Earnings Labs

FirstEnergy Corp. (FE)

Q3 2023 Earnings Call· Fri, Oct 27, 2023

$49.50

+0.11%

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Transcript

Operator

Operator

Greetings and welcome to the FirstEnergy Corp. Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Irene Prezelj, Vice President, Investor Relations and Communications for FirstEnergy Corp. Thank you. Ms. Prezelj, you may begin.

Irene Prezelj

Analyst

Thank you. Good morning, everyone and welcome to FirstEnergy’s third quarter 2023 earnings review. Our President and Chief Executive Officer, Brian Tierney, will lead our call today and he will be joined by Jon Taylor, our Senior Vice President and Chief Financial Officer. Our earnings release, presentation slides and related financial information are available on our website at firstenergycorp.com. Today’s session will include the use of non-GAAP financial measures and forward-looking statements. Factors that could cause our results to differ materially from these statements can be found in our SEC filings. The appendix of today’s presentation includes supplemental information, along with the reconciliation of non-GAAP financial measures. Now, it’s my pleasure to turn the call over to Brian.

Brian Tierney

Analyst

Thank you, Irene and good morning everyone. Today, I will discuss third quarter and year-to-date results, some key developments over the last few months and our outlook for the future. For the third quarter, we delivered GAAP earnings of $0.74 per share versus $0.58 last year. Operating earnings for the third quarter were strong at $0.88 per share at the upper end of our guidance range and compared favorably to $0.79 per share last year. Our financial performance was a result of discipline and operating expenses as well as execution of our regulated capital investment plan to improve system resiliency and reliability. Also, as previewed on the second quarter call, we realized a tax benefit in the quarter related to a state tax adjustment, which reduced our effective tax rate to 17% for the year-to-date period. Our service territory continued to experience very mild temperatures impacting earnings by $0.06 per share compared to last year. In addition, quarterly results were impacted by lower pension credit and higher financing costs, primarily as a result of higher debt balances used to fund our capital investment program. Through strong execution by our treasury group, our consolidated long-term borrowing rate remained essentially flat. For the year-to-date period, we reported GAAP earnings of $1.66 per share versus $1.42 per share last year. Operating earnings for the 9-month period were $1.94 per share compared to $1.91 in 2022. As you know, we have faced some headwinds in 2023 from both the impact of market conditions to our pension plan and the impact of the extremely mild temperatures on distribution sales. Our employees have risen to these challenges by focusing on the things within our control, allowing us to meet our financial commitments despite these headwinds. Examples include demonstrating financial discipline. Our employees were able to reduce…

Jon Taylor

Analyst

Thank you, Brian, and good morning, everyone. We had a strong quarter, which showcased our commitment to operational excellence and financial discipline. This work enabled us to offset the impact of continued unseasonably mild temperatures across our service territory and deliver operating results near the top-end of our guidance. In addition, we’re also making good progress on our regulatory initiatives, which I’ll review in more detail in a few minutes. Let’s start with a review of our financial performance. As Brian mentioned earlier, third quarter GAAP earnings were $0.74 a share and operating earnings were $0.88 a share. This compares to 2022 third quarter GAAP earnings of $0.58 a share and operating earnings of $0.79 a share. And on a year-to-date basis, operating earnings are $1.94 a share compared to $1.91 a share in 2022 despite significant headwinds from our pension plan and lower weather-related distribution sales. Our performance in large part is due to intense focus on our operating expenses. Lower company-wide O&M improved operating results by $0.08 a share in the third quarter and $0.21 a share on a year-to-date basis, representing a 13% reduction when compared to the first 9 months of 2022. And our expectation for the full year is an O&M reduction of roughly 15% versus 2022 levels. About 50% of that is unique in nature, including spending we accelerated in 2022, with the other 50% being sustainable cost reductions that we will build upon in 2024 and beyond, primarily related to improved productivity across the entire organization, reduced use of contractors and lower spending on branding and advertising, just to name a few. We’re also running ahead of plan with capital spending in both our transmission and distribution businesses. Strong planning and execution across our operations and supply chain teams as well as the…

