FirstEnergy Corp. this week reported third-quarter earnings above analyst expectations days after firing its CEO and other executives following a summer of corruption allegations about an Ohio state nuclear-power bailout.
The Akron, Ohio-based energy company reported net earnings of $454 million, or $0.84 a share, up from $391 million, or $0.73 a share. Quarterly revenue was $3 billion, flat compared with last year. This quarter’s earnings beat analyst expectations of $0.80 per share.
FirstEnergy shares have lost about 38.9% since the beginning of the year versus the S&P 500’s gain of 1.2%, according to Zacks analysts.
After receiving subpoenas from the U.S. Attorney’s Office for the Southern District of Ohio, an SEC investigation and several lawsuits, FirstEnergy this year launched its own internal review of executive conduct related to an alleged pay-to-play scheme in which the company was accused of helping former Ohio House Speaker Rep. Larry Householder (R) and other candidates win election to the state legislature in 2018 in return for the later passage of Ohio House Bill 6: a bailout for two plants owned by Energy Harbor, a former FirstEnergy subsidiary.
After the company’s probe, FirstEnergy said it fired former CEO Chuck Jones and two other executives for violating “certain FirstEnergy policies and its code of conduct.”
On Monday’s call, FirstEnergy board member Chris Pappas said the company formed a new audit subcommittee headed by independent board member Leslie Turner, who recently retired as senior vice president, general counsel and corporate secretary of the Hershey Company. The committee will work to ensure the company is making changes in order to obey its own compliance program, Pappas said.
FirstEnergy also reaffirmed a guidance range of $2.40 to $2.60 per share, according to CEO Steve Strah, appointed to replace Jones last week.
Strah said the company plans to be closer to $2.60 per share if decoupling, an energy policy that aims to remove incentives for companies to sell more energy, is not part of a repeal of House Bill 6. If it is, he said he expects the company to be closer to $2.50 per share. In energy policy, decoupling is considered the disassociation of a utility’s profits from its energy commodity sales.
In that case, the company will move back to the rate construct it had in 2018 before the passage of HB6, which would involve a $0.05 hit to earnings, Strah said.
The company plans to keep Strah as the CEO for the long term, Pappas said, adding that Strah had been working his way toward the CEO role anyway.
“That’s evidenced by his movement through the company,” Pappas said. “Due to the circumstances that we experienced last week, the board decided to move Steve immediately into the acting CEO role. In my view, and the board’s view, we’re on a normal transition to CEO with the person we always had in mind.”
The company on Monday declined to answer any questions about pending legal probes.
At this point, the company is under investigation by the Securities and Exchange Commission and the Public Utilities Commission of Ohio. Attorney General David Yost filed suit against the firm, along with two cities and a number of shareholders. The Ohio Elections Commission is also looking into the company’s charitable donations associated with House Bill 6.
