Allegheny Power 2010 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2010 Allegheny Power annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

30
FirstEnergy expects its existing sources of liquidity to remain sufficient to meet its anticipated obligations and those of its
subsidiaries. FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses,
construction expenditures, scheduled debt maturities and interest and dividend payments. During 2011, FirstEnergy
expects to satisfy these requirements with a combination of internal cash from operations and external funds from the
capital markets as market conditions warrant. FirstEnergy also expects that borrowing capacity under credit facilities will
continue to be available to manage working capital requirements along with continued access to long-term capital
markets.
A material adverse change in operations, or in the availability of external financing sources, could impact FirstEnergy’s
ability to fund current liquidity and capital resource requirements. To mitigate risk, FirstEnergy’s business model stresses
financial discipline and a strong focus on execution. Major elements of this business model include the expectation of:
projected cash from operations, opportunities for favorable long-term earnings growth as the transition to competitive
generation markets is completed, operational excellence, business plan execution, well-positioned generation fleet, no
speculative trading operations, appropriate long-term commodity hedging positions, manageable capital expenditure
program, adequately funded pension plan, minimal near-term maturities of existing long-term debt, commitment to a
secure dividend (dividends declared from time to time on FirstEnergy's common stock during any annual period may in
aggregate vary from the indicated amount due to circumstances considered by FirstEnergy's Board of Directors at the
time of the actual declarations) and a successful merger integration.
As of December 31, 2010, FirstEnergy's net deficit in working capital (current assets less current liabilities) was
principally due to short-term borrowings and the classification of certain variable interest rate PCRBs as currently
payable long-term debt. Currently payable long-term debt as of December 31, 2010, included the following (in millions):
Currently Payable Long-term Debt
PCRBs supported by bank LOCs (1) $ 827
FGCO and NGC PCRBs (1) 191
Penelec unsecured PCRBs 25
FirstEnergy Corp. unsecured note 250
NGC collateralized lease obligation bonds 50
Sinking fund requirements 33
FES term loan 100
Other obligations 10
$ 1,486
(1)
Interest rate mode permits individual debt holders to put the respective debt back to the
issuer prior to maturity.
Short-Term Borrowings
FirstEnergy had approximately $700 million of short-term borrowings as of December 31, 2010 and $1.1 billion as of
December 31, 2009. FirstEnergy's available liquidity as of January 31, 2011, is summarized in the following table:
Available
Company Type Maturity Commitment Liquidity
(In millions)
FirstEnergy(1) Revolving Aug. 2012 $2,750 $ 2,245
FES Term loan Mar. 2011 100 -
Ohio and Pennsylvania Companies Receivables financing Various
(2)
395 237
Subtotal $3,245 $ 2,482
Cash - 668
Total $3,245 $ 3,150
(1)
FirstEnergy Corp. and subsidiary borrowers.
(2)
Ohio - $250 million matures March 30, 2011; Pennsylvania - $145 million matures June 17, 2011 with optional extension terms.
On October 22, 2010, Signal Peak and Global Rail, as borrowers, entered into a $350 million syndicated two-year senior
secured term loan facility. The loan proceeds were used to repay $258 million of notes payable to FirstEnergy, including
$9 million of interest and $63 million of bank loans that were scheduled to mature on November 16, 2010. Additional
proceeds were used for general company purposes, including an $11 million repayment of a third-party seller’s note. As
discussed below under Guarantees and Other Assurances, FirstEnergy, together with WMB Loan Ventures LLC and
WMB Loan Ventures II LLC, the entities that share ownership with FEV in the borrowers, have provided a guaranty of the
borrowers’ obligations under the facility.