FirstEnergy Corp.

Greetings and welcome to the First Energy Corp's fourth quarter 2020 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Irene Prezel, Vice President, Investor Relations for First Energy Corp. Thank you, Ms. Prezel. You may begin.

Thank you. Welcome to our fourth quarter and full year earnings call. Today we will make various forward-looking statements regarding revenues, earnings, performance, strategies, prospects, and other matters. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by these statements can be found on the investor section of our website under the earnings information link and in our SEC filing. We will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures, the presentation that supports today's discussion, and other detailed information about the quarter can be found in the Strategic and Financial Highlights document on the First Energy Investor Relations website. Participants in today's call include our President and Acting Chief Executive Officer, Steve Senior Vice President and Chief Financial Officer, John Taylor, and our Executive Director and Independent Board Member, Chris Pappas. We also have several other executives available to join us for the Q&A session. Now I'll turn the call over to Steve.

Thank you, Irene, and good morning, everyone. Before I get into our results, I wanted to kick off the call with a few words on a critical area of focus for First Energy. taking appropriate actions to address our recent challenges and fostering a strong culture of compliance, ethics and integrity. We are deeply committed to creating a culture in which compliance is endemic and second nature and where our leaders prioritize and encourage open and transparent communications with all of our stakeholders. This focus is absolutely essential for our success as an organization. Our commitment starts at the top and extends throughout the organization. We are working to ensure that every leader is actively engaged in setting the proper tone and creating an environment where not only our words but our actions align with our core values and behaviors. We're building a world-class compliance function to underpin this effort including bringing on Hyun Park as our new Senior Vice President and Chief Legal Officer in January. Hyun is the right person to step into this role at this time and he will be instrumental in driving this cultural shift. We will also be appointing a Chief Ethics and Compliance Officer who will manage a dedicated team of compliance professionals and enhance our efforts to improve our compliance function, by shifting from a decentralized to a more centralized model. In addition, we'll be designating compliance ambassadors throughout the company to act as boots on the ground, ensuring the entire organization understands the critical importance of compliance and what it means for each individual. We are also making significant changes in our approach to political and legislative engagement and advocacy. Our activity in this space will be much more limited than it has been in the past, with closer alignment to our strategic goals and with additional oversight and significantly more robust disclosure. With this additional transparency, My goal is to make it crystal clear exactly what efforts we support. These efforts, together with enhanced policies and procedures, will help to bring additional clarity around appropriate behaviors at First Energy. And through enhanced communications, training, and most importantly, our actions, we are dedicated to reemphasizing that every employee, at every level, has the responsibility to consistently act in accordance with our core values and behaviors and to speak up if they see inappropriate behavior anywhere in the organization. At the same time, we're taking decisive actions to rebuild our reputation and brand and focus on the future. This includes the decisions recently made with respect to Ohio that I'll talk about shortly. And while we don't control the timeline related to the DOJ and SEC, we will continue to cooperate fully with these government investigations and remain focused on the matters that we can control. Chris will address a number of actions the Board has underway in a more detailed manner later in this call. But be assured that both management and the Board will be relentless and take the steps needed to position our company for long-term success. Now, turning to earnings, today we reported 2020 GAAP earnings of $1.99 per share and operating earnings of $2.39 per share. On Tuesday, we announced several proactive steps we're taking to resolve a range of regulatory proceedings affecting our Ohio utilities. These include our previously announced agreement with the Ohio Attorney General, along with the decision not to seek recovery of lost distribution revenues. This resulted in a charge of 15 cents per share in the fourth quarter. Absent this charge, our 2020 operating earnings would have been $2.54 per share, well above the midpoint of our most recent guidance range and reflective of our strong performance last year. While this was a difficult decision, we are confident it was the right decision. We believe resolving these matters in a comprehensive manner is a critical step to demonstrate our commitment to transparency and integrity in every aspect of our business, while taking steps toward removing uncertainty relating to our current Ohio regulatory matters. And in the interest of