Allegheny Power 2011 Annual Report Download - page 120

105
FirstEnergy(1)
FES
OE
CEI
TE
JCP&L
Met-Ed
Penelec
December 31, 2011
Carrying
Value
(In millions)
$ 17,165
3,675
1,157
1,831
600
1,777
729
1,120
Fair Value
$ 19,320
3,931
1,434
2,162
741
2,080
824
1,251
December 31, 2010
Carrying
Value
$ 13,928
4,279
1,159
1,853
600
1,810
742
1,120
Fair Value
$ 14,845
4,403
1,321
2,035
653
1,962
821
1,189
(1) Includes debt assumed in the AE merger (see Note 2, Merger) with a carrying value and a fair
value as of December 31, 2011, of $4,355 million and $4,561 million, respectively.
The fair values of long-term debt and other long-term obligations reflect the present value of the cash outflows relating to those
securities based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective
period. The yields assumed were based on securities with similar characteristics offered by corporations with credit ratings similar
to those of FirstEnergy and its subsidiaries listed above.
INVESTMENTS
All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the
Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents
include held-to-maturity securities, available-for-sale securities and notes receivable.
FE and its subsidiaries periodically evaluate their investments for other-than-temporary impairment. They first consider their intent
and ability to hold an equity investment until recovery and then consider, among other factors, the duration and the extent to which
the security’s fair value has been less than cost and the near-term financial prospects of the security issuer when evaluating an
investment for impairment. For debt securities, FE and its subsidiaries consider their intent to hold the security, the likelihood that
they will be required to sell the security before recovery of their cost basis and the likelihood of recovery of the security’s entire
amortized cost basis.
Unrealized gains applicable to the decommissioning trusts of FES, OE and TE are recognized in OCI because fluctuations in fair
value will eventually impact earnings while unrealized losses are recorded to earnings. The decommissioning trusts of JCP&L, Met-
Ed and Penelec are subject to regulatory accounting. Net unrealized gains and losses are recorded as regulatory assets or liabilities
because the difference between investments held in the trust and the decommissioning liabilities will be recovered from or refunded
to customers.
The investment policy for the NDT funds restricts or limits the trusts’ ability to hold certain types of assets including private or direct
placements, warrants, securities of FirstEnergy, investments in companies owning nuclear power plants, financial derivatives,
preferred stocks, securities convertible into common stock and securities of the trust funds’ custodian or managers and their parents
or subsidiaries.
Available-For-Sale Securities
FES and the Utility Registrants hold debt and equity securities within their NDT, nuclear fuel disposal trusts and NUG trusts. These
trust investments are considered available-for-sale securities at fair market value. FES and the Utility Registrants have no securities
held for trading purposes.
The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments held in NDT,
nuclear fuel disposal trusts and NUG trusts as of December 31, 2011 and 2010: