FirstEnergy Corp.

Greetings and welcome to the First Energy Corp First Quarter 2021 Earnings Conference Call. At this time, all participants are in a 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 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Irene Prezel, Vice President, Investment Relations for First Energy Corp. Thank you. Ms. Prezel, you may begin.

Thank you. Good morning, everyone, and welcome to our first quarter 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 risk 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 Investor section of our website. Participants in today's call include our President and Chief Executive Officer, Steve Straw, Senior Vice President and Chief Financial Officer, John Taylor, and our Vice Chairperson and Executive Director, John Somerhalder. We will 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. Yesterday, we reported first quarter 2021 gap earnings of $0.62 per share. and operating earnings of 69 cents per share, which is in the upper end of our guidance range. As John will discuss, our results reflect the continued successful implementation of our investment strategies, higher weather adjusted load in our residential class, and strong financial discipline in managing our operating expenses. Last month, I was honored to be named First Energy CEO and appointed to the board of directors. I greatly appreciate the trust and confidence the board has placed in me since I was named president last May and acting CEO in October. I have great pride in First Energy and the work our employees do to serve our customers and communities. It's my privilege to continue leading the company as we navigate our current challenges and position our business for long-term stability and success. As we work to move First Energy forward, my priorities are the continued safety of our employees and customers, ensuring that ethics, accountability, and integrity are deeply ingrained in our culture and supported by a strong corporate compliance program. Executing FE Forward our transformational effort to capitalize on our potential, deliver long-term results, and maximize near-term financial flexibility, and continuing our investments in infrastructure growth opportunities from electrification, grid modernization, and renewable integration to benefit our customers. During today's call, I'll provide an update on the Department of Justice investigation, regulatory matters, and our FE Forward initiative and other business developments. John Sommerhalder will join us for an update on the board and management's work towards instilling a culture of compliance built upon the highest standards of ethics and integrity. Then John Taylor will review our results and other financial topics before we open it up for your questions. As we discussed on our fourth quarter call, we are committed to taking decisive actions to rebuild our reputation and focus on the future and continuing to cooperate with the ongoing government investigations. We have begun discussions with the DOJ regarding the resolution of this matter, including the possibility First Energy entering into a deferred prosecution agreement. We can't currently predict the timing outcome or the impact of the possible resolution with the DOJ. Our goal is to take a holistic and transparent approach with a range of stakeholders across the spectrum of matters under review. This approach is consistent with the changes we're making in our political and legislative engagement and advocacy. For example, We are stopping all contributions to 501 . We've paused all other political disbursements, including from our Political Action Committee, and we've limited our participation in the political process. We have also suspended and or terminated various political consulting relationships. In addition, we'll be expanding our disclosures around political spending in order to provide increased transparency. For example, we have committed to post updates on our website on our corporate political activity, relationship with trade associations, and our corporate political activity policy, which is under revision. A comprehensive and open approach is also the cornerstone in our regulatory activity. In Ohio, we continue taking proactive steps to reduce the regulatory uncertainty affecting our utilities in the state. This includes our decision in late March to credit our Ohio utility customers approximately $27 million. This comprises the revenues that were collected through the decoupling mechanism authorized under Ohio law plus interest, the partial settlement with the Ohio Attorney General to stop collections of decoupling revenues, and our decision not to seek recovery of lost distribution revenues from our Ohio customers. Together, these actions fully address the requirements approved in Ohio House Bill 128, as well as the related rate impact of House Bill 6 on our customers. These are important steps to put this matter behind us. In other Ohio regulatory matters, we proactively updated our testimony in the ESP Quadrennial Review Case to provide prospective seat values on an individual company basis. We are engaged in settlement discussions with interested parties on this matter as well as the 2017, 2018, and 2019 seat cases that were consolidated into this proceeding. During our last call, we mentioned that we were proactively engaging with our regulators to refund customers for certain vendor payments. Those conversations are underway in each affected jurisdiction. In Ohio, at the PUCO's request, The scope of our annual audit of Rider DCR has been expanded to include a review of these payments. Outside of Ohio, our state regulatory activity is concentrated on customer-focused initiatives that will support the transition to a cleaner climate. For example, on March 1st, JCP&L filed a petition with the New Jersey Board of Public Utilities seeking approval for its proposed EV-driven program. If approved, the four-year $50 million program would offer incentives and rate structures to support the development of EV charging infrastructure throughout our New Jersey service territory in an effort to accelerate the adoption of electric vehicles and provide benefits to our residential, commercial and industrial customers. And in late March, the Pennsylvania PUC approved our five-year $390 million energy efficiency and conservation plan, which supports the PUC's consumption reduction targets. In other recent developments, last week FERC approved our uncontested JCP&L forward-looking formula rate settlement without any modifications. In March, we closed the transaction to sell JCP&L's 50% interest in the Yards Creek Pump Storage hydro plant and received proceeds of $155 million. And we also announced plans to sell Penelex Waverly New York distribution assets which serves about 3,800 customers to a local co-op. The deal, which is subject to regulatory approval, will simplify Penelec's business by solely focusing on Pennsylvania customers. During our fourth quarter call, we introduced you to FE Forward, our company-wide effort to transform First Energy into a more resilient, effective industry leader delivering superior customer value and shareholder returns. We expect the FE Forward initiatives to provide a more modern experience for our customers with efficiencies in operating and capital expenditures that can be strategically reinvested into our business, supporting our growth and investments in a smarter and cleaner electric grid while also maintaining affordable electric bills. During the first phase of the project, we evaluated our processes, business practices, and cultural norms to understand where we can improve. While our safety and reliability performance is strong, we found opportunities in many areas to enhance and automate processes, take a more strategic focus on operating expenditures, and modernize experiences for our customers and employees. We've identified more than 300 opportunities, and now we are diving deeper into these ideas, developing detailed, executable plans as we prepare for implementation beginning later this quarter. Examples of this work include Improving the planning and scheduling through integration of systems to allow our employees to deliver their best to our customers. Leveraging advanced technologies such as drones and satellite imagery to improve our vegetation management programs. Using predictive analytics and web-based tools to provide our customers with more self-service options and improve their experience. and leverage purchasing power to optimize payment terms. As part of these efforts, we intend to evaluate the appropriate cadence to initiate rate cases on a state-by-state basis to best support our customer-focused strategic priorities. We will also remain focused on emerging technologies, smart grid, electric vehicle infrastructure, and our customers' evolving energy needs as we think through how to reduce our carbon footprint. We're off to a great start this year, and yesterday we reaffirmed our 2021 operating earnings guidance of $2.40 to $2.60 per share. Our leadership team is committed to upholding our core values and behaviors, and executing on our proven strategies as we put our customers at the center of everything we do. We will take the appropriate steps to deliver on our promise to make First Energy a better company, one that is respected by our customers, the investment community, regulators, and our employees. Thank you for your time and confidence. Now I'll turn the call over to John Sommerhalder.