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Item 1A. Risk Factors

2023-02-13 compared with 2022-02-16 · 164 added, 130 removed, 324 unchanged (48% of the section changed)

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Additional information on risk factors is included in 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 and financial results.

Risks Associated with Damage to Our Reputation

Risks Associated with Damage to Our Reputation and HB 6 Related Litigation and Investigations

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.

Damage to our reputation could materially adversely affect our business, results of operations, and financial condition and may arise from numerous sources further discussed below, including a breach of the DPA, negative outcomes associated with the SEC and FERC investigations or other HB 6 litigation or investigations, a significant cyber-attack or data security breach, failure to provide safe and reliable service, and operating coal-fired generation.

Damage to our reputation could materially adversely affect our business, results of operations, and financial condition and may arise from numerous sources further discussed below, including a breach of the DPA, negative outcomes associated with the SEC investigation or other HB 6 litigation or investigations, a significant cyber-attack or data security breach, failure to provide safe and reliable service, and operating coal-fired generation.

Any damage to our reputation 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.

Further, a damaged reputation could further result in FERC and the state utility commissions that regulate our rates, and other regulatory and legislative authorities being less likely to view us in a favorable light, and could negatively impact the rates we charge customers or otherwise cause us to be susceptible to unfavorable legislative and regulatory outcomes, as well as increased regulatory oversight and more stringent legislative or regulatory requirements.

Risks Associated with the Ongoing Investigations

If We Violate our DPA That We Entered Into on July 20, 2021, It Could Have a Material Adverse Effect on our Reputation and Consolidated Financial Statements

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Attorney’s Office for the S.D.

Ohio of the investigation surrounding HB 6 in July 2020, certain of our stockholders and customers filed several lawsuits against us and certain current and former directors, officers and

other employees.

In addition, on August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FirstEnergy, and on September 1, 2020, issued subpoenas to FirstEnergy and certain of its officers.

Ohio of the investigation surrounding HB 6 in July 2020, certain of our 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.

The investigations and litigation related to HB 6 could divert management’s focus and have resulted in, and could continue to result in substantial investigation expenses, and the commitment of substantial corporate resources.

The outcome, duration, scope, result or related costs of the investigations and related litigation of the government investigations, particularly the SEC investigation and the securities class action lawsuit discussed below, are inherently uncertain.

Therefore, any of these risks could impact us significantly beyond expectations.

Moreover, we are unable to predict the potential for any

additional investigations or litigation, any of which could exacerbate these risks or expose us to potential criminal or civil liabilities, sanctions or other remedial measures, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

On August 10, 2020, the SEC, through its Division of Enforcement, issued an order directing an investigation of possible securities laws violations by FirstEnergy, and on September 1, 2020, issued subpoenas to FirstEnergy and certain of its officers.

We are cooperating with the SEC in their ongoing investigation.

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Given the ongoing nature and complexity of such investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the SEC investigation, but such resolution could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

The outcome of the government investigations and related litigation is inherently uncertain.

Further, we believe that it is probable that FE will incur a loss in connection with the resolution of In re FirstEnergy Corp.

Securities Litigation (Federal District Court, S.D.

We also believe that it is probable that FE will incur a loss in connection with the resolution of In re FirstEnergy Corp.

Securities Litigation .

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.

If one or more legal matters, including In re FirstEnergy Corp.

Securities Litigation, were resolved against us, our reputation, business, financial condition, results of operations, liquidity or cash flows may be materially adversely affected.

Further, such an outcome could result in settlement agreements, significant monetary damages, remedial corporate measures or other relief against us that could further adversely impact our operations.

We are unable to predict the outcome, duration, scope, result or related costs of the investigations and related litigation and, therefore, any of these risks could impact us significantly beyond expectations.

Moreover, we are unable to predict the potential for any additional investigations or litigation, any of which could exacerbate these risks or expose us to potential criminal or civil liabilities, sanctions or other remedial measures, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

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.

These matters are likely to continue to have an adverse impact on the trading prices of our securities.

See Note 13, “Commitments, Guarantees and Contingencies,” of the Notes to Consolidated Financial Statements, for additional details on the government investigations and subsequent litigation surrounding HB 6.

The FERC and State Regulatory Investigations and HB 6 Related Investigations Could Have a Material Adverse Effect on our Reputation, Business, Financial Condition, Results of Operations, Liquidity or Cash Flows

In letters dated January 26, and February 22, 2021, staff of FERC's Division of Investigations notified FirstEnergy that the Division is conducting an investigation of FirstEnergy’s lobbying and governmental affairs activities concerning HB 6 and staff directed FirstEnergy to preserve and maintain all documents and information related to the same as such have been developed as part of an ongoing non-public audit being conducted by FERC’s Division of Audits and Accounting.

We are cooperating with the FERC in the ongoing audit and investigation.

With respect to the FERC Division of Investigations matter, we believe that it is probable that FirstEnergy will incur a loss in connection with its resolution.

Given the ongoing nature and complexity of such investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from the resolution of the FERC Division of Investigations matter but such resolution could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

See Note 12, "Regulatory Matters," and Note 13, “Commitments, Guarantees and Contingencies,” of the Notes to Consolidated Financial Statements, for additional details on the government investigations and regulatory matters related to the investigation of HB 6.

In addition, there are several state regulatory matters associated with the ongoing governmental investigations including, but not limited to, the following:

• On September 15, 2020, the PUCO opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort, directing the Ohio Companies to show cause, demonstrating that the costs of any political or charitable spending in support of HB 6, or the subsequent referendum effort, were not included, directly or indirectly, in any rates or charges paid by customers.

• On November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the termination of certain members of senior management.

• On December 30, 2020, the PUCO reopened the DMR audit docket, and directed PUCO staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from customers through the DMR were only used for the purposes established in ESP IV.

The auditor filed its final audit report on January 14, 2022, which made findings and recommendations.

The report found that spending of DMR revenues was not required to be tracked, and that DMR revenues, like all rider revenues, are placed into the regulated money pool as a matter of routine, where the funds lose their identity.

Therefore, the report could not suggest that DMR funds were used definitively for direct or indirect support for grid modernization.

