Allegheny Power 2013 Annual Report Download - page 131

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operations during the year ended 2011. This impairment consisted of a $311 million write down of the carrying value of the plant
assets, approximately $5 million in excessive SO2 emission allowances and an $18 million charge for excessive or obsolete inventory
at these facilities. On April 25, 2012, PJM concluded its initial analysis of the reliability impacts from the previously announced plant
deactivations and requested RMR arrangements for Eastlake Units 1-3, Ashtabula Unit 5 and Lake Shore Unit 18 through the spring
of 2015. In February 2014, PJM notified FirstEnergy that Eastlake Units 1-3 and Lake Shore Unit 18 will be released from RMR
status as of September 15, 2014. On July 10, 2012, and as amended on October 31, 2012, FirstEnergy filed with FERC, for
informational purposes, the compensation arrangements for these units which will remain in effect for as long as these generating
units continue to operate. As of September 1, 2012, Albright, Armstrong, Bay Shore (except for generating unit 1), Eastlake Units
4-5, R. Paul Smith, Rivesville and Willow Island were deactivated. During the year ended December 31, 2012, FirstEnergy recognized
pre-tax severance expense of approximately $14 million ($10 million by FES) as a result of the deactivations. These costs are
included in "other operating expenses" in the Consolidated Statements of Income.
In addition to the emission allowance impairments in connection with the plant closures, FirstEnergy recorded during 2011, pre-tax
impairment charges of approximately $6 million ($1 million for FES and $5 million for AE Supply) for NOx emission allowances that
were expected to be obsolete after 2011 and approximately $16 million ($13 million for FES and $3 million for AE Supply) for excess
SO2 emission allowances in inventory that it expected will not be consumed in the future.
Fremont Energy Center
On March 11, 2011, FirstEnergy and American Municipal Power, Inc., entered into an agreement for the sale of Fremont Energy
Center, which included two natural gas combined-cycle combustion turbines and a steam turbine capable of producing 544 MW of
load-following capacity and 163 MW of peaking capacity. The execution of this agreement triggered a need to evaluate the
recoverability of the carrying value of the assets associated with the Fremont Energy Center. The estimated fair value of the Fremont
Energy Center was based on the purchase price outlined in the sale agreement with American Municipal Power, Inc. The result of
this evaluation indicated that the carrying cost of the Fremont Energy Center was not fully recoverable. As a result of the recoverability
evaluation, FirstEnergy recorded an impairment charge of $11 million to operating income in the first quarter of 2011. On July 28,
2011, FirstEnergy completed the sale of Fremont Energy Center to American Municipal Power, Inc.
Peaking Facilities
During 2011, FirstEnergy assessed the carrying values of certain peaking facilities that were to be sold or disposed of before the
end of their useful lives. The estimated fair values were based on estimated sales prices quoted in an active market and indicated
that the carrying costs of the peaking facilities were not fully recoverable. FirstEnergy recorded impairment charges of $23 million
during 2011 and on October 18, 2011, FirstEnergy closed on the sale of the Richland and Stryker peaking facilities.
12. CAPITALIZATION
COMMON STOCK
Retained Earnings and Dividends
As of December 31, 2013, FirstEnergy’s unrestricted retained earnings were $2.6 billion. Dividends declared in 2013 were $1.65
per share, which included dividends of $0.55 per share paid in the second, third and fourth quarters of 2013. Dividends declared
in 2012 were $2.20 per share, which included dividends of $0.55 per share paid in the second, third and fourth quarter of 2012 and
dividends of $0.55 per share paid in the first quarter of 2013. The amount and timing of all dividend declarations are subject to the
discretion of the Board of Directors and its consideration of business conditions, results of operations, financial condition and other
factors. On January 21, 2014 the Board of Directors declared a quarterly dividend of $0.36 per share to be paid in the first quarter
of 2014.
In addition to paying dividends from retained earnings, OE, CEI, TE, Penn, JCP&L, ME and PN have authorization from the FERC
to pay cash dividends to FirstEnergy from paid-in capital accounts, as long as their FERC-defined equity to total capitalization ratio
remains above 35%. In addition, TrAIL and AGC have authorization from the FERC to pay cash dividends to FE from paid-in capital
accounts, as long as their FERC-defined equity to total capitalization ratio remains above 50% and 45%, respectively. The articles
of incorporation, indentures, regulatory limitations and various other agreements relating to the long-term debt of certain FirstEnergy
subsidiaries contain provisions that could further restrict the payment of dividends on their common stock. None of these provisions
materially restricted FirstEnergy’s subsidiaries’ abilities to pay cash dividends to FirstEnergy as of December 31, 2013.
SIP/DRIP Program
On September 25, 2013, FE filed a registration statement with the SEC to register 4 million shares of common stock to be issued
to registered shareholders and its employees and the employees of its subsidiaries under its Stock Investment Plan. In addition,
during December 2013, FE began fulfilling certain share-based benefit plan obligations through the issuance of authorized but
unissued common stock.