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Section 1: 8-K (8-K)

Document
false0001031296 0001031296 2019-11-04 2019-11-04




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 4, 2019
Commission
 
Registrant; State of Incorporation;
 
I.R.S. Employer
File Number
 
Address; and Telephone Number
 
Identification No.
 
 
 
 
 
 
 
 
333-21011
 
FIRSTENERGY CORP
 
34-1843785
 
 
(An
Ohio
Corporation)
 
 
 
 
76 South Main Street
 
 
 
 
Akron
OH
44308
 
 
 
 
Telephone
(800)
736-3402
 
 
 
 
 
 
 
 
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, $0.10 par value per share
 
FE
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.










Item 2.02 Results of Operations and Financial Condition

On November 4, 2019, FirstEnergy Corp. (FirstEnergy or Company) issued two public documents regarding, among other things: results for the three and nine months ended September 30, 2019; updates to the 2019 GAAP and operating (non-GAAP) earnings guidance; and providing 2020 GAAP and operating (non-GAAP) earnings guidance. FirstEnergy’s Press Release and 3Q 2019 Strategic and Financial Highlights, which are attached as Exhibits 99.1 and 99.2, respectively, hereto and incorporated herein by reference, contain non-GAAP financial measures. Pursuant to the requirements of Regulation G and Item 10(e)(i) of Regulation S-K, FirstEnergy has provided quantitative reconciliations within the Press Release and 3Q 2019 Strategic and Financial Highlights of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). The information set forth in and incorporated into this Item 2.02 of this Current Report on Form 8-K is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

The attached Press Release and 3Q 2019 Strategic and Financial Highlights contain references to non-GAAP financial measures including, among others, Operating earnings (loss); Operating earnings (loss) per share; Operating earnings (loss) per share on a segment basis. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Operating earnings (loss), Operating earnings (loss) per share and Operating earnings (loss) per share by segment are not calculated in accordance with GAAP to the extent they exclude the impact of “special items.” Special items represent charges incurred or benefits realized that management believes are not indicative of or may obscure trends useful in evaluating the Company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items also reflect the adjustment to include the full impact of share dilution from the $2.5 billion equity issuance in January 2018. Special items are not necessarily non-recurring. The Company’s management cannot estimate on a forward-looking basis the impact of these items in the context of Operating earnings (loss) per share growth projections because these items, which could be significant, are difficult to predict and may be highly variable. Consequently, the Company is unable to reconcile Operating earnings (loss) per share growth projections to a GAAP measure without unreasonable effort. Operating earnings (loss) per share and Operating earnings (loss) per share for each segment is calculated by dividing Operating earnings (loss), which excludes special items as discussed above, for the periods presented in 2018 by 538 million shares, 539 million shares in the year-to-date 2019 period, 540 million shares in the third quarter and full year 2019, and 542 million shares in 2020, which reflects the full impact of share dilution from the equity issuance in January 2018.





Management uses non-GAAP financial measures such as Operating earnings (loss) and Operating earnings (loss) per share to evaluate the Company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Operating earnings (loss) per share by segment to further evaluate FirstEnergy’s performance by segment and references this non-GAAP financial measure in its decision-making. Management believes that the non-GAAP financial measures of Operating earnings (loss), Operating earnings (loss) per share and Operating earnings (loss) per share by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the Company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the Company’s peer group. All of these non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities.









Item 9.01 Financial Statements and Exhibits
(d)
Exhibits
Exhibit No.
 
Description
99.1
 
99.2
 
104
 
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)




























Forward-Looking Statements: This Form 8-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Unless the context requires otherwise, as used herein, references to “we”, “us”, “our”, and “FirstEnergy” refer to FirstEnergy Corp. Forward-looking statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “forecast,” “target,” “will,” “intend,” “believe,” “project,” “estimate,” “plan” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following (see Glossary of Terms for definitions of capitalized terms): the ability to successfully execute an exit from commodity-based generation, including, without limitation, mitigating exposure for remedial activities associated with formerly owned generation assets; the risks associated with the Chapter 11 bankruptcy proceedings involving FirstEnergy Solutions Corp. (FES), its subsidiaries, and FirstEnergy Nuclear Operating company (FENOC) (FES Bankruptcy) that could adversely affect us, our liquidity or results of operations, including, without limitation, that conditions to the FES Bankruptcy settlement agreement may not be met or that the FES Bankruptcy settlement agreement may not be otherwise consummated, and if so, the potential for litigation and payment demands against us by FES or FENOC or their creditors; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, our strategy to operate and grow as a fully regulated business, to execute our transmission and distribution investment plans, to continue to reduce costs through FE Tomorrow, which is the FirstEnergy initiative launched in late 2016 to identify our optimal organization structure and properly align corporate costs and systems to efficiently support FirstEnergy as a fully regulated company going forward, and other initiatives, and to improve our credit metrics, strengthen our balance sheet and grow earnings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; economic and weather conditions affecting future operating results, such as significant weather events and other natural disasters, and associated regulatory events or actions; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers’ demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated; the risks associated with the decommissioning of our retired and former nuclear facilities; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, including the Tax Act, or adverse tax audit results or rulings; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; and the risks and other factors discussed from time to time in FirstEnergy’s Securities and Exchange Commission (SEC) filings. Dividends declared from time to time on FirstEnergy’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in





FirstEnergy’s filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any obligation to update or revise, except as required by law, any forward-looking statements contained herein or in the information incorporated by reference as a result of new information, future events or otherwise.







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

November 4, 2019

 
 FIRSTENERGY CORP.
 
 Registrant
 
 
 
 
 By:
/s/ Jason J. Lisowski
 
Jason J. Lisowski
Vice President, Controller and
Chief Accounting Officer






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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1

FirstEnergy Corp.                    For Release: November 4, 2019
76 South Main Street
Akron, Ohio 44308
www.firstenergycorp.com    

News Media Contact:                    Investor Contact:
Tricia Ingraham                        Irene Prezelj
(330) 384-5247                        (330) 384-3859



FirstEnergy Announces Third Quarter 2019 Financial Results
Provides 2020 Guidance


Akron, Ohio - FirstEnergy Corp. (NYSE: FE) today reported third quarter 2019 GAAP earnings of $391 million or $0.73 per basic share ($0.72 diluted), on revenues of $3 billion. GAAP results include the impact of special items listed below. Operating (non-GAAP) earnings* for the third quarter of 2019 were $0.76 per share.

These results compare to a GAAP loss of $(512) million, or $(1.02) per basic and diluted share in the third quarter of 2018, which included charges related to FirstEnergy’s settlement agreement in the FirstEnergy Solutions and FirstEnergy Nuclear Operating Company bankruptcy cases and other special items listed below. Revenues for the third quarter of 2018 were $3 billion. Operating (non-GAAP) earnings* during the period were $0.80 per share.