The report also concluded that there was no documented evidence that ties revenues from the DMR to lobbying for the passage of HB 6, but also could not rule out with certainty uses of DMR funds to support the passage of HB 6.

The report further recommended that the regulated companies' money pool be audited more frequently and the Ohio Companies adopt formal dividend policies.

• On April 22, 2021, in anticipation of the effective date of HB 128 and in accordance with HB 128’s provisions regarding the prompt refund of decoupling funds, the Ohio Companies filed an application with the PUCO to modify CSR to return such amount over twelve months commencing June 1, 2021.

On July 7, 2021, the PUCO issued an order approving the Ohio Companies’ modified application and directed that all funds collected through CSR be refunded to customers over a single billing cycle beginning August 1, 2021.

The HB 6 Related State Regulatory Investigations Could Have a Material Adverse Effect on our Reputation, Business, Financial Condition, Results of Operations, Liquidity or Cash Flows

There are several state regulatory matters associated with the ongoing governmental investigations including, but not limited to, the following:

• On August 16, 2022, the U.S.

Attorney for the Southern District of Ohio requested that the PUCO stay the following pending HB 6 related matters for a period of six months, which request was granted by the PUCO on August 24, 2022:

◦ On September 15, 2020, the PUCO opened a new proceeding to review the political and charitable spending by the Ohio Companies in support of HB 6 and the subsequent referendum effort.

◦ On November 4, 2020, the PUCO initiated an additional corporate separation audit as a result of the FirstEnergy leadership transition announcement made on October 29, 2020

◦ On December 30, 2020, the PUCO directed PUCO staff to solicit a third-party auditor and conduct a full review of the DMR to ensure funds collected from customers through the DMR were only used for the purposes established in ESP IV.

The auditor’s report was filed on January 14, 2022 and the parties submitted final comments and responses in the second quarter 2022.

See ”Outlook – Ohio” below for additional information regarding the auditor’s findings.

◦ On March 10, 2021, the PUCO expanded the scope of an ongoing annual audit of the Ohio Companies’ Rider DCR for 2020 to include a review of certain transactions that were either improperly classified, misallocated, or lacked supporting documentation, and to determine whether funds collected from customers were used to pay the vendors, and if so, whether or not the funds associated with those payments should be returned to customers through Rider DCR or through an alternative proceeding.

• On May 11, 2021, the Maryland Office of People’s Counsel filed a petition asking the MDPSC to open an investigation regarding several matters including possible impacts to PE as a result of the HB 6 investigations in Ohio.

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and (iii) whether the Icahn Capital appointed directors would have the ability to assert substantial influence over PE in their roles as FE directors.

While FirstEnergy is committed to pursuing an open dialogue with stakeholders in an appropriate manner with respect to the numerous regulatory proceedings currently underway, the rates our Utilities and Transmission Companies are allowed to charge may be decreased as a result of actions taken by FERC or by a state regulatory commission to which our Utilities and Transmission Companies are subject to jurisdiction, whether as a result of the DPA, any failure to have complied with anti-corruption laws, or otherwise.

We are unable to predict the adverse impacts on federal or state regulatory matters, including with respect to rates, and, therefore, any of these risks could impact us significantly beyond expectations.

While FirstEnergy is committed to pursuing an open dialogue with stakeholders in an appropriate manner with respect to the numerous regulatory proceedings currently underway, the rates our Utilities and Transmission Companies are allowed to charge may be decreased as a result of actions taken by a regulator to which our Utilities and Transmission Companies are subject to jurisdiction, whether as a result of the DPA, any failure to have complied with anti-corruption laws, or otherwise.

We are unable to predict the adverse impacts on such regulatory matters, including with respect to rates, and, therefore, any of these risks could impact us significantly beyond expectations.

Moreover, we are unable to predict the potential for any additional regulatory actions, any of which could exacerbate these risks or expose us to adverse outcomes in pending or future rate cases, and could have a material adverse effect on our reputation, business, financial condition, results of operations, liquidity or cash flows.

Risks Associated with the Execution of Recently Announced Strategic Initiatives

The Inability to Close the FET Minority Equity Interest Sale to Brookfield Announced in February 2023 May Have Material Adverse Effects on Our Cash Flows, Liquidity and Financial Condition

As previously disclosed, on November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA I, with Brookfield and Brookfield Guarantors pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield would own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion.

The transaction closed on May 31, 2022.

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 purchase price will be payable in part by the issuance of a promissory note expected to be in the principal amount of $1.75 billion.

The remaining $1.75 billion of the purchase price will be payable in cash at the closing.

As a result of the consummation of the transaction, Brookfield’s interest in FET will increase from 19.9% to 49.9%, while FE will retain the remaining 50.1% ownership interests of FET.

The transaction is subject to customary closing conditions, including approval from the FERC and certain state utility commissions, and completion of review by the CFIUS.

In addition, pursuant to the FET P&SA II, FirstEnergy has agreed to make the necessary filings with the applicable regulatory authorities for the PA Consolidation.

The FET Minority Equity Interest Sale is expected to close by early 2024.

Upon closing, FET will continue to be consolidated in FirstEnergy’s GAAP financial statements.

This transaction involves various inherent risks, such as our ability to obtain the necessary regulatory and third-party approvals;

the timing of and conditions imposed upon us by regulators in connection with such approvals;

and our ability to realize the benefits expected from the transaction.

In addition, various factors, including prevailing market conditions, could negatively impact the benefits we receive from this transaction.

Our failure to consummate this transaction in a timely manner, including satisfying all closing conditions, could have material adverse effects on our cash flows, liquidity and financial condition.

The Consolidation of our Pennsylvania Companies May Not be Completed in a Timely Manner or at All, We May Not Be Able to Obtain the Approvals Required to Complete the PA Consolidation or Such Approvals May Contain Material Restrictions or Conditions Which May Make It Undesirable to Complete the PA Consolidation, and We Could Face Litigation Concerning the PA Consolidation, Whether or Not the PA Consolidation is Consummated

The PA Consolidation, including applicable asset sales is subject to numerous conditions, including the approval of NYPSC, PPUC and FERC, which may not approve one or more of the contemplated steps in the PA Consolidation, or such approvals may impose conditions on the completion, or require changes to the terms of the PA Consolidation, including restrictions on the business, operations or financial performance of the resulting operating company, which could be adverse to FirstEnergy’s interests.

