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Section 1: 8-K (8-K)

Document




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): July 23, 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(s)
 
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 July 23, 2019, FirstEnergy Corp. (FirstEnergy or Company) issued two public documents regarding, among other things, results for the three and six months ended June 30, 2019, updating its 2019 GAAP earnings forecast range, affirming operating (non-GAAP) earnings guidance for 2019, and providing operating (non-GAAP) earnings guidance for the third quarter of 2019. FirstEnergy’s Press Release and 2Q 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 2Q 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 2Q 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 second quarter of 2019 and by 540 million shares for the third quarter and full year 2019, 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
 












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: 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 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 Cuts and Jobs 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; 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, and thereby on FirstEnergy’s preferred 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.

July 23, 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: July 23, 2019
76 South Main Street
 
 
Akron, Ohio 44308
 
 
www.firstenergy.com
 
 
 
 
 
News Media Contact:
Investor Contact:
Tricia Ingraham
Irene Prezelj
(330) 384-5247
(330) 384-3859

FirstEnergy Announces Second Quarter 2019 Financial Results

Akron, Ohio - FirstEnergy Corp. (NYSE: FE) today reported second quarter 2019 GAAP earnings of $308 million or $0.58 per basic and diluted share, on revenue of $2.5 billion. In the second quarter of 2018, the company recorded GAAP earnings of $134 million, or $0.28 per basic and diluted share, on revenue of $2.6 billion. GAAP earnings for both periods include the impact of special items listed below.

Operating (non-GAAP) earnings* were $0.61 per share for the second quarter of 2019, and $0.62 per share for the second quarter of 2018.

Our results for the second quarter exceeded the midpoint of our guidance, despite the unusually mild weather across our service area this spring,” said Charles E. Jones, FirstEnergy president and chief executive officer. “We achieved strong operational performance as we continued to implement our strategic initiatives, and we are pleased to reaffirm our projection for 6% to 8% of compound annual growth from 2018 through 2021.”**

FirstEnergy also updated its 2019 GAAP earnings forecast range to $1.265 billion to $1.425 billion, or $2.34 to $2.64 per share based on 540 million shares outstanding, and affirmed its operating (non-GAAP) earnings guidance of $2.45 to $2.75 per share. For the third quarter of 2019, the company is providing an earnings guidance range of $365 million to $430 million on both a GAAP and operating earnings basis, or $0.68 to $0.80 per share based on 540 million shares outstanding.

In FirstEnergy’s Regulated Distribution business, lower operating expense, income taxes and net financing costs had a positive impact on results for the second quarter of 2019, but these factors were offset by lower distribution deliveries, primarily due to mild spring weather, higher depreciation expense,

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and the absence of a second quarter 2018 benefit related to a court ruling on renewable energy credits in Ohio.

Second quarter 2019 heating degree days were 20% below normal and 23% lower than the second quarter of 2018. Cooling degree days were 4% below normal, and 28% lower than the same period of 2018.
Total distribution deliveries decreased 5.5% compared to the second quarter of 2018. Residential sales decreased 9.7%, while deliveries to commercial customers decreased 5.6%. Deliveries to industrial customers decreased 1.7% as lower demand from steel and automotive customers offset continued growth in the shale sector.

In the Regulated Transmission business, second quarter earnings increased as a result of a higher rate base from continued investments in the company’s Energizing the Future initiative and a lower tax rate.

In the Corporate/Other segment, results for the second quarter of 2019 reflect lower expenses, partially offset by higher net financing costs.

For the first six months of 2019, FirstEnergy’s GAAP earnings were $623 million, or $1.17 per basic and diluted share on revenue of $5.4 billion. This compares to GAAP earnings of $1.4 billion or $2.86 per basic share ($2.85 diluted) in the first half of 2018, on revenue of $5.5 billion. GAAP earnings for the first half of 2018 included a gain on the deconsolidation of FirstEnergy Solutions Corp., its subsidiaries, and FirstEnergy Nuclear Operating Company as a result of their bankruptcy filing on March 31, 2018.
Operating (non-GAAP) earnings for the first half of 2019 were $1.28 per share, compared to $1.29 per share in the first half of 2018.








2




 
 
 
 
Consolidated GAAP Earnings to Operating (Non-GAAP) EPS* Reconciliation

 
 
 
Three Months
 Ended June 30,
 
Six Months
Ended June 30,
 
2019 Estimates
 
 
 
2019
2018
 
2019
2018
 
Third Quarter
Full Year
 
 
Net Income attributable to Common Stockholders (GAAP) - $M
$308
$134
 
$623
$1,364
 
$365 - $430
$1,265 - $1,425
 
 
Earnings Per Share
$0.58
$0.28
 
$1.17
$2.86
 
$0.68 - $0.80
$2.34 - $2.64
 
 
Excluding Special Items*:
 
 
 
 
 
 
 
 
 
 
Impact of full dilution
0.27
 
0.25
 
 
 
Regulatory charges
(0.17)
 
(0.01)
(0.16)
 
(0.01)
 
 
Tax reform
0.02
 
0.02
 
 
 
Debt redemption costs
0.21
 
0.21
 
 
 
Exit of competitive generation
0.03
0.01
 
0.12
(1.89)
 
0.12
 
 
    Total Special Items*
0.03
0.34
 
0.11
(1.57)
 
0.11
 
 
Operating EPS (non-GAAP)
$0.61
$0.62
 
$1.28
$1.29
 
 $0.68 - $0.80
 $2.45 - $2.75
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Per Share and Operating Earnings Per Share - (Non-GAAP) for the Third Quarter and Full Year are based on 540M shares outstanding.
 


