FirstEnergy Announces Transformative $3.4 Billion of Equity Financings, Introduces Long-Term Earnings Growth Rate of 6-8%

AKRON, Ohio, Nov. 7, 2021 /PRNewswire/ -- FirstEnergy Corp. (NYSE: FE) today announced two strategic financings with two of the premier global infrastructure funds – Blackstone Infrastructure Partners and Brookfield Super-Core Infrastructure Partners (Brookfield) – that will raise a combined $3.4 billion in equity proceeds to strengthen FirstEnergy's financial position, capitalize on incremental investment opportunities and address all equity plans. FirstEnergy also introduced a long-term EPS growth rate of 6-8%.

FirstEnergy announced an agreement to issue $1 billion of common equity to Blackstone Infrastructure Partners at $39.08 per share, which is equal to FirstEnergy's common equity five-day volume-weighted average price (VWAP) as of the market close on Friday, November 5, 2021. FirstEnergy has also entered into a definitive agreement with Brookfield to sell a 19.9% stake in FET, the holding company for FirstEnergy's three regulated transmission subsidiaries, for $2.4 billion, representing an exceptionally attractive electric utility valuation of 40x LTM P/E.

The company also announced a $2.2 billion increase to its capital investment plan through 2025, which now totals $17 billion from 2021 to 2025, including $10 billion in sustainable energy investments.

"We are pleased to announce these transformative strategic equity financings with two of the premier global infrastructure funds, Blackstone Infrastructure Partners and Brookfield. With these financings and, as importantly, long-term partnerships, FirstEnergy will be even better positioned to capitalize on the growth opportunities ahead and advance our company's key business priorities," said Steven E. Strah, FirstEnergy president and chief executive officer. "We are pleased to have achieved an historical premium valuation within the utility sector for the FET transaction with a long-term, experienced and well-respected partner in Brookfield. Together with the $1 billion investment by Blackstone Infrastructure Partners, these transactions will be key catalysts to fulfill our long-term strategy and drive smart grid and clean energy initiatives for our customers and communities. They also serve as a testament to our strong business model, and our talented and dedicated employees who are committed to executing our long-term strategy.

"Our strong operational momentum and increased financial strength reinforce our confidence in our ability to enhance shareholder value and serve the best interest of all our stakeholders," Strah continued. "That confidence is reflected in our 6-8% long-term growth rate, as well as our significantly expanded investment plan."

Donald T. Misheff, non-executive chairman of FirstEnergy's board of directors, said, "The entire board, including our voting and non-voting members, unanimously supports these important actions. This represents a pivotal moment in the company's trajectory and positions FirstEnergy to drive shareholder value."

$1 Billion Investment in Common Equity by Blackstone Infrastructure Partners

FirstEnergy entered into an agreement to issue $1 billion in common stock to Blackstone Infrastructure Partners, Blackstone's (NYSE: BX) dedicated-infrastructure group, at a price of $39.08 per share. FirstEnergy will appoint a Blackstone Infrastructure Partners-selected representative to its board of directors no later than the next annual meeting.

"We are excited about our strategic investment in FirstEnergy," stated Sean Klimczak, Global Head of Infrastructure at Blackstone. "With today's landmark announcement and FirstEnergy's rapidly expanding investment opportunities, the company is well positioned for accelerated growth. We are looking forward to supporting management and the board in FirstEnergy's further investment in smart grid resiliency and the transition to a clean energy future."

Sale of Minority Interest in FET

FET owns and operates one of the largest transmission systems in PJM and includes FirstEnergy's FERC-regulated transmission utility subsidiaries, including American Transmission Systems, Incorporated (ATSI), Mid-Atlantic Interstate Transmission, LLC (MAIT), and Trans-Allegheny Interstate Line Company (TrAILCo). The all-cash transaction with Brookfield for a 19.9% equity stake in FET represents a 40x LTM P/E. The 40x LTM P/E transaction multiple represents more than a 50% premium to the median LTM P/E for utility sector transactions.

Upon closing of the transaction, which is expected to occur in the first half of 2022, FirstEnergy will retain an 80.1% equity interest in FET and FirstEnergy's workforce will continue to operate the business. The transaction is subject to customary closing conditions, including approval from the Federal Energy Regulatory Commission (FERC) and review by the Committee on Foreign Investments in the United States.

Eduardo Salgado, managing partner in Brookfield's Infrastructure Group and head of Brookfield Super-Core Infrastructure Partners, said, "Brookfield believes FET is a very attractive investment given the high-quality and long-term stability of the business. FET is uniquely positioned to capture significant capital investment opportunities driven by the modernization of the grid, decarbonization and general electrification of the economy. We look forward to partnering with FirstEnergy and supporting FET's customer-focused investment and long-term value creation opportunities."

Strengthening FirstEnergy's Balance Sheet and Funding Incremental Growth Opportunities

Together, these transactions will enhance the company's credit profile, provide funding for strategic capital expenditures, and address all of FirstEnergy's equity plans, with the exception of annual issuances of up to $100 million under regular stock investments and employee benefit plans. These capital initiatives will also support a more resilient electric grid, drive the transition to a low-carbon future and better serve customers' evolving energy needs, with an emphasis on customer-focused emerging technologies, grid modernization and electric vehicle infrastructure. These initiatives include:

• Building a technologically advanced distribution platform that improves grid reliability and resiliency, while also enabling FirstEnergy and its customers to support a carbon-neutral economy through efforts such as electrification.
• Modernizing the company's transmission system and preparing it to integrate more renewables and distributed energy resources, enabling a clean-energy and carbon-neutral future.
• Supporting the company's goal to achieve carbon neutrality by 2050, with an interim 30% reduction in greenhouse gas emissions under the company's direct control by 2030.

