FirstEnergy Corp.

Greetings and welcome to the First Energy Corp. Second Quarter 2023 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 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. Good morning, everyone, and welcome to First Energy's second quarter 2023 earnings review. Leading our call today is Brian Tierney, our President and Chief Executive Officer, and John Taylor, our Senior Vice President and Chief Financial Officer. Our earnings release, presentation slides, and related financial information are available on our website at firstenergycorp.com. Today's discussion will include the use of non-GAAP financial measures and forward-looking statements. Factors that could cause our results to differ materially from these statements can be found in our SEC filings. The appendix of today's presentation includes supplemental information along with the reconciliation of non-GAAP financial measures. Now it's my pleasure to turn the call over to Brian.

Thank you, Irene, and good morning, everyone. This is my first earnings call as President and CEO of First Energy, following John Somerhalder, who did an outstanding job leading this company during a period of transition. I am thrilled to be here with you today and look forward to talking about our second quarter and year-to-date results, a dividend update, some discussion of why I came to First Energy, learnings from key stakeholder engagement, and the outlook for First Energy's future. Let's start with a quick look at the results we announced yesterday. We delivered second quarter gap earnings of 41 cents per share versus 33 cents per share last year. The company reported second quarter operating earnings of 47 cents per share at the upper end of our guidance range versus 53 cents per share last year. Mild temperatures continue to affect our service territory, impacting earnings by six cents in the quarter. Cooling degree days were 40% below normal and 48% below last year. Pension, signal peak, and financing costs were negative in comparison to last year. Our results were favorably impacted by a strong focus on operating expenses and continued execution on a regulated capital investment program for the benefit of our customers. For the year-to-date period, we reported GAAP earnings of 92 cents per share versus 83 cents per share last year. Operating earnings for the period were $1.06 per share compared to $1.12 for the first half of 2022. The impact of mild weather in the first half of the year reduced earnings by 18 cents per share compared to 2022 with heating degree days being 16% below last year and cooling degree days being 47% lower. The positive impacts of investments made for the benefit of our customers and operations and maintenance cost discipline partially offset the negative impact of pension and financing costs. Despite the impact of the mild weather, we're working hard to be disciplined about our cost structure and to have our investments reflected in rate base. As such, we are confident reaffirming our 2023 operating earnings guidance of $2.44 per share to $2.64 per share. Last week, our board declared a dividend of $0.39 per share, which is payable September 1st. Subject to Board approval, we expect to have one additional dividend payable this year. At that time, it's our expectation that we will be in a position to resume dividend growth in line with the new targeted payout ratio of 60 to 70 percent, which the Board approved earlier this year. This ratio is more in line with our peers and reflects our improved credit profile, as well as our commitment to enhancing value for investors. Many of you know that I recently returned to the electric industry. I decided to come to First Energy because I thought the company had evolved from a business and cultural perspective to a point where my background and experience could help further that evolution and growth. I could not be more excited to be working with my colleagues to provide the service that is the lifeblood of modern living to our communities. The employees of First Energy don't just view their service as a job, it is a vocation that they take very seriously. This vocation and the service we deliver are more important than ever. Electricity demand is growing through the electrification of sectors like transportation and home heating. On the supply side, requests for interconnection of distributed energy resources and renewables is putting more stress on the electricity grid. As a wires-only company in four states and a fully integrated company in one state, I can think of no other electric utility that is better positioned to enable the increased demand and facilitate the energy transition than First Energy. Through several strategic transactions, including great execution of a $1.5 billion convertible senior note transaction in the second quarter, the board and the management team have strengthened the balance sheet to invest in our regulated businesses in our service territories. This will lead to better customer reliability, system resiliency, and higher growth for the company. In the time before I arrived, the new board and management had done a commendable job of taking responsibility for and putting the activities of the past few years in the rearview mirror. On July 20th, the company filed the second of three planned updates to the Department of Justice on the company's deferred prosecution agreement. It was a very positive report detailing the progress the company has made on people, processes, and training to preclude such activities from happening again. We continue to cooperate with the department on any and all requests they make to us. During the quarter, the company received a subpoena from the Ohio Organized Crime Investigations Commission related to matters already detailed in the deferred prosecution agreement. We have cooperated with the commission and will continue to do so. Over the past 60 days, I have had the opportunity to meet with key company stakeholders. I have listened and learned a lot about where the company is in its evolution and some of the key elements required for future success. I've had many town hall, in-person, and virtual meetings with employees and union leadership. We've estimated that I've been able to reach about half of our 12,000 employees so far. This is a very engaged and dedicated workforce. Employees are asking for resources to better serve our customers. I have committed to them that we will invest in our system and them by making sure that we have the right complement of employees with the right training and the right equipment to serve our customers. These employees were not distracted by the events of the past few years and remain focused on safety and our customers. They will lead us into the future with their hard work, skill, and determination. Their commitment was on display again this weekend as our employees work to restore power to customers impacted by the recent storms. I've had the opportunity to meet with three of our five commissions and two of our state governors. In talking with them, I committed that the company will take responsibility for the actions of the past when those dockets come before them. I also expressed our desire to engage constructively in normal course of business with the commissions for the benefit of our customers. Each of the commissions I spoke with want First Energy to keep up with the normal day-to-day business of investing in our utilities and serving our customers. I have not detected any regulatory overhang associated with the past that would impact our forward-facing activities before the commissions. This is really important because we have a full regulatory schedule that John will take you through in detail. Camilo Serna and his regulatory team are engaged in base rate cases in Maryland, New Jersey, and West Virginia that represent about $7 billion in rate base with returns that need to be updated. We have important ESP5 and GridMod2 filings in Ohio, and the consolidation case in Pennsylvania. We anticipate base rate filings in Ohio and Pennsylvania next year with current combined rate bases of about $10.5 billion with returns that also need to be updated. We spent a lot of time together as a management team and with the board discussing how to best organize the company to reach our goals quickly and sustainably. There are key roles that need to be filled. In July, we added two key hires, Abigail Phillips as Chief Risk Officer, and Amanda Mertens Campbell, our Vice President of External Affairs. These are experienced professionals who have hit the ground running and are already making an impact. We are currently looking to fill our Chief Operating Officer role. We have attracted well-known, industry-leading candidates and hope to be able to make announcements in the near future. Over the past two years, First Energy has consolidated key functions like engineering, HR, workforce development, and others. These actions led to efficiencies and consistency in standards. At the same time, there is a sense that certain decision-making would be better if it were closer to the customer and to the employees providing the service. We are looking at ways to make that happen, and we'll be updating you on this in the months to come. I've spent considerable amount of time with investors, talking about our plans for organic investment and growth. These discussions have focused on the investment needed in our electric grid, management additions we plan to make, and the regulatory schedule necessary to convert investment into growth. I've had the opportunity to meet with three of the major rating agencies. I've committed to further optimizing our financing plan and improving our credit metrics and balance sheet. This included paying down short-term borrowings and repurchasing high coupon debt in the open market with the proceeds of the convertible bond offering from earlier in the quarter. We anticipate FFO to debt being in the 14% to 15% range by 2025. Following meetings with these and other stakeholders, I have not found any surprises relative to what I knew coming into the company. What I have found are some key indicators for success. A skilled, engaged, and dedicated workforce. A constructive regulatory environment focused on customer affordability and reliability, a system in need of investment for reliability, resiliency, and to support the energy transition, and finally, a strengthened balance sheet to be able to make that investment and to support organic growth. I believe in this company's strategy of making necessary investments to improve reliability, resiliency, and the customer experience. In addition to reaffirming the company's guidance for 2023, I am reaffirming our 6% to 8% long-term growth rate off of the original midpoint of prior year's guidance. We have a strong platform to build upon. We are getting and will continue to get the right people in place to lead this company to sustainable growth. I am incredibly excited about this company. and I'm thrilled to be here at the start of what I know will be a very bright future. With that, I will turn it over to John for more financial detail.