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.

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.

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 base O&M by over $130 million or 13% year-over-year by executing on various continuous improvement initiatives. Employees executed on our capital plan with CapEx increasing $410 million year-to-date, mostly in transmission, which is 50% ahead of 2022 levels. Our treasury organization executed on a strategic low cost of capital, convertible debt issuance that was used to retire high cost debt and fund our pension. Jon will discuss these drivers and others in more detail in just a few minutes. The key takeaway is that we have had tremendous operational and financial execution to allow us to meet our targets. We intend to build on this performance, continue to change our culture and improve resiliency and reliability for our customers. We are providing a fourth quarter guidance range of $0.55 to $0.65 per share, which assumes normal weather. We are also narrowing our 2023 operating earnings guidance range to $2.49 per share to $2.59 per share from our original range of $2.44 per share to $2.64. In addition, we are reaffirming our 6% to 8% targeted long-term growth rate off of the original midpoint of prior year’s guidance. Before I move to key developments in the quarter, I want to address a couple of other topics. First, I want to briefly address the Ohio Organized Crime Investigation Commission, subpoena. We have no new material update at this time, and we continue to cooperate with the commission and address their questions. Their focus continues to be on activities that were detailed in the deferred prosecution agreement with nothing new. FirstEnergy has taken full responsibility for those activities and implemented corrective actions to ensure that those type of activities never happen again. We will continue to cooperate with the OOCIC as we focus on executing our strategy and fulfilling our vision to transform FirstEnergy into a top-performing utility. The last subject before we move on is that I believe we are uniquely well positioned for the current interest rate environment. We expect to close on the FET transaction early next year and to receive the full proceeds of $3.5 billion in 2024 with the majority funded at close. In addition, our debt maturities are light over the next couple of years, on average, approximating 6% of our total debt outstanding. This positioning supports our robust capital plan. This year, we are on track for $3.7 billion in capital investments, up from our original plan of $3.4 billion. In 2024 and 2025, our planned capital investments are $3.9 billion and $4.1 billion, respectively. This brings our total capital investments over the 3-year period to approximately $12 billion. This capital investment plan is comprised of 47% transmission and 51% distribution, supporting 7% rate base growth over the period and we’re reviewing additional investments to serve our customers. Turning to Slide 6. Let’s review some recent key developments. In September, our Board declared a quarterly dividend of $0.41 per share payable December 1. This represents a 5% increase compared to the quarterly payments of $0.39 per share paid since March of 2020. The increase corresponds with our targeted payout ratio of 60% to 70% that was approved by the Board earlier this year. It sets the stage for future dividend growth that is aligned with our long-term operating earnings growth as we continue to work – as we continue working to enhance value for investors. During the quarter, we also achieved some important regulatory milestones that support our strategy of investing to improve reliability, resiliency and the customer experience. On October 18, the Maryland Public Service Commission approved our distribution base rate case including a $28 million revenue increase that supports equity returns of 9.5% and an equity ratio of 53%. We are pleased with this outcome, which support continued investments in the state and helps us deliver on our commitment to providing dependable and affordable electricity to our customers in Potomac Edison’s Maryland service territory. We are also excited to move forward with the first of our 3 utility-scale solar generation sites in West Virginia, totaling 30 megawatts of capacity. Our proposal, along with the small construction surcharge was approved by the West Virginia Public Service Commission in August. We plan to seek approval from the PSC to build an additional 2 solar sites, representing another 20 megawatts once customer subscriptions reach the 85% threshold. Jon will address the regulatory items and discuss the progress we’re making with other filings, including the Pennsylvania consolidation case and our rate proceedings in New Jersey, Ohio and West Virginia. We are focused on making the necessary investments in our regulated businesses, our employees and in systems and our systems to enhance the customer experience and create new opportunities from the energy transition. To execute that vision, we are shifting decision-making and accountability closer to where the work is being done to serve customers. We are making progress to fill several key executive positions in an organization that will be structured to allow greater execution at the business unit level. In the near future, we expect to announce a President, FirstEnergy Utilities, as well as a Chief Operating Officer. President, FirstEnergy Utilities, will oversee 5 business unit executives who will lead our state operations and our stand-alone transmission companies. In our new organization, the business unit executives will have P&L responsibility and will be accountable for regulatory direction and outcomes as well as operational performance. The Chief Operating Officer, will lead the customer experience group and a range of T&D functions, including planning, construction, system operations, safety and compliance. Five months into my role, I’m more excited than ever about the future of FirstEnergy. We are building a strong foundation of operational and financial excellence. We are using our strengthened balance sheet to invest in our people and our system for reliability, resiliency and in support of the energy transition. We are poised to capitalize on these opportunities to continue to grow the company and create a strong investment opportunity for investors. Thank you for joining us today. I look forward to seeing many of you at the EEI Conference next month and talking more about the progress we’re making at FirstEnergy. Now I will turn the call over to Jon for more financial detail.

