10-QPeriod: Q1 FY2022

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 21, 2022For Securities:FE

Summary

FirstEnergy Corp. (FE) reported its first quarter 2022 financial results, showing a net income of $288 million, or $0.50 per diluted share, a decrease from $335 million, or $0.62 per diluted share, in the same period of 2021. Total revenues increased by 10% to $2,989 million, driven by higher distribution and transmission service revenues. Operating expenses also rose, leading to flat operating income year-over-year. The company highlighted its strategic focus on regulated investments in transmission and distribution, with significant capital expenditure plans aimed at grid modernization and enabling the energy transition. Significant events during the quarter included progress on the sale of a minority interest in FirstEnergy Transmission, LLC, which is expected to close by the end of May 2022, and ongoing management of regulatory matters across its operating states. Financially, FirstEnergy demonstrated solid operational performance with increased revenues, though net income was impacted by various factors including higher operating expenses and the absence of certain one-time gains from the prior year. The company continues to strengthen its balance sheet and liquidity through strategic financing actions, including the recent private placement of common stock and new credit facilities. Management remains focused on executing its long-term strategy, "FE Forward," which aims for capital expenditure efficiencies and working capital improvements, while also addressing environmental initiatives and the ongoing legal and regulatory landscape, including the aftermath of the HB 6 investigations.

Financial Highlights

44 data points
Beta

Revenue

$2.99B

Net Income

$288.00M

9.6% Net Margin

EPS (Diluted)

$0.50

Total Assets

$44.62B

Cash & Equivalents

$283.00M

Free Cash Flow

$355.00M

Financial Statements
Beta
Revenue$2.99B
Operating Expenses$2.43B
Operating Income$559.00M
Interest Expense$275.00M
Net Income$288.00M
EPS (Basic)$0.51
EPS (Diluted)$0.50
Shares Outstanding (Basic)570.00M
Shares Outstanding (Diluted)571.00M

Key Highlights

  • 1Total revenues increased 10% to $2,989 million in Q1 2022 compared to $2,726 million in Q1 2021, primarily driven by higher distribution and transmission service revenues.
  • 2Net income for the quarter decreased to $288 million ($0.50/share) from $335 million ($0.62/share) in the prior year, mainly due to increased operating expenses and the absence of a prior year gain on sale.
  • 3The company continues to execute its 'FE Forward' initiative, projecting significant capital expenditure efficiencies and working capital improvements through 2024.
  • 4Significant progress was made on the sale of a 19.9% interest in FirstEnergy Transmission, LLC (FET) to Brookfield, with regulatory approvals secured and an expected closing in late May 2022.
  • 5Cash provided from operating activities decreased to $355 million in Q1 2022 from $533 million in Q1 2021, influenced by rate refunds and credits in Ohio and timing of working capital improvements.
  • 6FirstEnergy invested $520 million in property additions during the quarter, focused on regulated distribution and transmission infrastructure.
  • 7The company ended the quarter with $283 million in cash and cash equivalents, and $350 million in short-term borrowings.

Frequently Asked Questions

In the first quarter of 2022, FirstEnergy reported total revenues of $2,989 million, a 10% increase from $2,726 million in the same period of 2021. However, net income decreased by 14% to $288 million ($0.50 per diluted share) from $335 million ($0.62 per diluted share) in Q1 2021. This decline in net income was primarily due to higher operating expenses and the absence of a gain on the sale of the Yards Creek Generating Facility recognized in the prior year.

FirstEnergy is focused on its 'FE Forward' initiative, which aims to achieve capital expenditure efficiencies and working capital improvements. The company is also heavily investing in its regulated transmission and distribution businesses to modernize the grid, enhance reliability, and enable the clean energy transition. Key investment areas include advanced metering infrastructure, grid modernization, electric vehicle charging stations, and renewable energy integration. The sale of a stake in FirstEnergy Transmission, LLC is also a significant strategic move to enhance capital structure and fund investments.

FirstEnergy, along with FET, entered into an agreement with Brookfield for Brookfield to acquire a 19.9% interest in FET for $2.375 billion. Regulatory approvals from CFIUS and FERC have been obtained, and the transaction is expected to close at the end of May 2022. This transaction is expected to strengthen FirstEnergy's financial position and support its strategic investments.

FirstEnergy faces several ongoing risks and contingencies, including regulatory matters in various states, environmental compliance, potential litigation arising from past investigations (such as the HB 6-related matters), and market risks related to interest rates and commodity prices. The company has also noted potential supply chain challenges due to the COVID-19 pandemic. While the company has taken steps to address these, their ultimate impact remains uncertain and could materially affect financial results.