Brian Tierney

Analyst

Hey, Jon, real quick, before we go to Q&A, I’d like to share some late-breaking news from last night. Yesterday evening, PJM released the results of its open window process to address reliability concerns with data center load growth in the Dominion and APS service territories. Based on our preliminary review of these results, we are on track to gain a substantial portion of the projects. The recommendations still need to move through TAC and the PJM Board, but we anticipate that happening by year-end. While these projects won’t come to fruition until the latter half of the decade, we’re really excited about this opportunity. It builds on our successful bid for the onshore transmission construction that supports New Jersey’s offshore wind project, and it further highlights the significant transmission build-out we anticipate in our footprint to support the energy transition. We look forward to talking more about this opportunity at EEI once we’ve had a chance to fully understand the details. Now let’s move to your questions.

Operator

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Shar Pourreza with Guggenheim Partners. Please proceed with your question.

Shar Pourreza

Analyst

Hey, good morning, guys.

Brian Tierney

Analyst

Good morning, Shar.

Shar Pourreza

Analyst

Good morning, Brian. Let me just on the regulatory side. Obviously, we’re going to be approaching the Ohio case next May. I just – I guess I want to get a little bit of a sense on how you’re thinking about bill impact given this environment? Could this case still end up being sort of built neutral? And just remind us on what’s sort of the key driver of that case is on the invested capital side, rate base, deferred costs, O&M true-ups? And I guess any sort of experiences from the ESP proceeding that could dictate how you manage the GRC? Thanks.

Brian Tierney

Analyst

Yes. Thank you for the question, Shar. You’re really forward-looking. So we’re still in the midst of the ESP V discussions and the Grid Mod II. So we’re in the throes of that, engaging with staff and interveners and trying to come to successful conclusions there. But as you – all the things you mentioned are what we’re going to be doing in the base rate case next year, it’s going to be taking things out of the trackers and riders that we have, getting them put into base rates, updating fully our rate base, our prudently incurred costs, storm tree trimming, regular O&M, financing costs, all that getting that in base rates and then moving forward with some healthy trackers that we will have at that point. There is nothing that’s going to be controversial in that case. It’s a traditional rate case, nothing special about it, but all the things that you’d expect a regulated utility to be doing. We found over time that the Ohio Commission has been very supportive of wires investments and we’re poised to continue making those and look forward to investing in the state of Ohio. A couple of things that we’re going to be cognizant of in that case. One is where we’re earning right now relative to what we think a normal authorized return should be. We’re well below 9.5% to 10.5% return on equity, and we need to get that increased, and our rates today are about 14% below our in-state peers. So to be honest with you, Shar, it’s too early for us to know what the bill impact is going to be, but we’re always looking for ways to minimize the bill impact to customers.

Shar Pourreza

Analyst

Got it. Perfect. And then lastly for me, just on the O&M side and just pension, $0.31 of benefit is sort of very material year-over-year. I guess, how much should we assume with this benefit is tactical. So really short-term in nature versus how much of it is maybe more perpetual, so if we can put a multiple on it and assume that benefit carries into ‘25 and beyond. And then any sense on the pension performance year-to-date? Thanks, guys. Appreciate it.

Jon Taylor

Analyst

Hey, Shar, this is John. Thanks for the question. So yes, if you look at our O&M performance year-over-year, about a 15% reduction from what we incurred in 2022 which is about $200 million, a little bit more than that. I would tell you about 50% of that is associated with timing of work that we accelerated from ‘23 into ‘22 and some unique items. But the other 50% is sustainable savings associated with just productivity improvements, getting contractors off the property doing the work ourselves, we had some benefits associated with contract terminations associated with sponsorships and branding relationships that we had and just a real intense focus on just general business items that we spend. So I would say about half of it is kind of unique. I would say the other half of it is sustainable savings that we will build upon as we go into next year. With respect to the pension, the pension performance year-to-date is about flat. So that is something that we have our eye on. A lot of that is associated with the interest rate environment, but we’re taking that into account as we think about the long-term.

Shar Pourreza

Analyst

Perfect. I appreciate it guys. That’s all I had and Brian good luck with the search for the COO and President. Appreciate it.