“Our customer-focused, long-term infrastructure investment program drove solid third quarter financial results,” said Charles E. Jones, FirstEnergy president and chief executive officer. “Based on our success with these initiatives and our outlook for the future, we are affirming our projection for 6% to 8% compound annual growth from 2018 through 2021.”**


FirstEnergy also refined its 2019 earnings guidance and provided guidance for 2020. For 2019, the company is updating its GAAP earnings forecast range to $405 million to $1.02 billion, or $0.76 to $1.90 per share based on 535 million shares. Full-year 2019 operating (non-GAAP) earnings guidance is being narrowed to $2.50 to $2.60 per share.






For 2020, the company is providing a GAAP and Operating (non-GAAP) earnings guidance range of $2.40 to $2.60 per share.

In FirstEnergy’s Regulated Distribution business, third quarter 2019 earnings decreased primarily due to the absence of the Ohio Distribution Modernization Rider and more moderate summer weather compared to the third quarter of 2018. Results were also impacted by higher operating expenses and depreciation, partially offset by lower net financing costs and a lower effective tax rate.

Third quarter 2019 cooling degree days were 22% above normal, but 9% lower than the third quarter of 2018.
Total distribution deliveries decreased 2.2% compared to the third quarter of 2018. Residential sales decreased 2.2%, while deliveries to commercial customers decreased 3.8%. Deliveries to industrial customers decreased 1% as lower demand from the automotive, steel and chemical sectors offset continued growth in the shale gas industry.

In the Regulated Transmission business, third quarter 2019 earnings increased as slightly higher net financing costs were offset by higher rate base resulting from ongoing investments in the company’s Energizing the Future initiative, as well as a lower tax rate.

In the Corporate/Other segment, results for the third quarter of 2019 improved due to lower expenses.

For the first nine months of 2019, FirstEnergy’s GAAP earnings were $1 billion, or $1.90 per basic share ($1.89 diluted) on revenue of $8.4 billion. This compares to GAAP earnings of $853 million, or $1.76 per basic share ($1.75 diluted), on revenue of $8.6 billion in the first nine months of 2018.

Operating (non-GAAP) earnings* for the first nine months of 2019 were $2.04 per share, compared to $2.09 per share in the first nine months of 2018.







 
 
Consolidated GAAP Earnings to Operating (Non-GAAP)
EPS* Reconciliation
 
 
Third Quarter
 
Year-to-Date
 
2019 Estimates
 
2020 Estimates
 
 
2019
2018
 
2019
2018
 
Full Year
 
Full Year
 
Net Income (Loss) attributable to Common Stockholders (GAAP) - $M
$391
$(512)
 
$1,016
$853
 
$405 - $1,020
 
$1,300 - $1,410
 
Earnings (Loss) Per Share
$0.73
$(1.02)
 
$1.90
$1.76
 
$0.76 - $1.90
 
$2.40 - $2.60
 
Excluding Special Items*:
 
 
 
 
 
 
 
 
 
 
Impact of full dilution
-
0.18
 
(0.01)
0.49
 
(0.02)
 
-
 
Regulatory charges
-
(0.05)
 
(0.01)
(0.21)
 
(0.14)
 
-
 
Mark-to-market adjustments - Pension/OPEB actuarial assumptions
-
-
 
-
-
 
1.74 - 0.70
 
-
 
Tax reform
-
-
 
-
0.02
 
-
 
-
 
Debt redemption costs
-
-
 
-
0.21
 
-
 
-
 
Exit of competitive generation
  0.03
1.69
 
0.16
(0.18)
 
0.16
 
-
 
Total Special Items*
  0.03
1.82
 
0.14
0.33
 
1.74 - 0.70
 
-
 
Operating EPS (non-GAAP)
$0.76
  $ 0.80
 
$2.04
$2.09
 
$2.50 - $2.60
 
$2.40 - $2.60
 
 
 
 
 
Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by number of shares outstanding assuming full impact of dilution from the $2.5 billion equity issuance in January 2018. The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pre-tax amount if deductible/taxable. The income tax rates range from 21% to 29% in 2019 and 2018. 2019 Estimates of Earnings (Loss) Per Share is based on 535 million shares, and Operating Earnings Per Share (Non-GAAP) is based on 540 million shares. 2020 Estimates of Earnings (Loss) per Share and Operating Earnings Per Share (Non-GAAP) is based on 542 million shares.



Non-GAAP Financial Measures:
* Operating earnings (loss) excludes “special items” as described below, and is a non-GAAP financial measure. Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items also reflect the adjustment to include the full impact of share dilution from the $2.5 billion equity issuance in January 2018. Special items are not necessarily non-recurring. Management uses Operating earnings (loss) and Operating earnings (loss) per share to evaluate the company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Operating earnings (loss) per share by segment to further evaluate the company's performance by segment and references this non-GAAP financial measure in its decision making. Operating earnings (loss) per share and operating earnings (loss) per share for each segment is calculated by dividing Operating earnings (loss), which excludes specials items as discussed herein, for the periods presented in 2018 by 538 million shares, 539 million shares in the year-to-date 2019, 540 million shares for the third quarter and full year 2019, and 542 million shares in 2020, which reflects the full impact of share dilution from the equity issuance in January 2018. Management believes that the non-GAAP financial measures of Operating earnings (loss) and Operating earnings (loss) per share and Operating earnings (loss) per share by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the company’s peer group. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). These non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. Pursuant to the requirements of Regulation G, FirstEnergy has provided, where possible without unreasonable effort, quantitative reconciliations within this presentation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

** The Company’s management team cannot estimate on a forward-looking basis the impact of special items in the context of Operating earnings (loss) per share growth projections because special items, which could be significant, are difficult to predict and may be highly variable. Consequently, the Company is unable to reconcile Operating earnings (loss) per share growth projections to a GAAP measure without unreasonable effort.








Investor Materials and Teleconference

FirstEnergy’s Strategic and Financial Highlights and Investor Factbook are posted on the company’s Investor Information website - www.firstenergycorp.com/ir. Click on the Third Quarter 2019 Financial Results link.

The company invites investors, customers and other interested parties to listen to a live Internet webcast of its teleconference for financial analysts and view slides associated with the presentation at 9:00 a.m. EST today. FirstEnergy management will present an overview of the company’s financial results, followed by a question-and-answer session. The teleconference and presentation can be accessed on the website by selecting the Third Quarter 2019 Earnings Conference Call link. The webcast and presentation will be archived on the website.

FirstEnergy is dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company's transmission subsidiaries operate more than 24,500 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.