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 need to respond to more severe and capital-intensive storm events, resulted in an increase to our 2023 forecasted capital investment of nearly $300 million to $3.7 billion from our original plan of $3.4 billion. Looking now at the drivers for each of our business units for the third quarter. Results in our distribution business benefited from the diligent focus on operating expenses as well as our formula rate capital investment programs and rate structures. Together, these helped to offset the impact of a lower pension credit, higher financing costs, mostly associated with new debt issuances and the impact of mild weather on distribution sales. Mild summer temperatures with cooling degree days 17% lower than the third quarter of 2022 and 6% below normal drove a 3% decrease in total customer demand and impacted earnings by $0.06 a share compared to last year. Sales to residential customers decreased nearly 4% compared to the third quarter of 2022 resulting from a 6% decrease due to the mild summer weather, partially offset by a 2% increase on a weather-adjusted basis. Year-to-date, weather-adjusted usage in this customer class is about 2% higher than our forecast and last year, and about 5% higher than 2019 pre-pandemic levels. In the commercial sector, demand decreased just over 1%, resulting from a 2% decline in the mild temperatures but increased over 1% quarter-over-quarter on a weather-adjusted basis. Year-to-date weather-adjusted usage is flat to last year and continues to lag pre-pandemic levels by about 5%. Finally, sales to industrial customers were flat compared to the third quarter and year-to-date periods of 2022 and remain slightly lower than pre-pandemic levels. Looking at our transmission business, third quarter results increased as a result of rate base growth of 8% associated with our energizing the future investment program. So far this year, we deployed $1.2 billion of capital in our transmission business, an increase of $400 million or 50% versus last year and nearly $200 million or approximately 20% above our plan. Highlighting just a few of the many projects currently underway, in Northeast Pennsylvania, we’re rebuilding 20-mile 115 kV transmission line to enhance service reliability and improve system resiliency. In Ohio, we’re rebuilding a 20-mile section of a 138 kV power line in Belmont and Harrison Counties which is in the third phase of a larger 64-mile project to enhance service reliability, improve system resiliency and accommodate increasing customer demand. And in West Virginia, we’re upgrading 4 miles of a high-voltage transmission power line in Preston County to reinforce local transmission system against severe weather, meet future energy demands of the region and enhance service reliability for 5,000 customers in the Kingwood area. For the full year, we now anticipate transmission formula rate investments of over $1.8 billion versus our original plan of just under $1.7 billion. In our corporate segment, our results for the third quarter largely reflect the tax benefit from the expected use of state net operating loss carry-forwards, which we discussed on the second quarter call that reduced our consolidated effective tax rate for the year. As Brian mentioned, throughout 2023, our consistent operational and financial execution, including growth from our investment plan, significant cost control and other financing and tax benefits has more than offset the headwinds from pension and the impact of lower weather-related distribution sales which for the first 9 months of this year impacted results by $0.18 per share versus normal. I’m proud of how all of our employees have addressed these challenges and supported our commitments. While 2023 is not over, our 2023 debt financing plan is now complete, with 6 long-term debt transactions at our regulated operating companies totaling $1.6 billion, with an average coupon of 5.41%, slightly below our plan of 5.5%. Also earlier this year, FE Corp. issued $1.5 billion of convertible debt with a coupon of 4% that allowed the company to refinance revolver borrowings costing more than 7% and to make a voluntary pension contribution to eliminate minimum funding requirements in 2025. Additionally, earlier this month, we extended the maturity date on our $4.5 billion revolving credit facilities to October 2027 and added 2 new revolving credit facilities, including a $1 billion facility at FET LLC and $150 million facility at CatCo. Moving forward, we will have $5.65 billion of credit facilities to support our increasing capital programs. As we look to 2024 and 2025, our debt financing plan is minimal since the majority of the FET asset sale proceeds will be received at closing, with the remainder anticipated before the end of 2024. We plan to use these proceeds to repay costly revolver borrowings and depending on the interest rate environment will be used to redeem high coupon holdco debt, such as the 738 notes of which $460 million remain outstanding, retire maturing utility debt and/or defer other utility debt issuances. The funding from the FET transaction, our light debt maturity schedule plus the decision we made to issue the low-cost convertible debt provides significant flexibility with our utility debt financing plan, which other than refinancings and new money requirements at our stand-alone transmission companies could be as low as $2.1 billion over the next 2 years. And as for FE Corp’s holdco debt, we only have $300 million that matures in 2025. All that said, we’re uniquely well positioned for the current interest rate environment with minimal earnings sensitivity to interest rate increases over the next couple of years. Now let’s turn to an update on our rate proceedings and other regulatory activity. As we’ve discussed, we filed three base rate cases earlier this year, representing more than $7 billion of rate base. As Brian said, last week, we received an order in the Maryland base rate case that aligns with our goals to continue meeting the energy demands of Potomac Edison’s rapidly growing population. The order authorized an equity capitalization ratio of 53% with an equity return of 9.5%, recovery of regulatory assets associated with both COVID and electric vehicle infrastructure, while also providing support to help our strategy of strong reliability and resiliency in support of the energy transition. The new rates went into effect October 19. We’re also happy with the progress on the New Jersey and West Virginia base rate cases. In New Jersey, we’ve entered into settlement discussions on our proposed revenue increase of $192 million, and in West Virginia, our hearing is set for late January and our $207 million base rate case with new rates expected to be effective in March of next year. Other recent regulatory updates include in Pennsylvania, FERC approved our application to consolidate our four Pennsylvania distribution utilities in August, and the parties to the case filed a settlement agreement with the Pennsylvania Public Utility Commission on August 30. The settlement includes $650,000 in bill assistance for income-eligible customers over 5 years, supports unification of rates over time and includes a tracking mechanism to share certain cost savings associated with the legal entity consolidation with customers. With the ALJ’s recommended approval of the settlement, which is pending final regulatory approval, we expect the consolidation to close by early 2024. This consolidation aligns with our state operating model is an important step to simplify our legal entity structure and increase the flexibility and efficiency of our financing strategy. In Ohio, hearings for our Grid Mod II filing are scheduled to begin in December. This 4-year $626 million capital investment plan will support our continued work delivering safe, reliable power, offering modern customer experiences and supporting emerging technologies. And in November, hearings are scheduled to begin on our fifth Ohio electric security plan which supports our generation procurement process for non-shopping customers as well as investments in the distribution system, storm and vegetation management riders and energy efficiency programs. Our proposal also supports low-income customers and electric vehicle incentives. We have requested approval for the new ESP effective June 1 of next year. In West Virginia, we reached a unanimous settlement in our depreciation case, with an agreed-upon $33 million increase in depreciation rates, those rates will be effective upon conclusion of the West Virginia base rate case. And as Brian discussed, we received approval from the West Virginia Public Service Commission in August to move forward with construction of the first three utility-scale solar generation sites in the state. We expect the first site to be in service by the end of this year and all five sites to be completed before the end of 2025. And at a total investment cost of approximately $110 million. Just as a reminder, summaries of our key filings together with news releases and links to dockets are all available on the regulatory corner section of our Investor Relations website. Looking ahead, we plan to file our New Jersey infrastructure investment program in the next few weeks. And as you know, we are preparing for an active regulatory calendar in 2024. The performance of our team has been second to none by focusing on what we can control and a commitment to continuous improvement. We’ve delivered outstanding operational and financial performance. We’ve overcome the impact of historic unseasonable weather and other challenges to deliver solid results through the first 9 months of this year. We’re on track to meet our financial commitments, and we’re building a strong foundation for continued growth. Thank you for your time today. Now let’s open the call to your questions.

