FE - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the FirstEnergy Second Quarter 2019 Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Irene Prezelj, Vice President, Investor Relations for FirstEnergy. Thank you. Please go ahead.

Irene Prezelj

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

website financial financial along measures supports discuss also between reconciliations will FirstEnergy which measures, Investor the certain the with non-GAAP Relations be presentation, today's can and We found on non-GAAP GAAP discussion.

Chuck today's call Chief President in other Officer; the who Participants Executive and to session. Steve Officer; Senior include executives and Jones, President available and room, the in are Vice Chief in several Strah, participate Financial Q&A

Chuck. to over call the turn I'll Now

Chuck Jones

glad Thanks join everyone. could Good us. morning, I'm you Irene.

solid per guidance Last $X.XX of midpoint our call. we share, earnings quarter second with last along night operating of GAAP we which the share, above earnings of reported on the which is per provided range, $X.XX

While our quarter, the service as distribution base our transmission as results continued Future Energizing mild this program, growth lower to rate the expenses. from spring well sales to territory our benefited contributed lower weather related across

plans as on for and to on service oriented of customer the growth, grid the executing are systems and We we our distribution our them strengthen focus transmission prepare future.

you are more in As are about boring, promised, as excited these to calls where with FirstEnergy, start at, our line earnings is seriously, The strategies at but and guidance. downside where but that solid very a are see, going. may we producing find growth I'm only I we importantly, consistent little our

time you developments will your of business questions. some start few the the always, have and our Let's in as walk results months, ample will over then we a of the for last review recent Steve through with

service the during track in our this $X.X into we projects to Future XXXX. to XXX on pace business, Energizing remain to XXX In billion come transmission with investments on implement year

Last Public transmission Ohio. summit hosted week the a we by of Commission Utilities participated in

key Our areas the team brief the the our by addressed process need on the as benefits program, work to well investment Energizing of selection. project this for and for the commission and customers as our staff Future

Future of supported we by taking large place began growth. initiative, which the the a local sector work, the included projects regulators, and portion load Energizing our in required electric generation When supporting changes

transmission withstand cyber-attacks the expected and weather our Today impact security limit is maintenance and on focused also our outages Reflecting infrastructure. greater technology are they of the system flexibility, to predict to modernize aging create grid, upgrading help investments events, needed extreme occur. utilizing when enhance is when the while shift, operational and

transmission last these to we significantly on quarter, our impact customers. the outages As are reduce discussed designed investments of electric

we've areas XXXX, recognized a where reduction ATSI completed XX% work customer duration in in by in our been example, service of since number the For nearly outages. affected by outages of XX% and customers such the caused reduction interruptions has transmission

delivering refine consistent and called performance on and implementing structured, reliability or impact various projects benefits. would the like customers, planning, time method of more transmission projects of you project tremendous is remind reduction on performance The process each new development designed a tens year, construction stages our into saw in can achieving is of goal we as budget. events To that transmission processes our outage I to are ApEx. one XX% of excellence management to efficient management and of in providing outage thousands transmission manage hundreds

four in plans about total companies of million. of increase business. the each distribution the On by Pennsylvania LTIIPs, our to Pennsylvania our approved Commission Public Turning investment May plans or XXrd, Utility modified in infrastructure $XX spending operating our long-term XXXX the

enhancing XXXX state. reliability as capital accelerating was includes to for support planned in as the capital This that well additional

are recovering investments DISC all utilities. Rider at currently through We these the four

spending new the Next operating file plan outline LTIIPs our reliability incremental companies we Pennsylvania to XXXX will for through plan that month, XXXX period.

we signed Unit term non-binding will responsibility move Three to X. transfer decommissioning Mile the from Island that mention a for sheet Before we Pennsylvania, have I

This nuclear subsidiary would and Energy as transfer decommissioning the for an nuclear the LLC., property, decommissioning business. in Solutions, decommissioning the leader as trust to plant, plant license responsibility a well of industry

merger, As acquired owned and GPU and in background of We TMI-X XXXX Nuclear part the is was currently as an JCP&L. was of never operating not FES Met-Ed, FENOC. plan, license GPU Penelec to since by it part it do or

approvals, simplify of our regulatory this the requires agreement regulated process, While from which future beginning FirstEnergy we transfer obligations focus. still would numerous nuclear are to further and

New to and reliability Plus system. we've Reliability infrastructure begun to plan early plan and JCP&L of enhance BPU safety, May The with this implement Turning projects in Jersey. our the to designed approved New investment distribution our Jersey resiliency

devices the speed limit help installation first interruptions new service location help of and is neighborhood the One restoration. detecting to isolating problems local projects on issues, automated by frequency of the outages of pinpointing reclosing XXXX TripSaver automatically of These and duration powerlines. devices

turn of has the Last received approval we weeks. where Utilities three been a grid for week, our the Commission from quite there program. With $XXX several bit to let's last years. Now Ohio, million modernization Public investments over of over activity

a settlement by complemented the with customers of issues receiving a also order global all Tax Cuts Jobs savings. unanimously the that approved the the Act many of base and five Ohio, XXX% commissioners was commissioners parties impact on support. our the and with broad fully in resolved tax reaching This of resolves stipulation The

We expect related refunds to begin this quarter.

usage distribution to our the outages and designed duration and inform of work the is energy number we reduce communications. make help to our customers decisions with about system. their addition, modernize In will electric further metering and Ohio program The advanced begin

with consolidated utilities three filed our below return ROE Excessive Test Each of PUCO the and we utilities. XXth, Ohio calculated July equity results below companies On also threshold. XXXX for our well X.X% Significantly calculated each our SEET for well Earnings threshold our was or Ohio individual SEET on XXXX was

approved will customers our allows ability budget manner earnings. Ohio plan and included review. rates, under an the of an amendment it At combine our annual preserves footprint. operating stakeholders it best us results protection increase Ohio This our last a not maintains time, to week rate that important SEET a consumer Ohio single us our allows to The in interested the same other and assess serves PUCO implement the entire to across our customers change

by Bill approved Governor In the X other was developments, yesterday. Ohio DeWine and legislature House signed by

key our we good because for own generation, no state, customers, Bill legislation to the this it grid, support is provides As electric the assets and and believe of potential this contribute our nuclear is you while know, the and success the while longer state's X electric will future. issue resiliency the House economic uncertain the the it in in of now markets on mitigating a security of bills to regional customers' impact we electric

that amount certainty allow X at revenue distribution while of Bill was provisions a benefit XXXX, Ohio in utilities. to set mechanism, includes also link breaking implement utilities electric decoupling supports collected residential initiatives providing electricity further customers, House revenues between the the related the which and to base consumed. and It levels revenue efficiency energy that commercial

for mechanism to impacts approval our reviewing the the year. seek in are later and potential customers the this We could companies and

we in initially rider Distribution know Rider, Modernization the of It was of million I are interested the $XXX more this collection rider, for PUCO by of to year although the is as three of Finally, and in background year adjusted extend XXXX a year approved initial XXXX. of you last in years was in years. tax many the each the two that our revenues to allowed bit status the this filed for after million $XXX reform. DMR XXXX earlier

decision our Ohio the refund. the removal Company's rider are our subject with court current rates. utilities June, month, the that rider funds recovered motion issued calling of under from Ohio a DMR not In Supreme for court. filed to recognized the Earlier a Ohio for reconsideration this the Court already X-X But

by We a we and believe to modernization DMR we grid argument support legal was our our and our firmly investments customers jumpstarting position. believe the have solid benefiting

filed if the be July court orders plan. we motion rate the reconsideration, charges PUCO from the removed must which make DMR refund, rider for period, subject reconsideration the the to However, began along our ultimately during DMR the proactively with Xst to billed with

earnings recover the ultimately of year-to-date, second performance half we from our $X.XX are our we not in range. this If contribution lower the the results expect half $X.XX share affirming operating of to guidance per $X.XX XXXX Given approximately do the per of year, we would for DMR the share.

per introducing also of DMR to $X.XX are quarter of share. per $X.XX share including guidance range a We earnings $X.XX operating the third

through to XXXX. compound annual operating earnings are projection affirming from long-term we X% of XXXX Finally, our X% growth

never You'll been recall our in growth has DMR included that projections. the

Thank you.

