8-K: FirstEnergy Reports Full Year 2024 Earnings, Announces Increased Capital Investments and Core Earnings Growth Targets

FirstEnergy announced its fourth quarter and full year 2024 financial results, highlighting customer-focused capital investments and an expanded capital investment program.

Summary

• FirstEnergy reported full year 2024 GAAP earnings of $1.70 per share and Operating (non-GAAP) earnings of $2.63 per share, which was within the company's guidance range.
• The company invested $4.5 billion in customer-focused capital investments in 2024, a 20% increase over 2023, to improve grid reliability and resiliency and support the energy transition.
• FirstEnergy is expanding its Energize365 capital investment program through 2029 with planned investments of $28 billion, an 8% increase from the previous five-year plan, anticipating a 9% rate base growth.
• The company introduced 2025 Core (non-GAAP) earnings guidance and a targeted 6-8% compound annual Core earnings growth rate through the five-year planning period.
• Full year 2024 GAAP earnings from continuing operations were $978 million, or $1.70 per basic and diluted share, on revenue of $13.5 billion, compared to $1,123 million, or $1.96 per share, on revenue of $12.9 billion in 2023.
• Core (non-GAAP) earnings were $2.37 per share in 2024, an 8% increase from $2.20 per share in 2023.
• FirstEnergy is introducing a 2025 Core earnings guidance range of $1.4 billion to $1.5 billion, or $2.40 to $2.60 per share, representing 5.5% growth (at the midpoint) compared to 2024 Core earnings.
• The company expects to invest $5.0 billion on behalf of its customers in 2025 through the Energize365 program.
• Fourth quarter 2024 GAAP earnings from continuing operations were $261 million, or $0.45 per basic and diluted share, on revenue of $3.2 billion, compared to $175 million, or $0.30 per share, on revenue of $3.2 billion in fourth quarter 2023.
• Core (non-GAAP) earnings were $0.61 per share in the fourth quarter of 2024, compared to $0.52 per share in the fourth quarter of 2023.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting increased capital investments, core earnings growth, and a commitment to dividend growth. However, it also acknowledges challenges related to legacy issues, regulatory matters, and economic conditions, resulting in a moderately positive sentiment score.

Positives

• FirstEnergy's $4.5 billion capital investments in 2024 improved grid reliability and supported the energy transition.
• The expansion of the Energize365 program to $28 billion through 2029 is expected to drive a 9% rate base growth.
• The company's introduction of 2025 Core earnings guidance and a targeted 6-8% compound annual growth rate signals confidence in future performance.
• Core (non-GAAP) earnings increased by 8% in 2024, demonstrating strong underlying business performance.
• The company's commitment to investment-grade credit ratings and a broad range of financing options provides financial flexibility.
• The company has implemented structural changes to position FirstEnergy for long-term success, including redesigning the operating model and assembling a strong leadership team.
• FirstEnergy has completed rate reviews and formula rate filings for 83% of its rate base since 2023, resolving several legacy issues.

Negatives

• GAAP earnings from continuing operations decreased from $1,123 million in 2023 to $978 million in 2024.
• The company's unregulated legacy investment in Signal Peak has experienced sharp declines, impacting investor perception.
• Mark-to-market impacts from the company's pension plan have introduced volatility.
• Fourth quarter 2024 earnings were negatively impacted by lower Ohio distribution revenues resulting from the ESP V order and heating degree days being 10% below normal.
• The dilution from the incremental 30% interest sale of FirstEnergy Transmission (FET) to Brookfield offset some of the earnings growth in the Stand-Alone Transmission segment.

Risks

• Government investigations and agreements, including those related to the Deferred Prosecution Agreement and Ohio House Bill 6, pose potential liabilities and increased costs.
• Changes in national and regional economic conditions, including recession, volatile interest rates, and inflationary pressure, could affect the company and its customers.
• Variations in weather, including severe weather conditions and natural disasters, may increase storm restoration expenses and negatively affect operating results.
• Physical and cyber attacks on the company's information technology systems could compromise operations and data security.
• Changes in customer demand for power, including the impact of climate change and emerging technology, could affect the company's growth prospects.
• The ability to access public securities and other capital and credit markets in accordance with financial plans is subject to market conditions and credit rating agency actions.
• Human capital management challenges, including attracting and retaining qualified employees and labor disruptions, could impact operations.

Future Outlook

FirstEnergy is introducing a 2025 Core earnings guidance range of $2.40 to $2.60 per share and targeting a 6-8% compounded annual growth rate for Core earnings through the five-year planning period.

Management Comments

• In 2024, we implemented tremendous structural change to position FirstEnergy for long-term success as a premier electric company, said Brian X. Tierney, FirstEnergy Board Chair, President and Chief Executive Officer.
• We redesigned our operating model to better support the impactful work we do at the local level and assembled a strong and experienced leadership team charged with delivering superior service to our 6 million customers.
• We also put the power of our stronger financial position behind a comprehensive capital plan that can capture the immense opportunities to address customers needs, now and in the future.
• In addition, we completed rate reviews and formula rate filings for 83% of our rate base since 2023 and resolved several legacy issues, Tierney continued.
• Together, these milestones represent a multi-year transformation that strengthened FirstEnergys foundation, improved our financial profile and significantly derisked our business.
• To provide investors with more information about the performance of our regulated operations, this year we will begin measuring our annual growth rate based on Core earnings, Tierney said.

Industry Context

The announcement reflects a broader industry trend of utilities investing in grid modernization and renewable energy infrastructure to enhance reliability, support the energy transition, and meet growing demand from data centers and electrification.

Comparison to Industry Standards

• FirstEnergy's planned $28 billion investment in Energize365 is comparable to capital expenditure programs at other large investor-owned utilities such as Duke Energy and Southern Company, which are also focused on grid modernization and renewable energy integration.
• The company's targeted 6-8% Core EPS growth rate is competitive with industry peers, although specific growth rates vary depending on individual company circumstances and regulatory environments.
• FirstEnergy's commitment to maintaining investment-grade credit ratings aligns with industry best practices, as strong credit ratings are essential for accessing capital at favorable terms.
• The company's focus on formula rate mechanisms is consistent with industry trends, as these mechanisms provide greater regulatory certainty and support timely recovery of investments.

Stakeholder Impact

• Shareholders can expect continued dividend growth and attractive total return opportunities.
• Customers will benefit from improved grid reliability and resilience through capital investments.
• Communities will benefit from FirstEnergy's investments and engagement.
• Employees will benefit from a healthy culture and high-performing talent.

Next Steps

• FirstEnergy will continue to execute its Energize365 investment plan.
• The company will work towards settlement of the EnergizeNJ infrastructure investment program.
• FirstEnergy plans to file a West Virginia IRP in December to address future regulated generation options.
• The company will update its pending Ohio base rate case filing in 1Q25 to align with its ESP VI filing.
• FirstEnergy will continue to evaluate rate recovery mechanisms and explore potential pension lift-outs.

Key Dates