Allegheny Power 2014 Annual Report Download - page 123

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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, 2014 and 2013, $168 million and $207 million of the transition
bonds were outstanding, respectively.
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 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. As of December 31, 2014 and 2013, $386 million and $445 million of the phase-in
recovery bonds were outstanding, respectively.
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, 2014, the sinking fund
requirement for all FMBs issued under the various mortgage indentures amounted to payments of $8 million in 2014, all of which
relate to Penn. Penn expects to meet its 2014 annual sinking fund requirement with a replacement credit under its mortgage
indenture.
As of December 31, 2014, FirstEnergy’s currently payable long-term debt included approximately $92 million of FES 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, 2014. PCRBs
that can be tendered for mandatory purchase prior to maturity are reflected in 2015.
Year FirstEnergy FES
(In millions)
2015 $ 769 $ 501
2016 1,241 416
2017 1,641 163
2018 1,687 501
2019 2,266 322
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)
2015 $ 405 $ 405
2016 391 391
2017 130 130
2018 359 359
2019 232 232