FE 8-K
Firstenergy Corp (FE)
8-K
2021-02-16
For: 2021-02-16
View Original
Added on
April 10, 2026
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): February 16, 2021
| Commission | Registrant; State of Incorporation; | I.R.S. Employer | |||||||||||||||||||||
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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:
Securities registered pursuant to Section 12(b) of the Act:
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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 February 16, 2021, FirstEnergy Corp. (FirstEnergy or the Company) issued two public documents, which, among other things provide expected results for the year-ended December 31, 2020, and announce plans to introduce GAAP and Operating (non-GAAP) earnings guidance for the full-year 2021. FirstEnergy’s Press Release and Letter to the Investment Community, 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 reconciliations within the Press Release and Letter to the Investment Community 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 Letter to the Investment Community contain references to the non-GAAP financial measure Operating earnings (loss) per share. 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) per share 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 are not necessarily non-recurring. Management uses non-GAAP financial measures such as Operating earnings (loss) per share to evaluate the Company’s performance and manage its operations and frequently references this non-GAAP financial measure in its decision-making, using it to facilitate historical and ongoing performance comparisons. Management believes that the non-GAAP financial measure of Operating earnings (loss) per share provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measure is 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. This non-GAAP financial measure is intended to complement, and is not considered an alternative to, the most directly comparable GAAP financial measure. Also, the non-GAAP financial measure may not be comparable to similarly titled measures used by other entities.
Item 7.01 Regulation FD Disclosure.
On February 16, 2021, the Company issued a Press Release and Letter to the Investment Community announcing its Ohio utilities, the Ohio Edison Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company (the Ohio Companies), will not seek recovery of lost distribution revenue from residential and commercial customers authorized under their current Electric Security Plan (ESP) through May 31, 2024. A copy of the Press Release and Letter to the Investment Community are attached as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are in incorporated herein by reference.
The information set forth in and incorporated into this Item 7.01 of this Current Report on Form 8-K is being furnished pursuant to Item 7.01 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 filing of this Item 7.01 of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information herein that is required to be disclosed solely by reason of Regulation FD.
Item 8.01 Other Events.
You should carefully consider the risk factors discussed in "Item 1A. Risk Factors" in FirstEnergy’s Annual Report on Form 10-K for the year ended December 31, 2019, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, which could materially affect FirstEnergy’s business, financial condition or future results. The risk factor presented below updates, and should be read in conjunction with, the risk factors and information disclosed in FirstEnergy’s Annual Report on Form 10-K for the year ended December 31, 2019, and its Quarterly Report on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020.
We Have Received Requests for Information Related to Government Investigations. Related Potential Adverse Impacts on Federal or State Regulatory Matters Could Have a Material Adverse Effect on our Reputation, Business, Financial Condition, Results of Operations, Liquidity or Cash Flows
On July 21, 2020, we received subpoenas for records from the U.S. Attorney’s Office for the S.D. Ohio requesting the production of information concerning an investigation surrounding Ohio House Bill 6 (HB 6) involving the now former Ohio House Speaker Larry Householder and other individuals and entities allegedly affiliated with Mr. Householder. On January 26, 2021, staff of the Federal Energy Regulatory Commission’s (FERC) Division of Investigations issued a letter directing FirstEnergy to preserve and maintain all documents and information related to an ongoing audit being conducted by FERC’s Division of Audits and Accounting, including activities relating to lobbying and governmental affairs activities concerning HB 6. We are cooperating with the FERC in the ongoing audit and document preservation request.
We are subject to comprehensive regulation by various federal, state and local regulatory agencies that significantly influence our operating environment. As previously disclosed, among the matters considered with respect to the determination by the committee of independent members of the Board of Directors to terminate certain former members of senior management for violating certain FirstEnergy policies and its code of conduct related to a payment of approximately $4 million made in early 2019 in connection with the termination of a purported consulting agreement, as amended, which had been in place since 2013. The counterparty to such agreement was an entity associated with an individual who subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating the Ohio Companies, including with respect to distribution rates. FirstEnergy believes that payments under the consulting agreement may have been for purposes other than those represented within the consulting agreement. The matter is a subject of the ongoing internal investigation related to the government investigations.