second the of review a the half for Steve to and over it turn year. first I'll Now, the quarter of

Steve Strah

today. good to Good you everyone. morning, It's with speak

always, begin of housekeeping a with I'll As couple items.

available other website our strategic and detailed the reconciliations First, information the quarter and on document. financial highlights are about in

we Also, the fully results present this of a comparative on to provides and diluted best continue basis, performance. projections our operating view

shares January As XXXX conversions expected completed are be preferred currently of of XXX,XXX outstanding, with there July XXnd, by to

Now let's look at our results.

of in this quarter $X.XX above $X.XX midpoint Our spring earnings our share. were contrasted were spring guidance. our GAAP primarily as our by very results which were with Chuck the impacted share, In mild business, second was hot distribution a weather, per mentioned, very per earnings Operating XXXX.

taxes. last our across benefit the lower classes. customer Ohio. also load factors a and year's on the impact incurred of court of expenses This of from These cost income energy offset drove for lower Results all slightly ruling absence were three in credits renewable by reflect

both while lower Total for days in XX% quarter normal days XX% distribution and XXXX, and below XXXX weather-adjusted second deliveries the the about cooling period quarter second than same in below basis. XXXX. decreased quarter and compared degree XX% second degree of of the were actual the to Heating below normal X% were

the XXXX% X.X% last X.X% basis. weather-adjusted of XX-month residential the an grown have period. weather-adjusted to over Overall, modestly second basis Residential compared sales a quarter sales on our decreased on actual and

about weather. by actual manufacturers. adjusted In shale our lower gas industrial growth Second quarter the sales commercial automotive as and usage from X.X%, steel load customer for basis an in decreased was class when X.X% in continued and X.X% decreased offset sector class, on the

now changes year-over-year back XXXX, last four-year we've you period usage our These the sector the contributed GM about highest seen included still Lordstown the the at of plant. look If comparison. over second the steel tough was to quarter automotive closed and sector

Moving to in net Future a the related our which operating investments as rate costs. base expenses, at the business. lower And quarter offset higher higher rate our result our segment, reflect to at second our transmission initiative. formula companies results increased financing continued of Energizing Earnings corporate

few open I'll your call Before questions, items I review the within a to ratings activity. recent

BaaX CEI AX. to CEI yesterday Edison. the BaaX X that and Power to is Penn of ratings Penn and Edison stable Toledo pleased upgraded BaaX. Power was Toledo utilities. were from Ohio our of credit upgraded Edison to from Moody's both from are upgraded and Edison ratings several notches be Ohio We BaaX for upgraded The for outlook was positive and and BaaX

of underlying strength Moody's MAIT believe addition upgrades this We those and positive platform. our these year the and regulated for in ATSI, demonstrate of by JCP&L earlier momentum

recently that groups. are part In determine is addition, know, may to you methodology, ratings its S&P issuer of rating corporate which used entities revised credit as group for

group. As see the companies profile a actions result, operating of expect a we for stronger have credit consolidated that our positive ratings several to than

plans. We first with our our through this investment the remain commitments the to year, quarter of and we and meeting focused pleased community on progress executing are this our half

let's take your Now questions.

Operator

from comes Dumolin-Smith [Operator Bank line America. Instructions] of question first of Our the with Julien

Julien Dumolin-Smith

for exactly, would mechanics full secondly, XXXX. think XXXX establishing the year, this it to I know to at on you early for want can a how back and the in then I with is trickier days the XXXX the element the piece implementing but it, respect element. and filing applying addition implemented little outset to here. that it about still be there we over elaborate it decoupling acknowledge year how rates bit this And but is of XX-day a this, that So this should mechanics of to go in be of file might

our versus have XXXX the and see place bit side tracker other these comparably. how apples to we make it at oranges understand do I and in little it But you that a from nuance that least XXXX appreciate mechanism

the decoupling but So nuances is mind, here? if this is you few of there at I don't end the a get mechanism, a because day

