Allegheny Power 2014 Annual Report Download - page 45

30
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. FE's primary source of cash for continuing operations as a holding
company is cash from the operations of its subsidiaries. During 2014, FirstEnergy received $735 million of cash dividends and
capital returned from its subsidiaries and paid $604 million in cash dividends to common shareholders. In addition to internal sources
to fund liquidity and capital requirements for 2015 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.
In January 2014, FirstEnergy's Board of Directors declared a revised quarterly dividend of $0.36 per share of outstanding common
stock. 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. Most recently, FirstEnergy's Board of Directors declared
a quarterly dividend of $0.36 per share of outstanding common stock in January 2015 payable March 1, 2015 to shareholders of
record at the close of business on February 6, 2015.
FirstEnergy's strategy is to focus on investments in its regulated operations. The centerpiece of this strategy is a $4.2 billion Energizing
the Future investment plan that began in 2014 and will continue through 2017 to upgrade and expand the transmission system
owned by FirstEnergy’s Regulated Transmission segment. This program is focused on projects that enhance system performance,
physical security and add operating flexibility and capacity starting with the ATSI system and moving east across FirstEnergy's
service territory over time. FirstEnergy expects to fund these investments through a combination of debt, previously announced
equity issuances through a stock investment plan and, to the extent available, employee benefit plans, and cash. Regulated
Transmission's capital expenditures in 2014 were approximately $1.4 billion. In 2015, Regulated Transmission's capital expenditure
forecast is approximately $970 million. In total, FirstEnergy has identified at least $15 billion in transmission investment opportunities
across the 24,000 mile transmission system, making this a continuing platform for investment in the years beyond 2017. In the
future, FirstEnergy may consider additional equity to fund capital investments in the Regulated Transmission business.
In alignment with FirstEnergy’s strategy to invest in its Regulated Transmission and Regulated Distribution segments and the
repositioning of the CES segment, FirstEnergy is also focused on improving the balance sheet over time consistent with its business
profile, maintaining investment grade metrics at each business unit, and maintaining strong liquidity for an overall stable financial
position. Specifically, at the regulated businesses, authority has been obtained for various regulated distribution and transmission
subsidiaries to issue and/or refinance debt.
Capital expenditures for 2015 are expected to be approximately $2.9 billion, a decrease of $0.4 billion from 2014, excluding the
capital component of the Pension and OPEB mark-to-market adjustment, which increased 2014 capital by $387 million. These
capital expenditures, including this transmission expansion program, are expected to be funded with a combination of debt, equity
issuances through the stock investment plan and, to the extent available, employee benefit plans, and the projected $320 million
annually in cash preserved as a result of the dividend action taken in January 2014. In 2014, FirstEnergy issued $83 million in equity
through the stock investment plan and share-based employee benefit plans.
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.
Any financing plans by FirstEnergy, including refinancing of maturing debt and reductions in short-term borrowings, are subject to
market conditions and other factors. No assurance can be given that any such financings, refinancings, or reductions in short-term
debt, as the case may be, will be completed as anticipated. In addition, FirstEnergy expects to continually evaluate any planned
financings, which may result in changes from time to time.