The paragraph is an introduction to FirstEnergy Corp.'s First Quarter 2025 Earnings Conference Call. It begins with a welcome from the operator and a handover to Karen Sagot, Vice President of Investor Relations. Karen introduces the main speakers, Brian Tierney, Chair, President, and CEO, and Jon Taylor, Senior VP and CFO. The presentation involves non-GAAP financial measures and forward-looking statements, which carry certain risks and uncertainties. Participants are directed to the company's website for additional financial information. Brian Tierney then highlights the company's strong performance in the year's first quarter, emphasizing solid execution in regulated strategies, significant capital investments, and financial discipline, while affirming the company's confidence in meeting its 2025 core earnings guidance.

In the first quarter, the company reported improved earnings, with GAAP earnings at 62¢ per share and core earnings at 67¢ per share, both up from the previous year. This improvement is attributed to effective management across regulated businesses, approved rate cases, and normal weather conditions. The company focused on reducing operating expenses, implementing organizational changes to enhance efficiency, and reducing headcount. Investment efforts remain strong, with over a billion dollars invested in system reliability and resiliency, aligning with their plan to deploy $5 billion in customer-focused investments this year and $28 billion through 2029.

The leadership team at FirstEnergy has been revitalized to drive company growth, highlighted by a 4.7% increase in the quarterly dividend, resulting in an annual rate of $1.78 per share. The company is actively engaged in regulatory and legislative processes in Ohio, with progress in a base rate case and anticipation of new regulatory legislation. They are also working collaboratively with the Ohio governor and legislators for constructive utility reforms. In New Jersey, FirstEnergy achieved a settlement for its Energize New Jersey infrastructure investment program, recently approved by the BPU.

The plan outlines a $335 million investment over three and a half years focused on grid modernization, system resiliency, and substation upgrades, particularly in targeted neighborhoods. This includes $202 million in formula grade treatment. The company is also preparing its integrated resource plan for West Virginia, covering the state's energy needs for the next decade, and is exploring options for new dispatchable generation to support economic growth. Additionally, there is a focus on data center development, with 2.6 gigawatts of demand active or contracted through 2029. Meta plans to invest over $800 million in a new data center in the Toledo Edison service area, optimized for AI workloads, expected to be operational by the end of the year.

The paragraph discusses FirstEnergy's capital investment plans, highlighting significant growth opportunities for transmission investment, particularly through the ValleyLink joint venture with AEP and Dominion. The company recently received 15 large load study requests for data centers, mostly in Pennsylvania and Ohio, indicating ongoing interest in their service area. FirstEnergy's investment in ValleyLink and other subsidiaries totals around $800 million. They reaffirmed their 2025 core EPS guidance of $2.40 to $2.60 per share, aiming for the top half of the range, and project a total annual shareholder return of 10-12%. They also maintain a 6-8% compound annual growth rate for core earnings, with minimal tariff exposure in their $28 billion capital investment plan through 2029.

The paragraph outlines the company's proactive supply chain management efforts since COVID, resulting in a diversified supplier base with minimal single-source dependency and no tariff exposure on labor. The company foresees capital expenditure growth driven by investment opportunities rather than supply chain costs and remains committed to stable growth through its organic investment strategy. In 2025, they have made a strong start, focusing on efficiency and customer-centricity. Jon Taylor reports that the company's Q1 performance met or exceeded expectations, with core earnings rising by 37% compared to last year, driven by revenue growth and new base rates in Pennsylvania, New Jersey, and West Virginia. More details are available in their strategic and financial highlights document.

The paragraph discusses a company's financial performance and operational outcomes for the first quarter, highlighting strong regulatory results and effective investment programs that have led to increased customer demand and solid returns for investors. Despite milder than usual winter temperatures in 2024, a return to typical winter weather resulted in a 4% increase in customer demand, notably in the residential sector. Operating and maintenance expenses were reduced by 3.5% due to cost-saving initiatives. The distribution business saw a rise in core earnings due to new rates in Pennsylvania, while the integrated segment benefited from approved base rates and strong rate base growth. In the standalone transmission business, core earnings decreased slightly, despite a 10% increase in the rate base, due to the dilution from the sale of part of FirstEnergy Transmission to Brookfield.

