Greetings and welcome to the FirstEnergy Corp’s Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Meghan Beringer, Director, Investor Relations for FirstEnergy. Thank you, Miss Beringer. You may now begin.

Thanks, Rob. Good morning and welcome to our quarter earnings call. Today, we will make various forward-looking statements regarding revenues, earnings, performance, strategies and prospects. These statements are based on current expectations and are subject to certain risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by such statements can be found on the Investors section of our website under the Earnings Information link and in our SEC filings. We will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are also available on our website. Participating in today’s call are Chuck Jones, President and Chief Executive Officer; Jim Pearson, Senior Vice President and Chief Financial Officer; Donny Schneider, President of FirstEnergy Solutions; Jon Taylor, Vice President, Controller and Chief Accounting Officer; Steve Staub, Vice President and Treasurer and Irene Prezelj, Vice President, Investor Relations. Now I will turn the call over to Chuck Jones.

Thanks, Meghan. Good morning everyone. Thank you for joining us today. We’re pleased to report another solid quarter for FirstEnergy. Last night we reported third quarter operating earnings of $0.98 per share, which is $0.06 above the top of our guidance range for the quarter. As Jim will discuss in greater detail, these results reflect a solid performance across all three of our business segments. Based on our strong third quarter and year-to-date performance, we’re raising and narrowing our full year 2015 operating earnings guidance to a range of 267 to 275 per share from our previous range of 240 to 270 per share. This is shaping up to be a great year for FirstEnergy and as we look forward to 2016, our employees can be proud of what they’ve achieved. In addition to strong earnings, we have made tremendous progress on key initiatives that can provide us with greater strength and flexibility as we work to achieve our future goals. So far this year we have clarity on the results from two of these initiatives. The cash flow improvement project and PJM capacity market reforms and we continue to make progress on the third initiative, the Ohio ESP. As we discussed in July, our cash flow improvement project exceeded our initial target and should generate at least 240 million in cash flow improvements by 2017. That project would solicit cost savings ideas from across the company is rolling out as we expected and we remain fully on track to capture the 58 million in cash flow improvements identified for 2015. Overall, this effort is not only establishing a new cost structure for the company. It has also helped us to initiate a culture change around spending. Employees continue to provide suggestions for meaningful and sustainable ways to reduce our…

Thanks Chuck and good morning everyone. Before I get started I will remind you that more detailed information about the quarter can be found in the consolidated report that was posted to our website yesterday evening. We also welcome your questions in the Q&A or following the call. Our strong third quarter operating earnings of $0.98 per share compares to $0.89 per share in the third quarter of 2014. On a GAAP basis earnings were $0.94 per share for the third quarter of 2015 compared to $0.79 per share during the same period last year. Our operating earnings primarily reflect higher distribution sales and the net impact of previously resolved rate cases. Higher transmission revenues that resulted from our Energizing the Future initiative and ATSI’s forward-looking rate structure and higher commodity margin in our competitive business partially offset by higher operating expenses and a higher effective tax rate. In our distribution business residential sales increased 9% and commercial sales increased 2.6% compared to the third quarter of 2014, primarily resulting from cooling degree days that were 36% higher than last year and 13% above normal. Adjusting for weather however, residential deliveries decreased nearly 1% and commercials sales were down 2.4% reflecting the impact of energy efficiency mandates. As we mentioned during our second quarter call, we are examining the usage trend in all three customer classes particularly the impact of energy efficiency on residential usage and we will be prepared to discuss our load forecast in more detail during our analyst meeting. However, we do believe we are seeing the effects of energy efficient lightings sooner and with a larger impact than previous estimates. In the industrial sector, sales decreased 3.2% in the quarter as a result of lower usage from our steel, coal mining and electrical equipment and manufacturing…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Anthony Crowdell with Jefferies. Please proceed with your question.

Just a quick question I guess on Ohio PPA I am sure it will be a trend for the call, but I believe the record closes today in Columbus does the closing of the record complicate the chances of a settlement since nothing new could be introduced.

