FE

FIRSTENERGY CORP

NYSE · UTILITIES · ELECTRIC SERVICES

45.51

−0.21 −0.46%

USD · close Oct 21

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MKT CAP $26.3BP/E —DIV YIELD —FCF YIELD -6.63%REV TTM $15.5B +11.3%NET INCOME $1.1B −1.8%NET DEBT $26.3B52W 43.02 – 51.91SEC XBRL · TTM TO Invalid Date

How FE rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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RISK FACTORS We operate in a business environment that involves significant risks, many of which are beyond the Registrants’ control.
The Registrants regularly evaluate the most significant risks of their businesses and review those risks with their respective boards of directors and, if appropriate, committees of those boards of directors.
The following risk factors and all other information contained in this report should be considered carefully when evaluating the Registrants, and unless a risk factor expressly excludes a Registrant or the context requires otherwise, references to “we,” “us,” and “our” refer to both Registrants.
These risk factors could affect our financial results and cause such results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.
Below, we have identified risks we consider material.
The risks that we face are not limited to those in this section.
There may be additional risks and uncertainties (either currently unknown or not currently believed to be material) that could adversely affect our business, financial condition, results of operations, liquidity or cash flows.
Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.
These risk factors should be read in conjunction with Item 1., "Business,” Item 7., "Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other sections of this Form 10-K that include forward-looking and other statements involving risks and uncertainties that could impact our business, financial condition, results of operations, liquidity or cash flows.
Risks Associated with Damage to Our Reputation and Securities Class-Action Litigation Securities class-action litigation against us could have a material adverse effect on our reputation, business, financial condition, results of operations, our ability to access capital, liquidity or cash flows.
Attorney’s Office that, subject to court proceedings, resolves the previously disclosed U.S.
Attorney’s Office investigation into us relating to our lobbying and governmental affairs activities concerning HB 6.
Under the DPA, we paid a $230 million monetary penalty in 2021 and agreed to the filing of a criminal information charging FirstEnergy with one count of conspiracy to commit honest services wire fraud.
As of July 22, 2024, we successfully completed the obligations required within the three-year term of the DPA.
Under the DPA, and until the conclusion of any related investigation, criminal prosecution and civil proceeding brought by the U.S.
Attorney’s Office, we have an obligation to continue (i) publishing quarterly a list of all payments to 501(c)(4) entities and all payments to entities known by us to be operating for the benefit of a public official, either directly or indirectly; (ii) not making any statements that contradict the DPA; (iii) notifying the U.S.
Ohio of any changes in FirstEnergy’s corporate form; and (iv) cooperating with the U.S.
In accordance with the DPA, these obligations will continue until the completion of any related investigation, criminal prosecution, and civil proceeding brought by the U.S.
Attorney’s Office related to the conduct set forth in the DPA’s statement of facts, including the January 17, 2025 indictment against two former FirstEnergy senior officers, described in “Outlook—Other Legal Proceeding – United States v.
Larry Householder, et al.,” in Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations".
Attorney’s Office filed a status report confirming these commitments.
If we are found to have breached the terms of the DPA, the U.S.
Attorney’s Office may elect to prosecute, or bring a civil action against, us for conduct alleged in the DPA or known to the government, which could result in fines or penalties and could have a material adverse impact on our reputation or relationships with regulatory and legislative authorities, customers and other stakeholders, as well as our consolidated financial statements.
Failure to comply with the DPA, including alleged failures to comply with anti-corruption and anti-bribery laws, may also result in a breach of certain covenants contained in our credit agreements and could result in an event of default under such agreements, and we would not be able to access our credit facilities for additional borrowings and letters of credit during the existence of any such default.
Ohio of the investigation surrounding HB 6 in July 2020, certain of FE’s stockholders and customers filed several lawsuits against us and certain current and former directors, officers and other employees, including the federal securities class action litigation In re FirstEnergy Corp.
Securities Litigation (Federal District Court, S.D.
We believe that it is probable that FE will incur a loss in connection with the resolution of In re FirstEnergy Corp.
Given the ongoing nature and complexity of such litigation, we cannot yet reasonably estimate a loss or range of loss that may arise from its resolution.
However, if it is resolved against us substantial monetary damages could result and our reputation, business, financial condition, results of operations, liquidity or cash flows may be materially adversely affected.
This securities class-action litigation could divert management’s focus and have resulted in, and could continue to result in, substantial expenses, and the commitment of substantial corporate resources.
The outcome, duration, scope, result or related costs of the securities class action litigation In re: FirstEnergy Corp.
Securities Litigation discussed above, are inherently uncertain.
Therefore, any of these risks could impact us significantly beyond expectations.
See Note 14, "Commitments, Guarantees and Contingencies,” of the Combined Notes to Financial Statements of the Registrants and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” These matters are likely to continue to have an adverse impact on the trading prices of our securities, which could be material.
See Note 14., “Commitments, Guarantees and Contingencies,” of the Combined Notes to Financial Statements of the Registrants, for additional details on the government investigations and subsequent litigation surrounding HB 6.
Damage to our reputation may arise from numerous sources making us vulnerable to negative customer perception, adverse regulatory outcomes, or other consequences, which could materially adversely affect our business, results of operations and financial condition.
Our reputation is important towards maintaining new and ongoing positive relationships with customers, regulators, investors, and other stakeholders.
Damage to our reputation could materially adversely affect our business, results of operations and financial condition.
Such damage may arise from numerous sources further discussed generally within these risk factors.
Any damage to our reputation, either generally or as a result of, among other things, changes in our service reliability, our rate affordability or negative outcomes in the ongoing matters relating to HB 6, may lead to negative customer perception, which may make it difficult for us to compete successfully for new opportunities, or could adversely impact our ability to launch new sophisticated technology-driven solutions to meet our customer expectations.