In the corporate segment, the company's earnings improved by 2 cents per share in the second quarter of 2024, thanks to reduced financing costs from lower long-term debt and revolver borrowings. The consolidated return on equity (ROE) increased by 40 basis points to 9.8%. The company reaffirmed its 2025 earnings guidance of $2.40 to $2.60 per share, aiming for the higher end. Their $28 billion investment plan is progressing, with over $1 billion deployed in the first quarter, mainly in formula rate programs. Funding comes from internally generated cash flow and debt, with $3.6 billion in planned debt issuance, including $600 million through a recent transaction. Investor demand for the company's debt is strong due to its regulated business model and robust balance sheet. The company is focusing on financial discipline by seeking efficiencies and cost reductions in its operations and maintenance (O&M) plan for 2025 through technology, targeted capital investments, and supply chain improvements.

The company is integrating continuous improvement into its culture and leadership expectations to support long-term objectives. The leaders are committed to maintaining operating costs that align with these objectives. They report a successful start to the year with strong execution on regulated strategies and financial discipline. The first quarter core EPS is $0.67, exceeding last year's performance. With over $1 billion invested in capital during the quarter, they are on track and 15% above the previous year's Q1. Operating and maintenance costs are aligned with plans, and cash flow was better than expected. This performance supports the company's value proposition and shareholder return goals. After expressing commitment to stakeholders, the call is opened for a Q&A session.

In the paragraph, Michael Lonegan asks Brian Tierney about the status of settlement discussions in Ohio and upcoming hearings, as well as updates on investment in large load studies. Brian describes the settlement discussions as productive, with key parties engaged in negotiations about expected issues like capital structure and return on equity. He expresses optimism for an expeditious outcome. Regarding the large load studies, Brian notes that there's been no slowdown in projects, with Meta announcing a Toledo data center for AI, indicating sustained long-term investment opportunities for data centers in their service area. He suggests no change to the projected capital expenditures through 2029 and beyond.

The paragraph involves a conversation during an earnings call with Alex, speaking on behalf of Shar Pourreza from Guggenheim Securities, asking Brian Tierney about Ohio legislation related to energy reforms. Alex asks whether one bill is favored over another or if they might be combined. Brian responds that both bills are progressing without any clear preference and highlights the importance of provisions related to multiyear rate cases with forward-looking test years. Alex then inquires about the timing of the next base rate case if the current legislation passes and they remain under the existing framework with an unfrozen cap. Brian acknowledges the question and indicates that there are several possible scenarios to address potential impacts if the cap remains unchanged.

The paragraph discusses strategies for dealing with regulatory and financial constraints affecting a utility company. The company plans to seek lifting a cap and may reallocate capital expenditures within various jurisdictions if necessary. They anticipate filing a new base rate case by early 2026, with new rates expected by 2027. The conversation also touches on current settlement discussions and the handling of issues related to an Electric Security Plan (ESP). While some aspects might be resolved in a base rate case settlement, ongoing ESP discussions are addressed in separate active cases, with potential legislative influence to ensure a smooth transition between frameworks.

The paragraph discusses strategies for managing capital expenditures (CapEx) and regulatory processes in response to changes in the environment with the Electric Security Plan (ESP). The company is prepared to adjust CapEx within Ohio and other jurisdictions, and potentially pursue a new base rate case under the new regulatory framework. Despite potential challenges, Brian Tierney expresses confidence in maintaining a 6% to 8% compound annual growth rate (CAGR) in earnings per share (EPS) from now through 2025. Nick Campanella seeks clarification on their ability to navigate the shifting environment and meet growth expectations.

The paragraph discusses how the company plans to manage its investments and adapt to potential legislative changes affecting its current economic environment. Brian Tierney explains that the investment decisions made since February are based on certain assumptions, which they are now adjusting due to anticipated developments in ESP (Electric Security Plan) policies. Jon Taylor adds that the company has several strategies to shift capital around, such as accelerating the Grid Mod 2 CapEx into 2026, reallocating Ohio base capital, and exploring opportunities in Maryland and West Virginia with transmission CapEx. He emphasizes that the company is experienced in reallocating capital and not overly concerned about adapting to these potential changes.

In the paragraph, Brian Tierney discusses the ongoing transition in regulatory frameworks in Ohio, emphasizing that there is no indication from legislators or policymakers against investing in the state. Instead, they are focused on changing regulatory approaches to ensure a smooth transition. Jeremy Tonet inquires about the sensitive nature of settlement discussions and the parties involved, but Tierney refrains from specifics, stating that the initial discussions have been productive and constructive, drawing parallels to previous settlement successes like GridMod two. David Arcaro from Morgan Stanley then asks for insights regarding cost efficiency and affordability strategies in New Jersey, to which the paragraph ends without a specific response.