These conditions or changes could also delay or increase the cost of the PA Consolidation or limit the net income or financial prospects of the resulting operating company.

Our inability to complete the PA Consolidation in a timely manner, or at all, including applicable asset sales, could hinder our ability to close the FET Minority Equity Interest Sale to Brookfield and could negatively affect our share price, as well as our future business and financial results.

In addition, the work required to complete the PA Consolidation may place a significant burden on management and internal resources.

Management's attention and other company resources may be focused on the PA Consolidation instead of on day-to-day management activities, including pursuing other opportunities beneficial to FirstEnergy.

Risks Associated with Regulation of Our Distribution and Transmission Segments

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(1) FERC’s timely approval of rates to recover such investments;

(2) whether the investments are included in PJM's RTEP;

(2) whether the investments are included in PJM's Regional Transmission Expansion Plan;

(3) FERC's evolving policies with respect to incentive rates for transmission assets;

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There can be no assurance that our investment strategy in our Regulated Distribution and Regulated Transmission segments will deliver the desired result which could adversely affect our results of operations and financial condition.

The Inability to Close the FET Minority Equity Interest Sale to Brookfield May Have Material Adverse Effects on Our Cash Flows, Liquidity and Financial Condition

On November 6, 2021, FirstEnergy, along with FET, entered into the FET P&SA with Brookfield and Brookfield Guarantors, pursuant to which FET agreed to issue and sell to Brookfield at the closing, and Brookfield agreed to purchase from FET, certain newly issued membership interests of FET, such that Brookfield will own 19.9% of the issued and outstanding membership interests of FET, for a purchase price of $2.375 billion.

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 FERC and review by the CFIUS.

This transaction involves various inherent risks, such as our ability to obtain the necessary regulatory and third-party approvals;

the timing of and conditions imposed upon us by regulators in connection with such approvals;

and our ability to realize the benefits expected from the transaction.

In addition, various factors, including prevailing market conditions, could negatively impact the benefits we receive from this transaction.

Our failure to consummate this transaction in a timely manner, including satisfying all closing conditions, could have material adverse effects on our cash flows, liquidity and financial condition.

Complex and Changing Government Regulations and Actions, Including Those Associated with Rates, Could Have a Negative Impact on Our Business, Financial Condition, Results of Operations and Cash Flows

We are subject to comprehensive regulation by various federal, state and local regulatory agencies that significantly influence our operating environment.

Changes in, or reinterpretations of, existing laws or regulations, or the imposition of new laws or

regulations, could require us to incur additional costs or change the way we conduct our business, and therefore could have a material adverse impact on our results of operations and financial condition.

Changes in, or reinterpretations of, existing laws or regulations, or the imposition of new laws or regulations, could require us to incur additional costs or change the way we conduct our business, and therefore could have a material adverse impact on our results of operations and financial condition.

Our Utilities and Transmission Companies provide service at rates approved by one or more regulatory commissions.

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Owners, operators, and users of the bulk electric system are subject to mandatory reliability standards promulgated by NERC and approved by FERC.

The standards are based on the functions that need to be performed to ensure that the bulk electric system operates reliably.

The standards are based on the functions that need to be performed to ensure that the bulk electric

system operates reliably.

NERC, RFC and FERC can be expected to continue to refine existing reliability standards as well as develop and adopt new reliability standards.

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In addition to direct regulation by FERC, we are also subject to rules and terms of participation imposed and administered by various RTOs and ISOs that can have a material adverse impact on our business.

For example, the independent market monitors of ISOs and RTOs may impose bidding and scheduling rules to curb the perceived potential for exercise of market

power and to ensure the markets function appropriately.

For example, the independent market monitors of ISOs and RTOs may impose bidding and scheduling rules to curb the perceived potential for exercise of market power and to ensure the markets function appropriately.

Such actions may materially affect our ability to sell, and the price we receive for, our energy and capacity.

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In addition, RTOs have been developing rules associated with the allocation and methodology of assigning costs associated with improved transmission reliability, reduced transmission congestion and firm transmission rights that may have a financial impact on us.

As a member of an RTO, we are subject to certain additional risks, including those associated with the allocation among members of losses caused by unreimbursed defaults of other participants in that RTO’s market and those associated with complaint cases filed against the RTO that may seek refunds of revenues previously earned by its members.

As a member of PJM, which is an RTO, we are subject to certain additional risks, including those associated with the allocation among members of losses caused by unreimbursed defaults of other participants in PJM’s market and those associated with complaint cases filed against PJM that may seek refunds of revenues previously earned by its members.

Risks Related to Business Operations Generally

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Further, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information and/or security.

Despite security measures and safeguards we have employed, including certain measures implemented pursuant to mandatory NERC Critical Infrastructure Protection standards, our infrastructure may be increasingly vulnerable to such attacks as a result of the rapidly evolving and increasingly sophisticated means by which attempts to defeat our security measures and gain access to our information technology systems may be made.

our information technology systems may be made.

Also, we may be at an increased risk of a cyber-attack and/or data security breach due to the nature of our business.

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and/or (v) result in unauthorized access to the information stored in our data centers and on our networks and those of our vendors and service providers, including, company proprietary information, supplier information, employee data, and personal customer data, causing the information to be publicly disclosed, lost or stolen or result in incidents that could result in economic loss and liability and harmful effects on the environment and human health, including loss of life.

Additionally, because

our regulated generation, transmission and distribution services are part of an interconnected system, disruption caused by a cybersecurity incident at another utility, electric generator, RTO, or commodity supplier could also adversely affect our operations.

Additionally, because our regulated generation, transmission and distribution services are part of an interconnected system, disruption caused by a cybersecurity incident at another utility, electric generator, RTO, or commodity supplier could also adversely affect our operations.

Although we maintain cyber insurance and property and casualty insurance, there can be no assurance that liabilities or losses we may incur, including as a result of cybersecurity-related litigation, will be covered under such policies or that the amount of insurance will be adequate.

