FirstEnergy Announces Third Quarter 2022 Financial Results

Reports third quarter 2022 GAAP earnings of $0.58 per share and operating (non-GAAP) earnings of $0.79 per share, at top end of guidance range

Updates full-year GAAP guidance; affirms 2022 operating guidance with expected performance in the upper half of the range

AKRON, Ohio, Oct. 25, 2022 -- FirstEnergy Corp. (NYSE: FE) today reported third quarter 2022 GAAP earnings of $334 million, or $0.58 per basic and diluted share, on revenue of $3.5 billion. In the third quarter of 2021, the company reported GAAP earnings of $463 million, or $0.85 per basic and diluted share, on revenue of $3.1 billion. GAAP results include special items listed below.

"Our continued solid results, together with the ongoing efforts to strengthen our culture, accelerate improvement in our balance sheet and achieve operational excellence, are creating positive momentum at FirstEnergy and positioning us to capitalize on significant opportunities for growth through long-term, customer-focused investments," said John W. Somerhalder II, FirstEnergy Board Chair, interim president and chief executive officer. "I'm confident our leadership team and committed employees will continue to drive these strategies to transform the company into a best-in-class utility."

FirstEnergy updated its full-year GAAP earnings forecast range to $1,145 million to $1,260 million, or $2.01 to $2.21 per share based on 571 million shares outstanding. It also affirmed its full-year 2022 operating (non-GAAP) earnings guidance range of $1,315 million to $1,430 million, or $2.30 to $2.50 per share based on 571 million shares outstanding and expects results in the upper half of that range, assuming normal weather.

Third Quarter Results

Third quarter and year-to-date 2022 results reflect the impacts of certain accounting policy changes, rate credits that were provided to Ohio customers under the company's previously approved stipulation, and dilution related to the common equity financing transaction that closed at the end of 2021 and the sale of a minority interest in FirstEnergy Transmission, LLC that closed on May 31, 2022.

Excluding the impact of these items, third quarter operating results in the Regulated Distribution business were flat as higher revenue related to capital investment programs primarily in Pennsylvania, along with impacts from weather, offset higher planned operating expenses, including accelerating maintenance work into 2022.

Total distribution deliveries were flat compared to the third quarter of 2021, with lower sales in the residential and commercial sectors offset by a 2% increase in industrial sales.

In the Regulated Transmission business, third quarter 2022 operating results benefited primarily from the company's ongoing Energizing the Future capital investment program.

In the Corporate/Other segment, third quarter 2022 operating results improved as compared to the third quarter of 2021, primarily due to higher returns on legacy, commodity-based investments and lower interest expense from holding company debt redemptions during 2022.

First Nine Months

For the first nine months of 2022, FirstEnergy reported GAAP earnings of $809 million, or $1.42 per basic share ($1.41 per diluted share), on revenue of $9.3 billion. This compares to GAAP earnings of $856 million, or $1.57 per basic and diluted share, on revenue of $8.5 billion in the first nine months of 2021. Results for both periods reflect the impact of special items listed below.

Operating (non-GAAP) earnings* for the first nine months of 2022 were $1.91 per share, compared to $2.10 per share in the first nine months of 2021 and $1.74 per share on a pro forma basis in the first nine months of 2021, when adjusting for the impacts of accounting policy changes, Ohio rate credits and equity financing transactions described above.

Results for the first nine months of 2022, as compared to the same period last year, primarily reflect the strength of FirstEnergy's customer-focused investments, investment income and lower interest expense, partially offset by higher planned operating expenses.