Forward-Looking Statements: This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Unless the context requires otherwise, as used herein, references to “we”, “us”, “our”, and “FirstEnergy” refer to FirstEnergy Corp. Forward-looking statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “forecast,” “target,” “will,” “intend,” “believe,” “project,” “estimate,” “plan” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following (see Glossary of Terms for definitions of capitalized terms): the ability to successfully execute an exit from commodity-based generation, including, without limitation, mitigating exposure for remedial activities associated with formerly owned generation assets; the risks associated with the Chapter 11 bankruptcy proceedings involving FirstEnergy Solutions Corp. (FES), its subsidiaries, and FirstEnergy Nuclear Operating company (FENOC) (FES Bankruptcy) that could adversely affect us, our liquidity or results of operations, including, without limitation, that conditions to the FES Bankruptcy settlement agreement may not be met or that the FES Bankruptcy settlement agreement may not be otherwise consummated, and if so, the potential for litigation and payment demands against us by FES or FENOC or their creditors; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, our strategy to operate and grow as a fully regulated business, to execute our transmission and distribution investment plans, to continue to reduce costs through FE Tomorrow, which is the FirstEnergy initiative launched in late 2016 to identify our optimal organization structure and properly align corporate costs and systems to efficiently support FirstEnergy as a fully regulated company going forward, and other initiatives, and to improve our credit metrics, strengthen our balance sheet and grow earnings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; economic and weather conditions affecting future operating results, such as significant weather events and other natural disasters, and associated regulatory events or actions; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers’ demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated; the risks associated





with the decommissioning of our retired and former nuclear facilities; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, including the Tax Act, or adverse tax audit results or rulings; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; and the risks and other factors discussed from time to time in FirstEnergy’s Securities and Exchange Commission (SEC) filings. Dividends declared from time to time on FirstEnergy’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy’s filings with the SEC, including but not limited to the most recent Annual Report on 10-K, Quarterly Report on Form 10-Q and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any obligation to update or revise, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.


(110419)



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Section 3: EX-99.2 (EXHIBIT 99.2)

a3q2019strategicandfinan
Exhibit 99.2 3Q 2019 Strategic & Financial Highlights Charles E. Jones, President and CEO Steven E. Strah, SVP and CFO November 4, 2019


 
Non-GAAP Financial Matters This presentation contains references to non-GAAP financial measures including, among others, Operating earnings (loss), Operating earnings (loss) per share and Operating earnings (loss) per share by segment. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). Operating earnings (loss), Operating earnings (loss) per share and Operating earnings (loss) per share by segment are not calculated in accordance with GAAP to the extent they exclude the impact of “special items.” Special items represent charges incurred or benefits realized that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items also reflect the adjustment to include the full impact of share dilution from the $2.5 billion equity issuance in January 2018. Special items are not necessarily non-recurring. FirstEnergy Corp. (FE or the Company) management cannot estimate on a forward-looking basis the impact of these items in the context of Operating earnings (loss) per share growth projections because these items, which could be significant, are difficult to predict and may be highly variable. Consequently, the Company is unable to reconcile Operating earnings (loss) per share growth projections (i.e. CAGR) to a GAAP measure without unreasonable effort. Operating earnings (loss) per share and Operating earnings (loss) per share for each segment is calculated by dividing Operating earnings (loss), which excludes special items as discussed above, for the periods presented in 2018 by 538 million shares, 539 million shares in the year-to-date 2019 period, 540 million shares in the third quarter 2019 and full year 2019, and 542 million shares in 2020, which reflects the full impact of share dilution from the equity issuance in January 2018. Management uses non-GAAP financial measures such as Operating earnings (loss) and Operating earnings (loss) per share to evaluate the company’s performance and manage its operations and frequently references these non-GAAP financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Operating earnings (loss) per share by segment to further evaluate the company’s performance by segment and references this non-GAAP financial measure in its decision-making. Management believes that the non-GAAP financial measures of Operating earnings (loss), Operating earnings (loss) per share and Operating earnings (loss) per share by segment provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are useful to shareholders and other interested parties to understand performance trends and evaluate the company against its peer group by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or across the Company’s peer group. All of these non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. Pursuant to the requirements of Regulation G, FirstEnergy has provided, where possible without unreasonable effort, quantitative reconciliations within this presentation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. 2 November 4, 2019


 
2019 Financial Summary 3Q 2019 Results ■ Reported GAAP earnings of $0.73 per basic share ($0.72 diluted) ■ Reported Operating (non-GAAP) earnings of $0.76 per share* – Exceeded the midpoint of 3Q earnings guidance range of $0.68 - $0.80 – Absence of the Ohio DMR fully offset by favorable weather-related load, the continued strong execution of our strategy, and O&M discipline 2019 Earnings Guidance ■ Updating 2019 GAAP earnings forecast to $405M - $1,020M, or $0.76 - $1.90 per share ■ Narrowing 2019 Operating (non-GAAP) earnings guidance to $2.50 - $2.60 per fully diluted share* – This reflects solid results year-to-date as well as the absence of the DMR in the second half of 2019 – Details provided on slide 55 of 3Q 2019 Investor FactBook * Refer to the Earnings Supplement to the Financial Community section for reconciliations between GAAP and Operating (non-GAAP) earnings 3 November 4, 2019


 
2020 & CAGR Guidance 2020 Earnings Guidance ■ Initiating 2020 Operating (non-GAAP) earnings guidance of $2.40 - $2.60 per share* – Details provided on slide 56 of 3Q 2019 Investor FactBook 2020 Guidance Ranges by Segment Regulated Distribution $2.13 – $2.27 In line with 6% - 8% Long-Term Regulated Transmission $0.85 – $0.89 Operating EPS CAGR* projection Corp / Other ($0.58) – ($0.56) FE Consolidated $2.40 – $2.60 2018-2021 CAGR ■ Affirming Operating (non-GAAP) EPS CAGR* projection of 6% - 8% from 2018 through 2021 * Refer to slide 2 for information on Non-GAAP Financial Matters 4 November 4, 2019


 
Business Updates PA LTIIP Filings ■ In late August, each of our four Pennsylvania utilities filed new Long-Term Infrastructure Improvement Plans, or LTIIPs, to invest $572M over the 2020 - 2024 period – Expect to recover costs associated with LTIIP through the DSIC rider – Expect PA PUC approval by the end of the year so work can begin in early 2020 TMI-2 Transfer ■ In October, signed an agreement to transfer the responsibility for decommissioning Three Mile Island Unit 2 to a subsidiary of EnergySolutions, LLC – This would remove any future nuclear decommissioning obligations from FirstEnergy, and further simplify our regulated focus – Includes transferring the plant, property, nuclear decommissioning trust and plant license, as well as the associated liabilities and responsibility for decommissioning – While the agreement is subject to certain regulatory approvals, we expect this transfer to take place in the second half of 2020 5 November 4, 2019


 
Business Updates (continued) Ohio Updates ■ Beginning to implement our 3-year, $516M Grid Modernization program – Projects are expected to help reduce the number and duration of power outages, and allow our customers to make more informed decisions about their energy usage – Order also fully resolved the impact of the Tax Cuts and Jobs Act, and we began implementing those tax savings for customers on September 1, 2019 ■ Later this month, expect to file plans with the PUCO to implement a decoupling mechanism – Decoupling breaks the link between utility revenue and the amount of electricity consumed by customers – Supports continued energy efficiency efforts, while ensuring that our utilities have adequate resources to continue providing safe and reliable power to our customers – After our filing, the commission will have 60 days to review and approve the application JCP&L Transmission Filing ■ On October 30, 2019, filed a plan with FERC to move our New Jersey transmission assets onto a forward-looking formula rate structure, effective January 1, 2020 – Plan supports Energizing the Future investments needs in New Jersey, including ~$175M in capital spending for 2020 – Expect an initial response from FERC by the end of December 2019 6 November 4, 2019


