FirstEnergy Corp. (FE) Q3 2025 Earnings Call Transcript
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Overview
The earnings call summary and Q&A highlight strong financial metrics, optimistic guidance, and substantial capital investments, particularly in transmission and data centers. The reaffirmed earnings guidance and shareholder return plan further boost sentiment. While some management responses were vague, the overall outlook remains positive, driven by growth prospects and strategic investments.
Key Financial Performance
Third Quarter GAAP Earnings $0.76 per share compared to $0.73 in the third quarter last year. Reasons for change: Strong execution of customer-focused investment plan, Pennsylvania base rates effective January, and strong financial discipline.
Third Quarter Core Earnings $0.83 per share compared to $0.76 in the third quarter of 2024. Reasons for change: Strong execution of customer-focused investment plan, Pennsylvania base rates effective January, and strong financial discipline.
Year-to-Date Core Earnings $2.02 per share compared to $1.76 in 2024, an increase of 15%. Reasons for change: Execution of regulated strategies, stronger customer demand, and transmission rate base growth.
Capital Investments (First 9 Months of 2025) $4 billion, a 30% increase compared to last year. Reasons for change: Increased focus on system reliability and resiliency for customers.
2025 Capital Investment Program Increased by 10% to $5.5 billion. Reasons for change: Strong year-to-date results and focus on system reliability and resiliency.
Transmission Rate Base Growth 11% total growth, including 9% for stand-alone transmission rate base and 16% in transmission rate base within integrated business. Reasons for change: Strong capital investment program.
Distribution Business Earnings (Year-to-Date) $0.20 improvement due to $225 million annual rate adjustment in Pennsylvania, higher customer demand, and lower operating expenses.
Integrated Segment Earnings (Year-to-Date) Improved $0.05 per share or 7%. Reasons for change: Formula rate investments in transmission system and higher customer demand, partially offset by higher depreciation.
Stand-Alone Transmission Business Earnings Increased approximately 7%. Reasons for change: Strong capital investment program delivering owned rate base growth of 9%, partially offset by new debt and minority interest sale.
Sales (First 9 Months of 2025) 1% higher than last year and flat on a weather-adjusted basis. Reasons for change: Ramp-up schedules of data center customers.
Transmission Capital Expenditures (First 9 Months of 2025) $1.9 billion, a 35% increase compared to 2024. Reasons for change: Focus on reliability and storm restoration investments.
Return on Equity (Trailing 12-Month Basis) 10.1%, a 70 basis point improvement from 2024's 9.4%. Reasons for change: Strong financial performance and execution of strategies.
Cash from Operations (First 9 Months of 2025) $2.6 billion, an increase of more than $700 million compared to 2024. Reasons for change: Support for $4 billion capital investments.
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Operating Highlights
Integrated Resource Plan (IRP) in West Virginia: Proposed adding 70 MW of utility-scale solar in 2028 and 1.2 GW of dispatchable gas combined cycle generation by 2031. This aligns with West Virginia's 50 by 50 initiative.
Data Center Load Growth: FirstEnergy's service territory is experiencing high demand from data centers, with contracted customer demand increasing by over 30% since February 2025. System peak load is expected to grow nearly 50% by 2035.
Capital Investments: Increased 2025 capital investment program by 10% to $5.5 billion, with $4 billion already invested in the first 9 months of 2025, a 30% increase from 2024.
Transmission Investments: Significant investments planned to replace aging infrastructure and improve system performance. Transmission rate base growth expected to compound up to 18% annually through 2030.
Regulated Generation Expansion: Plans to add 1.2 GW of natural gas generation in West Virginia by 2031, representing a 35% increase in the regulated generation portfolio. Estimated project cost is $2.5 billion.
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Risk or Challenges
Regulatory Risks: The company faces potential regulatory hurdles, including the need for approval of new gas generation projects in West Virginia and the multiyear rate plan in Ohio. Delays or unfavorable rulings could impact planned investments and financial performance.
Economic and Affordability Concerns: Electric bills have increased by 11% in deregulated states, driven by generation costs. This could lead to customer dissatisfaction and challenges in maintaining affordability, which is a key priority for the company.
Supply Chain and Execution Risks: The company has significantly increased its capital investment plans, which may strain supply chains and execution capabilities. Any delays or cost overruns could impact financial performance and project timelines.
