|
|
Utilities
|
|
||
FirstEnergy holds off on updating growth plan after strong quarter from SNL Energy Finance Daily FirstEnergy holds off on updating growth plan after strong quarterByline: Darren Sweeney With the investment community seemingly pleased by a strong financial performance, FirstEnergy Corp. management on Nov. 4 sought to temper expectations that the company would roll out a new growth plan. "I know you're anxious for us to communicate both our [compound annual growth rate] and equity plans beyond the 2018 to 2021 time frame," FirstEnergy President and CEO Charles Jones Jr. told analysts and investors on the company's third-quarter earnings call. "We will provide this information as soon as it makes sense once we've completed our internal financial planning process. That should not be taken as any indication that either of these will ultimately be disappointing to the market." FirstEnergy on Nov. 4 reaffirmed its 6% to 8% operating earnings growth rate for 2018 through 2021. The company reported third-quarter operating earnings of 76 cents per share, compared with 80 cents per share in the same period of 2018. The results beat the S&P Global Market Intelligence normalized consensus EPS estimate of 73 cents, and the company narrowed its 2019 operating earnings guidance range to $2.50 per share to $2.60 per share from the previous range of $2.45 per share to $2.75 per share. FirstEnergy also initiated GAAP and operating earnings guidance of $2.40 per share to $2.60 per share for 2020. Jones said the company is "getting close" to releasing new details on its growth plans but did not provide a timetable. "To plan a company like ours three to four years out, it's a challenging process," Jones said. "It involves 10 operating companies, including our transmission business, looking at project-by-project what they plan to execute out in 2022 and beyond. It involves a lot of analysis around things like market performance and interest rates and growth economy versus recession economy, and we're doing all that right now." FirstEnergy is expected to be completely separated from bankrupt subsidiary FirstEnergy Solutions Corp. upon the competitive unit's emergence from bankruptcy before the end of the year. The company also plans to share a new corporate responsibility report and its "first public strategic plan" with the investment community at the Edison Electric Institute Financial Conference, which kicks off Nov. 10 in Orlando, Fla. "These reports support our commitment to increase transparency and engagement with investors, customers and other stakeholders, while providing a platform to track our progress as we transition to a cleaner, smarter and more sustainable energy future," Jones said. FirstEnergy also has met with all three rating agencies and expects updates on its entities "possibly as soon as EEI," management said. "As far as holdco leverage, I wish it wasn't what it was," Jones said in response to an analyst's question on the company's debt profile. "But at the same point, as I've discussed in the past, we are comfortable that we can deploy about $3 billion of capital investment in our transmission and distribution system that's what's driving the growth of this company and do it in a way where we will eventually grow into a stronger balance sheet. "We could deploy some of that cash toward maybe some of the holding company debt, but I just don't think that's the right thing to do for shareholders over the long term." FirstEnergy had consolidated non-GAAP debt of $20.33 billion, or 57% of its total capitalization as of Sept. 30, according to an investor factbook. The company is targeting holding company debt of approximately 35% of its total debt. Spending plans The CEO said the company will continue to invest its cash in growth and plans to spend $1.2 billion annually in transmission and $1.8 billion in distribution for the foreseeable future. FirstEnergy subsidiaries Metropolitan Edison Co., Pennsylvania Electric Co., Pennsylvania Power Co. and West Penn Power Co. filed long-term infrastructure plans in late August with Pennsylvania regulators that outline about $572 million in distribution and transmission spending for 2020 through 2024. The utilities plan to recover these investments through a rider mechanism, with approval from the Pennsylvania Public Utility Commission expected by the end of the year. In Ohio, FirstEnergy's utilities are in the process of implementing a three-year, $516 million grid modernization program focused on smart meter installation, automation and other distribution infrastructure upgrades. The grid modernization program, which the Public Utilities Commission of Ohio approved in July, is part of a settlement agreement that also fully resolved the impact of federal tax reform. FirstEnergy subsidiary Jersey Central Power & Light Co. filed a plan with the Federal Energy Regulatory Commission in late October seeking approval to move its transmission assets "onto a forward-looking formula rate structure" Jan. 1, 2020. This plan is designed to support the utility's "Energizing the Future" investment needs, which include $175 million in capital spending in 2020. |
return to message board, top of board |