Allegheny Power 2013 Annual Report Download - page 50

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Regulatory assets that do not earn a current return totaled approximately $477 million as of December 31, 2013 primarily related
to storm damage costs.
As of December 31, 2013 and December 31, 2012, FirstEnergy had approximately $440 million and $480 million, respectively, of
net regulatory liabilities that are primarily related to asset removal costs. Net regulatory liabilities are classified within Other noncurrent
liabilities on the Consolidated Balance Sheets.
CAPITAL RESOURCES AND LIQUIDITY
FirstEnergy expects its existing sources of liquidity to remain sufficient to meet its anticipated obligations and those of its subsidiaries.
FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction expenditures,
scheduled debt maturities and interest and dividend payments. In addition to internal sources to fund liquidity and capital requirements
for 2014 and beyond, FirstEnergy expects to rely on external sources of funds. Short-term cash requirements not met by cash
provided from operations are generally satisfied through short-term borrowings. Long-term cash needs may be met through the
issuance of long-term debt and/or equity. FirstEnergy expects that borrowing capacity under credit facilities will continue to be
available to manage working capital requirements along with continued access to long-term capital markets.
As discussed in the Overview, FirstEnergy's 2013 financial plan also included a series of actions, including the net transfer of 1,476
MW between AE Supply and MP of the Harrison and Pleasants power plants, which closed on October 9, 2013, and the sale of
527 MWs of unregulated hydro assets which closed on February 12, 2014. Proceeds from Harrison and the hydro sale were used
to reduce debt at the Competitive Energy Services segment and at FE.
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.
In January 2014, FirstEnergy’s Board of Directors declared a revised quarterly dividend of $0.36 per share of outstanding common
stock. The dividend is payable March 1, 2014, to shareholders of record at the close of business on February 7, 2014. This revised
dividend equates to an indicated annual dividend of $1.44 per share, reduced from the $0.55 per share quarterly dividend ($2.20
per share annually) that FirstEnergy had paid since 2008.
Capital expenditures for 2014 are expected to be approximately $3.3 billion, an increase of $1 billion from 2013 primarily due to
increased transmission investments. Over the next several years, these capital expenditures, including this transmission expansion
program, are expected to be funded with a combination of debt, equity issuances through the stock investment and employee benefit
plans, and the projected $320 million annually in cash preserved as a result of the dividend action taken in January 2014. The
Utilities and FirstEnergy's competitive generation operations expect to fund their capital expenditures over the next several years
through cash from operations, debt, and, depending on the operating company, equity contributions from FE. Additionally, FirstEnergy
also expects to issue long-term debt at certain Utilities and certain other subsidiaries to refinance short-term and maturing debt in
the ordinary course, subject to market and other conditions. These actions are expected to continue the focus, in 2014, of maintaining
strong balance sheets at the Utilities and the Competitive Energy Services segment.
A material adverse change in operations, or in the availability of external financing sources, could impact FirstEnergy’s liquidity
position and ability to fund its capital requirements. To mitigate risk, FirstEnergy’s business strategy stresses financial discipline
and a strong focus on execution. Major elements include the expectation of: adequate cash from operations, operational excellence,
business plan execution, well-positioned generation fleet, no speculative trading operations, appropriate long-term commodity
hedging positions, manageable capital expenditure program, adequately funded pension plan, minimal near-term maturities of
existing long-term debt and a commitment to our dividend.
As of December 31, 2013, FirstEnergy’s net deficit in working capital (current assets less current liabilities) was due in large part
to currently payable long-term debt and short-term borrowings. Currently payable long-term debt as of December 31, 2013, included
the following:
Currently Payable Long-Term Debt (In millions)
PCRBs supported by bank LOCs (1) $ 809
FMBs 175
Unsecured notes 150
Unsecured PCRBs (1) 76
Collateralized lease obligation bonds 74
Sinking fund requirements 124
Other notes 7
$ 1,415