 
Business Updates (continued) FES Update ■ In mid-October, the bankruptcy court approved FES’s plan of reorganization – FES has stated that it plans to emerge by the end of 2019 New Disclosures ■ Plan to publish our new Corporate Responsibility Report and Strategic Plan on November 8, 2019 Corporate Responsibility Report Strategic Plan ■ Aligned with the five pillars of our mission statement ■ Using the foundation of our seven core values, the plan ■ Includes extensive detail on our initiatives – from reducing clearly articulates our vision for the next five years the environmental impact of our operations and upholding ■ Includes our approach to the rapid changes in our industry high standards for corporate governance, to advancing fueled by evolving customer expectations, emerging employee and public safety while building a diverse and technologies and a lower-carbon economy inclusive workplace. ■ Prepared to meet any challenge as we work together to ■ We plan to update the Corporate Responsibility Report deliver energy for a brighter future annually, in alignment with future annual reports 7 November 4, 2019


 
(GAAP) (Non-GAAP) 3Q 2019 Earnings Results 3Q19 vs. 3Q18 EPS Variance Basic EPS Operating EPS* Regulated Distribution ($0.14) ($0.09) Quarter-over-Quarter (Basic EPS / Operating EPS*) Regulated Transmission $0.01 $0.02 Corporate / Other $1.88 $0.03 3Q Results FE Consolidated $1.75 ($0.04) ■ Continue to present all operating results and projections on a fully diluted basis – As of August 1, 2019, all of the outstanding preferred stock shares were converted to common stock ■ Reported 3Q 2019 GAAP earnings of $0.73 per basic share ($0.72 diluted) – Results include the impact of full dilution and the impact from the exit of competitive generation, including the bankruptcy settlement agreement with FES in 3Q 2018 – 3Q 2018 results also include the impact of regulatory charges – Reported 3Q 2019 Operating (non-GAAP) earnings* of $0.76 per share ■ Regulated Distribution ($0.14) / ($0.09) ■ Regulated Transmission: +$0.01 / +$0.02 – Results primarily due to lower weather-related usage and the – Favorable results primarily due to higher rate absence of earnings contribution from the Ohio DMR base from continued investments in – Weather-adjusted load trends: Energizing the Future – Special items – include the impact of full Residential +0.1% Load remains in line with our dilution forecast, with bright spots including Commercial (2.9%) stable residential usage and modest ■ Corporate / Other: +$1.88 / +$0.03 growth in the number of residential – Favorable results due to lower expenses Industrial (1.0%) and commercial customers – Special items – include the impact from the – Special items – include the impact from the exit of competitive exit of competitive generation and the impact generation, regulatory charges, and full dilution of full dilution Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5 billion equity issuance in January 2018. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount if deductible/taxable. The income tax rates range from 21% to 29% in the third quarter of 2019 and 2018 * Refer to the Earnings Supplement to the Financial Community section for reconciliations between GAAP and Operating (non-GAAP) earnings 8 November 4, 2019


 
Financial Updates Pension/OPEB Update ■ It’s our custom to provide an estimate of the annual Pension/OPEB mark-to-market adjustment (non-cash) along with our 3Q call – Estimate the after-tax adjustment to be in the range of $400M – $1B; based on: – Discount rate of approximately 3.00% to 3.50% – Actual return on plan assets through September 30, 2019 – Final adjustment will be determined by the discount rate and asset returns at year-end ■ Return on assets currently stand at 17+% year-to-date; if this hold through the end of the year, we would expect our 2022 funding requirements to decrease by ~$140M ■ Pension funded status has slightly improved; 78% vs. 77% at year-end 2018 Additional Updates ■ In September, extended FE Corp. term loans and now have a $1B, 1-year facility and a $750M, 2-year facility – Will evaluate refinancing some or all of these facilities into the capital markets sometime next year ■ Met with the rating agencies earlier this quarter to review our progress on our goals as a fully regulated company with an improved risk profile – Expect all three agencies to provide normal-course updates on our entities – possibly as soon as EEI 9 November 4, 2019


 
Earnings Supplement to the Financial Community TABLE OF CONTENTS (Slide) 11. 3Q Earnings Summary and Reconciliation 12. YTD Earnings Summary and Reconciliation 13. 3Q Earnings Drivers by Segment 14. Special Items Descriptions 15. 3Q 2019 Earnings Results 16. 3Q 2018 Earnings Results 17. Quarter-over-Quarter Earnings Comparison 18. YTD 2019 Earnings Results 19. YTD 2018 Earnings Results 20. Year-over-Year Earnings Comparison 21. 2019F GAAP to Operating (Non-GAAP) Earnings Reconciliation 22. Forward-Looking Statements Irene M. Prezelj, Vice President Gina E. Caskey, Senior Advisor Jake M. Mackin, Consultant [email protected] [email protected] [email protected] 330.384.3859 330.761.4185 330.384.4829 10 November 4, 2019


 
Quarterly Summary   3Q 2019 3Q 2018 Change GAAP Earnings (Loss) Per Basic Share $0.73 $(1.02) $1.75 Special Items $0.03 $1.82 $(1.79) Operating (Non-GAAP) Earnings Per Share $0.76 $0.80 $(0.04) Quarterly Reconciliation FirstEnergy EPS Variance Analysis Regulated Regulated Corporate / Corp. (in millions, except per share amounts) Distribution Transmission Other Consolidated 3Q 2018 Net Income (Loss) attributable to Common Stockholders (GAAP) $416 $99 $(1,027) $(512) 3Q 2018 Basic Earnings (Loss) Per Share (avg. shares outstanding 503M) $0.83 $0.20 $(2.05) $(1.02) Special Items - 2018 Impact of full dilution (0.05) (0.01) 0.24 0.18 Regulatory charges (0.05) — — (0.05) Exit of competitive generation 0.05 — 1.64 1.69 Total Special Items - 3Q 2018 (0.05) (0.01) 1.88 1.82 3Q 2018 Operating Earnings (Loss) Per Share - Non-GAAP (538M fully diluted shares) $0.78 $0.19 $(0.17) $0.80 Distribution Deliveries (0.02) — — (0.02) Absence of Ohio DMR (0.06) — — (0.06) Transmission Margin — 0.02 — 0.02 Net Operating and Miscellaneous Expenses (0.03) — 0.03 — Depreciation (0.01) — — (0.01) Net Financing Costs 0.01 (0.01) — — Effective Tax Rate 0.02 0.01 — 0.03 3Q 2019 Operating Earnings (Loss) Per Share - Non-GAAP (540M fully diluted shares) $0.69 $0.21 $(0.14) $0.76 Special Items - 2019 Exit of competitive generation — — (0.03) (0.03) Total Special Items - 3Q 2019 — — (0.03) (0.03) 3Q 2019 Basic Earnings (Loss) Per Share (avg. shares outstanding 538M) $0.69 $0.21 $(0.17) $0.73 3Q 2019 Net Income (Loss) attributable to Common Stockholders (GAAP) $370 $113 $(92) $391 Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5 billion equity issuance in January 2018. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount if deductible/taxable. The income tax rates range from 21% to 29% in the third quarter of 2019 and 2018. Note: Refer to slide 2 for information on Non-GAAP Financial Matters. 11 November 4, 2019


