and low-risk regulated T&D operations. FE completed an $850M FE-Pennsylvania offering at a 4.4% average coupon (>5x oversubscribed), plus $250M (MAIT) and $175M (ATSI) transmission-company issuances. Remaining 2026 financing includes $1.7B of subsidiary debt and a modest amount of common equity; the 5-year plan carries up to $2B of equity/equity-like securities, with annual common equity ~1% of market cap and ~$100M/yr from employee benefit programs.

FE has been awarded more than $5B in competitive transmission projects over the last four years and expects more from future solicitations, having shifted toward partnering with neighbors and more competitive bidding. Management noted 80–85% of the transmission capex plan is non-competitive work on the existing aging system, given the system's critical location in PJM. The PJM 2026 planning window is open, with Board approval of projects expected in Q1 2027.