Allegheny Power 2010 Annual Report Download - page 51

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36
customer behavior and consumption levels, but based on numerous planning assumptions management estimates an
amount of $3.0 billion during 2011.
GUARANTEES AND OTHER ASSURANCES
As part of normal business activities, FirstEnergy enters into various agreements on behalf of its subsidiaries to provide
financial or performance assurances to third parties. These agreements include contract guarantees, surety bonds and
LOCs. Some of the guaranteed contracts contain collateral provisions that are contingent upon either FirstEnergy or its
subsidiaries’ credit ratings.
As of December 31, 2010, FirstEnergy’s maximum exposure to potential future payments under outstanding guarantees
and other assurances approximated $3.7 billion, as summarized below:
Maximum
Guarantees and Other Assurances Exposure
(In millions)
FirstEnergy Guarantees on Behalf of its Subsidiaries
Energy and Energy-Related Contracts(1) $ 300
LOC (long-term debt) --Interest coverage(2) 2
FirstEnergy guarantee of OVEC obligations 300
Other(3) 227
829
Subsidiaries' Guarantees
Energy and Energy-Related Contracts 54
LOC (long-term debt) --Interest coverage(2) 3
FES' guarantee of NGC's nuclear property insurance 70
FES' guarantee of FGCO's sale and leaseback obligations 2,375
Other 2
2,504
Surety Bonds 82
LOC (long-term debt) -- Interest coverage(2) 3
LOC (non-debt)(4)(5) 339
424
Total Guarantees and Other Assurances $ 3,757
(1)
Issued for open-ended terms, with a 10-day termination right by FirstEnergy.
(2)
Reflects the interest coverage portion of LOCs issued in support of floating rate
PCRBs with various maturities. The principal amount of floating-rate PCRBs of
$827 million is reflected in currently payable long-term debt on FirstEnergy's
consolidated balance sheets.
(3)
Includes guarantees of $15 million for nuclear decommissioning funding
assurances, $161 million supporting OE's sale and leaseback arrangement, and
$39 million for railcar leases.
(4)
Includes $167 million issued for various terms pursuant to LOC capacity available
under FirstEnergy's revolving credit facility.
(5)
Includes approximately $130 million pledged in connection with the sale and
leaseback of Beaver Valley Unit 2 by OE and $42 million pledged in connection with
the sale and leaseback of Perry by OE.
FirstEnergy guarantees energy and energy-related payments of its subsidiaries involved in energy commodity activities
principally to facilitate or hedge normal physical transactions involving electricity, gas, emission allowances and coal.
FirstEnergy also provides guarantees to various providers of credit support for the financing or refinancing by its
subsidiaries of costs related to the acquisition of property, plant and equipment. These agreements legally obligate
FirstEnergy to fulfill the obligations of those subsidiaries directly involved in energy and energy-related transactions or
financings where the law might otherwise limit the counterparties' claims. If demands of a counterparty were to exceed
the ability of a subsidiary to satisfy existing obligations, FirstEnergy’s guarantee enables the counterparty's legal claim to
be satisfied by FirstEnergy’s assets. FirstEnergy believes the likelihood is remote that such parental guarantees will
increase amounts otherwise paid by FirstEnergy to meet its obligations incurred in connection with ongoing energy and
energy-related activities.