I don’t think it complicates the opportunity for a settlement at all. I think we have the opportunity to settle the case all the way through any final outcome actually. So it closes the record as far as anything new being introduced into the record as far as testimony and rebuttal testimony, but it doesn’t prohibit ongoing discussions.

Great, thanks for taking my question.

Our next question is from Greg Orrill with Barclays Bank. Please proceed with your question.

Yeah, thank you. May be a follow up there on generally how you are feeling about the process of negotiating the PPAs and whether you feel you have better likelihood of nuclear versus coal.

Well as I’ve said all along, I think that the plan that we filed is the best plan for the customers in Ohio and we continue to work to educate the commission staff as best we can on why we believe that is the case. I think, we are continuing to discuss certain parameters around the filing, but I would expect that as we go forward we are going to continue to talk about the PPA in somewhat the fashion that we filed it. Now, having said that there is always some room for negotiation, but I think the whole idea here is, we filed a plan that’s good for customers, protects them over the long haul and at the end of the day as I’ve told - I’ve gone through the example of what happens when plants closed in the past, it creates spending and transmission that customers pay for so I think this plan kind of is neutral to what the transmission spending would be and I still think that something that we can get through across goal line with.

And maybe just a question around the pension mark-to- market and kind of your treatment there and that doesn’t show up in the earnings guidance, how are you thinking about that?

Yeah, Greg this is Jim. It will not show up in our operating earnings guidance. We have historically treated that as a mark-to-market, in fact if you look at our consolidated report we have put a disclosure in there of what the range of potential impact or GAAP earnings would be if we would have marked that pension plan. Effective September 30, our plan had a loss on our return on assets of about 3.5% and discount range was 4.25%, so we put a range in there assuming that our assets return will remain at that level and the discount rate would be anywhere between 4.25% and 4.5%. As you know October has been a very good month in the equity markets, in fact it’s been probably one of the strongest months in history, so the return on our assets has improved somewhat and if we had to mark that today our discount range would be in the 4.5% range. So my expectation, all things being equal, if they don’t change from today that range that we gave of $0.30 to $0.67, it would be the lower end and in fact it may be less than $0.37 and may be less than 250 million that we disclosed. From a funding stand point, we have disclosed in the 10-K last year that it would be above 1.7 billion for the period ‘15 through ‘19. We did contribute a 143 million this year. From a funding standpoint we will have to see where the discount rate is and where the return on the assets are at the end of the year, but I don’t expect anything to be materially different than what we disclosed in our 10-K in 2014.

Great, thanks

I would just follow on a little bit though Jim’s answered it. I think we have been very open in disclosing what our pension funding obligations might be and the impact on our GAAP earnings, but from the very beginning of me coming into this position, one of the things we talked about was earnings quality and I think this quarter $0.94 and $0.98 GAAP versus non-GAAP. We have really reduced that gap between GAAP and non-GAAP as I told you I would and I think our earnings quality for all three quarters is substantially improved and that’s the way we expect to operate going forward.

Thank you, congratulations on the quarter

Thanks.

Our next question is from Paul Zimbardo with UBS. Please proceed with your question.

Good morning, another Ohio question if you will. We have seen few data points on potential new bill in Ohio recently now just hoping you could comment on how if at all you see these developments impacting the discussion the Ohio mission that’s starting, yeah.

I wouldn’t expect that they should have any impact on the discussion we are having with Ohio and there’s - conversely I don’t think the discussions we are having with Ohio should have any impact on any decisions for new builds because the construct of our energy security plan it has no impact on the competitive markets, so I don’t think the two are linked at all.

Okay, great and then unrelated question, I noticed the revolver borrowing fund about a billion quarter-over-quarter ,could you comment on if this represents kind of change in how you see the financial structure?

