01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
FirstEnergy Corp. (FE) presented its 2018 Annual Report (10-K) on February 19, 2019, detailing a company in transformation towards a fully regulated utility model.
The report highlights a significant strategic review aimed at exiting commodity-exposed generation and a focus on growing regulated distribution and transmission operations. Key achievements in 2018 included progress on the "Unlocking the Future" growth plan, substantial equity issuance to strengthen the balance sheet, and positive rating outlooks from credit agencies, signaling a more stable financial future. The company's operational focus is on its Regulated Distribution and Regulated Transmission segments, which serve millions of customers across the Midwest and Mid-Atlantic regions.
FirstEnergy is emphasizing significant capital investments in these regulated areas, with a substantial portion of transmission investments recoverable through formula rate mechanisms, reducing regulatory lag. The "Energizing the Future" transmission program and distribution infrastructure improvements are central to the company's growth strategy, aiming to enhance reliability and customer service while delivering attractive returns to investors.
02—Key points
Key Highlights
- FirstEnergy has largely completed its transition to a fully regulated utility business, exiting commodity-exposed generation activities.
- The company raised $2.5 billion in equity in January 2018 to strengthen its balance sheet and support its regulated growth plan.
- Capital expenditures for 2019 are projected between $2.9 to $3.0 billion, primarily focused on Regulated Distribution and Regulated Transmission segments.
- The "Energizing the Future" transmission program plans an additional $4.8 billion in investments from 2018-2021, with over 80% recoverable through formula rates.
- The FES Bankruptcy settlement agreement was approved, resolving significant claims and paving the way for FirstEnergy to concentrate on its regulated growth strategy.
- FirstEnergy achieved credit rating upgrades and positive outlooks from S&P and Fitch, reflecting improved financial health and strategy execution.
- The company declared a dividend increase of 6% to $0.38 per share, signaling a commitment to shareholder returns while maintaining significant reinvestment in the business.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $11.26B$10.93B | +3.0% |
| Operating Expenses | $8.76B$8.50B | +3.0% |
| Operating Income | $2.50B$2.43B | +3.0% |
| Interest Expense | $1.12B$1.00B | +11.0% |
| Net Income | $1.35B-$1.72B | +178.2% |
| EPS (Basic) | $1.99$-3.88 | +151.3% |
| EPS (Diluted) | $1.99$-3.88 | +151.3% |
| Shares Outstanding (Basic) | 492.00M444.00M | +10.8% |
| Shares Outstanding (Diluted) | 494.00M444.00M | +11.3% |
05—Questions
Frequently Asked Questions
What is FirstEnergy's primary business focus after the strategic review?
FirstEnergy's primary business focus is now on its Regulated Distribution and Regulated Transmission segments, having completed a strategic review to exit commodity-exposed generation activities and transform into a fully regulated utility company.
How did FirstEnergy strengthen its financial position in 2018?
In January 2018, FirstEnergy raised $2.5 billion in equity, comprising $1.62 billion in mandatorily convertible preferred equity and $850 million in common equity. This issuance was used to reduce holding company debt, fund its pension plan, and strengthen its balance sheet, supporting its transition to a fully regulated utility.
What are FirstEnergy's key capital investment priorities?
FirstEnergy's key capital investment priorities are in its Regulated Distribution and Regulated Transmission segments. The "Energizing the Future" transmission program is a major focus, with planned investments of up to $4.8 billion from 2018-2021, with over 80% of these investments expected to be recovered through formula rate mechanisms. Significant investments are also planned for distribution infrastructure modernization, including grid modernization initiatives in Ohio and reliability improvements in New Jersey.
What was the impact of the FES Bankruptcy on FirstEnergy?
The FES Bankruptcy led to deconsolidation of FES and FENOC from FirstEnergy's financial statements. A significant settlement agreement was reached and approved in September 2018, which resolved claims between FirstEnergy and FES creditors. FirstEnergy recorded pre-tax charges totaling $877 million in 2018 related to this bankruptcy. The settlement allowed FirstEnergy to shift its full focus to executing its regulated growth plans.
06—Continue