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 second quarter of 2019 and by 540 million shares for the third quarter and full year 2019, 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.



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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 Second 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 10:00 a.m. EDT tomorrow. 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 Second 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: 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 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

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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 Cuts and Jobs 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; 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, and thereby on FirstEnergy’s preferred 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.


(072319)


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Section 3: EX-99.2 (EXHIBIT 99.2)

q22019strategicandfinanc
Exhibit 99.2 2Q 2019 Strategic & Financial Highlights Charles E. Jones, President and CEO Steven E. Strah, SVP and CFO July 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 second quarter of 2019 and by 540 million shares for the third quarter and full year 2019, 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 July 2019


 
Financial and Business Updates 2Q 2019 Results ■ Reported GAAP earnings of $0.58 per share ■ Reported Operating (non-GAAP) earnings of $0.61 per share* – Slightly higher than the midpoint of our 2Q earnings guidance range of $0.55 - $0.65 ■ Continued execution of our customer service-oriented growth opportunities Transmission Updates ■ Energizing the Future: on pace for $1.2B in planned investments in 2019 – Remain on track to bring 600-700 projects in-service in 2019 ■ Last week, participated in a transmission summit hosted by the PUCO – FE team briefed the PUCO and Staff on our Energizing the Future program ■ Developed APEX, a new transmission performance management process Energizing the Future ■ Investments focused on grid modernization, ■ ATSI region investments since 2014 have enhanced security, and operational flexibility, resulted in 52% ↓ in number of customers while upgrading aging infrastructure affected by transmission outages * Refer to slide 11 for reconciliation between GAAP and Operating (non-GAAP) earnings 3 July 2019


 
Financial and Business Updates (Continued) PA and NJ Updates ■ On May 23, PA PUC approved modified Long-Term Infrastructure Investment Plans (LTIIPs) – Modification increases spend in 2019 by $85M – Includes acceleration of planned 2020 capital and additional capital to support enhanced reliability – In August, plan to file new LTIIPs for 2020-2024 period ■ Signed a non-binding term sheet to transfer responsibility for decommissioning Three Mile Island Unit 2 (TMI-2) to a subsidiary of EnergySolutions, LLC – TMI-2 was acquired in 2001 as part of the GPU merger – Currently licensed to GPU Nuclear and owned by Met-Ed, Penelec and JCP&L – Process requires numerous regulatory approvals – Would transfer future nuclear obligations from FE and further simplify our regulated focus ■ In May, NJ BPU approved our 2-year, $97M JCP&L Reliability Plus plan (June 2019 - Dec. 2020) – Includes projects designed to enhance safety, reliability, and resiliency of our NJ distribution system 4 July 2019


 
Financial and Business Updates (Continued) Ohio Updates ■ On July 17, received PUCO decision on our supplemental stipulation on tax reform and grid modernization – Approved by a 5-0 vote – Order fully resolves the impact of the Tax Cuts and Jobs Act, with customers receiving 100% of the tax savings – Grid modernization includes investments of $516M over 3 years ■ On July 15, filed our 2018 Significantly Excessive Earnings Test (SEET) with PUCO – Utilities’ ROEs in 2018 continue to be well below the calculated SEET threshold – On July 17, a change to Ohio legislation passed that allows our utilities to file one combined SEET – Allows our utilities to implement rates in a manner that best serves customers across our Ohio footprint Grid Mod Investments Grid Mod Benefits ■ 700,000 Advanced Meters and associated AMI technology ■ Reliability and operational improvements ■ Distribution Automation on 200 Circuits ■ Reduced energy consumption ■ Integrated Volt Var Control on 200 Circuits ■ Enhanced data access ■ Advanced Distribution Management System (“ADMS”) ■ Enable future grid modernization investments 5 July 2019


