FE - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the FirstEnergy Corp. Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Meghan Beringer, Director, Investor Relations for FirstEnergy Corp. Ms. you, Thank Beringer.

begin. You may

Meghan Geiger Beringer

statements in Christine, quarter differ our and Information forward-looking to can you, prospects. morning. regarding and current are subject uncertainties. on good be call. Today, fourth Factors to the to These cause and earnings strategies various earnings, our based we on SEC website indicated Earnings those revenues, our Investors expectations Thank performance, Welcome are actual could will statements and from and by of under found link the risks results section that materially filings. such make statements

We supports will Financial FirstEnergy discuss non-GAAP Controller President discussion. President, call Vice today's Legal Investor today's Executive the with Jones, President, Vice Vice Corporate Investor measures financial between financial Jim and measures. along Vice also Participants President, Accounting and and Treasurer; in non-GAAP and Regulatory Relations. GAAP Officer; President on Chuck Chief and Officer; certain Affairs Executive be include Strategy, Relations Vice Irene Pearson, Leila which Chief Prezelj, found and President Steve Officer; presentation can and Chief Vespoli, website Staub, Reconciliations a Executive Taylor, Chief Jon Officer;

Chuck like the would to Now, I call Jones. over turn to

Charles E. Jones

visibility Thanks, with earnings into results Yesterday, our guidance XXXX. Megan. Good opportunities that we XXXX investors morning, regulated XXXX along and rate with everyone. reported solid provides a growth through

and for revised year guidance Our range quarter. original last are the operating provided upper earnings surpassed results of we the near end the our

the guidance I three-year exceeding operating achieved shown entire of or midpoint the of am financial we straight period. team our to earnings this years has provided now have discipline over investors. three proud of We the meeting

of and the regulated performance reflect our the earnings transmission growth impact positive strong distribution financial operating as strategy. well XXXX as businesses our in Our

discuss competitive Cuts were these by well Jobs Act. and related our business Tax will the Our Jim plant and detail shortly. exit at GAAP earnings to impairments as in charges more costs impacted as

We utility a into our transform plans that a walk transition. prominent our minutes fully performing, to company regulated the few are the in earned impacts of equity through this made month positive our take is transaction last several company this gratified support investment billion who on I'll to to confidence $X.X our a having highly investors company.

to any We pension First, million the employee used metrics. balance proceeds pension allowed contribution further million it make $XXX We improve earlier credit us XXXX. a with contributions a strengthen our coupled some required XXXX. to $XXX expect in and of we don't FirstEnergy's to to the contribution sheet our plan, made through

positioned $X.XX grade also to least XXXX. a period holding equity issue stock our additional a We through credit and result, which This as purchase eliminates investment by we the our XXXX. reduced current company metrics planning through are for of any plans employee and, also outside debt benefit need at billion transaction sustained runs during

improvement Second, transaction transmission facilitates infrastructure in businesses. our growth and distribution an program investment the for accelerated

comparative incremental the segment. This projection a This fully presented investment view a our distribution total basis corporate basis rate from in rate the Ohio will investments diluted introducing discuss of the than earnings report regulated operating these XXXX. With capital later of to diluted base, on growth corporate segment. diluted and by to over regulated DMR results, transmission to XXXX offset I as X% with operating company's distribution timeframe. represents $X.XX also which are guidance we XXXX, of quarter note X% businesses, in This for on the For and utilities companies the is through intend we $X.XX long-term that impact that $XX regulated full reflecting earnings are we're the more a of preferred a of Beginning billion per share. performance. first I fully of XXXX. will our transmission net a earnings earnings shares both to and the provide operating operating excludes those growth projections with you introducing reflects in

FES make January transaction management the we Wilder three creditor familiar John Tony to executives: or The business. at Finally, group Senior become RWG of as Vespoli, at restructuring actions FirstEnergy in restructuring about these including and group emphasize includes shift with decisions formation and Together, will of the to Gary outside advisors, to any board fully in any Energy towards management Horton our designed continues opportunities focus addresses its allowing those FirstEnergy to Strategy; Working as tremendous Future meet it directors received the already to advise Benz, involved continue RWG regulated the anticipate will FirstEnergy's outside growth management Restructuring discussions a industry FES. our point to along The be Vice with that and Leila serving strategy. a members are that that the FES, decisions. Pearson, well. Jim working that important some presentation us has FirstEnergy It's started is of our our Solutions RWG with our transform President by will and restructuring of FirstEnergy FES Group team of includes from and help they professionals, Holdings. Bluescape potential work,

In review and completed initial XXXX phase we let's investment business, we strong operating developments higher as our at company. our performance saw of other businesses regulated Energizing Future very the earnings the our So across transmission the full-year program. our

billion enhanced invested to and customers. more the reliability our of service During to first the years than $X we four system support program,

targeted billion we're our the by bring low annual billion program, investments This million. increasing to will second phase end $XXX of investments $X the annually of the to XXXX. For planned through our $X.X