Yeah, I am not sure that revolver borrowings increased a billion dollars quarter-over-quarter, in fact if you look at our entire financing plan for the entire year we expect to increase debt just by above $350 million dollars year-over-year and most of that will be new long-term debt associated with the distribution and transmission business. In fact our revolver borrowings at the end of the 2014 were about 1.8 billion and my expectation is that they are going to be right in that range maybe slightly less than that the by the end of the year. So there is no real impact on our financing plans there.

Okay I just looked at the short-term borrowing declined a billion, I know you’d mentioned in the past your trying to or considering terming -

I thought you said that they were up and that was what was confusing me, right. Now they would be down.

Okay. Sorry to clarify, is that indication that you are trying to term more out or that’s just kind of normal fluctuation for the quarter. A That’s normal fluctuation. It’s not that we are terming any of that out.

Okay, great. Thank you very much.

Our next question comes from Mr. Chris Turnure with JP Morgan. Please proceed with your question.

Good morning guys, I wanted to get a little bit more clarity on transmission CapEx going forward basically versus the current CapEx that you have laid out in your slides. If you are successful with the, I guess the innovation [ph] of the assets in New Jersey and Pennsylvania how can we think about directional potential changes there in magnitude?

Well you’re going to have to wait for the analyst meeting. We’ve talked about 4.2 billion of transmission spend, four year period from ‘14 through ‘17 and at this point in time I am not prepared to say where we expect that number to be ‘18 and beyond, but I think as we get through the Ohio ESP and then we see the company that we have a base to build upon after that. I think when we have our Analyst Meeting we’ll talk to you more about what we expect to do in the future.

Okay. And then on cost cutting, you indicated that there is a potential to increase the numbers as you’ve laid them out right now, the numbers are pretty meaningful over the next several years, but they do mostly come from the unregulated side of the business. Could you talk a little bit more in detail maybe about what you’re looking at that’s incremental to this and any opportunities more specifically on the regulated side of the business there?

Well, first off, I wouldn’t expect them to be substantial and what I’ve kind of challenged the team to do is we need to continue to find efficiencies in this business that will offset any inflationary forces on our cost structure, specific to the utility side of things in an environment where we’re investing in reliability improvements now pretty much across our footprint. Taking cost out of the utilities doesn’t make sense right now. So I wouldn’t expect to see a lot of it come out of the utilities. We’re taking any incremental. That doesn’t mean we’re not focusing on efficient spending in the utilities, but as we create the efficiencies where recycling that back into more investment and more improved service for our customers rather than pulling it out and ultimately reducing the cost structure for the utilities.

Great, thank you.

The next question is from Mr. Dan Eggers with Credit Suisse. Please proceed with your question.

Hi, good morning, guys. First question for you just on the transmission guidance increase, CapEx has been in line basically with plan, but the earnings power from transmissions were 10% higher than you had budgeted for the year. What are you ascribing that improvement to? And how should we think about capitalizing the new base line for ‘16 and beyond?

Yeah, this is Jim. The way I would look at that, Dan, is that when we went into the year, we had some relatively conservative assumptions because of the uncertainty with the forward-looking rates within ATSI, not only the ROE but potential refunding in that. So I would say our initial estimate was somewhat conservative. And we also have a little higher rate base associated with in servicing some of the projects sooner than we had anticipated. When I would compare, say, ‘16 to ‘15, clearly we’ll give you more guidance at our Analyst Meeting. But I would say the headwinds we are going to face next year is, we are going to have a lower ROE in ATSI. So that’s going to impact our earnings somewhat and some of our transmission spend will be directed towards the former GPU companies where they’re still on standard rates and I would not look for me like rate recovery until beginning in 2017. So I would consider probably ‘15 and ‘16 years to be somewhat flattish and then we will move on in ‘17 once we have the MAIT completed in investments going towards the GPU companies.

That was helpful. Thank you. On the demand response case, the Supreme Court’s heard it now, you guys are very vested in the process. What was your read on what happened in this Supreme Court and then your expectations for when we’ll get a decision and then whatever adoptions that the PJM will have to make.