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Gone since FY2024

Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) other factors discussed herein and in FirstEnergy's other filings with the SEC.
The foregoing review of factors also should not be construed as exhaustive.
New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on our business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.
We expressly disclaim any obligation to update or revise, except as required by law, any forward-looking statements contained herein or in the information incorporated by reference as a result of new information, future events or otherwise.
Forward-looking and other statements in this Annual Report on Form 10-K regarding our Climate Strategy, including our GHG emission reduction goals, are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC.
In addition, historical, current and forward-looking statements regarding climate matters, including GHG emissions, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXECUTIVE SUMMARY AND RECENT DEVELOPMENTS Company Overview FirstEnergy is dedicated to integrity, safety, reliability and operational excellence and is principally involved in the transmission, distribution and generation of electricity through its reportable segments: Distribution, Integrated and Stand-Alone Transmission.
Its electric distribution companies form one of the nation's largest investor-owned electric systems, serving over six million customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York.
FirstEnergy’s transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions and two regional transmission operation centers.
As of December 31, 2024, AGC and MP control 3,604 MWs of net maximum generation capacity.
Segment Overview During the first quarter of 2024, FirstEnergy’s segment reporting structure was modified to increase transparency for leadership and investors, simplify the presentation to corresponding legal entities, and align FirstEnergy’s earnings, cash flows and balance sheets at the business unit level.
FirstEnergy’s reportable segments are as follows: The Distribution segment, which consists of the Ohio Companies and FE PA, representing $11 billion in rate base as of December 31, 2024, distributes electricity through FirstEnergy’s electric operating companies in Ohio and Pennsylvania.
The Distribution segment serves approximately 4.3 million customers in Ohio and Pennsylvania across its distribution footprint and purchases power for its provider of last resort, SOS, standard service offer and default service requirements.
The segment’s results reflect the costs of securing and delivering electric generation to customers, including the deferral and amortization of certain costs.
The Integrated segment includes the distribution and transmission operations under JCP&L, MP and PE, as well as MP’s regulated generation operations, representing $9.6 billion in rate base as of December 31, 2024.
The Integrated segment distributes electricity to approximately 2 million customers in New Jersey, West Virginia and Maryland across its distribution footprint; provides transmission infrastructure in New Jersey, West Virginia, Maryland and Virginia to transmit electricity and operates 3,604 MWs of regulated net maximum generation capacity located primarily in West Virginia and Virginia.
The segment will also include MP and PE’s 50 MWs of solar generation at five sites in West Virginia once complete.
The first two solar generation sites were completed and placed in service in January and September 2024, representing 24 MWs of net maximum generating capacity.
The remaining three sites, once completed, are expected to provide 26 MWs of additional net maximum generation capacity.
The Stand-Alone Transmission segment, which consists of FE's ownership in FET and KATCo, representing $5.3 billion in rate base as of December 31, 2024, includes transmission infrastructure owned and operated by the Transmission Companies and used to transmit electricity.
The segment’s revenues are primarily derived from forward-looking formula rates, pursuant to which the revenue requirement is updated annually based on a projected rate base and projected costs, which is subject to an annual true-up based on actual rate base and costs.