January the file effective for X, phase, the rates rates settlement continue final December, will pending service agreement of that we opportunity a effective provides filed order, part provides to to During JCP&L XXXX. the also expanding forward-looking In be into the our FERC JCP&L in territory. FERC second program Eastern for a with and

next we MAIT a in October FERC filed year. settlement in as to In great expect was that as We distribution on the several XXXX rule our well months. business, that settlement the

were results new that last trends forecast year. Our our in than of went which service also with share load load into basis, while the a impact XXXX. the pleased original deliveries weather-adjusted more several residential rates territories per milder $X.XX throughout compared offset reflect January, expectations. We're our On exceeded with commercial effect our the to the that consistent emerged of weather

XX% petroleum operating Regulated earnings gas, six in XXXX the of segment, exclude Distribution corporate Transmission growth consecutive XX% businesses, In from Together, of over addition, offset deliveries, by reflect steel primarily industries. and now XXXX our when the more and DMR. or we industrial driven quarters achieved increase the have you by an than shale

million the a we reduce monitoring Infrastructure with As a of the well that mechanism enhance application approved the prepare certain December to look and to will $XXX filed the of outages power XXXX an safety. enhance as Ohio restore in conditions, duration The Jersey, Program smart at and our BPU technologies. the of our system allows in plans for redesign the Ohio Modernization and plan remote PUCO system accelerate portions reliability, and Distribution for performance rulemaking beyond, utilities Platform In frequency modernize to and as three-year utilities to weather adverse New utilities grid allowing by distribution investments their real-time system resiliency, strengthen for This against grid creates that Investment conditions. faster, power help system December.

Jersey, initiatives our Incremental to a JCP&L filings Maryland case later to make operating growth drivers growth well year. as to modest We filing in represented in and a this primary earnings transmission regulated New distribution rate and are investment Ohio the projected increase as the expect our increased X% X%. by of rate in

before alternatives and capacity I the move from Finally, in Power West to projected Virginia. their Mon are that utility Potomac shortfall note I address evaluating Edison away will discussion,

outcome of of have was Service Station terminated Virginia our light resulted utility. application the at transfer Allegheny Mon risk Commission's Power, and the in purchase conditions, to Pleasants to in decision Given Public exposure to FERC's would agreements which Energy's our Power significant ownership of our commodity West

a X, will on that As Energy Allegheny deactivate the Pleasants on January PJM result, notified Friday, XXXX. Power Station

pursue plant prepare deactivation. we continue while We to for the will sell to opportunities

all are of year. the million. Supply sale payments, this be Hunlock to each the close plants paying Energy off and sale to to Moving of recall $XXX in we the $XXX that completed about Gans, of long-term Allegheny facilities first After December, and approximately you'll Buchanan make-whole these premium megawatts XXX expected are Supply, generating debt Chambersburg, in Energy in of from six Allegheny Energy news, transactions including Allegheny expected proceeds for the Bath at remaining net net other all half of involving plants track on Springdale, the The million at capacity proceeds. and to the

knowledge involved to our were we now would to our federal FES have turn very the of generation I'm multitude It levels Let's employees FirstEnergy benefited is personally communities, common that in in and and assets actively affordable solutions. to creditors. at way support endeavors that given resiliency, a and that these resulted state power legislative efforts both a to we in a policy and Solutions. region's haven't look of will all to continue and support will these reliable at importance the regarding FES the grid support economy. continue units, the plants options meaningful regulatory or disappointed

impaired the of fully nuclear assets January, the plants to form end However, the likelihood the invested regulatory as million increased lives. of the money discuss, end operate FES, subsidiaries that Jim of and not have its to the were because any $XX our At unregulated or receive has support be FENOC we pool. able will useful inability until their legislative in will

and from money money March shows borrowings $XXX million March $XXX and We credit FES million to The between of now between secured pool down of pool FirstEnergy. up the exit the XX. have sometime will that to they facility now expect end and current draw the forecast

regulated initiative prosper particularly our prepare we our variety properly that positioned our achieve and that a blueprint for shared we develop as year, fully we The Accenture we launched future. well to is team are an and our Last with is worked to create this grow to to organization scenarios FE a continuing called Tomorrow of organization. FE for this goal. told ensure services cost As to you Tomorrow efforts utility, our our that future aligned, at structure

of the next Jim employees Now, vision to strategies to as over to implementing the Pearson our team to A we stage closer becoming next months. we're charged has effort. XX fully Tomorrow of been regulated, XX that FE move reporting of entering the

yesterday, Jim named Executive been Finance. has As Vice we announced President,

our and for roles of will XXXX CFO position, shareholders. the And give customers RWG. the our million regulated moving FirstEnergy Steve was continue help and others Jim. While organization, Strah, at strengthen he plans well accelerate oversee positioned is and the he this our will customers, as reporting role Vice well meeting as that can Senior our be key stepping and this into Utilities, his will knowledge take that will individuals FirstEnergy President Nuclear transformation place planning into great businesses. succession X President ensure utmost regulated a to for our yesterday to benefit continue commitments business. will their Tomorrow our into Utilities. to year of financial We to by excited the that future. of investors very Chief of believe new will announced the infrastructure and Vice opportunity our Senior is Steve's Sam new FENOC and Officer, Vice growth FirstEnergy to We're over broaden These Belcher, about to role taking FirstEnergy President several will Senior changes attention as that our ensure the our improvement

will Jim, a fourth results. provide of Now, review quarter the

James F. Pearson

morning, Good everyone.

