Brian Tierney
President and Chief Executive Officer at FirstEnergy
Thank you, Karen. Good morning, everyone. Thank you for joining us today and for your interest in First Energy. I would like to welcome Karen Saget to FirstEnergy as our Head of Investor Relations. This is Karen's first of what I hope will be many earnings calls with us. She has quickly become a valued member of the management team. 2024 was a year of extraordinary structural change for our company and I'm proud of what we've accomplished. We significantly derisked our business from financial and regulatory perspectives and put together a team of leaders who are focused on driving a high-level of performance for customers, employees and investors. We also activated a powerful business model to invest in our electric infrastructure and our people, operate safely and efficiently with a focus on continuous improvement, recover our prudently incurred investments and finance our regulated operations. Together, these efforts are making a positive impact for our 6 million customers, energizing and engaging our employees and supporting our sustainable long-term growth objectives. I'll start today's call with a look at our 2024 financial performance and key milestones over the past year. I will discuss our outlook for 2025 and beyond and review the value proposition we offer shareholders. We delivered 2024 GAAP earnings of $1.70 per share. Operating earnings were $2.63 per share within the forecasted guidance range. Our 2024 results benefited from new rates and investments in our regulated businesses, execution on our capital plan and O&M discipline. Earnings were also impacted by several headwinds throughout the year. These included lower sales volumes, partially due to mild weather conditions versus normal throughout much of the year. In the summer, we also experienced an unusual amount of storm activity that didn't meet the regulatory requirements for deferral. In the second-half of the year, our Ohio revenues were below our plan due to the ESP5 order, which I will discuss in more detail a bit later. Employees did a great job of navigating these headwinds. A primary focus of our new leadership team is making the company more resilient so we can drive results consistent with our plan and realize our company's potential. We're working across the organization to drive performance excellence and build a strong culture of continuous improvement. This includes ensuring our processes, performance and accountability are consistent with being a premier electric company. The financial and regulatory milestones we achieved in 2024 and over the last couple of years have strengthened our foundation and reduced the risk profile of our underlying business. The success of the significant regulatory program we launched in 2023 has been instrumental to executing our strategy. We have now completed rate reviews in four of our five states since the 4th-quarter of 2023, derisking 83% of our rate base when including transmission formula rate investments. Approved rate cases over the past 18 months in Maryland, West Virginia, New Jersey and Pennsylvania have resulted in a net annual revenue increase of approximately $450 million and allow us to make the necessary investments for a stronger and more reliable grid. Most recently, in November, the Pennsylvania Commission approved our $225 million base rate case settlement with new rates effective January 1, 2025. We were pleased to reach this constructive outcome, which builds on service reliability enhancements made in recent years. We also resolved several additional proceedings in 2024 to facilitate our investment plans and recover specific costs. The Pennsylvania Commission approved our third long-term infrastructure investment plan, known as LTIP 3 in December. This program will track approximately $1.6 billion of capital targeted at grid modernization and reliability in Pennsylvania over the next five years. This includes planned investments of approximately $300 million in 2025 to improve circuits, deploy reclosures and other sectionalizing devices and replace overhead equipment to reduce customer outage times. Also in December, our Grid Mod 2 settlement was approved by the Ohio Commission. This is a four-year program that includes capital investments of just over $400 million to bring smart meter technology to all of our Ohio customers. In New Jersey, the BPU approved JC P&L's energy efficiency and conservation plan in November, which will help customers save on their electric bills. Total program costs of $817 million from January 2025 through June of 2027 with an authorized return of 9.6% on program investments. Turning to our balance sheet, completing the sale last March of the incremental 30% of FirstEnergy Transmission's equity interest was a transformative milestone for our company. It marked the final phase of our $7 billion multiyear effort to improve our balance sheet and fuel our investment plan. Successfully closing the transaction was the catalyst for our return to investment-grade status at all three credit rating agencies. Across our holding company and subsidiaries, we achieved a total of 40 ratings upgrades in 2024, more than double the number of upgrades in the entire US electric utility sector in 2023. Today, all First Energy subsidiaries are investment-grade and substantially all of our companies have their highest ratings in more than 20 years and we are committed to maintaining these metrics. We put the power of our stronger financial position behind our comprehensive capital investment program, Energize 365, to forge a smarter, more reliable grid. In 2024, we invested $4.5 billion in our system through this plan, surpassing our original plan by 5% and an increase of more than 20% compared to 2023. To ensure we're performing at the highest levels, we transformed our organization and implemented an operating model that moves decision-making closer to our customers and the employees doing the work. We then recruited external candidates and advanced internal talent to lead our companies forward. In total, we have placed 24 individuals into critical roles at the Vice-President level and above. This includes nine members of the senior leadership team, including our business unit presidents, as well as other key leadership roles. This new leadership team is applying their deep experience and building a high-performance culture based on accountability, operational excellence, financial discipline and achieving constructive regulatory outcomes. Another milestone in 2024 was resolving certain Ohio legacy proceedings, allowing us to focus our vision on the future. Finally, we delivered to shareholders a solid dividend with 2024 declarations totaling $1.70 per share, an increase of just over 6% versus those