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For all of these reasons, any such cyber incident could result in significant lost revenue, the inability to conduct critical business functions and serve customers for a significant period of time, the use of significant management resources, legal claims or proceedings, regulatory penalties, significant remediation costs, increased regulation, increased capital costs, increased protection costs for enhanced cybersecurity systems or personnel, damage to our reputation and/or the rendering of our internal controls ineffective, all of which could materially adversely affect our business, results of operations, financial condition and reputation.

If Our "FE Forward" Initiative Does Not Achieve the Expected Benefits, There Could Be Negative Impacts to FirstEnergy's Business, Results of Operations and Financial Condition

We are working to transform how we conduct business and serve our customers, to achieve value potential in a sustainable way.

In February 2021, we announced a new initiative to build upon our strong operations and business fundamentals and deliver immediate value and resilience, with substantial working capital improvements and capital efficiencies ramping up through 2024.

Called FE Forward, this initiative will play a critical first step in our transformation journey as we look to optimize processes and procedures.

FE Forward is projected to generate approximately $380 million in annualized capital expenditure efficiencies by 2024, as well as, approximately $250 million in working capital improvements by 2023.

This program includes an estimated $150 million of costs to achieve through 2023, which are expected to be self-funded through these efficiencies.

We plan to redeploy the capital expenditure efficiencies in a more diverse capital program that over the long-term, continues to support our strategy, and using 2022 as baseline, operating expenses are projected to naturally decline 1% annually allowing for strategic flexibility and customer affordability.

FE Forward is not a downsizing effort and there will not be any involuntary employee reductions in connection with this program.

There can be no assurance that FE Forward will provide the anticipated benefits to our business, results of operations and financial condition in a timely manner, if at all.

Additionally, our belief that digital transformation of our business, including system integration, automation, and mobility tools, is key to driving internal efficiencies as well as providing additional capabilities to customers is vital to the success of FE Forward.

Our information technology systems are critical to cost-effective, reliable daily operations and our ability to effectively serve our customers.

We expect our customers to continue to demand more sophisticated technology-driven solutions and we must enhance or replace our information technology systems in response.

This involves significant development and implementation costs to keep pace with changing technologies and customer demand.

Our ability to achieve the anticipated annualized capital expenditure efficiencies, working capital improvements, and other benefits from FE Forward, including failure to successfully implement critical technology, within the expected time frame is subject to many estimates and assumptions.

These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our control.

Further, during and following completion of FE Forward, FirstEnergy could experience unexpected delays and business disruptions resulting from supporting these initiatives, decreased productivity, and higher than anticipated costs, any of which may impair our ability to achieve anticipated results or otherwise harm FirstEnergy's business, results of operations and financial condition.

If Our "FE Forward" Initiative and Other Cost Saving Initiatives Do Not Achieve the Expected Benefits, There Could Be Negative Impacts to FirstEnergy's Business, Results of Operations and Financial Condition

In February 2021, we announced a new initiative, FE Forward, to build upon our strong operations and business fundamentals and deliver immediate value and resilience, with targeted working capital improvements by 2022 and capital efficiencies ramping up through 2024 that would be redeployed in a more diverse capital investment program.

In the two years that FE Forward has been active, we have realized working capital improvements and annualized capital expenditure efficiencies in line with our previously disclosed expectations.

After assessing our accomplishments and shortfalls, FE Forward has been integrated into our ongoing efforts for continuous improvement, including the strategic reduction of operating expenditures and continued reinvestment in a more diverse capital program in support of our long-term strategy.

As such, FirstEnergy has transitioned away from measuring these cash flow metrics and will no longer publish a forecast of these metrics.

In addition to FE Forward, FirstEnergy will leverage other opportunities to reduce costs – such as filling only critical positions, implementing our facility optimization plans, as well as exploring other additional, sustainable opportunities, such as reducing contractor spend.

There can be no assurance that FE Forward and our other cost saving initiatives will provide the anticipated benefits to our business, results of operations and financial condition in a timely manner, if at all.

Our ability to achieve the benefits from FE Forward and our other cost saving initiatives is subject to many estimates and assumptions.

FirstEnergy could experience unexpected delays and business disruptions resulting from supporting these initiatives, decreased productivity, and higher than anticipated costs, any of which may impair our ability to reduce operating expenditures and to achieve anticipated results or otherwise harm FirstEnergy's business, results of operations and financial condition.

Inflation may negatively impact our financial condition, results of operations, liquidity, and cash flows.

Prices for equipment, materials, supplies, employee labor contractor services, together with the cost of variable-rate debt have increased during 2022, and could continue to increase in 2023 and beyond.

Long-term inflationary pressures may result in such prices continuing to increase more quickly than expected.

Inflation increases costs for labor, materials and services, and we may be unable to secure these resources on economically acceptable terms or offset such costs with increased revenues, operating efficiencies, or cost savings, which may adversely impact our financial condition, results of operations, liquidity, and cash flows.

Continued Supply Chain Disruptions Could Have an Adverse Effect on Our Results of Operations, Cash Flow and Financial Condition.

We have continued to experience supply chain challenges due to economic conditions that have developed since the start of the COVID-19 pandemic, with order lead times increasing across numerous material categories and with some as much as doubling from pre-pandemic lead times.

Some key suppliers have struggled with labor shortages and raw material availability, which along

with increasing inflationary pressure, have increased the costs and decreased the availability of certain materials, equipment and contractors.

FirstEnergy has taken steps to mitigate these risks and does not currently expect service disruptions or any material impact on its capital spending plan.

However, the situation remains fluid and a prolonged continuation or further increase in supply chain disruptions could have an adverse effect on FirstEnergy’s results of operations, cash flow and financial condition.

We Are Subject to Financial Performance Risks from Regional and General Economic Cycles as Well as Heavy Industries such as Shale Gas, Automotive and Steel

Our business follows economic cycles.

Economic conditions impact the demand for electricity and declines in the demand for electricity will reduce our revenues.

Economic conditions, including inflationary pressures, impact the demand for electricity and declines in the demand for electricity will reduce our revenues.

The regional economy in which our Utilities operate is influenced by conditions in industries in our business territories, e.g., shale gas, automotive, chemical, steel and other heavy industries, and as these conditions change, our revenues will be impacted.