of to competitive I the items cost of $X.X value nuclear-generating exit includes in impairment few fourth report a Station, that reflects carrying we these asset exit for share we obligations, impairing at is related have As and fleet. and We always, the share fully fourth impairment Act. the a loss given quarter Yesterday, move quarter $X.XX nuclear and charges financial will discuss the plant information outlook our generation Cuts per our before retirement community and posted take quarter. Pleasants increasing to our to plant about on GAAP provided Jobs our asset the recorded our fleet and asset This fourth cost Tax to website. in the I detailed which consolidated the reducing or $X.XX minutes Power quarter impact of the on drivers. per billion assets of reported the

to position. the impacted business $X.X of quarter $X.XX asset our its addition, deferred share tax per charge significant non-cash and Cuts primarily GAAP include Act, Tax In a our which billion fourth given results, competitive related or Jobs

We during while are on to payer. Tax sales weather-adjusted of would decreased a residential fourth to same to cash share fourth operations while we the we share. energy distribution a flat, determine flow improvement down drove which a deliveries quarter X% compared aren't in business nearly X%. This total quarter, basis, quarter a regulatory compared usage. days strong as Shifting the Cuts but Jobs fourth operating gears January as commissions lower higher of XXXX. period customer FFO XXXX. were higher into the our deliveries sector, the with distribution impact Heating of in went deliveries through results $X.XX period for our XXXX. quarter up state per the were a that all the given the On a earnings same rates of those This efforts XXXX the to X% compared was federal Driving that commercial commercial sales In same per working Act XXXX. as well $X.XX of the utility the of residential from increase were and the very new rates weather-related had X% and results normal in effect our tax primarily efficiency reflected to in than period degree to were result essentially X%, our of deliveries

the to positive year, more growth operating as partially higher the our lower earnings and of margin due transmission revenues quarter Looking related Energizing earnings expenses. driven program. by in competitive the at recovery in operating business taxes, a gas trends offset industrial favorable last general with of by compared higher result in quarter business, X% and the to than In the improved Future depreciation the to steel. Fourth drilling O&M fourth continued sales, quarter commodity and fourth increased

on shareholders our focused remain will meeting our plans. our regulated we commitments to always, As growth and executing

Charles E. Jones

Thanks, Jim.

that operating move question-and-answer the and has on we want of with Now, independently provide on information to I will this FES. will be advisers about of FES I call status can behalf of not been we creditors. FES other XXXX, Q&A since the neither or negotiations executives the into credit call. our phase able or to the detailed preface speak early

questions. let's Now, take your

Operator

you. Thank

you. be now question-and-answer will session. a We conducting Thank

America of Dumoulin-Smith Our first Julien question comes from Please Lynch. the proceed line question. with of with your Bank Merrill

Julien Dumoulin-Smith

Congratulations. morning. good Hey,

Charles E. Jones

Julien. Hey,

Julien Dumoulin-Smith

Hey.

reflected So, can you bit off, little CapEx that you reflecting efforts here? latest talk the about released the JCP&L first you're and a guys range that that are How much just here? of in Ohio

James F. Pearson

this Yeah. $XXX as filing Julien, guidance, the our we we New upper end make made Ohio, as filing Jersey we'll anticipate included in Jim. that At we've Plan. of million is a Improvement this in that the later year the Infrastructure well for

Plan the money Infrastructure say New Improvement in end it includes I'd the $XXX range, includes So, million at the some the also Ohio, of in for and it top Jersey.

Julien Dumoulin-Smith

thoughts to embedded earned on can you talk outer of years regulated as ROEs, can turning your little and a And know what are in what tax there? returns some there and the little the are out filings bit a obfuscation there understanding there I are. deferred and of that Excellent. guidance? more back talk of to think about specifically, what's And you kind earned you that that's truly then the bit Pennsylvania the regulatory created items

James F. Pearson

itself. just cases tried defined in in that since When those there have in them Yeah. been questions They've little have just think about was Pennsylvania as of are the Julien, we've well the I I've staff our had look what I And Commission XX% Pennsylvania. not below cases. bit also fully that about when we're the I'd a Pennsylvania, compare heard as residential Commission that settlement raised ROEs and and state. but peers of two been the you our a at before Pennsylvania note rates that in the been in peers, our to

process what where we're at taxes see don't concern taxes. at standpoint. a Pennsylvania. So you pure are number about adjustments look on the a of you deferred I There's associated rate-making from GAAP deferred a right versus just And in there's in with where any

Charles E. Jones

with just smart the emphasize is everything if in all said. are there, out whatsoever. And follow no no There the hysteria I'll in to there that based off with there absolutely concern enough be on to market Pennsylvania. that But are should trade on concern just Jim about us So be you want any over-earning know there that should people I hysteria.

