FirstEnergy Corp.

Greetings and welcome to the FIRST Energy Corp First Quarter Earnings 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 is now my pleasure to introduce your host, Irene Prezel, Vice President, Investor Relations, and Communications for First Energy Corp. Thank you, Ms. Prezel. You may begin.

Thank you. Welcome to our first quarter 2023 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 filings. 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. We'll begin today's call with presentations from John Somerhalder, our board chair, interim president, and chief executive officer, and John Taylor, our senior vice president and chief financial officer. Several other executives will be available for the Q&A session. Now I'll turn the call over to John Somerhalder.

Thanks, Irene. Good morning, everyone. Thank you for joining us today. we've accomplished a lot since our last earnings call and continue to build on the positive momentum we have seen over the last couple of years. Our first quarter gap earnings are 51 cents per share. Despite the impact of extremely mild first quarter temperatures, operating earnings are 60 cents per share, which is within the guidance range and reflects the continued execution of our long-term regulated growth strategy. We continue to position First Energy for greater resiliency and growth by strengthening our financial position, enhancing our operations, optimizing the customer experience, and transforming our culture. When Brian Tierney joins us as president and CEO on June 1st, he will hit the ground running to build on these efforts. We're very excited to welcome him on board. Clearly, we recognize how important it was to find the right leader for our company. And in Brian, we have a CEO who understands our industry and business and is the right leader to drive our strategy and accelerate our momentum. I know many of you worked with Brian during his time at AEP, and you know him as a highly respected executive with a unique blend of operational, financial, and strategic skills and achievements. His strong track record of driving results is very well aligned with our goals at First Energy. He has expressed his support for the steps we've taken to position our company and he intends to continue to advance our business strategy, building on the strong foundation we have in place today. We know we found the right person to lead our company. I know everyone is looking forward to hearing from him and we will certainly give you that opportunity. He will have a busy calendar starting on June 1st. In the meantime, I'm so proud of our employees and their excellent work to position our company for the future. I know they will double down in their efforts to support Brian to drive long-term sustainable value for all of our stakeholders. This work includes a very busy regulatory calendar that addresses the critical investments that support reliability and a smarter and cleaner electric grid. John will review our recent distribution filings in a few minutes, but first I'll take a moment to provide an update on our transmission business. In early February, we announced an agreement to sell an additional 30% interest in First Energy Transmission, LLC, to Brookfield Supercore Infrastructure Partners for $3.5 billion. and this transaction remains on track to close in early 2024. Brookfield's partnership in FET supports our substantial long-term investments to build a more resilient and modern electric grid. We have a $1.7 billion transmission investment program this year, and that's increasing to $1.9 billion by 2025. The mild first quarter weather coupled with strong planning and execution helped us get off to a great start with our construction program. Our transmission capital investments of nearly $350 million are about 60% ahead of the first quarter of 2022 and about 50% ahead of our internal plan. Examples of this work include upgrading an eight-mile 138 KV transmission line in Ottawa County, Ohio, near Toledo. This project, which is scheduled for completion in May, includes stringing new, larger conductor that can handle additional demand, replacing older structures with monopoles, and installing more than 40 new components and insulators. Upgrading the high voltage transmission line in New Jersey that is expected to improve system reliability for more than 3,000 customers. This project includes the installation of 53 new wood pole structures to fortify and strengthen the line and help prevent outages. And our transmission program is also facilitating the energy transition by connecting clean energy resources to the grid. Earlier this year, JCP&L completed a grid connection for a 19.8 megawatt solar project located at a former landfill property in Mount Olive, New Jersey, that is now delivering clean energy through First Energy's transmission lines. We are excited to continue making these types of investments across our service territory in support of a clean energy future. We are affirming our 2023 guidance of $2.44 to $2.64 per share. As we discussed last quarter, the midpoint of this range represents 6% growth over our original 2022 midpoint of $2.40 per share. We are also introducing second quarter 2023 guidance of $0.40 to $0.50 per share. In addition, we are affirming our targeted 6% to 8% annual operating earnings growth rate. This represents year-over-year growth based off of prior year guidance midpoint. I want to spend a moment discussing our regulated earnings and earnings quality, particularly in light of the current contribution from the Signal Peak mining operation. While this is a legacy investment that we neither control nor operate, it has taken on a higher profile over the last year. Based on our plan, the earnings contribution from Signal Peak in 2023 is expected to be less than 15% of our $2.54 guidance midpoint. And the expectation longer term is that Signal Peak contribution will decline on an absolute and relative basis, representing less than 10% of 2024 and 2025 consolidated earnings, improving the company's earnings quality over time. We intend to continue providing transparency around Signal Peak's contribution going forward. Our focus is on our regulated operations, our state distribution companies and our transmission businesses, and on improving the credit quality of the company. We expect significant growth from our regulated operations given current returns in our distribution companies and our customer-focused investment strategies across both distribution and transmission, which will more than offset the decline in signal peak and support our expectations of 68% consolidated average annual earnings growth. I believe we are on the right path to leverage our strengths and deliver value to all of our stakeholders. Now, I'll turn the call over to John Taylor.