Aging Infrastructure: Significant investments are required to replace aging infrastructure and improve system reliability. Failure to address these issues could lead to operational disruptions and increased maintenance costs.
Demand Growth Challenges: The projected 50% increase in system peak load by 2035 due to data center demand requires substantial transmission and generation investments. Failure to meet this demand could impact reliability and customer satisfaction.
Debt and Financing Risks: The company has undertaken significant debt financing to support its capital investments. Rising interest rates or unfavorable market conditions could increase financing costs and impact financial stability.
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Guidance & Outlook
2025 Capital Investment Program: Increased by 10% to $5.5 billion, with a focus on system reliability and resiliency.
2025 Earnings Guidance: Raised midpoint and narrowed range to $2.50 to $2.56 per share.
Core Earnings Growth Rate: Reaffirmed compounded annual growth rate of 6% to 8%.
2026-2030 Capital Plan: Expected to roll out a higher CapEx plan early next year.
Data Center Load Growth: System peak load expected to increase by 15 gigawatts (nearly 50%) by 2035.
West Virginia Integrated Resource Plan: Proposed adding 70 megawatts of solar in 2028 and 1.2 gigawatts of gas generation by 2031.
Transmission Investments: Expected to increase by 30% in the 2026-2030 capital plan, with a compound rate base growth of up to 18% per year through 2030.
Natural Gas Generation in West Virginia: 1.2 gigawatts of generation planned by 2031, with an estimated cost of $2.5 billion.
Customer Affordability: Bills are on average 19% below in-state peers, with efforts to maintain affordability despite increased investments.
Ohio Base Rate Case: Expecting an order in November 2025, with plans to file a multiyear rate plan thereafter.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you explain the recovery of capital in the West Virginia generation build and transfer versus self-build scenario and its impact on earnings from 2028 to 2031?
A:In the build-own transfer scenario, the recovery of capital is straightforward. For self-build, the company would file for CWIP during construction, expecting recovery of that and potentially an earnings component during construction. The significant earnings component will come after the asset is online.
Q:What is the rate case strategy for 2026, particularly in Maryland, West Virginia, and New Jersey?
A:The company plans to follow a cadence similar to previous filings, starting with Maryland, New Jersey, and West Virginia. It is important for utilities to earn close to their allowed returns, and timely recovery through base rate increases will be ensured as capital is deployed.
Q:How do increased CapEx opportunities from transmission and West Virginia generation impact the earnings growth outlook?
A:The increased CapEx opportunities firm up the ability to remain in the 6% to 8% earnings per share growth range over the planning period, providing confidence in achieving solid growth.
Q:What is the current status of the data center pipeline and its impact on transmission CapEx?
A:The company has approximately $1 billion of CapEx associated with transmission interconnection requests for contracted and active large load customers. This includes direct connection projects and network upgrades, with variations expected based on location and size.
Q:What is the confidence level in the 30% upside opportunity for transmission CapEx?
A:The company is confident in the 30% upside for the next 5-year plan, with 60% of spending on reliability enhancements and 40% on regulatory-required projects. The full CapEx plan will be released in early 2026.
Q:What is the status of contracted data center projects under ESAs?
A:ESAs are typically finalized late in the process before power starts flowing. However, the company ensures earlier contractual agreements for building facilities and credit support, providing confidence in the contracted category even without signed ESAs.
Q:What is the appetite for building new generation across PJM regions?
A:The company has a clear window for building in West Virginia due to supportive governance. Building in other states would be speculative at this point.
Q:What is the plan for filing in Ohio after the base rate case order?
A:The company expects the base rate case order in Q4 and plans to file immediately afterward due to ongoing investments and the absence of trackers and riders in the state. A multiyear rate plan is considered the best avenue for filing.
Q:What regions in PJM are seeing the majority of the 30% CapEx investment opportunity, and is there cost inflation?
A:The 30% CapEx increase is broad-based across all five states, driven by incremental work rather than inflation. Investments include reliability, regulatory requirements, new customer hookups, and open windows.
Q:What is the confidence level in the load forecast embedded in the planning?
A:The company has high confidence in the load forecast for the next 5 years, based on contracted projects. For longer-term forecasts, factors like land ownership, permits, and public announcements are considered to ensure customer commitment.