Chuck Jones

to included utilities it. be fully me let at analyze chance is concern with decoupling goals. energy efficiencies think I to was continue speak companies. a the the bill to and It it on to to heart XXXX its further how XXXX high the customers for get to Ohio’s Well, first without don't it's affect and the clean the at But in going to to level bill bill going with either exact to energy nuances till try we're tackle we clean prepared and impact a our drive work all support the energy allows to the revenues of a the

it's then and over and period rates of shared eliminates DPL - XX-day decoupling bills now for this Julien, place. several I’ll mandates we mechanism it a And Duke before energy distribution effect days. the to in about applies customer bills, into because and only worry us it that to had the grow need that you the lost type base for out And goes help reduce have next efficiency to XX years. significantly AEP, going a Ohio, In going this ultimately mechanisms we're will revenue on some to our said point it's already already that. as

at would date this that decoupling would under XXth the could the be decision. has make for we're earliest ultimately file days being So to November a mechanism. looking commission And included new we XX

it January that till So XXth. pushes

as for combined opportunity puts very decoupling included that revenues that It with our strong. that's the the very in with us me, position and provisions through companies budget distribution if be place XXXX. - where ESP a Ohio the were I predictable bill you were in the look it, base our For in I can already combine at think seat

XXX DCR was from is approved million just and And modernization rider. going come the the for in in the grid that our investments the growth rider Ohio utilities to continued

on provide So three get a transparent for details how of ultimately clear yet. specifics I to to the I it's our very affects think story companies, just can't but it. going you We've and got and it XXXX Ohio into give XXXX just the

Julien Dumolin-Smith

easier are look just year-over-year and it that that's weather down if it you think simpler, about I like year-to-date. if this me you help comps, to? make to appropriate Ohio at just mean if to frame much tell about just way you me an for you this. let you be did. were year-over-year frame I on suppose, you Because think Maybe our just specifically it, Can might to if how as

Chuck Jones

Yes, Steve the weather answer is going issue. to

Steve Strah

look very XXXX maybe very Yes, one tackle quarter-over-quarter issue the hot weather compare adjustment the high comparison quarter, when quarters for us Julien I part kind this to at of makes XXXX. it them compare as weather versus to different level art a two year-over-year. was so is can you challenging science. we try at And it's XXXX dangerous just weather, is

are at When X.X% positive. overall at comfortable, you look total and that loads average, our think on looking I'm an more I trailing about the basis really to XX-month

along that comparison. helps. view very think that indicator. the we So as with I well broader Ohio Hopefully tracks And that

Julien Dumolin-Smith

until get And earliest Since, you November just even a file again last XXXX, to still apply decision to there. if XXth clarify don't potentially XXXX. June on question that the you would could

piece Just process? to the clarify of that last

Steve Strah

Yes.

Julien Dumolin-Smith

thank much. you very all well, Excellent,

Chuck Jones

Governor, want moment a Governor, bill take leadership here. willing issues Ohio Chairman Speaker is of numerous Commission the on members it who say to and very want how State of in in the Senate, work of looks complement to all And Senate they and the and House, this actually to our together topic, lead. have I to Columbus, because the complex of Lieutenant legislature the at a President, to on I just is great

transparent goal at time. utilities for customers stable strong With of keeping the same going providing a and their forward think I and rates Ohio

industry in with for think of looking strong an of this the that terms customers State was our and up Ohio. in out they approach I came very

Operator

of from Morningstar are questions the Research. with line Our Charles Fishman next

Charles Fishman

always assumption take just in to sheet, had of the that I plan with retires about what you're realize the - And we've either fund I both of assuming is, with I going the a on owners and bad and TMI this nuclear question one I have but memory is, unit a the I solutions or Chuck decommissioning decontamination. to is retired then happen I'm plants. related here. they that until for responsibilities what's them And all thought over other trust was my wrong first guess a energy seen wait together. exchange to at am that. do then term

contract then And the accelerate have would signed or of together you you what a acting you can they is do once two this decommissioning. since

good that. would time trust to there go the and certainly You doing is ahead a and derisk be fund

in money be Do is. have I plenty this there'll of So correct that right?