Non-GAAP financial measures

* Operating earnings (loss) excludes "special items" as described below, and is a non-GAAP financial measure. 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 Operating earnings (loss) and Operating earnings (loss) per share to evaluate the Company's performance and manage its operations and frequently references these non-GAAP financial measures in its decision making, using them to facilitate historical and ongoing performance comparisons. Additionally, management uses Operating earnings (loss) per share by segment to further evaluate the Company's performance by segment and references this non-GAAP financial measure in its decision making. Operating earnings (loss) per share and Operating earnings (loss) per share for each segment is calculated by dividing Operating earnings (loss), which excludes special items as discussed herein, for the periods presented by the number of shares outstanding. Basic EPS (GAAP) and Operating EPS (Non-GAAP), as well as Basic EPS (GAAP) and Operating EPS (Non-GAAP) for each segment, are based on 571 million shares for the third quarter, first nine months and full year of 2022 and 544 million for the third quarter and first nine months of 2021. Furthermore, pro forma earnings per share are also a non-GAAP financial measure and adjust the 2021 operating earnings (loss) per share for the three and nine months ended September 30, 2021, for certain accounting policy changes, rate credits and equity financing transactions that took effect or began to impact in 2022, which management believes provides for a more consistent and comparable measure of performance of its businesses period-over-period. Management believes that the non-GAAP financial measures of Operating earnings (loss) and Operating earnings (loss) per share, Operating earnings (loss) per share by segment, and pro forma earnings per share provide consistent and comparable measures of performance of its businesses on an ongoing basis. Management also believes that such measures are 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). These non-GAAP financial measures are intended to complement, and are not considered as alternatives to, the most directly comparable GAAP financial measures. Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities. Pursuant to the requirements of Regulation G, FirstEnergy has provided, where possible without unreasonable effort, quantitative reconciliations within this presentation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Investor Materials and Teleconference

FirstEnergy's Strategic and Financial Highlights presentation is posted on the company's Investor Information website – www.firstenergycorp.com/ir. To access the presentation, click on the Third Quarter 2022 Financial Results link.

The company invites investors, customers and other interested parties to listen to a live webcast of its teleconference for financial analysts and view presentation slides at 11:00 a.m. EDT tomorrow. FirstEnergy management will present an overview of the company's financial results followed by a question-and-answer session. The teleconference and presentation can be accessed on the website by selecting the Third Quarter 2022 Earnings Webcast link. The webcast and presentation will be archived on the website.

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 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.

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 potential liabilities, increased costs and unanticipated developments resulting from government investigations and agreements, including those associated with compliance with or failure to comply with the Deferred Prosecution Agreement entered into July 21, 2021 with the U.S. Attorney's Office for the Southern District of Ohio; the risks and uncertainties associated with government investigations and audits regarding Ohio House Bill 6, as passed by Ohio's 133rd General Assembly ("HB 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, particularly regarding HB 6 related matters, including risks associated with obtaining dismissal of the derivative shareholder lawsuits; changes in national and regional economic conditions, including recession, inflationary pressure, supply chain disruptions, higher energy costs, and workforce impacts, affecting us and/or our customers and those vendors with which we do business; weather conditions, such as temperature variations and severe weather conditions, or other natural disasters affecting future operating results and associated regulatory actions or outcomes in response to such conditions; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity, cybersecurity, and climate change; the ability to accomplish or realize anticipated benefits from our FE Forward initiative and our other strategic and financial goals, including, but not limited to, overcoming current uncertainties and challenges associated with the ongoing government investigations, executing our transmission and distribution investment plans, greenhouse gas reduction goals, controlling costs, improving our credit metrics, growing earnings and strengthening our balance sheet; the changing market conditions affecting the measurement of certain liabilities and the value of assets held in our pension trusts may negatively impact our forecasted growth rate, results of operations, and may also cause us to make contributions to our pension sooner or in amounts that are larger than currently anticipated; the risks associated with cyber-attacks and other disruptions to our, or our vendors', information technology system, which may compromise our operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; 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 factors such as 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, economic conditions, the impact of climate change, or energy efficiency and peak demand reduction mandates; the potential of non-compliance with debt covenants in our credit facilities; 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; labor disruptions by our unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, including, but not limited to, the Inflation Reduction Act of 2022, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in our Securities and Exchange Commission ("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. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy Corp.'s filings with the SEC, including, but not limited to, the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, 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 Corp. expressly disclaims any obligation to update or revise, except as required by law, any forward-looking statements contained herein or in the information incorporated by reference as a result of new information, future events or otherwise.