Brian Tierney

Analyst

Thank you, Shar.

Operator

Operator

Thank you. Our next question comes from the line of Jeremy Tonet with JPMorgan. Please proceed with your question.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Hi, good morning.

Brian Tierney

Analyst · JPMorgan. Please proceed with your question.

Good morning, Jeremy.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Just wanted to touch base, I guess, on the financing plans a bit here. Given your CapEx refresh, could you clarify, I guess, what’s in the financing needs at this point? It looks like – there was prior language last quarter about no equity needs except for $100 million SIP DRIP and didn’t see that messaging in this deck. And just wondering if anything has changed there, what we should expect on that front?

Jon Taylor

Analyst · JPMorgan. Please proceed with your question.

Yes. That’s still the case. I mean, Jeremy, if you think about where we are relative to our cash flow metrics and our projections, if you think about 14% to 15% FFO to debt. You think about $3.5 billion of proceeds coming in next year from the FET sale, that has significant impact on our financing plan in a meaningful way. And so we have a lot of financial flexibility in the plan. And so – no new equity requirements fully supports the CapEx plans that we have in place plus the ability to do some balance sheet improvement initiatives to take out additional holding company debt. So no issues there.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Got it. That’s helpful there. And then continuing along on the CapEx front, I just want to kind of run through some of the numbers by had it straight here, but looking at the ‘23 through ‘25 plan, the $12 billion, how that compares to the $18 billion in the ‘21 through ‘25 plan. I think you might have spent $2.4 billion in ‘21, $2.75 billion in ‘22. And it looks like your prior plan might imply $12.8 billion CapEx for ‘23 to ‘25 and so current plan $800 million less. I just wanted to know if I had those numbers right or if there were other moving pieces here, should we be thinking about or CapEx was decreased to any of the different subs?

Jon Taylor

Analyst · JPMorgan. Please proceed with your question.

CapEx hasn’t been decreased. I mean if you look at what we’re going to spend this year, it’s $3.7 billion and then in ‘24 and ‘25 million, it’s going to be $3.9 billion and $4.1 billion, respectively. So no change in the ‘24 and ‘25 capital plans from what we introduced back in February of this year. And in fact, we increased the capital plan in ‘23 by $300 million.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Got it. That’s helpful there. Thanks. Just last one, if I could. I think you talked about incremental business disclosures that could be coming forward here. Just wondering if you might be able to offer any incremental thoughts with regards to what type of information we could see there?

Jon Taylor

Analyst · JPMorgan. Please proceed with your question.

Yes. So I think what we’re going to plan on doing is looking at our segment reporting for 2024 and going forward and making it a little simpler and more transparent for the Street. And quite frankly, for us, it will reflect how we’re going to manage the business going forward. So we’re probably going to move to segments that is distribution, one, transmission another and integrated another, and that will allow us to not have to split companies between the segments and it will require us to not have to do reconciliations for analysts that cover us, investors that are interested in it just makes the presentation of our results simpler and more in line with how we manage the business.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Got it. That’s very helpful. I’ll leave it there. Thanks.

Jon Taylor

Analyst · JPMorgan. Please proceed with your question.

Perfect.

Brian Tierney

Analyst · JPMorgan. Please proceed with your question.

Thank you.

Operator

Operator

Thank you. Our next question comes from the line of Nick Campanella with Barclays. Please proceed with your question.

Nick Campanella

Analyst · Barclays. Please proceed with your question.

Hey, good morning, everyone. Happy Friday. Thanks for taking my questions. So I guess thanks for previewing the PJM transmission opportunity. As we kind of think about rolling that into our models, is this opportunity in the hundreds of millions of dollars. And I think you said back half of the plan? Or any idea how to size it at this point?

Brian Tierney

Analyst · Barclays. Please proceed with your question.

We’re still working through that, Nick. We just got the news last night. We do believe it will be in the hundreds of millions of dollars range. Which side of $500 million. We’re still trying to figure out today. But really, it’s late-breaking news for us. We have our engineers working on it today. We hope to be able to provide more detail on that at EEI.