 
Year-to-Date Summary   2019 2018 Change GAAP Earnings Per Basic Share $1.90 $1.76 $0.14 Special Items $0.14 $0.33 $(0.19) Operating (Non-GAAP) Earnings Per Share $2.04 $2.09 $(0.05) Year-to-Date Reconciliation FirstEnergy EPS Variance Analysis Regulated Regulated Corporate / Corp. (in millions, except per share amounts) Distribution Transmission Other Consolidated 2018 Net Income attributable to Common Stockholders (GAAP) $1,115 $302 $(564) $853 2018 Basic Earnings Per Share (avg. shares outstanding 485M) $2.30 $0.62 $(1.16) $1.76 Special Items - 2018 Impact of full dilution (0.23) (0.06) 0.78 0.49 Regulatory charges (0.21) — — (0.21) Tax reform 0.02 — — 0.02 Debt redemption costs — — 0.21 0.21 Exit of competitive generation 0.05 — (0.23) (0.18) Total Special Items - 2018 (0.37) (0.06) 0.76 0.33 2018 Operating Earnings (Loss) Per Share - Non-GAAP (538M fully diluted shares) $1.93 $0.56 $(0.40) $2.09 Distribution Deliveries (0.08) — — (0.08) Absence of Ohio DMR (2nd Half 2019) (0.06) — — (0.06) Transmission Margin — 0.06 — 0.06 Net Operating and Miscellaneous Expenses — (0.01) 0.05 0.04 Absence of Ohio AER Ruling (0.03) — — (0.03) Depreciation (0.04) — — (0.04) Net Financing Costs 0.03 (0.02) (0.02) (0.01) Absence of Pleasants Commodity Margin — — (0.03) (0.03) Effective Tax Rate 0.04 0.02 0.03 0.09 Other — 0.01 — 0.01 2019 Operating Earnings (Loss) Per Share - Non-GAAP (539M fully diluted shares) $1.79 $0.62 $(0.37) $2.04 Special Items - 2019 Impact of full dilution 0.02 0.01 (0.02) 0.01 Regulatory charges 0.01 — — 0.01 Exit of competitive generation (0.02) — (0.14) (0.16) Total Special Items - 2019 0.01 0.01 (0.16) (0.14) 2019 Basic Earnings (Loss) Per Share (avg. shares outstanding 533M) $1.80 $0.63 $(0.53) $1.90 Note: Refer to slide 2 for information 2019 Net Income (Loss) attributable to Common on Non-GAAP Financial Matters. Stockholders (GAAP) $957 $333 $(274) $1,016 Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5 billion equity issuance in January 2018. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount if deductible/taxable. The income tax rates range from 21% to 29% in year-to-date 2019 and 2018. 12 November 4, 2019


 
Earnings Drivers: 3Q 2019 vs. 3Q 2018 Regulated Distribution (RD) ▪ Distribution Deliveries: Total distribution deliveries decreased earnings $0.02 per share primarily due to weather-related usage, partially offset by incremental rider revenues in Ohio and Pennsylvania. Q-o-Q Weather-Adjusted Distribution Deliveries Q-o-Q Actual Distribution Deliveries 0.1% (2.2)% (1.0)% (2.2)% (1.0)% (1.1)% (3.8)% (2.9)% Residential Commercial Industrial Total Residential Commercial Industrial Total ▪ Absence of Ohio DMR: Absence of earnings contribution from the Ohio Distribution Modernization Rider (DMR), which ended on July 2, 2019, decreased earnings $0.06 per share. ▪ Net Operating and Miscellaneous Expenses: Higher O&M and miscellaneous expenses decreased earnings $0.03 per share. ▪ Depreciation: Higher depreciation expense decreased earnings $0.01 per share, primarily due to a higher asset base. ▪ Net Financing Costs: Lower net financing costs increased earnings $0.01 per share, due to lower interest expense as a result of various debt maturities and refinancings at lower rates and higher capitalized financing costs. ▪ Effective Tax Rate: Lower segment effective tax rate increased earnings $0.02 per share. ▪ Special Items: In the third quarter of 2019 and 2018, special items totaled $0.00 per share and ($0.05) per share, respectively. Regulated Transmission (RT) ▪ Transmission Margin: Higher transmission margin increased earnings $0.02 per share, primarily due to higher rate base at Mid-Atlantic Interstate Transmission, LLC (MAIT) and American Transmission Systems, Incorporated (ATSI). ▪ Net Financing Costs: Higher long-term debt decreased earnings $0.01 per share. ▪ Effective Tax Rate: Lower segment effective tax rate increased earnings $0.01 per share. ▪ Special Items: In the third quarter of 2019 and 2018, special items were $0.00 per share and ($0.01) per share, respectively. Corporate / Other (Corp) ▪ Net Operating and Miscellaneous Expenses: Lower expenses increased results $0.03 per share. ▪ Special Items: In the third quarter of 2019 and 2018, special items totaled $0.03 per share and $1.88 per share, respectively. 13 November 4, 2019


 
Special Items Descriptions ▪ Regulatory charges: Primarily reflects the impact of regulatory agreements or orders requiring certain commitments and/or disallowing the recoverability of costs, net of related credits. ▪ Tax reform: Primarily reflects charges and credits resulting from the Tax Cuts and Jobs Act. ▪ Debt redemption costs: Primarily reflects costs associated with the redemption and early retirement of debt. ▪ Exit of competitive generation: Primarily reflects charges or credits resulting from the exit of competitive operations and impairments of certain non-core assets, including the impact of deconsolidating FES, its subsidiaries and FENOC, following their voluntary petitions for bankruptcy protection on March 31, 2018. ▪ Mark-to-market adjustments - Pension/OPEB actuarial assumptions: Reflects the change in fair value of plan assets and net actuarial gains and losses associated with the company's pension and other postemployment benefit plans. ▪ Impact of full dilution: Represents the dilutive impact of increasing weighted average shares outstanding to reflect the full impact of share dilution from the $2.5 billion equity issuance in January 2018, including preferred dividends and conversion of preferred stock to common shares. ▪ In the Corp segment, this includes the addback of preferred share dividends and undistributed earnings to preferred shareholders of $7 million and $61 million in the first nine months of 2019 and 2018, respectively, and non-cash deemed dividends for the amortization of the beneficial conversion feature of $296 million in the first nine months of 2018. These amounts are considered a deduction to arrive at Net Income attributable to Common Stockholders under GAAP, and are added back to the calculation of Operating (Non- GAAP) earnings given the assumption that all preferred stock is converted. Note: Special items represent charges incurred or benefits realized, including share dilution, that management believes are not indicative of, or may obscure trends useful in evaluating the company’s ongoing core activities and results of operations or otherwise warrant separate classification. Special items are not necessarily non-recurring. 14 November 4, 2019