The segment’s results also reflect the net transmission expenses related to the delivery of electricity on FirstEnergy’s transmission facilities.
KATCo, which was a subsidiary of FET, became a wholly owned subsidiary of FE prior to the closing of the FET P&SA I and remains in the Stand-Alone Transmission segment.
On January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo and prior year results in the Stand-Alone Transmission segment reflect the earnings and results of those WP transmission assets.
Corporate/Other reflects corporate support and other costs not charged or attributable to the Electric Companies or Transmission Companies, including FE’s retained pension and OPEB assets and liabilities of former subsidiaries, interest expense on FE’s holding company debt and other investments or businesses that do not constitute an operating segment, including FEV’s investment of 33-1/3% equity ownership in Global Holding.
Also included in Corporate/Other for segment reporting is 67 MWs of net maximum generation capacity, representing AE Supply’s OVEC capacity entitlement.
As of December 31, 2024, Corporate/Other had approximately $6.1 billion of external FE holding company debt.
FirstEnergy believes that this segment reporting serves to provide: • Greater transparency into our business unit performance; • Alignment with our cash flow, credit metrics, balance sheet and earnings to the companies comprising each segment; • Simplification of our segment reporting so that each entire entity resides within a segment; and • Consistency with peers.
PA Consolidation On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, rendering FE PA a new, single operating entity and the successor-in-interest to all assets and liabilities of the Pennsylvania Companies.
As of January 1, 2024, FE PA is FE’s only regulated distribution power company in Pennsylvania encompassing the operations previously conducted individually by the Pennsylvania Companies.
FirstEnergy continues to evaluate the legal, financial, operational and branding benefits of consolidating the Ohio Companies into a single Ohio power company.
Also on January 1, 2024, WP transferred certain of its Pennsylvania-based transmission assets to KATCo, and PN and ME contributed their respective Class B equity interests of MAIT to FE, which were ultimately contributed to FET in exchange for a special purpose membership interest in FET.
So long as FE holds the FET special purpose membership interests, it will receive 100% of any Class B distributions made by MAIT.
FET Equity Interest Sale On February 2, 2023, FE, along with FET, entered into the FET P&SA II with Brookfield and the Brookfield Guarantors, pursuant to which FE agreed to sell to Brookfield at the closing, and Brookfield agreed to purchase from FE, an incremental 30% equity interest in FET for a purchase price of $3.5 billion.
The FET Equity Interest Sale closed on March 25, 2024 and FET continues to be consolidated in FirstEnergy’s financial statements.
The purchase price was paid in part by the issuance of two promissory notes at closing having an aggregate principal amount of $ 1.2 billion with: (i) one promissory note having an aggregate principal amount of $ 750 million, at an interest rate of 5.75 % per annum, with a maturity date of September 25, 2025 and (ii) one promissory note having an aggregate principal amount of $ 450 million, at an interest rate of 7.75 % per annum, with a maturity date of December 31, 2024.
The remaining $ 2.3 billion of the purchase price was paid in cash at closing.
On July 17, 2024, Brookfield paid FE approximately $ 1.2 billion in full satisfaction of the promissory notes.
Interest income associated with the promissory notes was $ 24 million for the year ended December 31, 2024 and is reported within “Miscellaneous income, net” on FirstEnergy’s Consolidated Statements of Income.
As a result of the consummation of the transaction, Brookfield’s interest in FET increased from 19.9 % to 49.9 %, while FE retained the remaining 50.1 % ownership interests of FET.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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