The paragraph features a discussion between Brian Tierney and David Arcaro regarding concerns over rising prices in the PJM capacity auction. Tierney expresses that both commissions and FirstEnergy are worried about these increases, as they are not bringing new dispatchable capacity to the market, thus offering little value to customers. The New Jersey Commission has requested a review of how to delay the impact of these price hikes for the first four months. Tierney emphasizes the need to mitigate or stop these harmful price increases since they negatively affect customers without solving the underlying issues. Arcaro acknowledges and asks how the conversation has progressed on these matters.

The paragraph discusses the challenges and potential solutions for resource adequacy in the PJM market, particularly in Pennsylvania. Brian Tierney emphasizes that reregulation is unlikely to be successful and points to other states like New York, Texas, and California as examples of successfully adding new types of generation without reregulation. He highlights the importance of state-level action, mentioning conversations with Pennsylvania's Governor Shapiro and acknowledging efforts by New Jersey's Governor Murphy to address these challenges. David Arcaro thanks Tierney for his insights, and the conversation moves on to a question from Carly Davenport of Goldman Sachs.

The paragraph features a discussion between Brian Tierney and Carly Davenport about the impact of the macroeconomic environment and tariffs on industrial investments and economic growth. Brian notes that tariffs create uncertainty, affecting investment decisions, but their company hasn't seen a significant impact yet, except for some slowdown in steel production due to reduced automotive demand. Industrial load constitutes a smaller margin share compared to residential, so near-term income impact is expected to be minimal. Carly also inquires about earnings guidance, mentioning that cash flow is tracking above plan for the year and targeting the top half of the 2025 range.

In the conversation, Jon Taylor discusses the company's operational and maintenance (O&M) strategy for the year, aiming to achieve lower operational performance to allow flexibility in operating costs and target the upper half of a performance range. Carly Davenport seeks clarification on this approach. Bill Apicelli later asks about investments in West Virginia, particularly regarding the base capital plan and the Integrated Resource Plan (IRP). Brian Tierney responds, explaining current investments in transmission and distribution (TND) and coal-fired power plants at Fort Martin and Harrison. He clarifies previous comments about investment timelines for these plants, noting terminal dates of 2035 for Fort Martin and 2040 for Harrison, with ongoing investment plans through these dates included in the current capital expenditure plan.

The paragraph discusses plans for the development of combined cycle generation in West Virginia as part of an Integrated Resource Plan (IRP). The proposal includes starting with a thousand megawatts, costing over a billion dollars, and the possibility of adding one to four more such cycles. These plans aim to either replace or supplement existing facilities like Fort Martin and Harrison, while bringing economic opportunities to the state. This flexibility could make West Virginia attractive to industries like data centers and transformer manufacturers. Additionally, there is an ongoing discussion about progress in the colocation docket at FERC, with expectations of forthcoming clarity from the commission to facilitate further actions for both generation and transmission parties.

The paragraph discusses the topic of colocation, specifically two types: taking existing capacity out of capital markets and adding incremental capacity to markets, with the latter being considered a smoother path. It mentions the Federal Energy Regulatory Commission (FERC), with Brian Tierney expressing that a resolution on colocation matters could occur in the coming months. Additionally, there's a brief exchange regarding the timing of settlement talks related to Ohio, as hearings are set to begin soon.

The paragraph features a discussion about the timing and independence of new legislation and a base rate case. Brian Tierney explains that the two can proceed on parallel paths without one impacting the other. Andrew Weisel then shifts the conversation to industrial sales trends, noting a 3% decline in the industrial group over the past several quarters. Jon Taylor attributes this decline mainly to a slowdown in the steel sector, which is closely tied to the automotive industry. He notes that after adjusting for the leap year, industrial sales are down 1.6%.

In this discussion, several company representatives addressed questions about their plans and projections. They confirmed that their data center projects for 2025 are generally on schedule, though some may face slight construction delays, pushing growth to late 2025. Andrew Weisel clarified that ValleyLink's investment is not in the CapEx plan because it will be treated as an equity investment, but $300 million is included in the CapEx. Jon Taylor added that the company is focusing on more efficient operations and maintenance to drive growth into 2026 and beyond. Anthony Crowdell asked about these efficiency drivers and their potential impact on future forecasts, with Taylor affirming their commitment to maintaining momentum in efficiency improvements.

The paragraph discusses a positive outlook for a company, highlighting momentum and strategic investments that are expected to drive success into 2025 and beyond. Anthony Crowdell asks about a specific rate case in Ohio, questioning whether staff opposition to extending the settlement window suggests a preference for a litigated decision. Brian Tierney responds that staff aims to expedite the case, which they initially filed over a year ago, and the company supports this swift progression. The conversation ends with Anthony's thanks, and the operator concludes the teleconference.

This summary was generated with AI and may contain some inaccuracies.