 
3rd Quarter 2019 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 2,571 $ 371 $ (33) $ 2,909 $ — $ — $ — $ — $ 2,571 $ 371 $ (33) $ 2,909 (2) Other 65 4 (15) 54 — —— — 65 4 (15) 54 (3) Total Revenues 2,636 375 (48) 2,963 — —— — 2,636 375 (48) 2,963 (4) Fuel 122 — — 122 — —— — 122 — — 122 (5) Purchased power 794 — 4 798 — —— — 794 — 4 798 (6) Other operating expenses 715 75 (32) 758 — — (26) (a) (26) 715 75 (58) 732 (7) Provision for depreciation 215 71 18 304 — —— — 215 71 18 304 (8) Amortization of regulatory assets, net 42 1 — 43 — —— — 42 1 — 43 (9) General taxes 197 53 7 257 — —— — 197 53 7 257 (10) Total Operating Expenses 2,085 200 (3) 2,282 — — (26) (26) 2,085 200 (29) 2,256 (11) Operating Income (Loss) 551 175 (45) 681 — — 26 26 551 175 (19) 707 (12) Miscellaneous income, net 36 4 17 57 — —— — 36 4 17 57 (13) Interest expense (124) (49) (88) (261) — —— — (124) (49) (88) (261) (14) Capitalized financing costs 10 9 — 19 — —— — 10 9 — 19 (15) Total Other Expense (78) (36) (71) (185) — —— — (78) (36) (71) (185) (16) Income (Loss) Before Income Taxes 473 139 (116) 496 — — 26 26 473 139 (90) 522 (17) Income taxes (benefits) 103 26 (22) 107 — — 5 (a) 5 103 26 (17) 112 (18) Income (Loss) From Continuing Operations 370 113 (94) 389 — — 21 21 370 113 (73) 410 (19) Discontinued operations, net of tax — — 2 2 — — (2) (a) (2) ———— (20) Net Income (Loss) 370 113 (92) 391 — — 19 19 370 113 (73) 410 (21) Income Allocated to Preferred Stockholders — — — — — —— ————— (22) Net Income (Loss) Attributable to Common $ 370 $ 113 $ (92) $ 391 $ — $ — $ 19 $ 19 $ 370 $ 113 $ (73) $ 410 (23) Average Shares Outstanding 538 540 540 (24) Earnings (Loss) per Share $ 0.69 $ 0.21 $ (0.17) $ 0.73 $ — $ — $ 0.03 $ 0.03 $ 0.69 $ 0.21 $ (0.14) $ 0.76 Special Items (after-tax impact): (a) Exit of competitive generation $ — $ — $ 19 $ 19 Impact to Earnings $ — $ — $ 19 $ 19 15 November 4, 2019


 
3rd Quarter 2018 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 2,698 $ 341 $ (30) $ 3,009 $ — $ — $ — $ — $ 2,698 $ 341 $ (30) $ 3,009 (2) Other 68 5 (18) 55 — —— — 68 5 (18) 55 (3) Total Revenues 2,766 346 (48) 3,064 — —— — 2,766 346 (48) 3,064 (4) Fuel 137 — — 137 — —— — 137 — — 137 (5) Purchased power 873 — 3 876 — —— — 873 — 3 876 (6) Other operating expenses 663 68 8 739 15 (a) (b) — (80) (b) (65) 678 68 (72) 674 (7) Provision for depreciation 202 64 17 283 — —— — 202 64 17 283 (8) Deferral of regulatory assets, net 65 2 — 67 — —— — 65 2 — 67 (9) General taxes 197 49 6 252 — —— — 197 49 6 252 (10) Total Operating Expenses 2,137 183 34 2,354 15 — (80) (65) 2,152 183 (46) 2,289 (11) Operating Income (Loss) 629 163 (82) 710 (15) — 80 65 614 163 (2) 775 (12) Miscellaneous income, net 34 4 11 49 20 (a) (b) — (23) (b) (3) 54 4 (12) 46 (13) Interest expense (127) (43) (85) (255) — —— — (127) (43) (85) (255) (14) Capitalized financing costs 6 9 1 16 — —— — 6 9 1 16 (15) Total Other Expense (87) (30) (73) (190) 20 — (23) (3) (67) (30) (96) (193) (16) Income (Loss) Before Income Taxes (Benefits) 542 133 (155) 520 5 — 57 62 547 133 (98) 582 (17) Income taxes (benefits) 126 34 (39) 121 3 (a) (b) — 18 (b) (c) 21 129 34 (21) 142 (18) Income (Loss) From Continuing Operations 416 99 (116) 399 2 — 39 41 418 99 (77) 440 (19) Discontinued operations, net of tax — — (857) (857) — — 845 (b) 845 — — (12) (12) (20) Net Income (Loss) 416 99 (973) (458) 2 — 884 886 418 99 (89) 428 (21) Income Allocated to Preferred Stockholders — — 54 54 — — (54) (d) (54) ———— (22) Net Income (Loss) Attributable to Common $ 416 $ 99 $(1,027) $ (512) $ 2 $ — $ 938 $ 940 $ 418 $ 99 $ (89) $ 428 (23) Average Shares Outstanding 503 538 538 (24) Earnings (Loss) per Share $ 0.83 $ 0.20 $ (2.05) $ (1.02) $ (0.05) $ (0.01) $ 1.88 $ 1.82 $ 0.78 $ 0.19 $ (0.17) $ 0.80 Special Items (after-tax impact): (a) Regulatory charges $ (23) $ — $ — $ (23) (b) Exit of competitive generation 25 — 883 908 (c) Tax reform — — 1 1 (d) Impact of full dilution — — 54 54 Impact to Earnings $ 2 $ — $ 938 $ 940 16 November 4, 2019


 
3rd Quarter 2019 vs 3rd Quarter 2018 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ (127) $ 30 $ (3) $ (100) $ — $ — $ — $ — $ (127) $ 30 $ (3) $ (100) (2) Other (3) (1) 3 (1) — — — — (3) (1) 3 (1) (3) Total Revenues (130) 29 — (101) — — — — (130) 29 — (101) (4) Fuel (15) — — (15) — — — — (15) — — (15) (5) Purchased power (79) — 1 (78) — — — — (79) — 1 (78) (6) Other operating expenses 52 7 (40) 19 (15) — 54 39 37 7 14 58 (7) Provision for depreciation 13 7 1 21 — — — — 13 7 1 21 (8) Amortization of regulatory assets, net (23) (1) — (24) —— — — (23) (1) — (24) (9) General taxes — 4 1 5 — — — — — 4 1 5 (10) Total Operating Expenses (52) 17 (37) (72) (15) — 54 39 (67) 17 17 (33) (11) Operating Income (Loss) (78) 12 37 (29) 15 — (54) (39) (63) 12 (17) (68) (12) Miscellaneous income, net 2 — 6 8 (20) — 23 3 (18) — 29 11 (13) Interest expense 3 (6) (3) (6) — — — — 3 (6) (3) (6) (14) Capitalized financing costs 4 — (1) 3 —— — — 4 — (1) 3 (15) Total Other Expense 9 (6) 2 5 (20) — 23 3 (11) (6) 25 8 (16) Income (Loss) Before Income Taxes (69) 6 39 (24) (5) — (31) (36) (74) 6 8 (60) (17) Income taxes (benefits) (23) (8) 17 (14) (3) — (13) (16) (26) (8) 4 (30) (18) Income (Loss) From Continuing Operations (46) 14 22 (10) (2) — (18) (20) (48) 14 4 (30) (19) Discontinued operations, net of tax — — 859 859 — — (847) (847) — — 12 12 (20) Net Income (Loss) (46) 14 881 849 (2) — (865) (867) (48) 14 16 (18) (21) Income Allocated to Preferred Stockholders — — (54) (54) — — 54 54 — — — — (22) Net Income (Loss) Attributable to Common $ (46) $ 14 $ 935 $ 903 $ (2) $ — $ (919) $ (921) $ (48) $ 14 $ 16 $ (18) (23) Average Shares Outstanding 35 2 2 (24) Earnings (Loss) per Share $ (0.14) $ 0.01 $ 1.88 $ 1.75 $ 0.05 $ 0.01 $ (1.85) $ (1.79) $ (0.09) $ 0.02 $ 0.03 $ (0.04) 17 November 4, 2019