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.

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

Hey, good morning, guys.

Good morning, Shar.

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.

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.

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.

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.

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

Thank you, Shar.

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

Hi, good morning.

Good morning, Jeremy.

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?

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.

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?

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.

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?

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.

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

Perfect.

Thank you.

Thank you. Our next question comes from the line of Nick Campanella with 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?

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.

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?

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.

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.

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.

Thank you.

Thanks Nick.

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

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

Good morning David.

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?

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.

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?

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.

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

Thank you, David.

Thank you. Our next question comes from the line of Angie Storozynski with 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.

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.

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?

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.

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?

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.

And that’s already reflected in the growth plan?

Correct.

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.

It’s all in there, Angie.

Okay. Thank you.

Thank you.

Thank you. Our next question comes from the line of Jeremy Tonet with 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.

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.

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

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

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

Thanks Jeremy.

Thank you. Our next question comes from the line of Anthony Crowdell with 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?

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.

I guess you have answered my – sorry.

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.

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?

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.

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

Thanks Anthony, we are too.

Thank you. Our next question comes from the line of Gregg Orrill with 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.

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.

Okay. Good luck. Thanks.

Thanks Gregg.

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

Yes. Hi. Good morning.

Good morning Steve.

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?

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.

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

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.

Got it. Okay. Thank you.

Thanks Steve.

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.