FirstEnergy Taking Decisive Actions to Move the Company Forward
Feb 26, 2021 11:06 AM ET
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FirstEnergy Corp. announced it is taking proactive steps to resolve a range of regulatory proceedings affecting its Ohio utilities by pursuing holistic and transparent discussions with key stakeholders. As a first step, the company will not seek recovery of lost distribution revenue from residential and commercial customers authorized under its current Electric Security Plan (ESP) through May 31, 2024.
FirstEnergy believes that pursuing an open and comprehensive dialogue with the Public Utilities Commission of Ohio (PUCO) and other key parties will benefit the company as it seeks to resolve a number of PUCO-led proceedings currently underway in a collaborative manner that balances the interests of all stakeholders. Today's decision builds upon a partial settlement with the Ohio Attorney General to end the collection of decoupling revenues permitted by Ohio House Bill 6.
"We are taking a number of decisive actions to put our company on the right path forward," said Steven E. Strah, president and acting chief executive officer. "Our commitment to engaging constructively with our Ohio regulators and the decision to forego lost distribution revenue are important steps toward removing uncertainty about regulatory concerns in Ohio and positioning the company for long-term success."
"The Board of Directors supports the prudent actions that the management team has taken to resolve pending regulatory matters in Ohio," said Donald T. Misheff, non-executive chairman. "These actions are aligned with the significant steps that the Board is already taking, including a robust and deliberate internal investigation."
Additional Actions to Move FirstEnergy Forward
The actions outlined above build on the steps the Board and management have taken, and are continuing to take, to address challenges and rebuild trust with stakeholders:
- The Board acted swiftly to form an independent committee, launch a robust and ongoing internal investigation, and remove five senior executives.
- Additionally, the Board named Steve Strah as Acting CEO, hired a Chief Legal Officer with extensive legal expertise and industry experience, established an Executive Director role, and expanded the Board Chair role to help navigate the challenges the company is facing.
- The company has initiated a search for a Chief Ethics and Compliance Officer, who will be instrumental in further driving a culture of compliance.
- With the Board's oversight, the management team has made significant changes to its approach to governmental affairs engagement and is limiting participation in the political process. This also includes ensuring that the disclosures around the company's political advocacy are more robust going forward so that it is clear what efforts the company appropriately supports.
- FirstEnergy has initiated FE Forward, a comprehensive project focused on improving business practices and policies; fostering trust, transparency and integrity; and enabling FirstEnergy to become a more nimble organization.
- The Independent Review Committee of the Board, with representation from independent counsel, is overseeing the ongoing internal investigation and monitoring the status of the various regulatory matters facing the company.
- The Board is analyzing and working through steps to improve the compliance policy and culture at FirstEnergy and established a Compliance Oversight Sub-Committee of the Audit Committee which includes representation from independent counsel and leading compliance advisors to support this work.
FirstEnergy expects to report 2020 GAAP earnings of $1.99 per basic and diluted share of common stock and operating (non-GAAP) earnings* of $2.39 per share. The company also expects to recognize a $0.15 per share charge in the fourth quarter of 2020 resulting from a settlement with the Ohio Attorney General and the cities of Cincinnati and Columbus regarding decoupling ($0.04 per share) and the decision to not seek collection of lost distribution revenue ($0.11 per share). Absent this charge, operating (non-GAAP) earnings in 2020 would have otherwise been expected to be $2.54 per share, a figure toward the top end of the company's previously announced guidance range. Complete financial results for 2020, the financial impact of this decision and other important updates will be discussed on the company's upcoming fourth quarter and full year earnings call, scheduled for Thursday, February 18, 2021, at 9 a.m.
*Non-GAAP financial measures
GAAP and operating (non-GAAP) earnings are based on 542 million shares outstanding. Operating earnings is a non-GAAP financial measure and excludes $0.40 per share in special items. Special items in 2020 consist of: $0.60 per share in mark-to-market adjustments – pension/OPEB actuarial assumptions and $0.01 per share in regulatory charges, partially offset by $0.21 per share in exit of generation credits. Management believes that the non-GAAP financial measure of Operating earnings (loss) per share provides a consistent and comparable measure of performance of its businesses on an ongoing basis. Management also believes that such a measure is 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). A non-GAAP financial measure is intended to complement, and is not considered as an alternative to, the most directly comparable GAAP financial measure. Also, the non-GAAP financial measure may not be comparable to similarly titled measures used by other entities.
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 24,500 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.
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