We Are Subject to Risks Arising from the Operation of Our Power Plants and Transmission and Distribution Equipment Which Could Reduce Revenues, Increase Expenses and Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations

Operation of generation, transmission and distribution facilities involves risk, including the risk of potential breakdown or failure of equipment or processes due to aging infrastructure, fuel supply or transportation disruptions, accidents, labor disputes or work stoppages by employees, human error in operations or maintenance, acts of terrorism or sabotage, construction delays or cost overruns, shortages of or delays in obtaining equipment, material and labor, operational restrictions resulting from environmental

requirements and governmental interventions, and performance below expected levels.

In addition, weather-related incidents and other natural disasters can disrupt generation, transmission and distribution delivery systems.

Because our transmission facilities are interconnected with those of third parties, the operation of our facilities could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties.

Failure to Provide Safe and Reliable Service and Equipment Could Result in Serious Injury or Loss of Life That May Harm Our Business Reputation and Adversely Affect Our Operating Results

We are committed to providing safe and reliable service and equipment in our franchised service territories.

Meeting this commitment requires the expenditure of significant capital resources.

However, our employees, contractors and the general public may be exposed to dangerous environments due to the nature of our operations.

Failure to provide safe and reliable service and equipment due to various factors, including equipment failure, accidents and weather, could result in serious injury or loss of life that may harm our business reputation and adversely affect our operating results through reduced revenues, increased capital and operating costs, litigation or the imposition of penalties/fines or other adverse regulatory outcomes.

Capital Investments and Construction Projects May Not be Completed Within Forecasted Budget, Schedule or Scope Parameters or Could be Canceled Which Could Adversely Affect Our Business and Results of Operations

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Any delays, increased costs or losses, or cancellation of a construction project could adversely affect our business and results of operations, particularly if we are not permitted to recover any such costs in rates.

Physical Acts of War, Terrorism.

Sabotage or Other Attacks on any of Our Facilities or Other Infrastructure Could Have an Adverse Effect on Our Business, Results of Operations, Cash Flows and Financial Condition

As a result of the continued threat of physical acts of war, terrorism, sabotage or other attacks in the United States, our electric generation, fuel storage, transmission and distribution facilities and other infrastructure, including power plants, transformer and high voltage lines and substations, or the facilities or other infrastructure of an interconnected company, could be direct targets of, or indirect casualties of, an act of war, terrorism, sabotage or other attack, which could result in disruption of our ability to generate, purchase, transmit or distribute electricity for a significant period of time, otherwise disrupt our customer operations and/or result in incidents that could result in harmful effects on the environment and human health, including loss of life.

Any such disruption or incident could result in a significant decrease in revenue, significant additional capital and operating costs, including costs to implement additional security systems or personnel to purchase electricity and to replace or repair our assets over and above any available insurance reimbursement, higher insurance deductibles, higher premiums and more restrictive insurance policies, legal claims or proceedings, greater regulation with higher attendant costs, generally, and significant damage to our reputation, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Failure to Provide Safe and Reliable Service and Equipment Could Result in Serious Injury or Loss of Life That May Harm Our Business Reputation and Adversely Affect Our Operating Results

We are committed to providing safe and reliable service and equipment in our franchised service territories.

Meeting this commitment requires the expenditure of significant capital resources.

However, our employees, contractors and the general public may be exposed to dangerous environments due to the nature of our operations.

The Outcome of Litigation, Arbitration, Mediation, and Similar Proceedings Involving Our Business, or That of One or More of Our Operating Subsidiaries, Is Unpredictable and an Adverse Decision in Any Material Proceeding Could Have a Material Adverse Effect on Our Financial Condition and Results of Operations

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Workforce demographic issues challenge employers nationwide and are of particular concern to the electric utility industry.

The median age of utility workers is higher than the national average.

Over the next three years, 34% percent of our current employees will meet the eligibility requirements to retire.

Our costs, including costs for contractors to replace employees, productivity costs and safety costs, may rise.

Our costs, including costs for contractors to replace employees and productivity costs, may rise.

Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to the new employees, may adversely affect our ability to manage and operate our business.

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While we anticipate that our operation and maintenance expenses will continue to increase, if actual results differ materially from our assumptions, our costs could be significantly higher than expected which could adversely affect our results of operations, financial condition and liquidity.

Physical Acts of War, Terrorism or Other Attacks on any of Our Facilities or Other Infrastructure Could Have an Adverse Effect on Our Business, Results of Operations, Cash Flows and Financial Condition

As a result of the continued threat of physical acts of war, terrorism, or other attacks in the United States, our electric generation, fuel storage, transmission and distribution facilities and other infrastructure, including power plants, transformer and high voltage lines and substations, or the facilities or other infrastructure of an interconnected company, could be direct targets of, or indirect casualties of, an act of war, terrorism, or other attack, which could result in disruption of our ability to generate, purchase, transmit or distribute electricity for a significant period of time, otherwise disrupt our customer operations and/or result in incidents that could result in harmful effects on the environment and human health, including loss of life.

Changes in Technology and Regulatory Policies May Make Our Facilities Significantly Less Competitive and Adversely Affect Our Results of Operations

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It is possible that advances in newer generation technologies will make newer generation technologies more cost-effective, or that legislation addressing climate change at the federal or state level together with changes in regulatory policy will create incentives or benefits that otherwise make these newer generation technologies even more competitive with central station electricity production.

To the extent that newer generation technologies are connected directly to load, bypassing the transmission and distribution systems, potential impacts could include decreased transmission and distribution revenues, stranded assets and increased uncertainty in load forecasting and integrated resource planning and could adversely affect our business and results of operations.

increased uncertainty in load forecasting and integrated resource planning and could adversely affect our business and results of operations.

Energy Companies are Subject to Adverse Publicity Causing Less Favorable Regulatory and Legislative Outcomes Which Could Have an Adverse Impact on Our Business

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Significant resources also may be expended to defend against allegations of violations of any such requirements.

We Have a Minority Ownership Stake in a Coal Mine That Requires Governmental Permits and Approvals to Operate and a Failure of the Coal Mine to Renew and Maintain Such Permits and Approvals May Adversely Affect Our Results of Operations and Cash Flow

FEV currently holds a 33-1/3% equity ownership in Global Holding, the holding company for a joint venture in the Signal Peak mining and coal transportation operations with coal sales predominantly in international markets.

