Allegheny Power 2013 Annual Report Download - page 134

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banks' commitments under the facility by $500 million to a total of $2.5 billion and to increase the individual borrower sub-limits for
FE by $500 million to a total of $2.5 billion and for JCP&L by $175 million to a total of $600 million.
On June 3, 2013, FG exercised a mandatory put option and repurchased approximately $235 million of PCRBs due 2023, which
FG is currently holding for remarketing subject to future market and other conditions.
As discussed in Note 8, Variable Interest Entities, in June 2013, the SPEs formed by the Ohio Companies issued approximately
$445 million of pass-through trust certificates supported by phase-in recovery bonds with a weighted average coupon of 2.48% to
securitize the recovery of certain all electric customer heating discounts, fuel and purchased power regulatory assets. The phase-
in recovery bonds were sold to a trust that concurrently sold a like aggregate amount of its pass through trust certificates to public
investors. The proceeds were primarily used to redeem $410 million in existing taxable bonds of the Ohio Companies with a weighted
average coupon of 5.71%, including $30 million of make-whole premiums. The securitization effectively allows for the recovery of
the make-whole premiums and transactional costs through the imposition of non-bypassable phase-in recovery charges on retail
electric customers of the Ohio Companies pursuant to Ohio law. The $410 million of redemption consisted of original maturities of
$225 million due 2013, $150 million due 2015 and $35 million due 2020. The make-whole premiums paid are included in cash flows
from operating activities in the Consolidated Statement of Cash Flows.
During August, the Ohio Companies redeemed an additional $660 million of long-term debt with interest rates ranging from 5.65%
to 7.25% and paid approximately $120 million of make-whole premiums which were deferred as a regulatory asset and will be
amortized over the original life of the redeemed debt. The make-whole premiums paid are included in cash flows from operating
activities in the Consolidated Statement of Cash Flows. Additionally, during August, JCP&L issued $500 million of 4.7% unsecured
notes due April 2024 and used the proceeds to pay down a portion of its short-term debt obligations.
On November 15, 2013, AE Supply optionally redeemed $235 million of its 7.00% PCRBs due July 15, 2039 at 100% of the principal
amount in connection with the deactivation of operations at Hatfield's Ferry.
On November 27, 2013, MP issued $400 million of 4.10% FMBs due April 15, 2024 and $600 million of 5.40% FMBs due December
15, 2043. Proceeds from this offering were used by MP to: (i) repay at maturity $300 million of its FMBs, 7.95% Series due December
15, 2013; (ii) redeem $120 million of its FMBs, 6.70% Series due June 15, 2014; (iii) repay a $572.7 million short-term promissory
note originally issued on October 9, 2013 to its affiliate, AE Supply in connection with MP’s acquisition of the remaining ownership
of the Harrison Power Station; and (iv) for working capital needs and other general corporate purposes.
During December of 2013, FE entered into an agreement to extend and amend its $150 million term loan agreement with a maturity
date of December 31, 2014. The maturity of the loan was extended to December 31, 2015 and the principal amount was increased
to $200 million. On December 26, 2013, PN redeemed $150 million of its 5.13% Senior Notes due April 1,2014 and ME redeemed
$100 million of its 4.88% Senior Notes due April 1, 2014.
See Note 6, Leases for additional information related to capital leases.
Securitized Bonds
Environmental Control Bonds
The consolidated financial statements of FirstEnergy include environmental control bonds issued by two bankruptcy remote, special
purpose limited liability companies that are indirect subsidiaries of MP and PE. Proceeds from the bonds were used to construct
environmental control facilities. The special purpose limited liability companies own the irrevocable right to collect non-bypassable
environmental control charges from all customers who receive electric delivery service in MP's and PE's West Virginia service
territories. Principal and interest owed on the environmental control bonds is secured by, and payable solely from, the proceeds of
the environmental control charges. The right to collect environmental control charges is not included as an asset on FirstEnergy's
consolidated balance sheets. Creditors of FirstEnergy, other than the special purpose limited liability companies, have no recourse
to any assets or revenues of the special purpose limited liability companies. As of December 31, 2013 and 2012, $472 million and
$493 million of environmental control bonds were outstanding, respectively.
Transition Bonds
The consolidated financial statements of FirstEnergy and JCP&L include the accounts of JCP&L Transition Funding and JCP&L
Transition Funding II, wholly owned limited liability companies of JCP&L. In June 2002, JCP&L Transition Funding sold transition
bonds to securitize the recovery of JCP&L’s bondable stranded costs associated with the previously divested Oyster Creek Nuclear
Generating Station. In August 2006, JCP&L Transition Funding II sold transition bonds to securitize the recovery of deferred costs
associated with JCP&L’s supply of BGS. JCP&L did not purchase and does not own any of the transition bonds, which are included
as long-term debt on FirstEnergy’s and JCP&L’s Consolidated Balance Sheets. The transition bonds are the sole obligations of
JCP&L Transition Funding and JCP&L Transition Funding II and are collateralized by each company’s equity and assets, which
consist primarily of bondable transition property. As of December 31, 2013 and 2012, $207 million and $243 million of the transition
bonds were outstanding, respectively.