FirstEnergy Corp.

Greetings and welcome to the First Energy Corp Second 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 Prezell, Vice President Investor Relations for First Energy Corp. Thank you, Ms. Prezell. Please begin.

Thank you and welcome to our second 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 risks and uncertainties. Factors that could cause actual results 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 on 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, Vice Chairperson and Executive Director John Sommerhalder, and Senior Vice President and Chief Financial Officer John Taylor. 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. Yesterday afternoon, we reported second quarter 2021 GAAP earnings of 11 cents per share. which includes the impact of the deferred prosecution agreement that I'll discuss in a moment. Operating earnings were 59 cents per share, which is above the top end of our earnings guidance. These strong operational results reflect a customer-focused investment strategy in our regulated distribution and transmission businesses, solid financial discipline, and the continued shift in higher weather-adjusted demand from our residential customers. We're pleased with our performance as well as the substantial progress we've made to transform First Energy and position our company for the future. We have taken critical steps to build a best-in-class compliance program while identifying and driving initiatives to deliver long-term value to all stakeholders. Our leadership team is committed to modeling the behaviors and the humility necessary to restore trust with our stakeholders. We look forward to continuing this work and achieving the milestones that will mark our progress. I'll start our call today with an update on the DOJ and other investigations related to House Bill 6. And John Sommerhalder will join us for a brief discussion on board activity and the progress of our compliance program. I'll come back to review recent business developments, and then John Taylor will discuss our second quarter results and other financial matters before we open it up to your questions. Yesterday, we announced that we've entered into an agreement with the U.S. Attorney's Office for the Southern District of Ohio to resolve the DOJ investigation into First Energy. This deferred prosecution agreement was filed in federal court. Under the three-year deferred prosecution agreement, we agreed to pay $230 million, which will be funded with cash on hand. Half of these funds is designated for the US Treasury, and the other half is being directed to the benefit of utility customers by the Ohio Development Service Agency. No portion of the fine will be recovered from customers. We also agreed to the government's single charge of honest services wire fraud, which will be eventually dismissed provided we abide by all the terms of the agreement. In accordance with the agreement, we will provide regular reports to the government regarding our compliance program, as well as internal controls and policies and continued efforts to build on the comprehensive compliance initiatives we've rolled out this year. In its decision to defer prosecution, the U.S. Attorney's Office acknowledged our substantial cooperation with the investigation, along with our significant remedial actions, which include establishing an executive director position at the board level, as well as a compliance-focused board subcommittee. hiring a new chief legal officer and a new chief ethics and compliance officer, working to establish a culture of ethics, integrity, and accountability at every level of the organization, and reviewing and revising political activity and lobbying and consulting policies, which will include robust disclosures about our lobbying activities. The conduct that took place at our company was wrong and unacceptable. Our board, the management team, and the entire First Energy organization have done extensive work and are committed to make the necessary changes to move on from this. Our progress on these efforts, along with the DPA, demonstrate that we are making meaningful headway in navigating through this period. and we are positioned to move forward as a stronger integrity-bound organization. We will continue to cooperate fully with the ongoing investigations, audits, and related matters as we work to resolve these issues and rebuild trust with our employees, customers, regulators, and investors. We are intently focused on fostering a strong culture of compliance and ethics, and assuring that we have robust processes in place designed to ensure that nothing like this happens again. In May, we held our first compliance town hall with employees to discuss what compliance, ethics, and integrity mean at First Energy, and the importance of building a culture of trust where everyone is comfortable with speaking up when something doesn't feel right. In the weeks following the town hall, our management team has responded to employee questions and concerns, and we are committed to continuing this conversation and engagement. Next week, we plan to hold another town hall meeting with employees where we will introduce our updated mission statement, reinforcing the role of uncompromising integrity as the cornerstone of First Energy's identity and business strategies. We will also refresh our core values to better reflect the importance of integrity, together with safety, diversity, equity, and inclusion, performance excellence, and stewardship. These values will be embedded in our practices and processes and become ingrained in the way we work. Additionally, we updated our code of business conduct, which John Summerhalder we'll speak to in a moment. We also continue to strengthen our leadership team with two more new hires. Michael Montague joined us earlier this month as Vice President, Internal Audit. And yesterday, we announced that Subhagya Parija has been named Vice President and Chief Risk Officer, effective August 16th. These two experienced professionals represent another important step as we strengthen our key internal functions, and I'm confident that they will help us develop best-in-class audit and enterprise risk programs. Now, John Sommerhalder will join us to provide an update on board matters and other facets of our compliance program. Then I'll be back to discuss FE Forward and review some regulatory updates.