Allegheny Power 2013 Annual Report Download - page 135

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Bondable transition property represents the irrevocable right under New Jersey law of a utility company to charge, collect and
receive from its customers, through a non-bypassable TBC, the principal amount and interest on transition bonds and other fees
and expenses associated with their issuance. JCP&L sold its bondable transition property to JCP&L Transition Funding and JCP&L
Transition Funding II and, as servicer, manages and administers the bondable transition property, including the billing, collection
and remittance of the TBC, pursuant to separate servicing agreements with JCP&L Transition Funding and JCP&L Transition Funding
II. For the two series of transition bonds, JCP&L is entitled to aggregate annual servicing fees of up to $628 thousand that are
payable from TBC collections.
Phase-In Recovery Bonds
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.
Other Long-term Debt
The Ohio Companies, Penn, FG and NG each have a first mortgage indenture under which they can issue FMBs secured by a
direct first mortgage lien on substantially all of their property and franchises, other than specifically excepted property.
Based on the amount of FMBs authenticated by the respective mortgage bond trustees as of December 31, 2013, the sinking fund
requirement for all FMBs issued under the various mortgage indentures amounted to payments of $7 million in 2013, all of which
relate to Penn. Penn expects to meet its 2013 annual sinking fund requirement with a replacement credit under its mortgage
indenture.
As of December 31, 2013, FirstEnergy’s currently payable long-term debt included approximately $809 million (FES — $736 million)
of variable interest rate PCRBs, the bondholders of which are entitled to the benefit of irrevocable direct pay bank LOCs. The interest
rates on the PCRBs are reset daily or weekly. Bondholders can tender their PCRBs for mandatory purchase prior to maturity with
the purchase price payable from remarketing proceeds, or if the PCRBs are not successfully remarketed, by drawings on the
irrevocable direct pay LOCs. The subsidiary obligor is required to reimburse the applicable LOC bank for any such drawings or, if
the LOC bank fails to honor its LOC for any reason, must itself pay the purchase price.
The following table presents scheduled debt repayments for outstanding long-term debt, excluding capital leases, fair value purchase
accounting adjustments and unamortized debt discounts and premiums, for the next five years as of December 31, 2013. PCRBs
that can be tendered for mandatory purchase prior to maturity are reflected in 2014.
Year FirstEnergy FES
(In millions)
2014 $ 1,376 $ 887
2015 1,264 391
2016 1,041 417
2017 1,641 163
2018 1,453 266
The following table classifies the outstanding fixed rate put PCRBs and variable rate PCRBs by year, excluding unamortized debt
discounts and premiums, for the next five years based on the next date on which the debt holders may exercise their right to tender
their PCRBs.
Year FirstEnergy FES
(In millions)
2014 $ 835 $ 762
2015 313 313
2016 391 391
2017 130 130
2018 125 125
Obligations to repay certain PCRBs are secured by several series of FMBs. Certain PCRBs are entitled to the benefit of irrevocable
bank LOCs, to pay principal of, or interest on, the applicable PCRBs. To the extent that drawings are made under the LOCs, FG,
NG and the applicable Utilities are entitled to a credit against their obligation to repay those bonds. FG, NG and the applicable
Utilities pay annual fees based on the amounts of the LOCs to the issuing banks and are obligated to reimburse the banks or
insurers, as the case may be, for any drawings thereunder. The insurers hold FMBs as security for such reimbursement obligations.