 
Financial and Business Updates (Continued) Ohio Updates (cont.) ■ On July 23, House Bill 6 was approved by the Ohio legislature – We believe this bill is good for customers – Contributes to Ohio’s economic success and the security and resiliency of the regional electric grid, while mitigating the potential impact of uncertain electric markets on our customers’ electric bills – Includes provisions that allow electric utilities to implement a decoupling mechanism (2018 baseline) – We are reviewing the potential impacts to our customers and the companies – Could seek approval for this mechanism later in the year ■ On June 19, Ohio Supreme Court issued a 4-3 decision calling for the removal of Rider DMR from current rates – On July 1, our Ohio utilities filed a Motion for Reconsideration – Proactively filed with the PUCO to make the DMR charges billed during the reconsideration period – which began July 1 – subject to refund if the Court ultimately orders that the rider must be removed from our rate plan 6 July 2019


 
Guidance Updates Earnings Guidance ■ Updating 2019 GAAP earnings forecast to $1.265B - $1.425B, or $2.34 - $2.64 per share based on 540 million shares outstanding ■ Affirming 2019 Operating (non-GAAP) earnings guidance of $2.45 - $2.75 per fully diluted share* – Excluding DMR benefit of ~$0.12 per share in 2H 2019, we would expect results in the lower half of the range ■ Introducing 3Q 2019 GAAP and Operating (Non-GAAP) earnings guidance of $365M - $430M, or $0.68 - $0.80 per share based on 540 million shares outstanding* – Includes DMR benefit of ~$0.06 per share ■ Affirming Long-Term Operating (non-GAAP) EPS CAGR* projection of 6% - 8% from 2018 through 2021 * Refer to slide 2 for information on Non-GAAP Financial Matters and slide 21 for 2019F reconciliation between GAAP and Operating (non-GAAP) earnings. 7 July 2019


 
(GAAP) (Non-GAAP) 2Q 2019 Earnings Results 2Q19 vs. 2Q18 EPS Variance Basic EPS Operating EPS* Regulated Distribution ($0.31) ($0.06) Quarter-over-Quarter (Basic EPS / Operating EPS*) Regulated Transmission --- $0.03 Corporate / Other $0.61 $0.02 2Q Results FE Consolidated $0.30 ($0.01) ■ Continue to present all operating results and projections on a fully diluted basis – Additional information is available in the Earnings Supplement of the 2Q 2019 Strategic and Financial Highlights ■ Reported 2Q 2019 GAAP earnings of $0.58 per basic and diluted share – Results include the impact from the exit of competitive generation and the impact of full dilution from the equity issuance in 2018 ■ Reported 2Q 2019 Operating (non-GAAP) earnings* of $0.61 per share ■ Regulated Distribution ($0.31) / ($0.06) – Results driven primarily by lower customer load from mild spring weather and the absence of last year’s benefit from a court ruling on costs incurred for renewable energy credits in Ohio – Special items – include the impact from the exit of competitive generation and the impact of full dilution ■ Regulated Transmission: – / +$0.03 – Favorable results driven primarily by higher rate base from continued investments in Energizing the Future ■ Corporate / Other: +$0.61 / +$0.02 – Favorable results due to lower expenses, partially offset by higher interest expense – Special items – include the impact from the exit of competitive generation and the impact 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 second quarter of 2019 and 2018 * Refer to slide 11 for reconciliation between GAAP and Operating (non-GAAP) earnings 8 July 2019


 
Rating Agency Updates Rating Agencies ■ On July 23, Moody’s upgraded the credit ratings of several of our utilities Cleveland Electric Ohio Edison Toledo Edison Pennsylvania Power Illuminating Date 7/23/2019 Action Upgrade Upgrade Upgrade Upgrade Issuer Rating Change To Baa2 from Baa3 To A3 from Baa1 To Baa1 from Baa3 To A3 from Baa1 Outlook Stable Positive Stable Positive – Continued upgrades demonstrate the underlying strength and positive momentum of our regulated platform ■ Recently, S&P revised its group rating methodology and as a result, we expect to see positive actions for several of our operating companies We are pleased with our progress through the first half of the year and remain focused on meeting our commitments to the investment community and executing on our plans 9 July 2019


 
Earnings Supplement to the Financial Community TABLE OF CONTENTS (Slide) 11. 2Q Earnings Summary and Reconciliation 12. YTD Earnings Summary and Reconciliation 13. 2Q Earnings Drivers by Segment 14. Special Items Descriptions 15. 2Q 2019 Earnings Results 16. 2Q 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 July 2019