Julien Dumoulin-Smith

overall, what Absolutely. the XXXX/XXXX then And across are the out reflecting utilities, you timeframe? in

James F. Pearson

what, Julien? As far as

Julien Dumoulin-Smith

regulated released. longer Earned dated returns, the just numbers you in just

James F. Pearson

returns assuming that our on approximate I would in out all think had earned would filings we're we utilities there. that our see what you the

Julien Dumoulin-Smith

Okay. Fair enough.

James F. Pearson

(XX:XX:XX) right in but again line we're And with those.

Julien Dumoulin-Smith

you. Thank Great.

Operator

line question with Stephen next Byrd Morgan proceed from comes Our of question. Please with your Stanley. the

Stephen Calder Byrd

morning. Good Hi.

Charles E. Jones

Good morning.

Stephen Calder Byrd

a we on material a of sort and to not how you've impact increase here? or out upward you've tax tax overall rate could that that that touch your terms about be laid projected reform? base has wanted in much really in of just I rate an been attributed base driver the think at all your reform when in Has an base terms rate numbers been numbers in of the of laid impact out, that

K. Jon Taylor

It's Stephen. Hey, Jon.

us the on code. that's tax the scaling have a elimination which But down actually is bonus really remember, depreciation the you slide that. original if under we to only think I of anyway thing was impact going

uplift two the So about rate That would that in those XXXX with elimination million a be XX% $XXX to XXXX. years. in was base and XX% of

Stephen Calder Byrd

Okay.

the I'm it. sorry. of extent so And that's

K. Jon Taylor

Distribution Transmission Regulated the on businesses. Both and

Stephen Calder Byrd

– perspective, just I due. wanted Occasionally, upcoming of raised on discussion of And or might know we check to effective firmness just the of can't really concern that understand on really I or thinking whether Understood. there's Okay. respect the FirstEnergy an payment that. FES, FirstEnergy's I'm just effectively about from that there's negotiations. timeline on ownership you you just your get latest bond into all with extend exiting business on your and trying period to the FES for not get

Charles E. Jones

removed will in will we of and tie that business. prepared said end expect they that my that money between be from the remarks with last be pool March, I that that the Well, and unregulated have I now the

speak shocked as I some FES, out be a for go I far beyond will While if type of can't filing. they

Stephen Calder Byrd

think point of the some of dealing sort in we bidding responsible Who auction capacity challenged? be of just, that, to fairly Great, be How assets guess, at management strategy that upcoming after the I the in with PJM. Chuck. economically item appear for key that, And is May when practice, to out? play related about the that in would a sort would of, that these business

Charles E. Jones

would how whether to bid for be upcoming and Power FES' Pleasants It's that it for would Mon that decision FES the Allegheny are Mon of auction Power's Station, decision assets. Supply's same It be Energy and for Power's. assets the decision the the in

Stephen Calder Byrd

you. Great. all That's I have. Thank

Operator

next line comes question. Gordon proceed from Please Our Evercore. of your with question the with Greg

Greg Gordon

morning, Good guys. Thanks.

Charles E. Jones

Hi, Greg.

Greg Gordon

out a organic under I keep of of how that that rate every outside you've the that we O&M? anything incremental laid with we're should you'll revenue model deploying only to you're think your overall then, requirement at laid out, from come saying earnings comfort that through should stated in we sort that you've Is flat. that the implying minimum, rate, the revenue of out you're rider is about in trajectory But mechanisms And control When that's O&M capital you're on getting you're that, would increases what the do our formal sort fair? that revenue assume level year way the looking assume growth guidance think any able states. to and generate. corroborate we different the I you're think a of case

use Just can midpoint guidance. trying a up parameters basic of set to modeling to your level come corroborate with confidence the that let's say, we at, of

James F. Pearson

our be guidance about me right. Yeah. And is. Greg, you're let really what clear

growth riders, falls the as and the in as a of, We the rate. a what well that spend under to off is We in do midpoint baked rider, well $X.XX upper X% spend associated transmission New we revenues is capital growth as in midpoint any it's X% based DMR would of X% would of $X.XX, that a with have that at infrastructure fall expect Ohio increases X% the under Jersey improvement as have a end, our plan in so rate would. to with primarily the

So stated not we a would those on unless filing, rates, increases there from get than other is any growth. organic

a have an yes, going we modest the to right perspective, an our compared pension guidance you're in additional for in an we well rate expense. in rate our to in We're Now but we now. see built and only O&M made case correct. the contribution From associated the have that result billion case hold that's plan in flat, O&M we what you'll of do that's And our million additional $X.XXX improvement in primarily as O&M with generated that January. expected XXXX as $XXX earnings Maryland,

So helps, Greg. I that hope

Greg Gordon

It convert, share all then does. preferreds And the us of the does. count It diluted, is fully given correct? you've assuming

James F. Pearson

Yes.