Nick Campanella

Analyst · Barclays. Please proceed with your question.

Great. And then, I guess, just the cadence of updates from here because I know that there is a lot of moving pieces with the COO search to your point, some of the resegmenting and everything, should we still expect fiscal ‘24 guidance on the fourth quarter? And then how do you think about financing CapEx, etcetera?

Brian Tierney

Analyst · Barclays. Please proceed with your question.

Yes. We will provide that guidance on the fourth quarter call. And look, there is going to be some late-breaking news. I’m trying to forecast what it is that we’re going to be – what the news is going to be, so nobody is surprised. And of course, we’re going to be updating you as that news comes in and becomes available. But I don’t want people to be surprised by the positions that we’re looking for, how we’re going to manage the company going forward, how we’re going to report going forward. And that’s really why we’re forecasting all that. And then we will update it as the news becomes reality. But we anticipate doing all that here over the next several months.

Nick Campanella

Analyst · Barclays. Please proceed with your question.

Okay, thanks. And if I could just squeeze one more in. Just I know that we will get 2024 guidance in the fourth quarter, but there were just some more one-time items in the fiscal ‘23 walk, I acknowledge you kind of brought up the pension headwinds in prepared remarks. How do you kind of think about the offset to those future headwinds like pension, the tax item, etcetera? I know we get a better comp on weather next year, but any guidance you could give would be helpful.

Jon Taylor

Analyst · Barclays. Please proceed with your question.

So, Nick, this is Jon. So, I guess the way I am thinking about this year, if you think about where we are with the pension, if you just look at the year-over-year weather impacts and you look at what the company has done to offset that in terms of rates and investments taking advantage of opportunities in the capital markets with low-cost convertible debt and how we deployed that proceeds. If you just look at the tight cost controls that we have put in place year-over-year, I think that overshadows the benefits associated with the income taxes. And so as you think about next year, and beyond, it’s right, you are right. We are going to get a benefit from going back to normal weather. We have the rate cases that we have in flight. We have the capital programs associated with our distribution companies that are on a formula rate as well as our transmission formula rate CapEx. And so if you think about where the returns are for the three rate cases that we filed this year, and if you look at where the returns are for the cases that we will file next year, I think you can do the math in terms of what’s going to carry the day for the earnings of the company.

Nick Campanella

Analyst · Barclays. Please proceed with your question.

Thank you.

Brian Tierney

Analyst · Barclays. Please proceed with your question.

Thanks Nick.

Operator

Operator

Thank you. Our next question comes from the line of David Arcaro with Morgan Stanley. Please proceed with your question.

David Arcaro

Analyst · Morgan Stanley. Please proceed with your question.

Hi. Good morning. Thanks very much for taking my question.

Brian Tierney

Analyst · Morgan Stanley. Please proceed with your question.

Good morning David.

David Arcaro

Analyst · Morgan Stanley. Please proceed with your question.

I was wondering if you could maybe give the latest on the status of the New Jersey rate case. Current thoughts on the settlement potential and maybe specifically on the pension normalization mechanism, how optimistic you are in that coming through?

Brian Tierney

Analyst · Morgan Stanley. Please proceed with your question.

So, we are – as you know, they have stayed the schedule for now to the last settlement discussions to continue. And we are working all of those things that you just mentioned are still in play, and we are still working – engaging with staff, interveners, others to try and bring a successful conclusion to that case and without having to take it through adjudication.

David Arcaro

Analyst · Morgan Stanley. Please proceed with your question.

Okay. It sounds good. And then also curious if you could give the latest feedback from rating agencies on prospects going forward to achieve investment-grade ratings at the parent and how the FFO to debt outlook is sitting right now as you are heading into 2024 as well?

Jon Taylor

Analyst · Morgan Stanley. Please proceed with your question.