Chuck Jones

let it from kind the Well, me beginning. of take

any FirstEnergy to owned us and with and believe both don't unit how Exelon about assets. plan is utilities by And move is I said. our by together. First, one GPU the unit decisions was Exelon, own both One I to decommission nuclear I make units as ever forward there to are through going think owned our

Our decision Exelon close now was have more support on to to up they looking there what ongoing monitoring do made have TMI-X. seriously that And been TMI-X at TMI-X. we relying that the we've us until to things for now you to some caused needed and is with start with do that decision

transferred the all outlines I'm entirely. assets, the And is to property, that fund the what basically decommissioning and out I trying the it approach of will term for along business FirstEnergy the the the decommissioning to license, think sheet with get of nuclear Energy will an whereby all liability Solutions be say

Charles Fishman

And money of there's trust plenty in fund. the

Chuck Jones

with thesis to they the good so the plenty margin and decommission over is whatever and Solutions from at in it less this. believe the in speak fund perspective being of fund decommissioning. Energy that's for on they than they’re There execute that the think trust can is their I is, Well, trust money left what's

Operator

Mizuho. Fremont the question is from line of Next with Paul

Paul Fremont

the they the that first quarter noticed are quarter. I is lower guess slide fourth unchanged in than on interest Can rates, but question were the I on the end think fourth from be, the would in pension substantially any update sort at unfunded that of of type the an be I pension indicating, you what X.X of you slide? provide think the that were billion this year I liability would versus

Chuck Jones

have I'll December horrible and really over our Last by on caught everybody it's a returns out it and to July Steve, turn doing the pension well. month year that was I'll while but point surprise. been

And year-to-date we but to at. So we think can't a we we're kind where on outlook is predict a you in you. what of really July, will happen, give can give going Steve

Paul Fremont

Great.

Steve Strah

Paul, Steve it's Starh.

Chuck only clear until we it's -- a of get won't really So year. the July, we've have the picture to end

on on what based yield as XX%. Specifically asset But well performances the of yield, right what our the funded curve. as the we know impact is now status right around full

Paul Fremont

actually what the be with show right? to that it that's where, So consistent would slide

Steve Strah

Yes.

we so by keep in assets on return curve So right so that we date. a made to contribution yield XX% million around and year, the benefited earlier and basically our XXXX are full the mind, the to in related have we change that us impacts ended this $XXX offset

So XX% from and that really to funded XX%. million our the status contribution $XXX washes so improved

Chuck Jones

round just through our off XXXX. it additional saying, period would an by I And need see planning we through don't contribution for a

Paul Fremont

And then you XXXX. beyond on indication provide growth an when might of any update

Steve Strah

this EEI Not year earliest. before at their

Paul Fremont

question providing fairly sort provide jurisdictions. as in last where sort then in update of, there ranges and both you're still you if of and those range particularly you're see doesn't, guidance for And providing New it an that yourself New for wide Ohio -- of to Jersey, of does would And both you the a settlement the that Jersey? is both Ohio because sort is and the reflect CapEx for on

Steve Strah

and we It settlements provide does ranges. a the reflect

money cetera up the to reason us years state Just state to to unfold are the et and there. are come as that give move unforeseen from some for that the to distribution that's ranges things some around transmission only flexibility

next capital think billion I of billion us years. you and be range to can $X.X several the expect total to $X each that

Operator

from Lapides next Michael of line the question is Sachs. with Our Goldman

Michael Lapides

Two questions.

you so? how of the are for about outlook year next distribution O&M or over business, all First and the O&M growth on thinking the

Chuck Jones

say I about it -- thinking look would flat. we're being

Michael Lapides

flat relatively the trying So keeping think at level versus level O&M baseline a XXXX ongoing just O&M or XXXX I'm what what is? about to growth

Chuck Jones

just, I would went the program O&M exceeded our just FE our baseline through but and reduced corporate million. spend targets say where the our which of original we by baselines some obviously we been $XX Tomorrow

our in cost to the we're baked us going been So as in these is trying that of wages of What we reductions investments investments go allow material O&M make each our as transmission supplies in things like keep can and that's flat year. current numbers O&M all have incrementally that forward to kind and make to and up distribution. do offsetting