Greg Gordon

So be that what share actual the share the we're impacted share in in year but actuality, count count interim, count average being lower average preferreds... actually in with because the will

James F. Pearson

convert to by have would middle of the XXXX. They

we that plans. about our $XXX equity and it right XXXX, is and to diluted associated you're by probably reinvestment have issuance million there. growing just The million $XXX dividend the I incremental So fully think with assumes

Greg Gordon

Okay.

the that's plans. and you share it actual grows count more less in as XXXX, your use then or So to continue

James F. Pearson

That's correct.

it continue to increase. would issue we plans, our through As

Greg Gordon

you, sir. Thank Okay.

James F. Pearson

Okay.

Charles E. Jones

So on I'll the on bit little just follow a O&M.

as that our we Jim peers. than are lower benchmark job managing Our have in to pretty you an true we that's our years. XX And costs when fact, and serve. in very low our O&M state the have rates XX much behind compared that's last key done utility it, to stated, peers, one really the drivers of of the companies over outstanding Pennsylvania, And every O&M

Greg Gordon

Okay.

Operator

proceed Please next Our from line question comes question. with the with Pourreza your Shar Guggenheim. of

Shahriar Pourreza

Good morning, guys.

Charles E. Jones

Shar. Hi,

Shahriar Pourreza

some driving the just of of distribution cases? sort What's there's my very your that into are been were from an showing growth of slides modeling a standpoint, healthy since XXXX. absence rate this most year-over-year But on questions especially have we answered. So,

Charles E. Jones

are period looking you What at, Shar?

Shahriar Pourreza

Just XXXX, over a looks from little like growing XXXX is distribution to XX%.

James F. Pearson

Yeah.

Let a at that, Shar. take me shot

We have to XXXX. grow some XXXX that in will revenue compared

the case. First, of it rate a Pennsylvania reflects full year

that year. have effect a until As not full of you'll did recall, the we'll latter into go so part January,

in have DCR. We that a with in incremental some From associated industrial we primarily normal side, the growth talked Ohio our then West expect And with expense with that we expect associated revenues also expenses, and talked And improvement I year. XXXX we we've that's will a earlier. have the growth be about pension also expense we assume about load associated the weather that some there. then Virginia where on

compare drive would you about that it XXXX. when in that $X.XX to So earnings

I those general a primary taxes. the depreciation are and bit offset So drivers, little that's additional by and think

Shahriar Pourreza

that. helpful, just then Got it. That's it and after Jim, normalize

a mitigate Okay. may then back cash just need regions reform, of the of volatility, tax they from lot real on there's necessarily And obviously immediately quick not that sort to some evidence in commissioners some around that cetera. rate preliminary order several et

sort in when multiple the think plan So especially scenario of a that especially that the And you're case leverage some savings tax you opportunity, then order light an your O&M of especially in this the and outlook, there assuming states? you're is accelerate O&M kind you of distribution of spending in fact that levers you out have? laid about given given what's to have, the base here, growth kind you of in

James F. Pearson

Yeah.

out plan benefit with In at our all we when most recognize tax have reform. reform. our not to any recognized any Right working to does associated is forward. Let with you we handle way me with now, it associated of have look going plan, not five appropriate this base tax that the But take the commissions what we're benefits see there, that.

Shahriar Pourreza

Excellent. Thanks, morning. a guys. good Have

Operator

with Our Paul line next Associates. with Glenrock of question proceed Patterson Please your question. comes from the

Paul Patterson

morning. Good you? are How

Charles E. Jones

Paul. Hey,

Paul Patterson

on that last Just point.

you are rate benefit the correct? associated on to in tax lower So, any through Ohio, earnings, with is guys flowing that planning not

James F. Pearson

laid Paul. plan out, we in no We correct, have that benefit that's our

Paul Patterson

it was any be there until in there some perhaps that or filings, – was that? Because base a how true-up guess, little what some about rate the case is general difference you Okay. wasn't there bit was I on position there could Is won't rate because – case, a that a it XXXX. elaborate a that

James F. Pearson

Well, we provision stay-out have a May through XXXX. XX,

up say we addressed not to The begin DMR our can go whether riders. taxes will that go go whether rates reason, down. or filed DCR not those there. out, tax on side other taxes for other of lower not done laid we've and plan have Ohio But with we our adjust I any already incorporated we've we in have the technically, the expenses up, than that anything benefits. taxes any So, for

Paul Patterson

Okay.

you not other are terms your down correct? in they're to fact not clear, guidance provided, words, will it going so just the that to crystal be rates that – make So is that tax going benefiting EPS in of the