Yes. I think we continue to have dialogue with the rating agencies. Those have been constructive conversations. They have our projections. It clearly shows that we are going to be in that 14% to 15% in ‘24 and ‘25. I will say that we have kind of taken a little bit of a step back this year in terms of our performance in the metrics. And a lot of that is because of the unseasonable weather, the fact that we made a voluntary pension contribution, we have – we had some one-off items associated with severance associated with the voluntary retirement program. So, if you kind of take those out of the mix, I mean, we are closer to that 11% range. But clearly, with the rate cases that we have in flight, which we risk adjusted in terms of what we are going to get, the fact that we are going to get now 100% of the FET proceeds in 2024, whereas before, it was going to be about 50% next year, 50% in 2025. So, we will have an opportunity to deploy all of that. It clearly shows that we will be in the 14% to 15% range next year.

David Arcaro

Analyst · Morgan Stanley. Please proceed with your question.

Okay. Excellent. I appreciate that color. Thanks so much.

Brian Tierney

Analyst · Morgan Stanley. Please proceed with your question.

Thank you, David.

Operator

Operator

Thank you. Our next question comes from the line of Angie Storozynski with Seaport Global. Please proceed with your question.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

Thank you. Just following up on that FFO to debt question, so I am looking at your financials, I mean the FFO looks particularly weak, right, for the first nine months. And I hear the explanation of why that is. But I thought that we are waiting for some improvement, not even to hit that 14% to 15%, but just some improvement in the FFO to debt, to warrant any upgrades? And it doesn’t seem like it will happen this year, is that fair to say that the trailing 12 months doesn’t seem to have any upward momentum for now.

Jon Taylor

Analyst · Seaport Global. Please proceed with your question.

Yes. Like I have said, I think the trailing 12 months and where we are this year, we have taken a little bit of a step back. Some of that was planned because we wanted to make the voluntary pension contribution. Some of it was associated with non-recurring items such as the severance that I have mentioned, that’s really going to have about a 1-year payback if you think about it. So, that will improve the metrics next year. And you can’t discount the impact of weather and it, what’s that done to cash flow, right, in terms of the lower weather-related sales. So, I understand your question, but we are very confident in the plan. We are very confident in the metrics that we provided to the rating agencies, and we will see where we get to.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

Okay. And my bigger question here, and I know that this is what we are all sort of the beating is that you obviously have this bullish EPS and now dividend growth plan. It’s pretty much contingent on the outcome of the distribution case in Ohio, and we won’t know that what happens there until probably very late to 2025. So, how do we get comfortable with that validation of your growth profile between now and then?

Brian Tierney

Analyst · Seaport Global. Please proceed with your question.

Just – so Angie, I don’t think we are all debating that at all. I just disagree with that. The things that you look for and how we hit our growth rate are how we perform in the rate cases that are before us, and you are going to have signposts to that long before the end of ‘25. We have the Ohio ESP Grid Mod II. We have the New Jersey case, the West Virginia case. And if we are performing well on those, I think you will be able to see – you will be able to get an indication that we are being successful in prosecuting rate cases, engaging with staff and interveners and come to positive outcomes. So, no need to wait until the end of 2025.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

And then just lastly on the tax benefit, very big tax benefits. And I understand that you are trying to address the weather impact. I mean lots of headwinds actually this year, but you are also reflecting in the O&M lever. I mean did you expect to have this tax benefit this year, again – and is it cash related?

Jon Taylor

Analyst · Seaport Global. Please proceed with your question.

So, at the beginning of the year, we did not anticipate the effective tax rate being at that 17%, 18%. We anticipated it being probably in that 19% to 19.5% range. So, some of the benefit that we achieved this year was not planned, but something that came up midyear and that the team executed on. I would tell you, long-term though, Angie, if you think about our blended effective tax rate, it’s probably going to be 17%, 18% this year. But longer term, it will be a more normal tax rate in that 20% to 21% range.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

And that’s already reflected in the growth plan?

Jon Taylor

Analyst · Seaport Global. Please proceed with your question.

Correct.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

Along with those additional costs that will come with basically those additional managers that you are hiring for the utilities and the COO, right? All of this is reflected in your – in your EPS growth plan.

Brian Tierney

Analyst · Seaport Global. Please proceed with your question.

It’s all in there, Angie.

Angie Storozynski

Analyst · Seaport Global. Please proceed with your question.