The viability of our investment depends upon several factors beyond our control, including, but not limited to:

Signal Peak’s ability to renew and maintain governmental permits and approvals and remain in compliance with federal, state, and local safety and environmental statutes, rules, and regulations affecting the coal mining industry.

Failure by Signal Peak to renew and maintain necessary permits and approvals, and to comply with any such statutes, rules and regulations, may impair its operations and the ability to generate cash flows necessary for Global Holding to pay future dividends and contribute to FirstEnergy’s earnings.

Signal Peak operates a single underground coal mine in south-central Montana and must obtain numerous governmental permits and approvals that impose strict conditions and obligations relating to, among other things, various environmental and safety matters in connection with its mining and coal transportation operations.

The rules applicable to these permits and approvals are complex and can change over time.

Regulatory authorities exercise considerable discretion in the timing and scope of permit issuance.

In addition, the public has the right to comment on permit applications and otherwise participate in the permitting process, including through court intervention.

Limitations on Signal Peak’s ability to conduct its mining operations due to its inability to obtain or renew necessary permits or similar approvals could materially reduce or even halt production at the mine resulting in an adverse effect on our balance sheet, results of operations and cash flow.

Signal Peak is currently a party to litigation that is challenging the validity of its permit to expand its mine into adjacent leased federal coal reserves.

After receiving initial approval in 2015 from the OSMRE to expand the mine, environmental non-governmental organizations filed suit in the United States District Court for the District of Montana the same year challenging OSMRE’s environmental assessment, which was a finding of no significant impact, and the expansion approval.

The District Court affirmed OSMRE’s conclusions, and the environmental non-governmental organizations appealed to the U.S.

Court of Appeals for the Ninth Circuit.

In April 2022, the Ninth Circuit Court reversed the District Court’s ruling affirming the expansion approval and remanded the case back to the District Court.

On February 10, 2023, the District Court vacated the permit issued by OSMRE, which would restrict Signal Peak’s ability to mine federal coal until OSMRE completes an environmental impact statement and reissues the permit.

While the District Court’s ruling is not expected to materially impede Signal Peak’s ability to conduct its mining operations over the next 12-24 months, the inability to successfully obtain the permit from OSMRE would prohibit Signal Peak from mining those adjacent leased federal coal reserves and could further adversely impact Signal Peak from efficiently and economically conducting its mining operations thus reducing its production, cash flow and profitability.

Costs of Compliance with Environmental Laws are Significant, and the Cost of Compliance with New Environmental Laws, Including Limitations on GHG Emissions Related to Climate Change, Could Adversely Affect Our Cash Flows and Financial Condition

Our operations are subject to extensive federal, state and local environmental statutes, rules and regulations.

Compliance with these legal requirements requires us to incur costs for, among other things, installation and operation of pollution control equipment, emissions monitoring and fees, remediation and permitting at our facilities.

Compliance with these legal requirements requires us to incur costs for, among other things, installation and operation of pollution control

equipment, emissions monitoring and fees, remediation and permitting at our facilities.

These expenditures have been significant in the past and may increase in the future.

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An unfavorable ruling in any such case could result in the need to make modifications to our coal-fired generation or reduce emissions, suspend operations or pay money damages or penalties.

Adverse rulings in these or other types of actions could have an adverse impact on our results of operations, cash flows and financial condition and could significantly impact our business operations.

Adverse rulings in these or other types of actions could

have an adverse impact on our results of operations, cash flows and financial condition and could significantly impact our business operations.

We Are and May Become Subject to Legal Claims Arising from the Presence of Asbestos or Other Regulated Substances at Some of Our Facilities that May Have an Adverse Impact on Our Business Operations, Financial Condition and Cash Flows

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Transition Risks Associated with Climate Change, Including Those Related to Regulatory Mandates Could Negatively Impact Our Financial Results

Where federal or state legislation mandates the use of renewable fuel sources, such as wind and solar and such legislation does not also provide for adequate cost recovery, it could result in significant changes in our business, including material increases in REC purchase costs, purchased power costs and capital investments.

Where federal or state legislation mandates the use of renewable fuel sources, such as wind and solar and such legislation does not also provide for adequate cost recovery, it could result in significant changes in our business, including material increases in renewable energy credit purchase costs, purchased power costs and capital investments.

Such mandatory renewable portfolio requirements may have an adverse effect on our financial condition and results of operations.

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Should we be required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these measures could have a negative financial impact.

In the past, we have been adversely impacted by reduced electric usage due in part to energy conservation efforts such as the use of efficient lighting products such as CFLs, halogens and LEDs.

In the past, we have been adversely impacted by reduced electric usage due in part to energy conservation efforts such as the use of efficient lighting products such as compact fluorescent lights, halogens and light emitting diodes.

We are unable to determine what impact, if any, conservation will have on our financial condition or results of operations.

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Further, as extreme weather conditions increase system stress, we may incur costs relating to additional system backup or service interruptions, and in some instances, we may be unable to recover such costs.

For all of these reasons, these physical risks could have an adverse financial impact on our business operations, financial condition and cash flows.

For all of these reasons, these physical risks could have an adverse financial impact on our

business operations, financial condition and cash flows.

Climate change poses other financial risks as well.

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Risks Associated with Markets and Financial Matters

Our Results of Operations and Financial Condition May be Adversely Affected by the Volatility in Pension and OPEB Investments and Obligations Due to Capital Market Performance and Other Changes

FirstEnergy recognizes in income the change in the fair value of plan assets and net actuarial gains and losses for its pension and OPEB plans.

This adjustment is recognized in the fourth quarter of each year and whenever a plan is determined to qualify for a remeasurement, resulting in greater volatility in pension and OPEB expenses and may materially impact our results of operations.

Our financial statements reflect the values of the assets held in trust to satisfy our obligations under pension and OPEB plans.

Certain of the assets held in these trusts do not have readily determinable market values.

Changes in the estimates and assumptions inherent in the value of these assets could affect the value of the trusts.

If the value of the assets held by the trusts declines by a material amount, our funding obligation to the trusts could materially increase.

These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates.

Forecasting investment earnings and costs to pay future pension and other obligations requires significant judgment and actual results may differ significantly from current estimates.