James F. Pearson

our anything be and flowing benefiting at we're through. be Those will right, would point. now, Right deferred not guidance, they this not

Paul Patterson

you, general, I I just May? are you know you generally then that going going think in on apprised least very is wholesale perspective, what's when just FES, guys that thinking saying? be follow And or understand and the if what and the FES out be great. you But the to have done demand your have not by supply I'm I market what the making up that Okay, you're capacity there show going clear be to to looking about being guys since it. decisions – you you obviously to operating or you're are you auction much amount what mean, what might of are participating and how from going or be might in a be gotten big the haven't guys expectation. the auction, Do in are policy power just is you to at there, many What a looking just speaking, utility and thoughts in plants, the clearing plants? up at might follow your necessarily has about be – supportive fails expectation power to auction but not do leaving, of the not be you since strategic Incrementally, decision me? from shown

Charles E. Jones

about going done what assets. not in step administrated their way will something speculate do the over is I'm Unless others plants the in give plants, haul, these coal simple you been change with markets. in and future. Well, might markets of unless disadvantaged my the nuclear there a states view no coal have these just to to to be I'll which left construct of provide administrated support, to nuclear or the long

Paul Patterson

much. so you Thank Okay.

Operator

proceed comes JPMorgan. question from with of next your question. Our the line Please Turnure Chris with

Christopher James Turnure

and Jim. morning, Good Chuck

Charles E. Jones

morning. Good

Christopher James Turnure

is For the you moved segments, any costs give. And we the kind than plan? if into from a I'm baked as or had corporate lower or any if other range there you that successful cutting provided well that baked go guidance as been that and then unregulated modeling. of also corporate into there's segment the costs the guys cost FES that into is the wondering out you guidance lot we in

James F. Pearson

that's accounts about that that. like Yeah. we are associated that plan have with and none than ourselves, FES with included, What the are million be we've and between currently charged assumed would common other in associated is depreciation accounting payable, FES $XX something systems, the payroll, of being and that that costs to systems

where The the some corporate tax side lost is shield other rate. of at interest used deducted to the XX% we've impact on be the a

a rate. XX% it's Now,

about would hold the forward, corporate the driving $X.XX range. that's in going in some expect, flat But difference. of plan that I would So,

Christopher James Turnure

Okay.

in to depreciation you level? with think plan, at you So, forward all into know million date everything that's given going realistic including that corporate of corporate pretty cost-cutting but efforts of your the and you're $XX only the moved

James F. Pearson

in That's right. correct. That's there. built we what That's have

Christopher James Turnure

incremental part mentioned then Anyway guidance. second the wanted you're confident previously no you've internal new other can needs just I sure and you cash internal that or question going than fund equity the entirely plans debt. of my make existing were that flows to your program is forward just with And CapEx the that Okay.

James F. Pearson

spend debt you'll well into do that any as when new as would we have Yes, is comfortable confident above think debt. have we But is new a of internally. built $X about do that can the funded transmission $X.X we very you what see capital are typically we yeah, range, billion new do billion through to be we can and we're that of But in in debt the that plan. distribution half some

Charles E. Jones

month No additional question we're one doing $X.X But will billion can't XXXX. that its getting there only believe be none. that through I equity again. already after

Christopher James Turnure

Thank guys. enough, Fair Okay. you.

Operator

Our next Orrill of question your comes with Gregg from UBS. line Please question. with proceed

Gregg Orrill

talk Can how and reception be there thought the since kind Thank you've Modernization of Yeah. the if likely the Platform sort any there's is scaling $XXX – down, it plan to in gotten of you you what any just million to you and it to about Ohio what filed program? up you. and or process Distribution change,

Charles E. Jones

the it questions Well, been we that, beyond it staff what to think ask to does, answering a from add about And customers. Leila helps what how I up I'd don't have that now, in till to position but... just is, it really we're say.

Leila L. Vespoli

would, Commission the grid a around full-blown, got So the more state. discussions of the its different if the then filing platform impetus having That there you had and kind another modernization plan. behind out was stalled when for we that,

built there looked of. can be any and so and certain system, grid at we that things our should be off are smart that system done be And can done

And that's front of we in so them. have what

their as kind it for of you're So not And to at to spend, phase in. the the it, consider looking Commission it's a quite to way tie hands. frankly,

whether slip we So in Commission. shared received. we – it when the hearings, meet or it we the it date have was schedule to concept, requested of and warmly they – the in bit. with whether was yet warmly had a received regard, discussions And we'll a But have little any pre-filing, don't can see terms might we

Gregg Orrill

you. Thank

Operator

with question of comes Praful from next Please Mehta Citi. proceed with question. line the your Our

Praful Mehta

Hi, guys. Thanks so much.

well. to from perspective, So you is the as forecast right put just cash the plan obviously be revenue that walk tax out. you've I my and on what question because reform. or expect And it's refunds impact into flow cash you the flow built is now a DTL down not really have you understand coming can But through

what how be is impact you cash flow to do your to debt? that So FFO that expect and impacting