Michael Lapides

unrelated of needed, you how out whether what a in and infrastructure and B, this question, need that's build of point significant build Virginia. other about getting guys new of in on well when you substation kind pretty do transmission and kind does of out normalized that? little timing and demand do especially an how for think you One the recovery you've for bit about tracked even to weather or go create generation a At or its industrial West

Chuck Jones

of the in substantial so Well, of West shale transmission several businesses those and of single years, particular, deal budgets. capital been recent budgets. Virginia gas and year inside new in our there we we within dealing with development all projects with existing cover that have distribution transmission in both fairly every Pennsylvania In what part

for amount, exceptional year single part plan plan moves each every certain what is there. there We business contemplate a for no of around think really need as I we anything new it and to year, but

Operator

Our question Scotia Weisel the next Andrew line with Weil. Instructions] Howard is [Operator of from

Andrew Weisel

question a the Pennsylvania. treatment I’ve Ohio of got particularly writers, and in on

Ohio, through outlook money the Avenue or is very just seek range guidance. spent work program, it freeze it to for I clear. understand recovery or maybe spend think continue about I'm in wide within to notwithstanding, question more So the that you the the of be planning were court postponed downsize in was very unfavorable of a will that you to to just traditional That's one. that CapEx actual spend going an obviously DMR you is wondering the be rate My should I decision still but for spending? money and the going as and

Chuck Jones

I court should legal as rehearing into a disappointed, ruling. we from it way, of in of it that think And we're that factored this application our but I very capital said think growth is strong the basis, the cash first capital. already made whole I has plan, I to $X.X that was all, which going several It's you what think mean for the we've not said came across affect to each be we $X the to our year years next affect on going the rider period. billion billion to footprint. rate It's not going over spend

us it worked be credit In gave quarters, it's big a balance two fact, hard not strengthen to sheet. nobody there deal to cash our for it's going ever now, when anyway. we've it's and And for

a Steve at double rating all them. articulated, of Ohio them particularly one the our agency with recent in at upgrade of upgrades credit utilities on actions

but X% of to cash it's growth mod grid the solid is it, So that telling which the going story we're not writers. in impact take the with and the CR from and don't the movement you, to X% we Ohio is like track off us

Andrew Weisel

the to we filing Pennsylvania for in like. I'll CapEx give us for ask way. questions into that how maybe we, you upcoming parallel to similar the you it might can as stated split size of what formula, Pennsylvania, a that preview of think for Maybe guidance sneak XXXX you LTIIP a then look it XXXX, the have And should should filing you when give little

Chuck Jones

the capital we you is but our if give years and next at billion I going we that which to somewhere I've can don't said but keep think range. every in invested we as us enough know of a $X.X hang and at take think still of to we bottom formulating expand can't. goals you expect, LTIIP the of are of range, that on would to our that it it's where it be, exactly -- to over year. we and capital projects $X we're end it we decide what companies the I But, billion range top large until to the range the that That's if can order which may we of several decide

Andrew Weisel

reign is if have that the little rate the case its if end through of about it? to LTIIP that were the way than recover number, the capital mean the that would So outcome larger, maybe type a to lower of just that process sooner think of you'll traditional

Chuck Jones

No, I think and what file LTIIP. we

that We you at come these have out desk then things you to through company, we companies. for when to unless anything a base we'll unless, some throughout different the for all that the the expect the revenues capital given of that have year then ability that range tell to have to than that to our change other recover get think for should I the rate where we've reason we continue, would us manage X% range have to allow flexibility us ultimately, case to it's point and but don't you

Operator

over Thank closing like turn you. our comments. to to I'd back question-and-answer session. of We've reached the end the management floor for

Chuck Jones

hope All weren't good to your support. it you call you shortest I bored. But we're feels you call. I third where too Well, will be it think forward at. be with to thank earnings Look our for to right. the talking And quarter

Operator

today's concludes teleconference. This

You you for at may lines participation. your time this and disconnect your thank

FirstEnergy (FE) 24 Jul 192019 Q2 Earnings call transcript