 
YTD September 2019 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 7,214 $ 1,090 $ (96) $ 8,208 $ — $ — $ — $ — $ 7,214 $ 1,090 $ (96) $ 8,208 (2) Other 187 13 (46) 154 — —— — 187 13 (46) 154 (3) Total Revenues 7,401 1,103 (142) 8,362 — —— — 7,401 1,103 (142) 8,362 (4) Fuel 382 — — 382 — —— — 382 — — 382 (5) Purchased power 2,177 — 13 2,190 — —— — 2,177 — 13 2,190 (6) Other operating expenses 2,116 205 (178) 2,143 (15) (a) (b) — (3) (b) (18) 2,101 205 (181) 2,125 (7) Provision for depreciation 644 211 55 910 — —— — 644 211 55 910 (8) Amortization of regulatory assets, net 79 6 — 85 8 (a) —— 8 87 6 — 93 (9) General taxes 572 156 29 757 — — (2) (b) (2) 572 156 27 755 (10) Total Operating Expenses 5,970 578 (81) 6,467 (7) — (5) (12) 5,963 578 (86) 6,455 (11) Operating Income (Loss) 1,431 525 (61) 1,895 7 — 5 12 1,438 525 (56) 1,907 (12) Miscellaneous income, net 128 12 51 191 2 (b) — 2 (b) 4 130 12 53 195 (13) Interest expense (370) (142) (261) (773) — —— — (370) (142) (261) (773) (14) Capitalized financing costs 27 25 1 53 — —— — 27 25 1 53 (15) Total Other Expense (215) (105) (209) (529) 2 — 2 4 (213) (105) (207) (525) (16) Income (Loss) Before Income Taxes 1,216 420 (270) 1,366 9 — 7 16 1,225 420 (263) 1,382 (17) Income taxes (benefits) 259 87 (65) 281 3 (a) (b) — 1 (b) 4 262 87 (64) 285 (18) Income (Loss) From Continuing Operations 957 333 (205) 1,085 6 — 6 12 963 333 (199) 1,097 (19) Discontinued operations, net of tax — — (62) (62) — — 62 (b) 62 — — — — (20) Net Income (Loss) 957 333 (267) 1,023 6 — 68 74 963 333 (199) 1,097 (21) Income Allocated to Preferred Stockholders — — 7 7 — — (7) (c) (7) ———— (22) Net Income (Loss) Attributable to Common $ 957 $ 333 $ (274) $ 1,016 $ 6 $ — $ 75 $ 81 $ 963 $ 333 $ (199) $ 1,097 (23) Average Shares Outstanding 533 539 539 (24) Earnings (Loss) per Share $ 1.80 $ 0.63 $ (0.53) $ 1.90 $ (0.01) $ (0.01) $ 0.16 $ 0.14 $ 1.79 $ 0.62 $ (0.37) $ 2.04 Special Items (after-tax impact): (a) Regulatory charges $ (6) $ — $ — $ (6) (b) Exit of competitive generation 12 — 68 80 (c) Impact of full dilution — — 7 7 Impact to Earnings $ 6 $ — $ 75 $ 81 18 November 4, 2019


 
YTD September 2018 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ 7,497 $ 996 $ (107) $ 8,386 $ — $ — $ — $ — $ 7,497 $ 996 $ (107) $ 8,386 (2) Other 197 14 (46) 165 — —— — 197 14 (46) 165 (3) Total Revenues 7,694 1,010 (153) 8,551 — —— — 7,694 1,010 (153) 8,551 (4) Fuel 404 — — 404 — —— — 404 — — 404 (5) Purchased power 2,391 — 2 2,393 — —— — 2,391 — 2 2,393 (6) Other operating expenses 2,227 182 (46) 2,363 78 (a) — (165) (b) (87) 2,305 182 (211) 2,276 (7) Provision for depreciation 598 187 58 843 — —— — 598 187 58 843 (8) Amortization (deferral) of regulatory assets, net (194) 6 — (188) 52 (a) —— 52 (142) 6 — (136) (9) General taxes 576 144 26 746 — —— — 576 144 26 746 (10) Total Operating Expenses 6,002 519 40 6,561 130 — (165) (35) 6,132 519 (125) 6,526 (11) Operating Income (Loss) 1,692 491 (193) 1,990 (130) — 165 35 1,562 491 (28) 2,025 (12) Miscellaneous income, net 146 11 7 164 20 (b) — (24) (b) (4) 166 11 (17) 160 (13) Interest expense (384) (124) (350) (858) — — 106 (b) 106 (384) (124) (244) (752) (14) Capitalized financing costs 18 28 1 47 — —— — 18 28 1 47 (15) Total Other Expense (220) (85) (342) (647) 20 — 82 102 (200) (85) (260) (545) (16) Income (Loss) Before Income Taxes (Benefits) 1,472 406 (535) 1,343 (110) — 247 137 1,362 406 (288) 1,480 (17) Income taxes (benefits) 357 104 (6) 455 (35) (a) (c) — (87) (b) (c) (122) 322 104 (93) 333 (18) Income (Loss) From Continuing Operations 1,115 302 (529) 888 (75) — 334 259 1,040 302 (195) 1,147 (19) Discontinued operations, net of tax — — 322 322 — — (347) (b) (347) — — (25) (25) (20) Net Income (Loss) 1,115 302 (207) 1,210 (75) — (13) (88) 1,040 302 (220) 1,122 (21) Income Allocated to Preferred Stockholders — — 357 357 — — (357) (d) (357) ———— (22) Net Income (Loss) Attributable to Common $ 1,115 $ 302 $ (564) $ 853 $ (75) $ — $ 344 $ 269 $ 1,040 $ 302 $ (220) $ 1,122 (23) Average Shares Outstanding 485 538 538 (24) Earnings (Loss) per Share $ 2.30 $ 0.62 $ (1.16) $ 1.76 $ (0.37) $ (0.06) $ 0.76 $ 0.33 $ 1.93 $ 0.56 $ (0.40) $ 2.09 Special Items (after-tax impact): (a) Regulatory charges $ (112) $ — $ — $ (112) (b) Exit of competitive generation 25 — (14) 11 (c) Tax reform 12 — 1 13 (d) Impact of full dilution — — 357 357 Impact to Earnings $ (75) $ — $ 344 $ 269 19 November 4, 2019