So I should have preempted all of these Q&A by stating this. I said earlier, Leila is not here and I don’t think you want any of us other than Leila judging what’s happening at the Supreme Court. So here is what I’ll do, Dan, Irene will talk with Leila and we’ll get back to you on that one, but I just don’t feel comfortable asking - answering technical legal questions.

Okay, that’s fair enough. And then, Jim, looking back at the 10-K on the pension, I know this is kind of still bubbling out there. You guys had said out about $880 million for pension funding in ‘16 and ‘17 and then 646 in ‘18, ‘19, are those still realistic or is there a weighted shift some of the timing of that money being put to work?

No, those are still pretty much realistic and those are based on requirements. Dan, it’s not that we can shift money. We could fund more earlier, but you look at what your funding has to be over a seven-year period and so you have to fund at least that amount. I don’t expect when we update that ‘16 and ‘17 will be much different than what we disclosed in our 10-K for 2014. But we will just update some of the years based on where the return on the assets are and where the discount rate is. The Senate had just passed the, I guess, I got the five partisan budget bill. We had extended the funding or the smoothing requirements three additional years through 2020, so that will give some type of relief, because you will be able to use your historical discount rate during those funding periods. So that will lessen all things being equal our funding requirements over that period of time.

So your assumptions in the 10-K are reflective of the extension of the smoothing or would that lower that number?

No, the 10-K that we filed in 2014 did not take into account any of the changes to the smoothing and primarily that smoothing doesn’t impact our funding until year 2019.

Okay and then I guess just on the financing side of it, you guys have been keen not to talk about equity needs and that sort of thing, but should we expect more comprehensive planning update at the Analyst and would that then include whatever you would have to fund for the pension perspective?

Yeah, I think that’s the whole game plan, Dan. Let’s get Ohio behind us one way or another, find out where that leaves us. We know pretty much where capacity performance landed and we know we’ve done internally to strengthen our cash flows. I think at that point in time we are going to give you more of a view towards the future. Two thousand and fifteen has been all about kind of strengthening the base that we want to build from.

Okay, great. Thank you, guys.

Thank you. Our next question is from Mr. Paul Patterson with Glenrock Associates. Please proceed with your question.

Good morning. Can you hear me?

Good morning. Yeah.

Okay. Just as a follow-up on Ohio for a second, if you guys were to get a settlement, what would the process be in terms of after that? I mean would there be - I assume comments there would be and stuff on that and how much time before after a settlement, do you think it would take for approval of that settlement to take place?

Yes, there would be an opportunity for comment. I expect we are going to end up at the same place here regardless of a settlement which is an outcome that’s finalized early next year.

Okay and by early you mean first couple of months.

I would think so, yeah.

Okay. And then in terms of the pension funding, could you remind me how much the breakdown is between regulated and non-regulated with that obligation?

I would say that probably about 60% of the unfunded would reside in the regulated companies.

Okay. And then you mentioned some intriguing step about the energy efficiency in lighting and the deployment of that’s been a little bit more aggressive than what you previously have thought. I’m just wondering if you could elaborate a little bit on that in terms of what sectors you are seeing that in and what customer classes?

From my standpoint, the biggest impact has been in the residential sector. We’ve seen somewhat in commercial, typically commercial customers will move towards more energy efficient products sooner than residential. But when you think about the lighting, the Federal Energy Efficiency Lighting standards kicked in 2015. You can’t buy an incandescent bulb right now and we’ve always expected that we would see some impact to our residential usage associated with that. It’s just happening a little bit faster than we had originally planned on our original load forecast.

How much - I guess why is that do you think? And because like you said, all the stuff is sort of known. I mean what do you - can you give us a little bit more flavors to how much more that you are seeing and why you think you are seeing it?

