FirstEnergy Corp (NYSE:FE). reported robust third-quarter earnings, beating last year's figure and exceeding the upper end of the guidance range. The company attributes this performance to disciplined operating expenses and its regulated capital investment plan execution. Despite mild temperatures impacting earnings, the company achieved regulatory milestones and is progressing in filling key executive positions. It also plans significant capital investments in the coming years.
Key takeaways from the earnings call include:
- FirstEnergy reported GAAP earnings of $0.74 per share, up from $0.58 last year. Operating earnings for the quarter were $0.88 per share.
- The company is narrowing its 2023 operating earnings guidance range to $2.49 to $2.59 per share and reaffirming its targeted long-term growth rate of 6% to 8%.
- FirstEnergy plans to invest approximately $12 billion in capital over the next three years, primarily in transmission and distribution. The forecasted capital investment for 2023 is $3.7 billion, up from $3.4 billion.
- The company expects to close on the FET transaction in early 2024 and receive the full proceeds of $3.5 billion.
- Regulatory milestones achieved include the approval of a distribution base rate case in Maryland and the approval to build utility-scale solar generation sites in West Virginia.
- The company is actively recruiting for key positions and shifting decision-making closer to the business unit level.
During the earnings call, FirstEnergy outlined its plans and investments, highlighting strong operational and financial performance. Despite a decrease in total customer demand due to mild weather, sales to residential customers increased on a weather-adjusted basis, while sales to industrial customers remained flat. The transmission business saw increased results due to the rate base growth associated with its investment program.
The organization also discussed its debt financing plan, regulatory proceedings, and recent achievements. It is well-positioned for the current interest rate environment and plans to file its New Jersey infrastructure investment program soon. It anticipates gaining a substantial portion of the projects to address reliability concerns with data center load growth.
In terms of rate cases and rate base growth, FirstEnergy is aiming for rate base growth of about 7% in 2024 and 2025, with the potential to add to that in the future. They anticipate a return on equity (ROE) of 9.5% to the low 10% range. The company is also engaged with regulatory agencies and working to settle any remaining litigation.
In response to a query about the Ohio case and potential impact on bills, Brian Tierney stated that they are currently engaged in discussions regarding the ESP V and Grid Mod II and that the base rate case next year will involve updating the rate base, prudently incurred costs, storm tree trimming, regular O&M, and financing costs. He mentioned that they are below the authorized return and that rates are 14% below in-state peers.
FirstEnergy is actively moving forward with hiring candidates for various key positions, expressing confidence in their strong candidate pool, and expecting to make announcements soon. The company is also focused on settling ongoing litigation and moving beyond legacy investigations.
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