 
Quarterly Summary   2Q 2019 2Q 2018 Change GAAP Earnings (Loss) Per Basic Share $0.58 $0.28 $0.30 Special Items $0.03 $0.34 $(0.31) Operating (Non-GAAP) Earnings Per Share $0.61 $0.62 $(0.01) Quarterly Reconciliation FirstEnergy EPS Variance Analysis Regulated Regulated Corporate / Corp. (in millions, except per share amounts) Distribution Transmission Other Consolidated 2Q 2018 Net Income (Loss) attributable to Common Stockholders (GAAP) $377 $104 $(347) $134 2Q 2018 Basic Earnings (Loss) Per Share (avg. shares outstanding 477M) $0.79 $0.22 $(0.73) $0.28 Special Items - 2018 Impact of full dilution (0.09) (0.03) 0.39 0.27 Regulatory charges (0.17) — — (0.17) Tax reform 0.02 — — 0.02 Deb redemption costs — — 0.21 0.21 Exit of competitive generation — — 0.01 0.01 Total Special Items - 2Q 2018 (0.24) (0.03) 0.61 0.34 2Q 2018 Operating Earnings (Loss) Per Share - Non-GAAP (538M fully diluted shares) $0.55 $0.19 $(0.12) $0.62 Distribution Deliveries (0.08) — — (0.08) Transmission Margin — 0.02 — 0.02 Net Operating and Miscellaneous Expenses 0.03 — 0.03 0.06 Absence of Ohio AER Ruling (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 2Q 2019 Operating Earnings (Loss) Per Share - Non-GAAP (539M fully diluted shares) $0.49 $0.22 $(0.10) $0.61 Special Items - 2019 Impact of full dilution 0.01 — (0.01) — Exit of competitive generation (0.02) — (0.01) (0.03) Total Special Items - 2Q 2019 (0.01) — (0.02) (0.03) 2Q 2019 Basic Earnings (Loss) Per Share (avg. shares outstanding 532M) $0.48 $0.22 $(0.12) $0.58 2Q 2019 Net Income (Loss) attributable to Common Stockholders (GAAP) $258 $116 $(66) $308 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 Note: Refer to slide 2 for information divided by the number of shares outstanding for the period assuming full impact of dilution from the $2.5 billion equity issuance in January on Non-GAAP Financial Matters. 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 second quarter of 2019 and 2018. 11 July 2019


 
Year-to-Date Summary   2019 2018 Change GAAP Earnings (Loss) Per Basic Share $1.17 $2.86 $(1.69) Special Items $0.11 $(1.57) $1.68 Operating (Non-GAAP) Earnings Per Share $1.28 $1.29 $(0.01) 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) $699 $203 $462 $1,364 2018 Basic Earnings Per Share (avg. shares outstanding 477M) $1.47 $0.43 $0.96 $2.86 Special Items - 2018 Impact of full dilution (0.17) (0.05) 0.47 0.25 Regulatory charges (0.16) — — (0.16) Tax reform 0.02 — — 0.02 Deb redemption costs — — 0.21 0.21 Exit of competitive generation — — (1.89) (1.89) Total Special Items - 2018 (0.31) (0.05) (1.21) (1.57) 2018 Operating Earnings (Loss) Per Share - Non-GAAP (538M fully diluted shares) $1.16 $0.38 $(0.25) $1.29 Distribution Deliveries (0.07) — — (0.07) Transmission Margin — 0.04 — 0.04 Net Operating and Miscellaneous Expenses 0.03 (0.01) 0.03 0.05 Absence of Ohio AER Ruling (0.03) — — (0.03) Depreciation (0.03) — — (0.03) Net Financing Costs 0.02 (0.01) (0.02) (0.01) Absence of Pleasants Commodity Margin — — (0.03) (0.03) Effective Tax Rate 0.02 0.01 0.03 0.06 Other — — 0.01 0.01 2019 Operating Earnings (Loss) Per Share - Non-GAAP (539M fully diluted shares) $1.10 $0.41 $(0.23) $1.28 Special Items - 2019 Impact of full dilution 0.01 0.01 (0.02) — Regulatory charges 0.01 — — 0.01 Exit of competitive generation (0.02) — (0.10) (0.12) Total Special Items - 2019 — 0.01 (0.12) (0.11) 2019 Basic Earnings (Loss) Per Share (avg. shares outstanding 531M) $1.10 $0.42 $(0.35) $1.17 2019 Net Income (Loss) attributable to Common Note: Refer to slide 2 for information Stockholders (GAAP) $587 $220 $(184) $623 on Non-GAAP Financial Matters. 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 years 2019 and 2018. 12 July 2019


 
Earnings Drivers: 2Q 2019 vs. 2Q 2018 Regulated Distribution (RD) ▪ Distribution Deliveries: Total distribution deliveries decreased earnings $0.08 per share due to lower customer load, primarily driven by weather. Q-o-Q Weather-Adjusted Distribution Deliveries Q-o-Q Actual Distribution Deliveries (1.7)% (1.7)% (2.4)% (2.4)% (5.6)% (5.5)% (3.2)% (9.7)% Residential Commercial Industrial Total Residential Commercial Industrial Total ▪ Net Operating and Miscellaneous Expenses: Lower O&M increased earnings $0.03 per share. ▪ Absence of Ohio AER Ruling: The absence of the benefit from the Supreme Court of Ohio's ruling on the recoverability of renewable energy credits recognized in 2Q 2018 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, primarily reflecting lower interest expense as a result of various debt maturities and refinancings at lower rates. ▪ Effective Tax Rate: Lower segment ETR increased earnings $0.02 per share. ▪ Special Items: In the second quarter of 2019 and 2018, special items totaled $0.01 per share and ($0.24) 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). ▪ Effective Tax Rate: Lower segment ETR increased earnings $0.01 per share. ▪ Special Items: In the second quarter of 2019 and 2018, special items were $0.00 per share and ($0.03) per share, respectively. Corporate / Other (Corp) ▪ Net Operating and Miscellaneous Expenses: Lower expenses increased results $0.03 per share. ▪ Net Financing Costs: Higher interest expense on long-term debt decreased results $0.01 per share. ▪ Special Items: In the second quarter of 2019 and 2018, special items totaled $0.02 per share and $0.61 per share, respectively. 13 July 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. ▪ 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 $9 million and $43 million in the first six months of 2019 and 2018, respectively, and non-cash deemed dividends for the amortization of the beneficial conversion feature of $261 million million in the first six 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 July 2019