It’s hard for me to talk about customer behavior especially this early on, but my suspicion is that the cost of these bulbs are coming down and they are being offered in a number of stores and consumers are just switching those bulbs sooner than we thought they would be. And as we said, we are looking at this pretty closely right now and we should have a better view on that when we come to the Analyst Meeting. But as we said, we automatically knew that this was going to happen. It’s just maybe happening a little sooner than we expected.

Okay. And we’ll find out obviously in the Analyst Meeting what it means for energy - for the energy efficiency, but I would suggest that you guys are expecting to see more sooner than previously thought. Is that --?

Yeah, we’ll have that build into the load forecast we have.

Okay. Thank you.

Thank you. Our next question is from Mr. Paul Ridzon with KeyBanc Capital Markets. Please proceed with your question.

Thank you. I just had a real quick question about CES fourth quarter drivers. I think I’ve done math right, recalling looking for a flattish quarter versus 4Q last year after you had a nice pickup in the third quarter here?

Yeah, I would say during the fourth quarter we would expect that the earnings would be pretty much flat quarter-over-quarter.

We’re getting a big capacity pick-up, aren’t we?

Yeah, we are, but we have Beaver Valley that’s out essentially in an entire month of October.

Got it. Okay. Thank you very much.

Thank you. Our next question comes from Mr. Charles Fishman with Morningstar. Please proceed with your question.

Thank you. I just have one left. On the LTIP that was filed in Pennsylvania a couple of weeks ago, it implies from the release that’s a quarterly rate rider. Is that a done deal? I mean is that legislation or is that - you took commission [indiscernible] another utility that’s done that? You are pretty confident you will get that quarterly rider?

Well, the way the process works in Pennsylvania as you file a long-term infrastructure improvement plan, which pretty much details the types of investments and the impact for customers that you expect to achieve. The Pennsylvania Public Utilities Commission reviews the LTIP, Once they review and approve the plan, then recovery under the distribution system, plus recovery rider is essentially, it’s a legislative recovery and it’s essentially very certain [ph] after that. So as long as we spend what we say we were going to spend and do what we say we’re going to do.

Okay. That was the only question I had. Thank you.

Thank you. Our next question comes from Ashar Khan with Visium. Please proceed with your question.

Good morning and congrats on a good quarter. Chuck, just going back to the expectations of getting this case done by early next year, is it fair to assume that - are you able to reach a settlement it should come in the next month or so?

I’m not going to handicap it, Ashar. I mean we’re working every day, talking on the phone, Leila is down there meeting with the staff today, working through a lot of complex issues and it’s a very complex case. So I don’t want to put pressure on Leila nor on the Commission staff or any other parties that we are talking with. We just keep working through the process. And I believe that there is an opportunity for an ultimate settlement, because I think that we are getting to the point where everybody is starting to really understand why it’s good for customers.

Okay. I appreciate it. Thank you so much.

Thank you. Our next question comes from [indiscernible] with Citigroup. Please proceed with your question.

Hi, guys. Just a couple of quick questions, one on CS, when we look at 2017 fact book and we look at the breakdown of the hedges and the contracted revenues that you have, it looks like there is a significant proportion that’s clearly open right now, 36 terawatt hours that’s committed sales and the rest is open. Do you expect more committed sales to happen in the buckets of the MM, MCI, OCI, GA [indiscernible] those structures? Do you expect more contracting or committed sales to happen in 2017 for that? Or is it generally all going to flow into the wholesale bucket?

The first item is it does not contemplate PPA scenario at all. So we are successful in getting the PPAs done. That will reduce by about half.

Yeah.

Donny, go ahead.

Yeah, yeah, Chuck is absolutely right. With the PPA, we only have about 3 terawatt hours open in the front half of ‘17 and about 16 terawatt hours in the back half and to answer your question, with the PPA we would move that into our sales channels regardless of the PPA, we would move it into the sales channels, we wouldn’t take it all to the wholesale market. Without the PPA, you’ve got a 41 terawatt hours again more heavily weighted on the back half of ‘17.

