10-QPeriod: Q3 FY2018

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 25, 2018For Securities:FE

Summary

FirstEnergy Corp. (FE) reported mixed financial results for the nine months ended September 30, 2018. While total revenues increased by 4% year-over-year to $8.55 billion, driven by growth in both Regulated Distribution and Regulated Transmission segments, the company posted a net loss of $458 million for the third quarter, a significant decline from a net income of $396 million in the prior year period. This loss was heavily influenced by a substantial charge of $1.2 billion related to the FES bankruptcy settlement. Despite the quarterly loss, the company's strategic transition to a fully regulated utility is progressing. Significant equity issuance of $2.5 billion in January 2018 strengthened the balance sheet and is expected to support investment-grade credit metrics. Capital investment plans for Regulated Distribution and Regulated Transmission remain robust, focusing on infrastructure improvements and modernization to enhance reliability and customer service. The company's outlook centers on stable, predictable earnings from its regulated operations, supported by planned capital expenditures through 2021.

Financial Highlights

46 data points
Beta

Revenue

$3.06B

Net Income

-$458.00M

-14.9% Net Margin

EPS (Diluted)

$-1.02

Total Assets

$39.44B

Cash & Equivalents

$436.00M

Free Cash Flow

$846.00M

Financial Statements
Beta
Revenue$3.06B
Operating Expenses$2.35B
Operating Income$710.00M
Interest Expense$255.00M
Net Income-$458.00M
EPS (Basic)$-1.02
EPS (Diluted)$-1.02
Shares Outstanding (Basic)503.00M
Shares Outstanding (Diluted)505.00M

Key Highlights

  • 1Total revenues increased 4% to $8.55 billion for the nine months ended September 30, 2018, compared to the same period in 2017.
  • 2Net loss of $458 million for the third quarter of 2018, a significant decrease from a net income of $396 million in the prior year period, primarily due to a $1.2 billion pre-tax charge related to the FES bankruptcy settlement.
  • 3The company completed a $2.5 billion equity issuance in January 2018, strengthening its balance sheet and supporting its transition to a fully regulated utility.
  • 4Regulated Distribution segment plans capital investments of $5.7-$6.7 billion through 2021, expecting a 5% rate base growth rate.
  • 5Regulated Transmission segment plans capital investments of $4.0-$4.8 billion from 2018-2021, expecting an 11% rate base growth rate.
  • 6FirstEnergy has determined a loss is probable related to the FES bankruptcy and recorded a pre-tax charge of $1.2 billion in the third quarter of 2018.
  • 7The company continues to work with state regulatory commissions to determine appropriate customer rate changes resulting from the Tax Cuts and Jobs Act of 2017.

Frequently Asked Questions

The primary driver of the net loss of $458 million in the third quarter of 2018 was a pre-tax charge of $1.2 billion related to the definitive settlement agreement for the FES bankruptcy. This charge reflects the estimated commitments and payments under the settlement.

The company strengthened its balance sheet through a $2.5 billion equity issuance in January 2018, which included $1.62 billion in mandatorily convertible preferred equity and $850 million in common equity. The proceeds were used to reduce holding company debt and fund the pension plan.

FirstEnergy's strategy is to be a fully regulated utility company, focusing on stable and predictable earnings and cash flow from its Regulated Distribution and Regulated Transmission businesses. This involves significant capital investment in infrastructure modernization and reliability improvements.

A definitive settlement agreement was entered into on August 26, 2018, and approved by the Bankruptcy Court on September 26, 2018. However, the agreement is subject to material conditions, primarily the issuance of a final court order approving the reorganization plan. There is no assurance that all conditions will be met.