 
2nd 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 $ 2,131 $ 367 $ (32) $ 2,466 $ — $ — $ — $ — $ 2,131 $ 367 $ (32) $ 2,466 (2) Other 61 5 (16) 50 — —— — 61 5 (16) 50 (3) Total Revenues 2,192 372 (48) 2,516 — —— — 2,192 372 (48) 2,516 (4) Fuel 129 — — 129 — —— — 129 — — 129 (5) Purchased power 606 — 5 611 — —— — 606 — 5 611 (6) Other operating expenses 630 64 (88) 606 (9) (a) — 27 (a) 18 621 64 (61) 624 (7) Provision for depreciation 220 71 18 309 — —— — 220 71 18 309 (8) Amortization of regulatory assets, net 34 3 — 37 — —— — 34 3 — 37 (9) General taxes 177 52 10 239 — —— — 177 52 10 239 (10) Total Operating Expenses 1,796 190 (55) 1,931 (9) — 27 18 1,787 190 (28) 1,949 (11) Operating Income (Loss) 396 182 7 585 9 — (27) (18) 405 182 (20) 567 (12) Miscellaneous income, net 46 4 30 80 2 (a) — (2) (a) — 48 4 28 80 (13) Interest expense (124) (48) (87) (259) — —— — (124) (48) (87) (259) (14) Capitalized financing costs 7 8 1 16 — —— — 7 8 1 16 (15) Total Other Expense (71) (36) (56) (163) 2 — (2) — (69) (36) (58) (163) (16) Income (Loss) Before Income Taxes 325 146 (49) 422 11 — (29) (18) 336 146 (78) 404 (17) Income taxes (benefits) 67 30 (16) 81 3 (a) — (6) (a) (3) 70 30 (22) 78 (18) Income (Loss) From Continuing Operations 258 116 (33) 341 8 — (23) (15) 266 116 (56) 326 (19) Discontinued operations, net of tax — — (29) (29) — — 29 (a) 29 — — — — (20) Net Income (Loss) 258 116 (62) 312 8 — 6 14 266 116 (56) 326 (21) Income Allocated to Preferred Stockholders — — 4 4 — — (4) (b) (4) ———— (22) Net Income (Loss) Attributable to Common $ 258 $ 116 $ (66) $ 308 $ 8 $ — $ 10 $ 18 $ 266 $ 116 $ (56) $ 326 (23) Average Shares Outstanding 532 539 539 (24) Earnings (Loss) per Share $ 0.48 $ 0.22 $ (0.12) $ 0.58 $ 0.01 $ — $ 0.02 $ 0.03 $ 0.49 $ 0.22 $ (0.10) $ 0.61 Special Items (after-tax impact): (a) Exit of competitive generation 8 — 6 14 (b) Impact of full dilution — — 4 4 Impact to Earnings $ 8 $ — $ 10 $ 18 15 July 2019