James F. Pearson

reform, and cash at not points. would FFO percentage probably there all rates, are FFO now, assumes XX% our When had impact to we tax X flows the if by impact still X.X adjust to about And of full the we XXXX. of it those to at we debt remain our Praful, a right about look forecast through

But think dates are. concerned about those you the formula So, rates, – I'm when that. not or about the stated will whenever they reset

actually. For reset or there's rate decide proceeding the another whenever they'll others, to commissions

ultimately they'll assets, XX normalization customers, the is of life XX rules, those refunded will to as far over those and which I refunding amounts years. be generally As the follow think

now it's then not So, going that be back are debt. flow immediately, improve our and benefit customers any through FFO further to cash going the flowed to that to to required our flow to cash flows that's

Praful Mehta

got you. helpful. That's I

in is So, refund piece? and it? portion the you can the just there down assumption break unprotected Is of unprotected and a on refund, of what the that protected DTL portion

K. Jon Taylor

Yeah. grand things. not was There if over be XX% of would It's and life Praful, about refunded which $X.X The assets. of the the that, more, unprotected an scheme small is of piece. this protected property Jon. is taxes related very was be in deferred those to excess billion.

Praful Mehta

that of can tax DMR. building Got to building to get DMR of us in the what your you to add doesn't you. current impact even from FFO then FFO you're to in DMR And flow then in debt, the I'm the small, in the coming DTL extended, potentially the and have finally, just though looks some FFO assuming revenues the reform? you excluding the and If like refunds Thanks. DMR debt impact tell lower plus it's cash it,

James F. Pearson

That's right.

said our XXXX. the our built assume and earlier, FFO would goes be through reform Praful, XXXX impact beyond in It we we And in XX% have also, still full of the extended As forecast. the did not I've DMR in tax is range.

Praful Mehta

target is And FFO a you. is there that different target? for level or Got the

James F. Pearson

the make that have range XX% we I that and with to right think appropriate. plan capital comfortable the we the investment is we're amount of plan now,

As a planning time model goes to with investment on, going we where would of like that the to to we're fully drive and that up amount somewhat, is capital but I regulated comfortable do. think right now that we're very

Praful Mehta

is parent to... the just debt Got you. finally And

Charles E. Jones

about need there more move and time questions. people are ask We're six, we seven to of in the on. running to Praful, queue out

Praful Mehta

All right. I appreciate it. guys. Thank you,

Charles E. Jones

questions one your or to not six. two, So or please five limit

Operator

you. Thank

from line comes Fremont the proceed your question of Please next with with Our Mizuho. Paul question.

Paul Fremont

the guess, Hi. in any driver, O&M Thanks. quantify When you talk a there about benefit you're I of is I guess beyond numerically? being O&M sort And further can pension sort also, reduction the you assuming that pension? of potential as

James F. Pearson

would I get the probably pension, way and we a Paul, billion almost look we're return incremental The is at have an to $X.XXX X.X% going on that.

an the be benefit in other be in would we other haven't about the than So, O&M flat. range. From anything standpoint, would $X.XX built it else O&M probably

we would earlier, any be cost go within cost-effective within reductions formula Chuck have to As when else those or adjusted said very utilities. Any of are our proceedings. for rate rates either through really in types we rates the

do side you. into assuming we On will at the competitive million side, the from that we we $XX offset that can see the look we're we've not anything those corporate given that in continue to to cost built if forecast have depreciation

Paul Fremont

whatever you would as sort from deferral. not clarify that I gone reform, assuming on treat, immediately, a to tax accounting that flow like would been over And just you're through it's benefit But perspective, a of potential know an lot.

would So, way Is years? of tax of that reasonable sort other any perspective, of not from an income reform statement to booking in terms benefit in be the about any your you think XXXX or guidance? a

James F. Pearson

upside in have metrics. don't our our in our that anything earnings. guidance, it From a but of baked into have don't be into that cash At flow we through, us built benefit flows will that point, standpoint, any we any to yes, this cash either

Paul Fremont

very much. you Thank Okay.

Operator

Please with Goldman question. Our your with next question comes from the line proceed Sachs. of Michael Lapides

Michael Lapides

Mon range about outcomes when their coming are really are Hey, you potential head? needs? How terms from of Power needs those supply supply the Chuck. in a And to of thinking specifically

Charles E. Jones

need you're But in Well, if what years, there. any not PJM are just take that's they would the we'll need supply are meet integrated the anyway. at two attempt I to In file we another what think needs we short another asking. we market. another Michael, Pleasants, resource And to do reevaluating plan term, from planning to

Michael Lapides

existing thinking more in today Yeah. ratepayers? market assets that of I in at lines either new was are the them price an attractive or the maybe customer for acquiring acquisition and build but of