Okay. Thank you.

Brian Tierney

Analyst · Seaport Global. Please proceed with your question.

Thank you.

Operator

Operator

Thank you. Our next question comes from the line of Jeremy Tonet with JPMorgan. Please proceed with your question.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Hi. Good morning. Thanks for squeezing me back in here. Just wanted to kind of clarify, I guess the cadence of updates of what we should be expecting for updates on 4Q or for EEI, just wondering when ‘24 – I guess future color as far as long-term plan revisions might be if that’s the 4Q event, just wanted to kind of clarify some of the prior comments there.

Brian Tierney

Analyst · JPMorgan. Please proceed with your question.

Yes. We are going to provide an update on the fourth quarter earnings call. So, we will do specific guidance for ‘24 and we will also update the capital plan at that time.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Got it. And this could include everything EPS, long-term EPS CAGR as well or just those two items really the focus?

Brian Tierney

Analyst · JPMorgan. Please proceed with your question.

Yes. We are – there is going to be no change in the long-term EPS CAGR.

Jeremy Tonet

Analyst · JPMorgan. Please proceed with your question.

Got it. Great. Very helpful. I will leave it there. Thank you.

Brian Tierney

Analyst · JPMorgan. Please proceed with your question.

Thanks Jeremy.

Operator

Operator

Thank you. Our next question comes from the line of Anthony Crowdell with Mizuho Securities. Please proceed with your question.

Anthony Crowdell

Analyst · Mizuho Securities. Please proceed with your question.

Hey. Good morning. Just hopefully two quick questions on – one on Slide 25, and I am not trying to run your rate case decisions in the jurisdictions. But when do you kind of think that we could see like normalized earnings coming from the utilities or maybe we are in a different way? Do you guys have a target of what you think you could earn across the OpCos?

Brian Tierney

Analyst · Mizuho Securities. Please proceed with your question.

Yes. I think we can be earning in that 9.5 to low-10s range in terms of ROEs. And so if you look at this, that’s a significant component of earnings growth is going back in having these rate cases, updating our rate base, getting ROEs higher, getting current costs reflected in rates and adjusting what you can see is lower than normal earned ROEs on that slide.

Anthony Crowdell

Analyst · Mizuho Securities. Please proceed with your question.

I guess you have answered my – sorry.

Brian Tierney

Analyst · Mizuho Securities. Please proceed with your question.

No, it’s the normal stuff that utilities do, Anthony. It’s just the normal work pale that you expect us to do. We invest for the benefit of our customers. We then operate. We then recover and finance. And that’s what we will be doing this part of the presentation is the recover, where we go back in to get our hard work reflected in current rates.

Anthony Crowdell

Analyst · Mizuho Securities. Please proceed with your question.

Okay. And I think that actually answers my second question. I think earlier in one of the slides, I apologize I forgot the number. You guys give us – I appreciate the detailed rate base growth of about 7%. And to Jeremy’s question earlier about the long-term growth rate of earnings of 6% to 8%, I guess how – I was curious if you think there is going to be any lag or spread between the rate base growth and the earnings growth, but it seems that they are aligned because of this improvement in ROE. Am I thinking of that correctly?

Brian Tierney

Analyst · Mizuho Securities. Please proceed with your question.

Yes. So, we are getting ahead of this now, right. We have very active rate cases to get what you reflected on Slide 25, up to more normal levels. And as we do that, we will have some growth associated with that. And then going forward, we said rate base growth for ‘24, ‘25 was going to be about 7%, and we are looking to add to that as we go forward. So, a combination of continued investment growth in rate base, active rate cases for the foreseeable future and continuing to invest for the benefit of our customers, all of that will put us in that 6% to 8% long-term growth rate.

Anthony Crowdell

Analyst · Mizuho Securities. Please proceed with your question.

Great. Thanks so much for taking my questions. I am looking forward to seeing you at EEI.

Brian Tierney

Analyst · Mizuho Securities. Please proceed with your question.

Thanks Anthony, we are too.

Operator

Operator

Thank you. Our next question comes from the line of Gregg Orrill with UBS. Please proceed with your question.