 
2nd 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 $ 2,291 $ 336 $ (56) $ 2,571 $ — $ — $ — $ — $ 2,291 $ 336 $ (56) $ 2,571 (2) Other 61 5 (12) 54 — —— — 61 5 (12) 54 (3) Total Revenues 2,352 341 (68) 2,625 — —— — 2,352 341 (68) 2,625 (4) Fuel 128 — — 128 — —— — 128 — — 128 (5) Purchased power 699 — (2) 697 — —— — 699 — (2) 697 (6) Other operating expenses 666 60 (42) 684 70 (a) — (45) (b) 25 736 60 (87) 709 (7) Provision for depreciation 200 62 21 283 — —— — 200 62 21 283 (8) Deferral of regulatory assets, net (107) — — (107) 52 (a) —— 52 (55) — — (55) (9) General taxes 184 48 8 240 — —— — 184 48 8 240 (10) Total Operating Expenses 1,770 170 (15) 1,925 122 — (45) 77 1,892 170 (60) 2,002 (11) Operating Income (Loss) 582 171 (53) 700 (122) — 45 (77) 460 171 (8) 623 (12) Miscellaneous income, net 56 3 (11) 48 — — (1) (b) (1) 56 3 (12) 47 (13) Interest expense (129) (42) (184) (355) — — 103 (b) 103 (129) (42) (81) (252) (14) Capitalized financing costs 6 10 — 16 — —— — 6 10 — 16 (15) Total Other Expense (67) (29) (195) (291) — — 102 102 (67) (29) (93) (189) (16) Income (Loss) Before Income Taxes (Benefits) 515 142 (248) 409 (122) — 147 25 393 142 (101) 434 (17) Income taxes (benefits) 138 38 (75) 101 (40) (a) (c) — 21 (b) (19) 98 38 (54) 82 (18) Income (Loss) From Continuing Operations 377 104 (173) 308 (82) — 126 44 295 104 (47) 352 (19) Discontinued operations, net of tax — — (9) (9) — — (9) (b) (9) — — (18) (18) (20) Net Income (Loss) 377 104 (182) 299 (82) — 117 35 295 104 (65) 334 (21) Income Allocated to Preferred Stockholders — — 165 165 — — (165) (d) (165) ———— (22) Net Income (Loss) Attributable to Common $ 377 $ 104 $ (347) $ 134 $ (82) $ — $ 282 $ 200 $ 295 $ 104 $ (65) $ 334 (23) Average Shares Outstanding 477 538 538 (24) Earnings (Loss) per Share $ 0.79 $ 0.22 $ (0.73) $ 0.28 $ (0.24) $ (0.03) $ 0.61 $ 0.34 $ 0.55 $ 0.19 $ (0.12) $ 0.62 Special Items (after-tax impact): (a) Regulatory charges $ (94) $ — $ — $ (94) (b) Exit of competitive generation — — 117 117 (c) Tax reform 12 —— 12 (d) Impact of full dilution — — 165 165 Impact to Earnings $ (82) $ — $ 282 $ 200 16 July 2019


 
2nd Quarter 2019 vs 2nd 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 $ (160) $ 31 $ 24 $ (105) $ — $ — $ — $ — $ (160) $ 31 $ 24 $ (105) (2) Other — — (4) (4) — — — — — — (4) (4) (3) Total Revenues (160) 31 20 (109) — — — — (160) 31 20 (109) (4) Fuel 1 — — 1 — — — — 1 — — 1 (5) Purchased power (93) — 7 (86) — — — — (93) — 7 (86) (6) Other operating expenses (36) 4 (46) (78) (79) — 72 (7) (115) 4 26 (85) (7) Provision for depreciation 20 9 (3) 26 — — — — 20 9 (3) 26 (8) Amortization of regulatory assets, net 141 3 — 144 (52) — — (52) 89 3 — 92 (9) General taxes (7) 4 2 (1) — — — — (7) 4 2 (1) (10) Total Operating Expenses 26 20 (40) 6 (131) — 72 (59) (105) 20 32 (53) (11) Operating Income (Loss) (186) 11 60 (115) 131 — (72) 59 (55) 11 (12) (56) (12) Miscellaneous income, net (10) 1 41 32 2 — (1) 1 (8) 1 40 33 (13) Interest expense 5 (6) 97 96 — — (103) (103) 5 (6) (6) (7) (14) Capitalized financing costs 1 (2) 1 — — — — — 1 (2) 1 — (15) Total Other Expense (4) (7) 139 128 2 — (104) (102) (2) (7) 35 26 (16) Income (Loss) Before Income Taxes (190) 4 199 13 133 — (176) (43) (57) 4 23 (30) (17) Income taxes (benefits) (71) (8) 59 (20) 43 — (27) 16 (28) (8) 32 (4) (18) Income (Loss) From Continuing Operations (119) 12 140 33 90 — (149) (59) (29) 12 (9) (26) (19) Discontinued operations, net of tax — — (20) (20) — — 38 38 — — 18 18 (20) Net Income (Loss) (119) 12 120 13 90 — (111) (21) (29) 12 9 (8) (21) Income Allocated to Preferred Stockholders — — (151) (151) — — 151 151 — — — — (22) Net Income (Loss) Attributable to Common $ (119) $ 12 $ 271 $ 164 $ 90 $ — $ (262) $ (172) $ (29) $ 12 $ 9 $ (8) (23) Average Shares Outstanding 55 1 1 (24) Earnings (Loss) per Share $ (0.31) $ — $ 0.61 $ 0.30 $ 0.25 $ 0.03 $ (0.59) $ (0.31) $ (0.06) $ 0.03 $ 0.02 $ (0.01) 17 July 2019