Got you and that 41 terawatt hours, if there is no PPA would be moving into the wholesale bucket?

No, no. We would move it into our LCI or [indiscernible] channels. Wholesale is kind of our last resort if you will, because we don’t make much margin on that.

So of the 80 or so terawatt hours in total approximately 40 would be committed in the non-PPA scenario?

No, we would still hold some back for the spot market. We would hold back by about 15 to 20 terawatt hours in the spot market.

Got you. So what is the total committed sales you would expect in the non-PPA scenario for 2017?

So it would be about 75 minus 15 or 20 so about 55 terawatt hours.

I got you. Okay, got it.

What Donny is describing is we are going to run that business kind of like a utility. We are going to sell forward two-thirds to three-fourths of our available generation. We are going to keep, as he said, 15 to 20 megawatt hours opened to use as what I refer to as reserve margin to ensure ourselves against weather days, cold weather days to ensure ourselves against a unit. It doesn’t perform as expected and essentially be able to deliver more consistent earnings out of that sector than what we have been able to do in the past because we were exposed to volatility and we were exposed to poor performance by our generating fleet.

Fair enough. Sorry, go ahead.

As you said, if you look at our fact book on slide 98, page 49, it lays out those sales channels and our ranges around it.

Yeah, now got it exactly. I’m just saying that I looked at the fact book for 2017 that 36 terawatt hours of committed sales and I was just trying to bridge to what would it look like in naturally 2017 if you had no PPA and that was helpful color that you gave me.

Sure.

If I would have bridged to that number that you just said, as you exit certain [indiscernible] contracts, how did that shape like the 2017 committed sales? I’m just trying to understand what would be the proportions of the different buckets as you kind of think about in a non-PPA scenario, what it would look like with the committed sales?

Yeah, so I would say in a non-PPA scenario if you look at our 2016 EBITDA slide, that’s going to give you the pretty good proportions and we are not intending to change those proportions.

Fair enough. Got you. Okay, thank you and then finally just a quick question on NOLs. I know that NOLs clearly help from a deferred tax perspective right now. Do you still kind of see them as a 2017-18 timeframe kind of full utilization of NOLs?

Yeah, our expectation is that, well, first bonus depreciation, we think it’s likely to be extended through the ‘15 and ‘16 timeframe. That’s not part of the budget bill, but it’s typically done usually at the end of the year in an extender. If the bonus depreciation is not extended, then we’ll likely expire our NOLs around the end of 2018 or into 2019. Assuming bonus depreciation is extended, then we could go out further into the 2020 timeframe. Again that would be impacted by the resolution of the Ohio ESP.

Understood, got it. Thank you so much.

Thank you. Our next question is from Mr. Ryan Caylor with Tudor, Pickering, Holt. Please proceed with your question.

Hi, good morning.

Morning.

Just back to the Ohio PPA real quick, just a quick question on timing AP [ph] on their Q3 2015 earnings call they gave I guess a year end 2015 expectations for a final order for their PPA. I guess it’s our understanding that you guys are further long in the process right? So I mean is that difference in timing a matter of AP just being you know I guess a little more aggressive relative to your kind of early Q1 2016 timeline or any color there relative to AP would be helpful? Thanks.

Well, I would say that I think we are all just kind of trying to speculate about what could happen. We are being a little more conservative maybe then the AP in there traditionally there is not going to get a lot done in December after Thanks Giving for our RKs to get settled by the end of this calendar year they have to work pretty hard pretty much the whole month of December I think to meet the time tables so we are just expecting likely to get done after the first three year.

Got it. That’s helpful thanks.

Okay, well I don’t see any more questions on our call so I want to thank you all very much for your support and just say look forward to you in a week from Monday at EEI and I am sure we will go through all these questions again. Thank you.

Thanks everybody.

This concludes today's teleconference. You may disconnect your lines at this time. And we thank you for your participation.