declared in 2023. The successes we achieved in 2024, strengthen our foundation and support our vision for the company's bright future. Turning to Slide 7, let's give a quick regulatory overview, starting with Ohio, which represents 17% of our rate base. As many of you know, the commission's long-awaited auditor's report and our base rate case was made public last Friday. We believe the auditor's report was constructive on several issues and look-forward to filing our response in the near-term. The Ohio Commission has been diligent in separating legacy issues from traditional rate proceedings and has maintained that diligence in this case. The auditor's report focused mainly on our rate request. We have not experienced regulatory overhang in our interactions with the commission. In regards to the electric security plan, the Commission approved our withdrawal of ESP5 in December. The Ohio companies reverted back to ESP4 on February 1, but without revenue increases for our distribution capital recovery rider. ESP4 should remain in-place until ESP6 goes into effect, which is expected to be close-in time to when the base rate case is effective. Like ESP5, our ESP6 proposal focuses on reliability, affordability and stewardship. ESP6 defines distribution riders for the full-term of the ESP and proposes increases to the DCR tied to reliability performance to better align with in-state peers and support significant capital investments. In the coming weeks, our Ohio companies will update the pending base rate case to remove provisions that are now appropriately addressed in our ESP6 filing. In New Jersey, we continue working toward a settlement related to our infrastructure investment program, ENERGIZE, New Jersey, which includes investments targeting system resiliency and substation modernization. In West Virginia this year, we will file our required integrated resource plan. The 10-year plan will include updated load forecasts and provide options around future generation needs to serve our customers and support economic development. Given the energy needs in West Virginia, we plan to explore building new dispatchable generation in the state. Should this be approved, it would be incremental to our investment plan. Turning to Slide 8. Over the last few years, we had remarkable growth in our core regulated earnings, but this growth did not come through clearly because of non-core components of operating earnings. Today, to assist investors in assessing our performance in our core business, we are introducing core earnings, which are the earnings of our distribution, integrated, standalone transmission and corporate segments, excluding the earnings contribution from pension and the Signal Peak mine and special items. From 2022 to 2024, high-quality core earnings have grown by 33%. During the same-period, non-core earnings from pension and Signal Peak, which are volatile and often outside of management's control, decreased by 59%. As we have in the past, we will continue to seek an exit from our Signal Peak ownership position. We believe that core earnings better reflect the true performance of the regulated utilities we manage and the necessary corporate functions of the company. Beginning in 2025 and for future periods, we will provide guidance for core earnings and core earnings growth rates. For 2025, we are introducing a core earnings per share guidance range of $2.40 per share to $2.60. This compares to core earnings of $2.37 per share in 2024. At the midpoint of 2025 guidance, this would represent growth of 5.5% or 7% when adjusted for the dilutive effect of the 2024 FET transaction. Our 2025 guidance includes continued solid growth from investments in our regulated operations. Our new guidance also accounts for several unanticipated factors that developed since our 3rd-quarter call. These include the impact of higher-than-anticipated financing costs including significantly higher interest rates. The removal of a 50 basis-point incentive from ATSE transmission rates, consistent with the decision by the US Sixth Circuit Court of Appeals in January. And Ohio DCR revenue caps, which were frozen at May 2024 levels consistent with the commission's December order and our return to ESP4 in February. In addition, the settlement in the Pennsylvania rate base calls for incremental spend on reliability-related maintenance activities, which is fully recovered in new rates. Initially, our plan included reductions in O&M in all of our segments so that total baseline O&M, inclusive of the increase in Pennsylvania would be flat to 2023 and 2024. Ultimately, we concluded that doing so would not be sustainable and would not support the long-term operating, regulatory and financial objectives of our company. Our core earnings guidance for 2025 reflects financial discipline from a targeted program being led by the new management team. The program includes organizational design changes as well as programs focused on procurement and contractor staffing. With this program, we expect O&M in 2025 to be flat to 2023 and 2024 with the exception of the Pennsylvania-related increases. John will provide more detail on O&M discipline later in the call. This approach was developed with the new leadership of our operating companies. In this model, decision-making is closer to the customer, employee and regulator. We will operate and invest consistent with the regulatory outcomes and commitments we have made to our customers in each jurisdiction. We anticipate investing $5 billion in our regulated properties during the year, an increase of approximately 11% over 2024. This investment is enabled by recent rate activity. Subject to Board approval, we anticipate annual dividend declarations totaling $1.78 per share in 2025 and a payout ratio of 60% to 70% of core earnings over the planning period. For the 2025 through 2029 investment horizon, we are providing forecasted core earnings compounded annual growth rate of 6% to 8%. We're extending our Energized $365 billion, $28 billion investment program through 2029. This represents an 8% increase from our previous five-year plan and results in a 9% compounded annual rate base growth during the period. For our base investment plan, we do not anticipate incremental equity needs beyond our ongoing employee benefit programs. We are committed to our investment-grade credit ratings and as we have incremental investment opportunities, we would consider a broad range of financing operations. Our capex plan is solid and has the flexibility to handle changes to individual projects. We believe that FirstEnergy represents a low-risk, reasonable return investment proposition to investors with an attractive total return opportunity of 10% to 12%. With that, let me turn the call over to John for more detail. John?