Capital market conditions that generate investment losses or that negatively impact the discount rate and increase the present value of liabilities may increase our future pension and OPEB expenses and further may have significant impacts on the value of the pension and other trust funds, which could require significant additional funding and negatively impact our results of operations and financial position.

Our Results of Operations and Financial Condition May be Adversely Affected by Certain Risks Related to our Minority Interest in a Coal Mine

In the second quarter of 2022, FEV received its first dividend of $20 million after more than ten years of equity ownership in the joint venture and received total dividends in 2022 of $170 million.

Additionally, during 2022, FirstEnergy recognized approximately $168 million of pre-tax earnings (approximately $128 million after-tax) from its investment in Global Holding.

Global Holding’s ability to positively affect our results of operations or pay future dividends depends upon several factors beyond our control, including, but not limited to:

the market price of coal, the availability and reliability of transportation facilities and other systems, and Global Holding’s ability to renew and maintain governmental permits and approvals and remain in compliance with safety and environmental regulations affecting the coal mining industry.

The price for Signal Peak’s coal depends upon factors beyond our control, including:

overall global economic conditions, the effect of worldwide energy consumption, including the impact of technological advances on energy consumption;

international developments impacting the supply of coal;

international developments impacting the supply of oil & gas;

and the impact of domestic and foreign governmental laws and regulations, including environmental and climate change regulations.

Any adverse change in these factors could result in weaker demand and lower prices for Global Holding’s products, and, as a result, could impact Global Holding’s ability to pay future dividends or adversely affect our cash flow and results of operations.

Failure to Comply with Debt Covenants in Our Credit Agreements or Conditions Could Adversely Affect Our Ability to Execute Future Borrowings and/or Require Early Repayment, and Could Restrict our Ability to Obtain Additional or Replacement Financing on Acceptable Terms or at All

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Upon the occurrence of such an event of default, any amounts outstanding under our credit facilities could be declared to be immediately due and payable and all applicable commitments to extend further credit could be terminated.

If indebtedness under our credit facilities is accelerated, there can be no assurance that we will have sufficient assets to repay the indebtedness.

If indebtedness under our credit facilities is accelerated,

there can be no assurance that we will have sufficient assets to repay the indebtedness.

In addition, certain events, including but not limited to any covenant breach related to alleged failures to comply with anti-corruption and anti-bribery laws, an event of default under our credit agreements, and the acceleration of applicable commitments under such facilities could restrict our ability to obtain additional or replacement financing on acceptable terms or at all.

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Furthermore, additional downgrades could increase the cost of such capital by causing us to incur higher interest rates and fees associated with such capital.

Additional rating downgrades would further increase our interest expense on certain of

FirstEnergy's long-term debt obligations and would also further increase the fees we pay on our various existing credit facilities, thus increasing the cost of our working capital.

Additional rating downgrades would further increase our interest expense on certain of FirstEnergy's long-term debt obligations and would also further increase the fees we pay on our various existing credit facilities, thus increasing the cost of our working capital.

Such additional rating downgrades could also negatively impact our ability to grow our regulated businesses or execute our business strategies by substantially increasing the cost of, or limiting access to, capital.

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See “Failure to Comply with Debt Covenants in our Credit Agreements or Conditions Could Adversely Affect our Ability to Execute Future Borrowings and/or Require Early Repayment, and Could Restrict our Ability to Obtain Additional or Replacement Financing on Acceptable Terms or at All.”

Our Results of Operations and Financial Condition May be Adversely Affected by the Volatility in Pension and OPEB Expenses Due to Capital Market Performance and Other Changes

FirstEnergy recognizes in income the change in the fair value of plan assets and net actuarial gains and losses for its pension and OPEB plans.

Our financial statements reflect the values of the assets held in trust to satisfy our obligations under pension and OPEB plans.

Certain of the assets held in these trusts do not have readily determinable market values.

Changes in the estimates and assumptions inherent in the value of these assets could affect the value of the trusts.

If the value of the assets held by the trusts declines by a material amount, our funding obligation to the trusts could materially increase.

These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates.

Forecasting investment earnings and costs to pay future pension and other obligations requires significant judgment and actual results may differ significantly from current estimates.

Capital market conditions that generate investment losses or that negatively impact the discount rate and increase the present value of liabilities may have significant impacts on the value of the pension and other trust funds, which could require significant additional funding and negatively impact our results of operations and financial position.

In the Event of Volatility or Unfavorable Conditions in the Capital and Credit Markets, Our Business, Including the Immediate Availability and Cost of Short-Term Funds for Liquidity Requirements, Our Ability to Meet Long-Term Commitments and the Competitiveness and Liquidity of Energy Markets May be Adversely Affected, Which Could Negatively Impact Our Results of Operations, Cash Flows and Financial Condition

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Reduced capital and liquidity and failures of significant institutions that participate in the energy markets could diminish the liquidity and competitiveness of energy markets that are important to our business.

Perceived weaknesses in the competitive strength of the energy markets could lead to pressures for greater regulation of those markets or attempts to replace those market structures with other mechanisms for the sale of power, including the requirement of long-term contracts, which could have a material adverse effect on our results of operations and cash flows.

Our Use of Non-Derivative and Derivative Contracts to Mitigate Risks Could Result in Financial Losses That May Negatively Impact Our Financial Results

We may use a variety of non-derivative and derivative instruments, such as swaps, options, futures and forwards, to manage our financial market risks.

In the absence of actively quoted market prices and pricing information from external sources, the valuation of some of these derivative instruments involves management’s judgment or use of estimates.

As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of some of these

Also, we could recognize financial losses as a result of volatility in the market value of these contracts if a counterparty fails to perform or if there is limited liquidity of these contracts in the market.

Perceived weaknesses in the competitive strength of the energy markets could lead to pressures for greater regulation of those

markets or attempts to replace those market structures with other mechanisms for the sale of power, including the requirement of long-term contracts, which could have a material adverse effect on our results of operations and cash flows.

The IRA of 2022 Could Change the Rate of Taxes Imposed On Us and Could Negatively Affect Our Cash Flows and Financial Condition

On August 16, 2022, the U.S.