Q:What is the status of the West Virginia self-build project, including supply chain and pricing?
A:The project is estimated at $2.5 billion, with a decision pending on build-own-transfer versus self-build. Lead times for major equipment are 3-4 years, and pricing remains strong. The regulatory framework supports approvals and facility readiness by 2031.
Q:How is the company addressing affordability pressures in New Jersey?
A:The company is focused on keeping bills low by managing O&M spending and advocating against PJM capacity auctions that burden customers with costs for new generation that does not materialize. It is well understood that generation costs drive rate increases.
Q:What is the impact of transmission open window outcomes on the 18% rate base growth?
A:A modest amount from the PJM open window is included in the plan. Significant incremental awards would be added to the plan, but the company is confident in achieving the 6% to 8% earnings growth range regardless.
Q:Will the upcoming CapEx update reallocate spending across segments or increase the overall plan?
A:The update will not reallocate spending but will increase across jurisdictions. The management structure ensures tailored CapEx plans for each jurisdiction, with no limitations on the balance sheet or labor force.
Q:What are the trends and outlook for industrial load outside of data centers?
A:There is a slight rebound in fabricated metals and steel manufacturing. Industrial load is expected to increase meaningfully in 2024, driven by data centers, with mid-single-digit growth by Q2 and higher by Q4.
Q:What is the company's response to rising consumer energy costs and state-level policymaker concerns?
A:The company is engaging with regulators and legislators to address cost increases, advocating for changes to PJM capacity auctions, and exploring mechanisms to attract new capacity while ensuring customers receive value for their payments.
Q:Are large load tariffs being applied for in the company's operating states?
A:The company does not see the need for large load tariffs due to the flexibility of existing tariffs and contract structures, which protect customers and ensure developers bear incremental investment costs.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to questions about the specific impact of PJM open window outcomes on the growth rate and the exact allocation of CapEx increases across jurisdictions. Additionally, responses about the West Virginia self-build project and supply chain specifics were somewhat vague, lacking detailed commitments or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Chair today
Commission approval
Financial Vice
FirstEnergy customer
FirstEnergy demand
FirstEnergy result
IRP
Jon
President Investor
Slide
asset
bill state
capacity
center developer
change generation
customer investment
date
demand center
gas generation
gigawatts gas
increase generation
investment PJM
investment transmission
load gigawatts
midpoint
need West
peak load
plan increase
planning period
position
project
region
state peer
support
transmission rate
transmission system
upgrade
voltage
window process
FE Transcript
FirstEnergy Corp. (FE) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary and Q&A highlight strong financial metrics, optimistic guidance, and substantial capital investments, particularly in transmission and data centers. The reaffirmed earnings guidance and shareholder return plan further boost sentiment. While some management responses were vague, the overall outlook remains positive, driven by growth prospects and strategic investments.
FirstEnergy Corp. (FE) Q2 2025 Earnings Call Transcript
Positive7-31
The earnings call summary indicates strong financial performance with record revenue, increased dividends, and promising capital investments. Management's responses during the Q&A session were generally positive, showing confidence in handling regulatory issues and future growth. The guidance remains optimistic, with ongoing investments and strategic plans. Despite some uncertainties in regulatory timelines, the overall sentiment is positive, suggesting a likely stock price increase.
FirstEnergy Corp. (FE) Q1 2025 Earnings Call Transcript
Positive4-24
The earnings call reflects strong financial performance, with significant increases in EPS and dividends, and a positive outlook on shareholder returns. The Q&A reveals constructive settlement discussions and no major risks from industrial customers. While debt and investment risks exist, the company has a solid growth plan. The positive dividend increase and reaffirmed shareholder return proposition further support a positive sentiment, likely resulting in a 2%-8% stock price increase.
FirstEnergy Corp. (FE) Q4 2024 Earnings Conference Call Transcript
Positive2-27
The earnings call presents several positive factors: increased capital investments, dividend growth, and a strong ROE. Despite some uncertainties, the company maintains a solid growth outlook with a 6-8% CAGR and improved credit ratings. The Q&A reveals management's confidence in achieving the upper range of growth targets, and the recent regulatory settlement supports future revenue growth. Although some responses lacked clarity, the overall sentiment is positive, with optimistic guidance and strategic initiatives likely to boost the stock price.
FE Slides
FE Report
Frequently Asked Questions
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