Key Updates:
- FirstEnergy has reported that the number of potential data centers in its service area has surged to nearly 3 gigawatts (GW) by 2029, significantly up from previous estimates. When including both existing facilities and contracts, this could total around 6 GW by the end of the decade.
- The company anticipates an annual load growth of 2.4% over the next five years, with industrial sales, which encompass data centers, projected to rise by 5.1%. Residential sales are expected to grow by 1.7% per year, although commercial sales might decline by 0.6% during the same period.
- On the stock market, FirstEnergy’s shares fell nearly 10.5%, closing at $38.54/share, as the company adjusted its earnings per share (EPS) forecast to reflect a new “Core EPS” metric. This excludes some unstable income sources.
Company Insights:
FirstEnergy plans to focus on its regulated utility and transmission operations by implementing a new Core EPS metric. This metric will remove earnings from its 33.3% ownership stake in Signal Peak, a coal company, as well as its pension fund income.
Utilizing this revised metric, FirstEnergy expects a 5.5% growth in earnings this year. However, increased borrowing costs, the loss of a return on equity adder for its Ohio utility, and high operational costs are dampening its results.
Looking ahead, FirstEnergy forecasts a 6% to 8% annual growth in its Core EPS over the next five years. Analysts note that the adjustment in earnings expectations also accounts for additional income sources being excluded beyond just the coal company and pension results.
Additionally, the company has enhanced its five-year capital investment plan by 8%, bringing it to $28 billion. This investment is expected to yield a 9% compounded annual growth rate.
Approximately 75% of these investments involve recovery mechanisms that supply real-time returns. A significant portion is tied to assets regulated by the Federal Energy Regulatory Commission, contributing to a 10% growth rate in the transmission segment.
In line with future operations, FirstEnergy’s Monongahela Power subsidiary is likely to propose adding dispatchable generation capacity in order to meet resource needs, planning to file its integrated resource plan with West Virginia regulators this year.
Currently, FirstEnergy owns around 3 GW of coal-fired power in West Virginia, which is scheduled for retirement between 2035 and 2040. The company estimates that replacing this capacity with 3 GW to 4 GW of gas-fired generation could require investments totaling between $4 billion and $6 billion.
The company has also indicated potential challenges due to tariffs on imports, which could have negative implications for their operations and financial health.
With increasing electricity demand in its service area, FirstEnergy warns that it may need to procure energy from the market or build additional resources to satisfy customer needs if supply becomes insufficient.
Overall, FirstEnergy’s earnings from ongoing operations saw a 13% decrease in 2024, totaling $978 million compared to $1.1 billion the previous year, primarily due to environmental liability costs associated with coal operations. However, revenue rose by 5% to $13.5 billion.
FirstEnergy serves approximately 6 million customers across several states, including Ohio, Pennsylvania, New Jersey, West Virginia, Maryland, and New York.