Any appearance of non-compliance with anti-corruption laws, as well as any alleged failures to comply with anti-corruption laws, could have an adverse impact on our reputation or relationships with regulatory authorities, and result in a material inquiry or investigation by such federal, state and local regulatory agencies, and result in adverse rulings against us, which could have a material adverse impact on our financial condition, operating results and operations.
For example, there are several regulatory matters associated with the ongoing governmental investigations including, but not limited to, the following:
•On September 15, 2020, the Public Utilities Commission of Ohio (PUCO) opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort, directing the Ohio Companies to show cause, demonstrating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by ratepayers.
•On November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the termination of certain members of senior management.
•On December 30, 2020, the PUCO reinstated the requirement that the Ohio Companies file a distribution rate case by May 31, 2024, which requirement had previously been eliminated by the PUCO in November 2019.
•Also, on December 30, 2020, the PUCO reopened the Distribution Modernization Rider (DMR) audit docket, and directed the PUCO Staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from ratepayers through the DMR were only used for the purposes established in ESP.
•On January 26, 2021, staff of FERC's Division of Investigations issued a letter directing FirstEnergy to preserve and maintain all documents and information related to an ongoing audit being conducted by FERC's Division of Audits and Accounting, including activities related to lobbying and governmental affairs activities concerning HB 6.
•In connection with the partial settlement with the Ohio Attorney General and other parties, the Ohio Companies filed an application with the PUCO on February 1, 2021, to set the respective decoupling riders (Rider CSR) to zero and, in a related action, the Ohio Companies will not seek to recover lost distribution revenue from residential and commercial customers; as a result, FirstEnergy recognized a $108 million pre-tax charge ($84 million after-tax) in the fourth quarter of 2020, and $77 million (pre-tax) of which is associated with forgoing collection of lost distribution revenue.
We are unable to predict the adverse impacts on federal or state regulatory matters, including with respect to rates, and, therefore, any of these risks could impact us significantly beyond expectations. Moreover, we are unable to predict the potential for any additional regulatory actions, any of which could exacerbate these risks or expose us to adverse outcomes in pending or future rate cases, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.
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. Such 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 results of our ongoing internal investigation matters and evaluation of its controls framework and remediation of our material weakness in internal control over financial reporting; the risks and uncertainties associated with government investigations regarding Ohio House Bill 6 and related matters including potential adverse impacts on federal or state regulatory matters including, but not limited to, matters relating to rates; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, maintaining financial flexibility, overcoming current uncertainties and challenges associated with the ongoing governmental investigations, executing our transmission and distribution investment plans, controlling costs, improving our credit metrics, strengthening our balance sheet and growing earnings; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; the extent and duration of COVID-19 and the impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, volatile capital and credit markets, legislative and regulatory actions, the effectiveness of our pandemic and business continuity plans, the precautionary measures we are taking on behalf of our customers, contractors and employees, our customers’ ability to make their utility payment and the potential for supply-chain disruptions; the potential of non-compliance with debt covenants in our credit facilities due to matters associated with the government investigations regarding Ohio House Bill 6 and related matters; 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; 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; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in our SEC filings. Dividends declared from time to time on FirstEnergy Corp.’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.’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. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K 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 Corp.’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 current intention to update or revise, except as required by law, any forward-looking
statements contained herein or the information incorporated by reference as a result of new information, future events or otherwise.
SIGNATURES
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.
February 16, 2021
| FIRSTENERGY CORP. | |||||
| Registrant | |||||
| By: | /s/ Jason J. Lisowski | ||||
Jason J. Lisowski Vice President, Controller and Chief Accounting Officer | |||||
| Exhibit 99.1 | |||||||||||
| FirstEnergy Corp. | For Release: February 16, 2021 | ||||||||||
| 76 South Main Street | |||||||||||
| Akron, Ohio 44308 | |||||||||||
www.firstenergycorp.com | |||||||||||
| News Media Contact: | Investor Contact: | ||||||||||
| Jennifer Young | Irene Prezelj | ||||||||||
| (216) 337-8789 | (330) 384-3859 | ||||||||||
FirstEnergy Taking Decisive Actions to Move the Company Forward
Company will not seek to resume collection of lost distribution revenue authorized under current rate plan as part of proactive efforts to resolve regulatory uncertainty in Ohio
Builds on additional actions being taken by the Board and management
to address challenges and rebuild trust
Fourth quarter and full year 2020 earnings per share to reflect charge associated
with decision not to seek collection of lost distribution revenue
Akron, Ohio – FirstEnergy Corp. (NYSE: FE) today announced it is taking proactive steps to resolve a range of regulatory proceedings affecting its Ohio utilities by pursuing holistic and transparent discussions with key stakeholders. As a first step, the company will not seek recovery of lost distribution revenue from residential and commercial customers authorized under its current Electric Security Plan (ESP) through May 31, 2024.
FirstEnergy believes that pursuing an open and comprehensive dialogue with the Public Utilities Commission of Ohio (PUCO) and other key parties will benefit the company as it seeks to resolve a number of PUCO-led proceedings currently underway in a collaborative manner that balances the interests of all stakeholders. Today’s decision builds upon a partial settlement with the Ohio Attorney General to end the collection of decoupling revenues permitted by Ohio House Bill 6.
“We are taking a number of decisive actions to put our company on the right path forward,” said Steven E. Strah, president and acting chief executive officer. “Our commitment to engaging constructively with our Ohio regulators and the decision to forego lost distribution
revenue are important steps toward removing uncertainty about regulatory concerns in Ohio and positioning the company for long-term success.”
“The Board of Directors supports the prudent actions that the management team has taken to resolve pending regulatory matters in Ohio,” said Donald T. Misheff, non-executive chairman. “These actions are aligned with the significant steps that the Board is already taking, including a robust and deliberate internal investigation.”
Additional Actions to Move FirstEnergy Forward
The actions outlined above build on the steps the Board and management have taken and are continuing to take to address challenges and rebuild trust with stakeholders:
•The Board acted swiftly to form an independent committee, launch a robust and ongoing internal investigation, and remove five senior executives.
•Additionally, the Board named Steve Strah as Acting CEO, hired a Chief Legal Officer with extensive legal expertise and industry experience, established an Executive Director role, and expanded the Board Chair role to help navigate the challenges the company is facing.
•The company has initiated a search for a Chief Ethics and Compliance Officer, who will be instrumental in further driving a culture of compliance.
•With the Board’s oversight, the management team has made significant changes to its approach to governmental affairs engagement and is limiting participation in the political process. This also includes ensuring that the disclosures around the company’s political advocacy are more robust going forward so that it is clear what efforts the company appropriately supports.
•FirstEnergy has initiated FE Forward, a comprehensive project focused on improving business practices and policies; fostering trust, transparency and integrity; and enabling FirstEnergy to become a more nimble organization.
•The Independent Review Committee of the Board, with representation from independent counsel, is overseeing the ongoing internal investigation and monitoring the status of the various regulatory matters facing the company.
•The Board is analyzing and working through steps to improve the compliance policy and culture at FirstEnergy and established a Compliance Oversight Sub-Committee of the Audit Committee which includes representation from independent counsel and leading compliance advisors to support this work.
Financial Update
FirstEnergy expects to report 2020 GAAP earnings of $1.99 per basic and diluted share of common stock and operating (non-GAAP) earnings* of $2.39 per share. The company also expects to recognize a $0.15 per share charge in the fourth quarter of 2020 resulting from a settlement with the Ohio Attorney General and the cities of Cincinnati and Columbus regarding decoupling ($0.04 per share) and the decision to not seek collection of lost distribution revenue ($0.11 per share). Absent this charge, operating (non-GAAP) earnings in 2020 would have otherwise been expected to be $2.54 per share, a figure toward the top end of the company’s previously announced guidance range. Complete financial results for 2020, the financial impact of this decision and other important updates will be discussed on the company’s upcoming fourth quarter and full year earnings call, scheduled for Thursday, February 18, 2021, at 9 a.m.