Charles E. Jones

answer point, Well, Mon is RFP, do to and shortcomings go to determined said sure previous that I'm question. what if at I do and in at it's all it's they'll options. some that they may, too RFP, to the early. Power be as this the We're looking They in going too early back but point, FERC and it, RFP, sit down, at another address

Michael Lapides

in versus like big then, Steve Jim of – and how guidance a you in, quickly, there? a And what it. transmission in expecting in question, Got revenue this are are be a how baking real may of big XXXX or a XXXX? step-up Kind of step-up you

James F. Pearson

we'll Michael, upper $X billion billion we $X.X the end, of range. transmission. at assuming in be our At we're At end the spend guidance, would the that low

normal a increase about have we'll revenues, last the XXXX year two. or in think I So seen in as you've over

Michael Lapides

made a and gave of Okay. year. those given referenced this settlements if JCP&L, didn't they the the in of you I boost I one-time just because checking was some know implementation

Charles E. Jones

No.

Michael Lapides

Okay. Thank you, guys.

James F. Pearson

be stated in it standpoint, would will from compare revenue base our $X.XX you XXXX, about look JCP&L, a another with about Yeah, and to a be that $X.XX. rates probably little at XXXX growth then in when I the would rate probably bit

Michael Lapides

Got it. Thanks, Much guys. Thank appreciated. you, Jim.

James F. Pearson

Sure.

Operator

Jonathan the Our next question. comes from your Please proceed question with Bank. line Deutsche with of Arnold

Jonathan Philip Arnold

Yeah. guys. Good morning,

Charles E. Jones

Jonathan. Hey,

Jonathan Philip Arnold

kinds or similar this the $XXX Just in consider there? on the can kinds IIP might in different give components? of putting insight of it be New Will into Jersey to program filing, some what is Ohio, million you things us you

Charles E. Jones

it developing now, to talk Well, it's about. we too early are Jonathan, right and

as are prepared So we we as to disclose soon it, probably, will.

Jonathan Philip Arnold

Okay.

of be Thanks. it's kind it same or be may to up. Distribution So not may stuff necessarily the not Modernization

Charles E. Jones

us will of it designed safety, intended resiliency, programs to projects and that was to clearly, be security, the for plan et are improving types try reliability, the address. say things improving would that cetera, I at improving

Leila L. Vespoli

parameters stay And may Jonathan, that. you project rule provides so, just eligibility the the for itself within obviously, know, as of will

Jonathan Philip Arnold

sizes relative New of good about current with of in or we be think start sort then, sort necessarily? Ohio place CapEx And about the a Jersey scale this of to Okay. thinking versus not as

Charles E. Jones

Yeah.

it'd the Ohio Platform in on filed the under think, with be I we what order Distribution Modernization.

Jonathan Philip Arnold

XXXX just Jim, sort clarify of pension topic, on the And you. between Thank to referenced, XXXX? I if great. just could that want you I bridge is Okay, and the just this $X.XX

James F. Pearson

Jonathan. correct, That's Yes.

Jonathan Philip Arnold

And the benefit XXXX of is around immaterial? you I the as in of that there do bedding assumption is or accounting's – forward you're off that any from it like quantifiable rate go discount your differently. sort you know looks slightly lower little fairly

James F. Pearson

a Yeah. And would rate showed There's what were earnings today, assumptions did, our from on discount liability rate discount at that rate But provided had think, to set with an no we growing on it if be term already the X.XX%. longer what standpoint. and discount the a I probably slide benefit be associated X.X%. we to

a that's So, we even. liability the conservative pretty for think estimate

Jonathan Philip Arnold

But earnings that's basically? the driving not guidance

James F. Pearson

No, no, no. No impact there.

Jonathan Philip Arnold

Okay. Thank you.

Operator

question. Angie Storozynski time Thank with Capital you. final - Macquarie. you. constraints, question. question proceed our have will I (USA), Due literally Angie Please the line to with Inc. Macquarie from of Thank one your And comes Storozynski

latest and the utilities with Ohio understanding was the in ESP distribution Chairman an that their upon we he that investing as be met included in by emphasizing systems will Ohio, called PUCO state. your the remember So

total years of investment in given what opportunity this of to businesses? the how is So be this light plan Distribution as what that, here under-investment perceived for Modernization does to $XXX distribution million compare is,

Charles E. Jones

to year. of was that $XXX that to $XXX We plan programs filed million a about the into intended types just DMR DMR of a was The contemplate. invest million the

in are Inc. (USA), - they to Angie provided Capital us substantially ESP. track for invest think I So, Macquarie everything we Storozynski on that that

you. Thank Okay.

Operator

back you. Thank closing for the comments. over like would turn to to I floor Mr. now you Jones,

Charles E. Jones

Take support call. your and Thank our care, you end continued will thanks FirstEnergy. of Okay. everyone. for This

Operator

Ladies teleconference. this conclude and today's gentlemen, does

day. your at disconnect participation this a Thank for lines you may your and wonderful You time. have

FirstEnergy (FE) 21 Feb 182017 Q4 Earnings call transcript