FirstEnergy (FE) Q4 FY25 earnings call: guidance and Q&A

How will the $1.2 billion incremental WV investment be financed, given the cash CWIP proposal, and will it push EPS growth above the 6-8% range?

The financing will target 15% from cash recovery during construction, 50% from a DOE loan, and the remaining 35% from new equity. Management will update EPS growth guidance as incremental opportunities are formally added to the plan.

“So I expect that to be 15% of the total investment. We'll target 50% of the total investment with the Department of Energy loan, with the rest likely being new equity to fund the investment.”

asked by Nicholas Campanella · answered by K. Taylor

Clarify the rate base growth (10.4% vs. 11.4% with WV) and the lag between rate base growth and EPS growth. Also, elaborate on future WV generation opportunities, timing, and data center conversations.

The math on rate base growth is approximately correct. The company will update EPS growth guidance once incremental projects are approved. West Virginia is very welcoming to generation investment, with a governor's goal of 50 GW by 2050. FirstEnergy plans to pursue additional 1,200 MW units, potentially dedicated to data centers, leveraging existing supplier relationships.

“Your math is about right on the 10.4% to 11.4%. And we've always said we'll update the CapEx plan, we'll update earnings as things like -- and incremental transmission comes in.”

asked by Shahriar Pourreza · answered by Brian Tierney

What are the expectations for the next New Jersey rate case timing and the overall regulatory environment following executive orders?

Affordability is a key focus for the Governor. The company is working constructively with state officials to address affordability while continuing investments to improve reliability, which was the focus of the last rate case. They will go in for a new rate case when needed to update rate base and cost structure, but no specific timing has been set.

“We've not said, and we're not being cagey about that. We just haven't decided. And obviously, we'll be in discussions with the governor's office and the BPU about when is the right time for us to go in.”

asked by David Arcaro · answered by Brian Tierney

Confirm the assumption of flattish ROEs (9.5-10%) throughout the plan and discuss key levers for maintaining earned ROEs.

The company aims to stay in the 9.5% to 10% earned ROE range, as close to authorized returns as possible. This will be achieved through regular rate case filings due to the magnitude of investments and leveraging formula rate recovery mechanisms.

“Our goal is to be as close to our authorized returns as possible. Given the amount that we're investing, we're going to be going in regularly for rate cases because of the magnitude and the investment that we're making to drive reliability.”

asked by David Arcaro · answered by Brian Tierney

Does the company have sufficient internal engineering and project management capabilities, especially for transmission, given labor tightness, and how are in-house vs. contractor relations?

The company is very confident in its ability to deliver, especially on transmission, leveraging long-standing relationships with contractors, labor, and suppliers. They are ramping up these relationships as investments increase. Supply chain tightness is easing compared to COVID, and they have made strategic long-term orders.

“We're very confident in our ability to deliver against the plan, especially the transmission side of it, we're having considerable growth. We've been investing in that side of the business significantly since 2014.”

asked by Ryan Levine · answered by Brian Tierney

What specifically needs approval for the WV project (certificate of need, cost levels, CWIP rate making), and what is the exact timing within H2?

Approvals needed include a certificate of need and public necessity, interim financing with AFUDC, and CWIP. The commission has up to a year but is expected to act much quicker, with a procedural schedule anticipated within the next month. They are fast-tracking the investment due to its importance for economic development.

“So what they're going to approve is a certificate of need and public necessity. We're asking for the interim financing in the plan where we get AFUDC. CWIP we've asked for.”

asked by Steven Fleishman · answered by Brian Tierney

How much of the transmission CapEx is demand-driven versus aging infrastructure replacement? Is the New Jersey offshore wind project (Tri-Collector) still part of the plan?

The $5 billion in competitive transmission projects from PJM open windows since 2022 is demand-driven (data centers, PJM system demand). The rest addresses aging infrastructure, with 60-70% of the system reaching end-of-life in the next decade. For New Jersey offshore wind, they are working with NJ and PJM to modify the plan to focus on "no regrets" portions beneficial regardless of offshore wind.

“We're working with New Jersey and PJM to modify what portions of that plan are no regrets and will be beneficial to New Jersey and PJM even without the offshore wind component of that.”

asked by Paul Patterson · answered by Brian Tierney

Where is the most data center activity, and will recent additions be within the 5-year plan or later (early 2030s)?

Most activity is in Maryland (Frederick area), followed by Pennsylvania and Ohio. Significant load and contracted load are expected between now and 2030/2031, with a huge amount ramping up between 2031 and 2035.

“So we're seeing a lot of activity currently in our Maryland service territory associated with the data center outside of Frederick, Maryland. And then after that, we're seeing significant activity in both Pennsylvania and Ohio.”

asked by Andrew Weisel · answered by Brian Tierney