providing additional transparency, today's investor materials will include more information about regulatory ROEs in each of the states we serve. We remain excited about the significant investment opportunities that will continue to drive solid earnings and growth in the years ahead. When we have further clarity in Ohio and with the ongoing government investigations, we intend to resume providing a long-term growth rate that should be consistent with traditional utility growth rates and similar to what we have provided in the past. For now, We are focusing on this year and we have introduced 2021 operating earnings guidance of $2.40 to $2.60 per share. We have made these disclosures early so you would have time to absorb them before this call. Because we have a lot of ground to cover today, including our solid operational performance last year, even in the face of the pandemic. our strategy for 2021 and beyond, including our commitment to building shareholder value, and the work we're doing to position the company for the future. Our fundamental performance continues to be excellent. We continued making demonstrable progress on our strategic goals, and we had an exceptional year from a safety perspective. Even with about half of our employees working from home, and the others adopting new health and safety protocols, the First Energy team has remained laser focused on providing safe and reliable service to our 6 million customers. I am deeply proud of the team's resilience and commitment, especially in light of the turbulence that marked the year. Our results in 2020 reflect our commitment to strong operations as well as the stability provided by our diverse footprint and our WIRES focused platform. Last year, we also successfully executed our plan to invest $3 billion in our distribution and transmission systems as we continued our reliability and grid mod program to benefit customers. We believe our robust long-term organic growth opportunities are well aligned with the focus on electrification and the critical role the grid plays in supporting the transition to a carbon neutral economy. These opportunities and our goals that support them are included in our strategic plan, published last month and available on our website. I hope you have taken some time to review it. This updated plan addresses our unwavering commitment to transparency and accountability and identifies bold goals for key areas of our business. These goals are aligned with our core values and behaviors, our regulatory strategy, and our commitments to our customers, communities, and investors, as well as environmental stewardship. Among these objectives outlined in the plan, is our pledge to achieve carbon neutrality by 2050. This ambitious goal reflects our transformation to a regulated electric utility and our responsibility to help create a sustainable energy future. The strategic plan also addresses our continued commitment to build a more diverse and inclusive workplace. We've had a D&I-focused KPI for three years now, And we are taking even more aggressive steps to make progress in this area. We're excited to pursue a 30% increase in our number of racially and ethnically underrepresented employees by 2025, both overall and at the supervisor and above level. We believe this will help accelerate our transformation into an innovative, diverse, and sustainable company. and drive an important shift in our corporate culture. We recently completed our fourth company-wide survey of all employees. Overall, I'm proud to say we scored relatively well on many fronts, but we certainly have more work to do. One area identified for improvement is listening and valuing the opinions of our employees. We want employees to feel empowered to voice their opinion on important issues and my team, with guidance and support from the board of directors, is addressing this head on. We view this work as central to strengthening our compliance program and a culture of ethics, integrity, and accountability. I'd like to explain my approach to driving this change, and perhaps we can use the company's safety culture as an analogy. Several years ago, We had concerns that our safety culture was trending in the wrong direction. Management led a significant effort with our employees to put in place new programs and training and to consistently demonstrate that safety is and will always be an unwavering core value. These efforts ultimately instituted a cultural shift in how we all understood the critical importance of safety. We want that very same cultural shift to occur as it relates to compliance and ethics, and we want our employees to know that we value and welcome their opinions. As we look ahead, I feel confident in our path forward. We have a strong foundation, our fundamentals are solid, and our strategies are proven. And we are building on that with a relentless focus on making First Energy a better company as we work to rebuild trust, work to achieve financial results, and deliver for our customers and investors. We recognize that changes won't happen overnight. They happen over time, just like the evolution in our safety culture I spoke about earlier. I'm confident we will emerge a stronger, better First Energy. Now I'll turn it over to Chris Pappas, who can address the specific and significant actions that the Board and management are taking to address the current challenges and set First Energy on the right path for a successful future.