 
YTD June 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 $ 4,643 $ 719 $ (63) $ 5,299 $ — $ — $ — $ — $ 4,643 $ 719 $ (63) $ 5,299 (2) Other 122 9 (31) 100 — —— — 122 9 (31) 100 (3) Total Revenues 4,765 728 (94) 5,399 — —— — 4,765 728 (94) 5,399 (4) Fuel 260 — — 260 — —— — 260 — — 260 (5) Purchased power 1,383 — 9 1,392 — —— — 1,383 — 9 1,392 (6) Other operating expenses 1,401 130 (146) 1,385 (15) (a) (b) — 23 (b) 8 1,386 130 (123) 1,393 (7) Provision for depreciation 429 140 37 606 — —— — 429 140 37 606 (8) Amortization of regulatory assets, net 37 5 — 42 8 (a) —— 8 45 5 — 50 (9) General taxes 375 103 22 500 — — (2) (b) (2) 375 103 20 498 (10) Total Operating Expenses 3,885 378 (78) 4,185 (7) — 21 14 3,878 378 (57) 4,199 (11) Operating Income (Loss) 880 350 (16) 1,214 7 — (21) (14) 887 350 (37) 1,200 (12) Miscellaneous income, net 92 8 34 134 2 (b) — 2 (b) 4 94 8 36 138 (13) Interest expense (246) (93) (173) (512) — —— — (246) (93) (173) (512) (14) Capitalized financing costs 17 16 1 34 — —— — 17 16 1 34 (15) Total Other Expense (137) (69) (138) (344) 2 — 2 4 (135) (69) (136) (340) (16) Income (Loss) Before Income Taxes 743 281 (154) 870 9 — (19) (10) 752 281 (173) 860 (17) Income taxes (benefits) 156 61 (43) 174 3 (a) (b) — (4) (b) (1) 159 61 (47) 173 (18) Income (Loss) From Continuing Operations 587 220 (111) 696 6 — (15) (9) 593 220 (126) 687 (19) Discontinued operations, net of tax — — (64) (64) — — 64 (b) 64 — — — — (20) Net Income (Loss) 587 220 (175) 632 6 — 49 55 593 220 (126) 687 (21) Income Allocated to Preferred Stockholders — — 9 9 — — (9) (c) (9) ———— (22) Net Income (Loss) Attributable to Common $ 587 $ 220 $ (184) $ 623 $ 6 $ — $ 58 $ 64 $ 593 $ 220 $ (126) $ 687 (23) Average Shares Outstanding 531 539 539 (24) Earnings (Loss) per Share $ 1.10 $ 0.42 $ (0.35) $ 1.17 $ — $ (0.01) $ 0.12 $ 0.11 $ 1.10 $ 0.41 $ (0.23) $ 1.28 Special Items (after-tax impact): (a) Regulatory charges $ (6) $ — $ — $ (6) (b) Exit of competitive generation 12 — 49 61 (c) Impact of full dilution — — 9 9 Impact to Earnings $ 6 $ — $ 58 $ 64 18 July 2019


 
YTD June 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 $ 4,799 $ 655 $ (77) $ 5,377 $ — $ — $ — $ — $ 4,799 $ 655 $ (77) $ 5,377 (2) Other 129 9 (28) 110 — —— — 129 9 (28) 110 (3) Total Revenues 4,928 664 (105) 5,487 — —— — 4,928 664 (105) 5,487 (4) Fuel 267 — — 267 — —— — 267 — — 267 (5) Purchased power 1,518 — (1) 1,517 — —— — 1,518 — (1) 1,517 (6) Other operating expenses 1,564 114 (54) 1,624 63 (a) — (87) (b) (24) 1,627 114 (141) 1,600 (7) Provision for depreciation 396 123 41 560 — —— — 396 123 41 560 (8) Amortization (deferral) of regulatory assets, net (259) 4 — (255) 52 (a) —— 52 (207) 4 — (203) (9) General taxes 379 95 20 494 — —— — 379 95 20 494 (10) Total Operating Expenses 3,865 336 6 4,207 115 — (87) 28 3,980 336 (81) 4,235 (11) Operating Income (Loss) 1,063 328 (111) 1,280 (115) — 87 (28) 948 328 (24) 1,252 (12) Miscellaneous income, net 112 7 (4) 115 — — (1) (b) (1) 112 7 (5) 114 (13) Interest expense (257) (81) (265) (603) — — 106 (b) 106 (257) (81) (159) (497) (14) Capitalized financing costs 12 19 — 31 — —— — 12 19 — 31 (15) Total Other Expense (133) (55) (269) (457) — — 105 105 (133) (55) (164) (352) (16) Income (Loss) Before Income Taxes (Benefits) 930 273 (380) 823 (115) — 192 77 815 273 (188) 900 (17) Income taxes (benefits) 231 70 33 334 (38) (a) (c) — (102) (b) (140) 193 70 (69) 194 (18) Income (Loss) From Continuing Operations 699 203 (413) 489 (77) — 294 217 622 203 (119) 706 (19) Discontinued operations, net of tax — — 1,179 1,179 — — (1,192) (b) (1,192) — — (13) (13) (20) Net Income (Loss) 699 203 766 1,668 (77) — (898) (975) 622 203 (132) 693 (21) Income Allocated to Preferred Stockholders — — 304 304 — — (304) (d) (304) ———— (22) Net Income (Loss) Attributable to Common $ 699 $ 203 $ 462 $ 1,364 $ (77) $ — $ (594) $ (671) $ 622 $ 203 $ (132) $ 693 (23) Average Shares Outstanding 477 538 538 (24) Earnings (Loss) per Share $ 1.47 $ 0.43 $ 0.96 $ 2.86 $ (0.31) $ (0.05) $ (1.21) $ (1.57) $ 1.16 $ 0.38 $ (0.25) $ 1.29 Special Items (after-tax impact): (a) Regulatory charges $ (89) $ — $ — $ (89) (b) Exit of competitive generation — — (898) (898) (c) Tax reform 12 —— 12 (d) Impact of full dilution — — 304 304 Impact to Earnings $ (77) $ — $ (594) $ (671) 19 July 2019


 
YTD June 2019 vs YTD June 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 $ (156) $ 64 $ 14 $ (78) $ — $ — $ — $ — $ (156) $ 64 $ 14 $ (78) (2) Other (7) — (3) (10) — — — — (7) — (3) (10) (3) Total Revenues (163) 64 11 (88) — — — — (163) 64 11 (88) (4) Fuel (7) — — (7) — — — — (7) — — (7) (5) Purchased power (135) — 10 (125) — — — — (135) — 10 (125) (6) Other operating expenses (163) 16 (92) (239) (78) — 110 32 (241) 16 18 (207) (7) Provision for depreciation 33 17 (4) 46 — — — — 33 17 (4) 46 (8) Amortization of regulatory assets, net 296 1 — 297 (44) — — (44) 252 1 — 253 (9) General taxes (4) 8 2 6 — — (2) (2) (4) 8 — 4 (10) Total Operating Expenses 20 42 (84) (22) (122) — 108 (14) (102) 42 24 (36) (11) Operating Income (Loss) (183) 22 95 (66) 122 — (108) 14 (61) 22 (13) (52) (12) Miscellaneous income, net (20) 1 38 19 2 — 3 5 (18) 1 41 24 (13) Interest expense 11 (12) 92 91 — — (106) (106) 11 (12) (14) (15) (14) Capitalized financing costs 5 (3) 1 3 — — — — 5 (3) 1 3 (15) Total Other Expense (4) (14) 131 113 2 — (103) (101) (2) (14) 28 12 (16) Income (Loss) Before Income Taxes (187) 8 226 47 124 — (211) (87) (63) 8 15 (40) (17) Income taxes (benefits) (75) (9) (76) (160) 41 — 98 139 (34) (9) 22 (21) (18) Income (Loss) From Continuing Operations (112) 17 302 207 83 — (309) (226) (29) 17 (7) (19) (19) Discontinued operations, net of tax — — (1,243) (1,243) — — 1,256 1,256 — — 13 13 (20) Net Income (Loss) (112) 17 (941) (1,036) 83 — 947 1,030 (29) 17 6 (6) (21) Income Allocated to Preferred Stockholders — — (304) (304) — — 304 304 — — — — (22) Net Income (Loss) Attributable to Common $ (112) $ 17 $ (637) $ (732) $ 83 $ — $ 643 $ 726 $ (29) $ 17 $ 6 $ (6) (23) Average Shares Outstanding 54 1 1 (24) Earnings (Loss) per Share $ (0.37) $ (0.01) $ (1.31) $ (1.69) $ 0.31 $ 0.04 $ 1.33 $ 1.68 $ (0.06) $ 0.03 $ 0.02 $ (0.01) 20 July 2019


 
2019F GAAP to Operating (Non-GAAP) Earnings(1) Reconciliation 2019 Forecast 3Q19 Forecast (In $M, except per share amounts) RD RT Corp FE FE 2019F Net Income (Loss) attributable to Common Stockholders (GAAP) $1,170 - $1,275 $435 - $480 ($340) - ($330) $1,265 - $1,425 $365 - $430 2019F Earnings (Loss) Per Share $2.16 - $2.36 $0.81 - $0.89 ($0.63) - ($0.61) $2.34 - $2.64 $0.68 - $0.80 Excluding Special Items: Impact of full dilution (0.02) — 0.02 — — Regulatory charges (0.01) — — (0.01) — Exit of competitive generation 0.03 — 0.09 0.12 — Total Special Items — — 0.11 0.11 — 2019F Operating Earnings (Loss) Per Share - Non-GAAP (540M fully diluted shares) $2.16 - $2.36 $0.81 - $0.89 ($0.52) - ($0.50) $2.45 - $2.75 $0.68 - $0.80 Note: Current forecast assumes full year of Ohio Rider DMR (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 and 2019F Operating Earnings (Loss) Per Share - Non-GAAP are based on 540M shares outstanding. 21 July 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: 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 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 Cuts and Jobs 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; 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, and thereby on FirstEnergy’s preferred 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 July 2019


 
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