 
YTD September 2019 vs YTD September 2018 (in millions, except for per share amounts) GAAP Special Items Operating (Non-GAAP) RD RT Corp FE RD RT Corp FE RD RT Corp FE (1) Electric sales $ (283) $ 94 $ 11 $ (178) $ — $ — $ — $ — $ (283) $ 94 $ 11 $ (178) (2) Other (10) (1) — (11) — — — — (10) (1) — (11) (3) Total Revenues (293) 93 11 (189) — — — — (293) 93 11 (189) (4) Fuel (22) — — (22) — — — — (22) — — (22) (5) Purchased power (214) — 11 (203) — — — — (214) — 11 (203) (6) Other operating expenses (111) 23 (132) (220) (93) — 162 69 (204) 23 30 (151) (7) Provision for depreciation 46 24 (3) 67 —— — — 46 24 (3) 67 (8) Amortization of regulatory assets, net 273 — — 273 (44) — — (44) 229 — — 229 (9) General taxes (4) 12 3 11 — — (2) (2) (4) 12 1 9 (10) Total Operating Expenses (32) 59 (121) (94) (137) — 160 23 (169) 59 39 (71) (11) Operating Income (Loss) (261) 34 132 (95) 137 — (160) (23) (124) 34 (28) (118) (12) Miscellaneous income, net (18) 1 44 27 (18) — 26 8 (36) 1 70 35 (13) Interest expense 14 (18) 89 85 — — (106) (106) 14 (18) (17) (21) (14) Capitalized financing costs 9 (3) — 6 —— — — 9 (3) — 6 (15) Total Other Expense 5 (20) 133 118 (18) — (80) (98) (13) (20) 53 20 (16) Income (Loss) Before Income Taxes (256) 14 265 23 119 — (240) (121) (137) 14 25 (98) (17) Income taxes (benefits) (98) (17) (59) (174) 38 — 88 126 (60) (17) 29 (48) (18) Income (Loss) From Continuing Operations (158) 31 324 197 81 — (328) (247) (77) 31 (4) (50) (19) Discontinued operations, net of tax — — (384) (384) — — 409 409 — — 25 25 (20) Net Income (Loss) (158) 31 (60) (187) 81 — 81 162 (77) 31 21 (25) (21) Income Allocated to Preferred Stockholders — — (350) (350) — — 350 350 — — — — (22) Net Income (Loss) Attributable to Common $ (158) $ 31 $ 290 $ 163 $ 81 $ — $ (269) $ (188) $ (77) $ 31 $ 21 $ (25) (23) Average Shares Outstanding 48 1 1 (24) Earnings (Loss) per Share $ (0.50) $ 0.01 $ 0.63 $ 0.14 $ 0.36 $ 0.05 $ (0.60) $ (0.19) $ (0.14) $ 0.06 $ 0.03 $ (0.05) 20 November 4, 2019


 
2019F GAAP to Operating (Non-GAAP) Earnings(1) Reconciliation 2019 Forecast (In $M, except per share amounts) RD RT Corp FE 2019F Net Income (Loss) attributable to Common Stockholders (GAAP) $720 - $1,085 $455 - $460 ($770) - ($525) $405 - $1,020 2019F Earnings (Loss) Per Share $1.35 - $2.03 $0.85 - $0.86 ($1.44) - ($0.99) $0.76 - $1.90 Excluding Special Items: Impact of full dilution (0.04) (0.02) 0.04 (0.02) Mark-to-market adjustments - Pension/OPEB actuarial assumptions 1.01 - 0.40 - 0.73 - 0.30 1.74 - 0.70 Regulatory charges (0.14) - - (0.14) Exit of competitive generation 0.02 - 0.14 0.16 Total Special Items $0.85 - $0.24 $(0.02) $0.91 - $0.48 $1.74 - $0.70 2019F Operating Earnings (Loss) Per Share - Non-GAAP (540M fully diluted shares) $2.20 - $2.27 $0.83 - $0.84 ($0.53) - ($0.51) $2.50 - $2.60 (1) Operating earnings exclude special items as described in the reconciliation table above and is a non-GAAP financial measure. Per share amounts for the special items above are based on the after-tax effect of each item divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5B equity issuance in January 2018 (540M fully diluted shares). The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount if deductible/taxable. The income tax rates range from 21% to 29%. 2019F Earnings (Loss) Per Share is based on 535M shares and 2019F Operating Earnings (Loss) Per Share - Non-GAAP are based on 540M shares. 21 November 4, 2019


 
Forward-Looking Statements Forward-Looking Statements: This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Unless the context requires otherwise, as used herein, references to “we”, “us”, “our”, and “FirstEnergy” refer to FirstEnergy Corp. Forward-looking statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “forecast,” “target,” “will,” “intend,” “believe,” “project,” “estimate,” “plan” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following (see Glossary of Terms for definitions of capitalized terms): the ability to successfully execute an exit from commodity- based generation, including, without limitation, mitigating exposure for remedial activities associated with formerly owned generation assets; the risks associated with the Chapter 11 bankruptcy proceedings involving FirstEnergy Solutions Corp. (FES), its subsidiaries, and FirstEnergy Nuclear Operating company (FENOC) (FES Bankruptcy) that could adversely affect us, our liquidity or results of operations, including, without limitation, that conditions to the FES Bankruptcy settlement agreement may not be met or that the FES Bankruptcy settlement agreement may not be otherwise consummated, and if so, the potential for litigation and payment demands against us by FES or FENOC or their creditors; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, our strategy to operate and grow as a fully regulated business, to execute our transmission and distribution investment plans, to continue to reduce costs through FE Tomorrow, which is the FirstEnergy initiative launched in late 2016 to identify our optimal organization structure and properly align corporate costs and systems to efficiently support FirstEnergy as a fully regulated company going forward, and other initiatives, and to improve our credit metrics, strengthen our balance sheet and grow earnings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; economic and weather conditions affecting future operating results, such as significant weather events and other natural disasters, and associated regulatory events or actions; changes in assumptions regarding economic conditions within our territories, the reliability of our transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers’ demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions affecting us and/or our major industrial and commercial customers or others with which we do business; the risks associated with cyber-attacks and other disruptions to our information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts and other trust funds, or causing us to make contributions sooner, or in amounts that are larger, than currently anticipated; the risks associated with the decommissioning of our retired and former nuclear facilities; the risks and uncertainties associated with litigation, arbitration, mediation and like proceedings; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, including the Tax Act, or adverse tax audit results or rulings; the ability to access the public securities and other capital and credit markets in accordance with our financial plans, the cost of such capital and overall condition of the capital and credit markets affecting us, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; actions that may be taken by credit rating agencies that could negatively affect either our access to or terms of financing or our financial condition and liquidity; and the risks and other factors discussed from time to time in FirstEnergy’s Securities and Exchange Commission (SEC) filings. Dividends declared from time to time on FirstEnergy’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy’s filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The foregoing review of factors also should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. FirstEnergy expressly disclaims any obligation to update or revise, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise. 22 November 4, 2019


 
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