President signed into law the IRA of 2022 which, among other things, imposes a new 15% corporate AMT based on AFSI, applicable to corporations with a three-year average AFSI over $1 billion.

The AMT is effective for the 2023 tax year and, if applicable, corporations must pay the greater of the regular corporate income tax or the AMT.

Although NOL carryforwards created through the regular corporate income tax system cannot be used to reduce the AMT, financial statement net operating losses can be used to reduce AFSI and the amount of AMT owed.

The IRA of 2022 as enacted requires the U.S.

Treasury to provide regulations and other guidance necessary to administer the AMT, including further defining allowable adjustments to determine AFSI, which directly impacts the amount of AMT to be paid.

Based on interim guidance issued by U.S.

Treasury in late December 2022, FirstEnergy continues to believe that it is more likely than not it will be subject to the AMT beginning in 2023.

Until final U.S.

Treasury guidance is issued, the amount of AMT FirstEnergy would pay could be significantly different than current estimates or it may not be a payer at all.

The regulatory treatment of the impacts of this legislation will also be subject to the discretion of the FERC and state public utility commissions.

Any adverse development in this legislation, including guidance from U.S.

Treasury and/or the IRS or unfavorable regulatory treatment, could reduce future cash flows and impact financial condition.

Changes in Local, State or Federal Tax Laws Applicable to Us or Adverse Audit Results or Tax Rulings, and Any Resulting Increases in Taxes and Fees, May Adversely Affect Our Results of Operations, Financial Condition and Cash Flows

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Any such changes, or any adverse tax audit results or adverse tax rulings on positions taken by FirstEnergy or its subsidiaries could have a negative impact on its results of operations, financial condition and cash flows.

In addition, the U.S.

President and the majority political party of the U.S.

Congress have announced a potential reform of U.S.

The details of the President's comprehensive tax plan have not yet emerged but has outlined several proposed changes to corporate taxes including a corporate minimum tax based on adjusted financial statement income.

We cannot predict whether, when or to what extent new U.S.

tax laws, regulations, interpretations or rulings will be issued, nor is the long-term impact of proposed tax reform clear.

tax laws, regulations, interpretations or rulings will be issued.

A reform of U.S.

tax laws may be enacted in a manner that negatively impacts our cash flow, results of operations, and financial condition.

The Phasing Out of LIBOR Could Adversely Affect our Financial Results

The Transition from LIBOR to SOFR Could Adversely Affect our Financial Results

A portion of FirstEnergy’s indebtedness bears interest at fluctuating interest rates, primarily based on LIBOR.

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Accordingly, FirstEnergy’s interest expense for any particular period will fluctuate based on LIBOR and other variable interest rates.

On July 27, 2017, the FCA (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

LIBOR is not expected to be phased out entirely until 2023 and it is unclear whether new methods of calculating LIBOR will be established in the interim.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S.

dollar LIBOR with a newly created index (the secured overnight financing rate or SOFR), calculated based on repurchase agreements backed by treasury securities.

On July 27, 2017, the FCA (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and according to the FCA, IBA will permanently cease to publish overnight, 1-month, 3-month, 6-month and 12-month LIBOR settings on June 30, 2023.

FirstEnergy’s 2021 Credit Facilities provide a mechanism to automatically transition to a SOFR-based benchmark when all U.S.

dollar LIBOR settings are no longer provided or are no longer representative.

In addition, FirstEnergy’s 2021 Credit Facilities provide an option for the applicable borrower and lender to jointly elect to transition early to a SOFR-based benchmark, or in certain circumstances, an alternative benchmark replacement.

It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere.

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Additionally, the Utilities and Transmission Companies are regulated by various state utility and federal commissions that generally possess broad powers to ensure that the needs of utility customers are being met.

Those state and federal commissions could attempt to impose restrictions on the ability of the Utilities and Transmission Companies to pay dividends or otherwise restrict cash payments to us.

Those state and federal

commissions could attempt to impose restrictions on the ability of the Utilities and Transmission Companies to pay dividends or otherwise restrict cash payments to us.

We Cannot Assure Common Shareholders that Future Dividend Payments Will be Made, or if Made, in What Amounts They May be Paid

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Upon such characterization, shareholders are urged to consult their own tax advisors regarding the income tax treatment of our distributions to them.

Risks Associated with the Global Pandemic

The Continuing Impact of the COVID-19 Pandemic is Highly Unpredictable and Could Have an Adverse Effect on Our Business, Results of Operations, Cash Flows and Financial Condition

The extent to which the COVID-19 pandemic impacts FirstEnergy going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic;

governmental, business, and individuals' actions in response to the pandemic;

and the impact on economic activity including inflation, and the possibility of recession or financial market instability.

This uncertainty is expected to continue to impact our business in 2022.

While most of the moratoriums on utility disconnections imposed across FirstEnergy’s five-state service territory have been rescinded, similar actions could occur in the future.

We have also incurred increased expenses related to safety and cleaning protocols that were implemented to protect the health and safety of our employees, contractors, and customers and to support social distancing requirements, which expenses include new or added benefits provided to employees, the purchase of additional personal protection equipment and disinfecting supplies, additional facility cleaning services, the initiation of programs and communications to customers on utility response, and increased technology expenses to support remote working, where possible.

While FirstEnergy believes that all these measures have been necessary or appropriate, they have resulted in additional costs and may adversely impact its business and results of operation in the future or expose it to additional unknown risks.

Although it is not possible to predict the ultimate impact of COVID-19, including on FirstEnergy’s business, results of operations, cash flows or financial positions, such impacts that may be material include, but are not limited to:

(i) lower commercial and industrial customer demand for electricity, (ii) impacts of rapidly-changing governmental and public health directives to contain and combat the pandemic together with executive and legislative initiatives imposing, among other things, required COVID-19 testing or workforce COVID-19 vaccination mandates, which could affect the retention and recruitment of our current and prospective employees, respectively, (iii) increased credit risk, including increased failure or delay by customers to make their utility payments, (iv) reduced availability and productivity of its employees, (v) increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events, and (vi) delays and disruptions in the availability of contracted labor and the timely delivery of materials and components used in its operations, as well as increased costs for such materials and components.

To the extent the duration of any of these conditions extends for a longer period of time, the adverse impact will generally be more severe.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors