FirstEnergy Corp. 2026 Q3 Earnings Call

Good morning, everyone, and welcome to FirstEnergy's third quarter 2026 earnings review. Our earnings release presentation and related financial information are available on our website at firstenergycorp.com/ir. Today's discussion will include the use of non-GAAP financial measures and forward-looking statements, which are subject to risks and uncertainties. Actual results could differ materially from forward-looking statements discussed in our news release, during today's conference call, and in our SEC filings. The appendix of today's presentation includes supplemental information along with the reconciliation of non-GAAP financial measures. Please read our cautionary statement and discussion of non-GAAP financial measures on slides 2 and 3 of the presentation. Our Chairman, President, and Chief Executive Officer, Brian Tierney, will lead our call today, and he will be joined by Jon Taylor, our Senior Vice President and Chief Financial Officer. Now it's my pleasure to turn the call over to Brian.

Thank you, Karen, and good morning, everyone. We delivered another strong quarter and remain on track to meet our objectives for the year. Our performance reflects strong capital deployment, financial discipline, and an improving customer experience. The team has done a great job executing against our plan to drive continuous improvement while focusing on affordability for our customers. We've also made great progress advancing key regulatory strategies and business opportunities that will fundamentally change the trajectory for FirstEnergy. We continue to see strong interest from data center companies, with contracted and pipelined demand up nearly 60% since year-end, including a 90% increase in contracted demand. West Virginia is a big part of that growth, with pipeline demand up approximately six times to nearly 6 gigawatts. Our proposed Maidsville Energy Generating Facility will be a key investment to support this demand.

We expect an order from the West Virginia Public Service Commission in the fourth quarter. Given our confidence level and to protect the schedule, we have reserved the turbines with Siemens for delivery in 2030. All other major contracts are on track to be signed shortly after we receive a commission order. Maidsville is an important project on its own, but we see it as the first of a broader set of opportunities in West Virginia. Last November, I was at our Harrison Power Station with Governor Morrisey to announce our plans for a new generation. He challenged FirstEnergy to do more. My response to the Governor was simple: Challenge accepted. West Virginia's constructive legislative and regulatory environment are driving economic development, jobs, and businesses that will have a long-term positive impact in the state.

We are in active negotiations with large load customers about locations within our West Virginia service territory. Those conversations are open and constructive around delivery schedules, pricing, risk mitigation, and frameworks for benefits to communities and existing customers. To support these large load customers, we have issued a request for proposal for an initial 3 gigawatts of additional combined-cycle turbines, and we expect to provide an update in early 2027. We are also exploring innovative bridge power options and temporary behind-the-meter solutions as we build out the grid to support these customers with permanent transmission and generation service. This is a significant opportunity for FirstEnergy. These investments will support the state's goals and create meaningful value for our shareholders. In addition to the opportunities in West Virginia, transmission and distribution remain the foundation of our business and investment strategy.

Our transmission system sits at the heart of PJM, a region serving more than 65 million people. Our network connects critical parts of the grid and helps deliver power where it is needed most. The need for transmission investment has never been more important. We need a more flexible and resilient grid to support increasing demand and the economic development taking place in and around our service territory. Across our footprint, we now have 7.9 gigawatts of contracted data center demand. We are in active negotiations with approximately 4 gigawatts of additional load. This demand and the critical infrastructure needed to support a more resilient and reliable regional grid will continue to require increasing transmission investments for the foreseeable future. We expect this to drive at least a 25% increase in our current $19 billion transmission investment plan when we release our updated five-year plan.

We are also seeing measurable progress in our distribution business, particularly in Pennsylvania and New Jersey, where we are investing to improve reliability. Since 2024, our reliability has improved by 11% in Pennsylvania and 40% in New Jersey. This is solid proof that our investment plan is working. I am pleased with our progress and believe that our customers, regulators, and policymakers are seeing value from the investments we are making. In the rate cases we have filed, we made the case for investments to meet or exceed our customers' expectations. When we consistently demonstrate the value of our investments for customers, we expect a fair and constructive regulatory outcome. There is more to do, but we are making the right investments, improving performance, and delivering tangible value to our customers.

We are reaffirming our 2026 Core EPS guidance range of $2.62 to $2.82 per share and expect to be at or slightly above the midpoint. We remain on track to deliver core earnings growth near the top end of our 6%-8% range through 2030 and have meaningful opportunities to increase earnings growth over time. Our experienced leadership team has the expert to execute major projects while making the operational improvements our customers expect. We have the people, capability, and commitments to deliver for our customers and shareholders. I will now turn the call over to Jon to cover our financial performance and the progress we have made on key regulatory priorities.

Jon? Thank you, Brian, and good morning, everyone.

Our financial results are on track for the year, and we've made solid progress on regulatory and strategic priorities. Let me start with our third quarter results. For the quarter, we reported GAAP earnings of $0.96 per share, compared with $0.76 in the third quarter of 2025. Core earnings were $0.98 per share, compared with $0.83 a year ago, largely reflecting growth from our rates and investment programs, increasing customer demand, strong financial discipline, and a slightly lower effective tax rate. Through the first nine months of the year, Core EPS increased 9% at $2.20 per share, compared with $2.02 for the same period last year. Through September, we've deployed $4.9 billion of investments to strengthen our electric system, a 23% increase from the same period of 2025.

On a trailing 12-month basis, our financial performance resulted in a consolidated 9.5% return on equity in line with our targeted returns. Strong capital deployment continues to drive rate base growth in line with plan of 9.9% at the FirstEnergy level, supported by total transmission rate base growth of 14%, including 21% in our integrated transmission business. We also continue to see encouraging demand trends in our service territory. Total weather-adjusted load increased 1.2% in the third quarter and has been positive in each of the last four quarters. This growth is led by the industrial class, which increased 3.3% in the third quarter and 2.1% over the last 12 months. We are seeing broad strength in manufacturing activity, including metals, oil and gas, and chemical sectors, along with increasing data center demand.

These promising trends give us confidence in the strength and durability of the growth we're seeing across our footprint. As for our financing plan, we've completed our subsidiary debt financings for the year, issuing $2.6 billion at an average coupon of 4.7%. Our expected common equity needs in 2026 remain modest, and we continue to consider equity-like instruments to support our long-term financing plan. Going forward, approximately 50% of our total long-term debt financing needs are supported by formula rate mechanisms that recover interest costs, providing meaningful protection from changes in interest rates. Transitioning to regulatory updates where we continue to make good progress. Earlier this month, we submitted several low voltage transmission solutions through PJM's Open Window process to address near-term reliability needs. We expect projects to be awarded in the first quarter of next year.

We've had a solid track record of success in Open Windows since 2022, with over $5 billion in awarded competitive transmission investments, including joint ventures with other major utilities to develop large, complex projects that cross state boundaries. Our track record positions us well to compete for additional investments as growing electricity demand and new generation drive the need for a stronger regional grid. In New Jersey, we filed our base rate case in August, requesting a rate increase of $253 million, which reflects approximately $1 billion in rate base growth since our last increase was approved in February 2024. Those investments are delivering results for our customers. Reliability improved 16% in 2025, followed by another 22% year-over-year improvement through September of this year.

We developed a proposal that delays the impact of any rate increase until 2028 and engaged with the Sherrill administration, the Board of Public Utilities, and Rate Counsel throughout that process. Our proposal balances the investments necessary to improve reliability with affordability for our customers. Even with the proposed increase associated with these important investments, we expect our rates to remain approximately 18% below the state average for investor-owned utilities. In Maryland, we filed our base rate case in September, requesting a revenue increase of $53 million since our last rate increase was approved in October 2023. Hearings are scheduled for January, and we expect an outcome in April of next year. In West Virginia, we received a regulatory decision on our base rate case, with the commission approving our $76 million inflation and investment adjustment filing as submitted.