2022 Earnings Guidance and Forward-Looking Projections

FirstEnergy is providing full-year 2022 earnings guidance of $2.30 to $2.50 per share, as well as a 2022 capital investment plan of $3.3 billion. The company is also maintaining its 2022 annualized dividend rate at the 2021 level of $1.56 per share, subject to board approval.

The company also provided the following financial projections:

• Projecting a 13% funds from operations-to-debt ratio no later than 2024; targeting mid-teens thereafter.
• $17 billion of capital investments from 2021 to 2025; $2.2 billion incremental to the previous plan.

Advisors

Citigroup Global Markets Inc. and J.P. Morgan Securities LLC served as financial advisors to FirstEnergy for the sale of the minority interest in FET. J.P. Morgan Securities LLC also served as lead placement agent to FirstEnergy for the common equity issuance to Blackstone Infrastructure Partners. Jones Day served as legal advisor to FirstEnergy for both transactions. Moelis & Company served as financial advisor to FirstEnergy's board of directors for both transactions. Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to Brookfield. Latham & Watkins LLP served as legal advisor to Blackstone Infrastructure Partners.

FirstEnergy is dedicated to integrity, safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation's largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. The company's transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online at www.firstenergycorp.com.

Forward-Looking Statements: This news release includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties and readers are cautioned not to place undue reliance on these forward-looking statements. These statements include declarations regarding management's intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "forecast," "target," "will," "intend," "believe," "project," "estimate," "plan," and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, which may include the following: the completion of the transactions contemplated by the agreements governing the sale of the minority interest in FET and the common stock issuance on the anticipated terms and timing or at all, including the receipt of regulatory approvals; the potential liabilities, increased costs and unanticipated developments resulting from governmental investigations and agreements, including those associated with compliance with or failure to comply with the Deferred Prosecution Agreement entered into on July 21, 2021 with the U.S. Attorney's Office for the Southern District of Ohio; the risks and uncertainties associated with government investigations regarding House Bill 6, as passed by Ohio's 133rd General Assembly, and related matters, including potential adverse impacts on federal or state regulatory matters, including, but not limited to, matters relating to rates; the potential of noncompliance with debt covenants in the company's credit facilities; the risks and uncertainties associated with litigation, arbitration, mediation and similar proceedings; legislative and regulatory developments, including, but not limited to, matters related to rates, compliance and enforcement activity, including the final approval by the Public Utilities Commission of Ohio ("PUCO") of the Unanimous Stipulation and Recommendation filed by the Company and eleven other parties with the PUCO on November 1, 2021; the ability to accomplish or realize anticipated benefits from the company's FE Forward initiative and its other strategic and financial goals, including, but not limited to, maintaining financial flexibility, overcoming current uncertainties and challenges associated with the ongoing government investigations, executing the company's transmission and distribution investment plans, greenhouse gas reduction goals, controlling costs, improving the company's credit metrics, growing earnings, and strengthening the company's balance sheet through the sale of a minority interest in FET and the common stock issuance; economic and weather conditions affecting future operating results, such as a recession, significant weather events and other natural disasters, and associated regulatory events or actions in response to such conditions; mitigating exposure for remedial activities associated with retired and formerly owned electric generation assets; the ability to access the public securities and other capital and credit markets in accordance with the company's financial plans, the cost of such capital and overall condition of the capital and credit markets affecting the company, including the increasing number of financial institutions evaluating the impact of climate change on their investment decisions; the extent and duration of the COVID-19 pandemic and the impacts to the company's business, operations and financial condition resulting from the outbreak of COVID-19, including, but not limited to, disruption of businesses in the company's territories and governmental and regulatory responses to the pandemic; the effectiveness of the company's pandemic and business continuity plans, the precautionary measures the company is taking on behalf of its customers, contractors and employees, its customers' ability to make their utility payment and the potential for supply-chain disruptions; actions that may be taken by credit rating agencies that could negatively affect either the company's access to or terms of financing or its financial condition and liquidity; changes in assumptions regarding economic conditions within the company's territories, the reliability of its transmission and distribution system, or the availability of capital or other resources supporting identified transmission and distribution investment opportunities; changes in customers' demand for power, including, but not limited to, the impact of climate change or energy efficiency and peak demand reduction mandates; changes in national and regional economic conditions, including inflationary pressure, affecting the company and/or its customers and those vendors with which the company does business; the risks associated with cyber-attacks and other disruptions to the company's, or its vendors', information technology system, which may compromise the company's operations, and data security breaches of sensitive data, intellectual property and proprietary or personally identifiable information; the ability to comply with applicable reliability standards and energy efficiency and peak demand reduction mandates; changes to environmental laws and regulations, including, but not limited to, those related to climate change; changing market conditions affecting the measurement of certain liabilities and the value of assets held in the company's pension trusts, or causing the company to make contributions sooner, or in amounts that are larger, than currently anticipated; labor disruptions by the company's unionized workforce; changes to significant accounting policies; any changes in tax laws or regulations, or adverse tax audit results or rulings; and the risks and other factors discussed from time to time in the company's Securities and Exchange Commission ("SEC") filings. Dividends declared from time to time on FirstEnergy's common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FirstEnergy's Board of Directors at the time of the actual declarations. A security rating is not a recommendation to buy or hold securities and is subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. These forward-looking statements are also qualified by, and should be read together with, the risk factors included in FirstEnergy's filings with the SEC, including, but not limited to, the most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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 FirstEnergy's 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. FirstEnergy expressly disclaims 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.

SOURCE FirstEnergy Corp.

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http://www.firstenergycorp.com

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