*Non-GAAP financial measures
GAAP and operating (non-GAAP) earnings are based on 542 million shares outstanding. Operating earnings is a non-GAAP financial measure and excludes $0.40 per share in special items. Special items in 2020 consist of: $0.60 per share in mark-to-market adjustments – pension/OPEB actuarial assumptions and $0.01 per share in regulatory charges, partially offset by $0.21 per share in exit of generation credits. Management believes that the non-GAAP financial measure of Operating earnings (loss) per share provides a consistent and comparable measure of performance of its businesses on an ongoing basis. Management also believes that such a measure is 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). A non-GAAP financial measure is intended to complement, and is not considered as an alternative to, the most directly comparable GAAP financial measure. Also, the non-GAAP financial measure may not be comparable to similarly titled measures used by other entities.
FirstEnergy is dedicated to integrity, 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 approximately 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.
(021621)
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. Such 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 results of our ongoing internal investigation matters and evaluation of its controls framework and remediation of our material weakness in internal control over financial reporting; the risks and uncertainties associated with government investigations regarding Ohio House Bill 6 and related matters including potential adverse impacts on federal or state regulatory matters including, but not limited to, matters relating to rates; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, maintaining financial flexibility, overcoming current uncertainties and challenges associated with the ongoing governmental investigations, executing our transmission and distribution investment plans, controlling costs, improving our credit metrics, strengthening our balance sheet and growing earnings; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; the extent and duration of COVID-19 and the impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, volatile capital and credit markets, legislative and regulatory actions, the effectiveness of our pandemic and business continuity plans, the precautionary measures we are taking on behalf of our customers, contractors and employees, our customers’ ability to make their utility payment and the potential for supply-chain disruptions; the potential of non-compliance with debt covenants in our credit facilities due to matters associated with the government investigations regarding Ohio House Bill 6 and related matters; 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; 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; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in our SEC filings. Dividends declared from time to time on FirstEnergy Corp.’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.’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. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K 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 Corp.’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 current intention to update or revise, except as required by law, any forward-looking statements contained herein or the information incorporated by reference as a result of new information, future events or otherwise.
| Exhibit 99.2 | |||||||||||
 | Irene M. Prezelj | ||||||||||
| Vice President | |||||||||||
| Investor Relations | |||||||||||
| FirstEnergy Corp. | |||||||||||
| 76 S. Main Street | |||||||||||
| Akron, Ohio 44308 | |||||||||||
| Tel 330-384-3859 | |||||||||||
| February 16, 2021 | |||||||||||
TO THE INVESTMENT COMMUNITY:1
FirstEnergy (FE) today announced it is taking proactive steps to resolve a range of regulatory proceedings affecting Ohio Edison, The Illuminating Company and Toledo Edison (collectively, the Ohio companies) by pursuing comprehensive and transparent discussions with stakeholders.
As you know, on January 31, 2021, FE reached a partial settlement with the Ohio Attorney General (AG) and the cities of Columbus and Cincinnati regarding decoupling, which resulted in the Ohio Companies requesting Public Utilities Commission of Ohio (PUCO) approval to set the rates under Rider CSR to zero effective February 9, 2021. In addition, FE today announced its Ohio Companies will not seek to recover lost distribution revenue (LDR) from residential and commercial customers as currently authorized under the Companies’ existing Electric Security Plan (ESP).
This Letter provides additional background related to the decoupling provision included in Ohio House Bill 6 (HB6), decisions and actions the FE management team is taking with respect to current and future Ohio regulatory matters, and an updated financial outlook.
Ohio Decoupling
In July 2019, HB6 was signed into law and included a provision to allow electric distribution utilities in the state of Ohio the opportunity to file an application with the PUCO requesting decoupling.
The Ohio Companies filed, and were approved by the PUCO in January 2020, to move to a decoupling rate mechanism consistent with HB6 that included two components: (1) decoupling to 2018 base distribution revenue levels, and (2) 2018 LDR allowed under their existing ESP, approved in March 2016, related to the impact from energy efficiency programs. Absent HB6 decoupling legislation, the Ohio Companies would have continued to collect LDR during the term of the ESP (through May 31, 2024).
The Ohio Companies began recovering both components under Rider CSR in February 2020 and were to collect approximately $115 million in 2021.
1 Please see the Forward-looking Statements at the end of this Letter.
Moving FE Forward
While the agreement with the AG focused specifically on decoupling, the FE management team has made the decision that its Ohio Companies will not seek to return to the pre-HB6 rate construct of collecting LDR from residential and commercial customers as authorized under the ESP.
FE’s Ohio regulatory team is committed to pursuing an open dialogue in an appropriate manner with respect to numerous regulatory proceedings currently underway, including several audits, and multi-year SEET and ESP quadrennial reviews, among other matters. FE believes a holistic, transparent discussion with PUCO Staff, and all interested stakeholders in the regulatory process, is an important step toward removing uncertainty about regulatory concerns in Ohio and critical to re-establishing trust in FE and restoring its reputation.
Financial Update
As a result of the AG agreement and this decision, FE recognized a $0.15 per share charge in the fourth quarter of 2020, of which $0.11 per share was associated with forgoing collection of LDR.
FE is scheduled to release 2020 earnings results pre-market on Thursday, February 18, 2021 and expects to report GAAP earnings of $1.99 per share and operating (non-GAAP) earnings of $2.39 per share2.
While FE continues to have customer-focused investment opportunities across its transmission and distribution businesses of up to $3 billion annually, it will discontinue providing a long-term compound annual growth rate until there is further clarity in Ohio and with the ongoing Department of Justice (DOJ) and Securities and Exchange Commission (SEC) investigations. For now, FE is focused on 2021 and plans to introduce GAAP and operating (non-GAAP) earnings guidance of $2.40 to $2.60 per share3, which includes the impact of the decision not to seek recovery of LDR as discussed in this Letter. FE expects to continue to pay a quarterly dividend of $0.39 per share for 2021 ($1.56 per share annually), subject to Board of Directors approval, which will consider the risks and uncertainties of the DOJ and SEC investigations, among other matters.
We look forward to discussing these and other important updates on our upcoming earnings call, scheduled for Thursday, February 18, 2021, at 9:00 a.m. (EST).
Sincerely,
Irene M. Prezelj
Vice President
Investor Relations
2 GAAP and operating (non-GAAP) earnings are based on 542 million shares outstanding. Operating earnings is a non-GAAP financial measure and excludes $0.40 per share in special items. Special items in 2020 consist of: $0.60 per share in mark-to-market adjustments – pension/OPEB actuarial assumptions and $0.01 per share in regulatory charges, partially offset by $0.21 per share in exit of generation credits.
3 Based on 544 million shares outstanding
Forward-Looking Statements: This Letter includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 based on information currently available to management. Such 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 results of our ongoing internal investigation matters and evaluation of its controls framework and remediation of our material weakness in internal control over financial reporting; the risks and uncertainties associated with government investigations regarding Ohio House Bill 6 and related matters including potential adverse impacts on federal or state regulatory matters including, but not limited to, matters relating to rates; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity; the ability to accomplish or realize anticipated benefits from strategic and financial goals, including, but not limited to, maintaining financial flexibility, overcoming current uncertainties and challenges associated with the ongoing governmental investigations, executing our transmission and distribution investment plans, controlling costs, improving our credit metrics, strengthening our balance sheet and growing earnings; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; the extent and duration of COVID-19 and the impacts to our business, operations and financial condition resulting from the outbreak of COVID-19 including, but not limited to, disruption of businesses in our territories, volatile capital and credit markets, legislative and regulatory actions, the effectiveness of our pandemic and business continuity plans, the precautionary measures we are taking on behalf of our customers, contractors and employees, our customers’ ability to make their utility payment and the potential for supply-chain disruptions; the potential of non-compliance with debt covenants in our credit facilities due to matters associated with the government investigations regarding Ohio House Bill 6 and related matters; 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; 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; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in our SEC filings. Dividends declared from time to time on FirstEnergy Corp.’s common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy Corp.’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. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and risks that are included in our filings with the SEC, including but not limited to the most recent Annual Report on Form 10-K 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 Corp.’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 current intention to update or revise, except as required by law, any forward-looking statements contained herein or the information incorporated by reference as a result of new information, future events or otherwise.