Dive Brief:
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The PJM Interconnection has selected at least two FirstEnergy transmission projects totaling $372 million to help handle load from data centers, a move that reflects the company’s expectations for transmission development, FirstEnergy officials said Friday during the company’s third quarter earnings conference call.
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“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 buildout we anticipate in our footprint to support the energy transition,” Brian Tierney, FirstEnergy president and CEO, said, noting the “2022 Window 3” PJM projects are slated for a board vote in December after being reviewed by a committee.
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FirstEnergy is cooperating with the Ohio Organized Crime Investigation Commission, which is investigating the utility company’s activities around its bribery scandal involving state lawmakers, according to Tierney. There is nothing new in the investigation beyond activities detailed in the deferred prosecution agreement with federal prosecutors, he said.
Dive Insight:
With a revamped board and other efforts, FirstEnergy is trying to settle remaining litigation related to the bribery scandal, “put that past behind us and strongly focus on the future, and I don’t anticipate any unexpected hiccups there,” Tierney said.
Despite the disruptions FirstEnergy faces, the company’s leadership team is focused on executing its strategy and running the business, the company said in a quarterly filing with the Securities and Exchange Commission.
“The outcome of the government investigations, [Public Utilities Commission of Ohio] proceedings, legislative activity, and any of these lawsuits is uncertain and could have a material adverse effect on FirstEnergy’s financial condition, results of operations and cash flows,” the company said.
Like all utilities, FirstEnergy is grappling with rising interest rates, which has caused the interest expense on borrowings under its credit facilities and new capital market issuances to be significantly higher, the Akron, Ohio-based company said in its SEC filing.
However, FirstEnergy is well positioned to handle the rising rates — in part because it expects to receive $3.5 billion next year when it sells a 30% stake in a transmission subsidiary to Brookfield Super-Core Infrastructure Partners, according to Taylor.
FirstEnergy plans to use the sale proceeds to pay down high-cost revolver borrowings, reduce holding company debt, retire certain utility debt and/or defer other utility debt issuances, according to a company presentation.
The higher interest rates come amid a surge in planned capital expenditures by FirstEnergy.
The utility company expects to spend $3.7 billion in capital investments this year, up from an initial $3.4 billion plan, according to Jon Taylor, FirstEnergy chief financial officer. It expects to invest $3.9 billion and $4.1 billion next year and in 2025, he said, adding that about 51% of the planned spending is on FirstEnergy’s distribution system and 47% is for transmission, supporting 7% rate base growth.
So far this year, FirstEnergy has spent $1.2 billion on its transmission business, up $400 million from a year ago, according to Taylor. He said FirstEnergy expects to spend $1.8 billion this year on transmission projects eligible for formula rates, which are reviewed by the Federal Energy Regulatory Commission without the scrutiny of a rate case.
Meanwhile, FirstEnergy expects it will consolidate its Pennsylvania utilities early next year, according to the SEC filing. They are Metropolitan Edison, Pennsylvania Electric, Pennsylvania Power and West Penn Power.
FirstEnergy’s third-quarter income from continuing operations jumped 26% to $421 million, up from $334 million, a year ago. Revenue was flat at $3.5 billion.
FirstEnergy electricity sales fell 1.7% in the third quarter to 38.8 million MWh compared to the year-ago quarter. But, weather-adjusted sales, a measure that aims to eliminate the variability of weather, increased 1.2%, driven by higher residential sales, FirstEnergy said.