Gregg Orrill

Analyst · UBS. Please proceed with your question.

Hi Brian. Hi Jon. Just on, Brian, where do you stand in terms of the key management hires that you are looking to do? I know you announced two of them already. Are there more to come there? And then just secondly, how are you thinking about moving beyond the sort of legacy investigations that remain? And do you see concerns with that at this point? Thank you.

Brian Tierney

Analyst · UBS. Please proceed with your question.

Thank you, Gregg. I appreciate that. In terms of the key hires, I am spending and our senior executive team here is spending a significant amount of our time recruiting. I feel some of this we need to do sequentially. I need to get a COO in place, President of FE Utilities in place, and I would like those people to help us recruit then the people who are going to be reporting to the President of FE Utilities. And they will be the five people running our major businesses. So, sort of – and by the way, we are not waiting to interview a candidate pool for those five people. We are proceeding ahead on that as well. So sequentially, trying to get the COO, President of FE Utilities, then next the people that run our four businesses and get those people seated as quickly as possible. But moving very much forward on that, it’s active. We are trying to get this done as quickly as possible. But at the same time, making sure that we are getting the right people in the place who will bring the right skills to bear for the things that we are trying to do. And we have a very strong candidate pool for all of those positions that we are recruiting for. So, I am confident we will get success. The timing of it is going to be here in the, I would say, in the near-term and hope to be able to make those announcements shortly. In terms of putting the past behind us, A lot of that heavy lifting had been done by the Board and the management team before I got here. There is active engagement with the OOCIC. We are providing our updates for the DPA with the Department of Justice. And then for the remaining litigation that’s out there, we are moving forward with that, trying to settle what we can, but put that pass behind us and strongly focused on the future. And I don’t anticipate any unexpected hiccups there.

Gregg Orrill

Analyst · UBS. Please proceed with your question.

Okay. Good luck. Thanks.

Brian Tierney

Analyst · UBS. Please proceed with your question.

Thanks Gregg.

Operator

Operator

Thank you. Our next question comes from the line of Steve Fleishman with Wolfe Research. Please proceed with your question.

Steve Fleishman

Analyst · Wolfe Research. Please proceed with your question.

Yes. Hi. Good morning.

Brian Tierney

Analyst · Wolfe Research. Please proceed with your question.

Good morning Steve.

Steve Fleishman

Analyst · Wolfe Research. Please proceed with your question.

Good morning. Just the cases in Ohio, the Grid Mod and the ESP filing, can you just talk to the schedule there coming up. And I know some of the other utilities have actually have been able to settle ESPs and the like. Is that possible for you?

Brian Tierney

Analyst · Wolfe Research. Please proceed with your question.

Yes. So, we are in the midst of ESP-5 right now. That case is in flight. We have seen intervener’s testimony. I think staff testimony comes out on Monday. But as you would expect us to do, we are actively engaged in settlement discussions in those cases, trying to positively engage people like the staff and the other interveners and hopeful that we will be able to come to a settlement similar to what the other companies have settled at. I don’t see any reason to think that we won’t be able to do that.

Steve Fleishman

Analyst · Wolfe Research. Please proceed with your question.

And then on the Grid Mod, would that be kind of part of the same thing or separate?

Brian Tierney

Analyst · Wolfe Research. Please proceed with your question.

Same thing, slightly behind where we are in ESP-5. But as soon as we get through the ESP, we will get the Grid Mod and hope to be able to settle that as well. There is nothing, Steve, that’s controversial in these. It’s normal course of business, trying to update the rate base and costs that are reflected in those riders, and then hopefully leave those in place until we get to the May ‘24 rate case and then try to get those cleared out and get them reflected in base rates.

Steve Fleishman

Analyst · Wolfe Research. Please proceed with your question.

Got it. Okay. Thank you.

Brian Tierney

Analyst · Wolfe Research. Please proceed with your question.

Thanks Steve.

Operator

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session and concludes our call today. A replay of the call will be available on FirstEnergy’s Investor Relations website. Thank you for your participation. You may now disconnect your lines.