Allegheny Power 2014 Annual Report Download - page 54

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Subsequent to the occurrence of a senior unsecured credit rating downgrade to below S&P's BBB- and Moody's Baa3, or a “material
adverse event,” the immediate posting of collateral or accelerated payments may be required of FE or its subsidiaries. The following
table discloses the additional credit contingent contractual obligations that may be required under certain events as of December 31,
2014:
Collateral Provisions FES AE Supply Utilities Total
(In millions)
Split Rating (One rating agency's rating below investment grade) $ 603 $ 6 $ 48 $ 657
BB+/Ba1 Credit Ratings $ 643 $ 6 $ 48 $ 697
Full impact of credit contingent contractual obligations $ 886 $ 72 $ 86 $ 1,044
Excluded from the preceding chart are the potential collateral obligations due to affiliate transactions between the Regulated
Distribution segment and CES segment. As of December 31, 2014, neither FES nor AE Supply had any collateral posted with their
affiliates. In the event of a senior unsecured credit rating downgrade to below S&P's BB- or Moody's Ba3, FES would be required
to post $24 million with affiliated parties.
Other Commitments and Contingencies
FirstEnergy is a guarantor under a syndicated three-year senior secured term loan facility due October 18, 2015, under which Global
Holding borrowed $350 million. Proceeds from the loan were used to repay Signal Peak's and Global Rail's maturing $350 million
syndicated two-year senior secured term loan facility. In addition to FirstEnergy, Signal Peak, Global Rail, Global Mining Group,
LLC and Global Coal Sales Group, LLC, each being a direct or indirect subsidiary of Global Holding, have also provided their joint
and several guaranties of the obligations of Global Holding under the new facility.
In connection with the current facility, 69.99% of Global Holding's direct and indirect membership interests in Signal Peak, Global
Rail and their affiliates along with FEV's and WMB Marketing Ventures, LLC's respective 33-1/3% membership interests in Global
Holding, are pledged to the lenders under the current facility as collateral.
FirstEnergy, FEV and the other two co-owners of Global Holding, Pinesdale LLC, a Gunvor Group, Ltd. subsidiary, and WMB
Marketing Ventures, LLC, have agreed to use their best efforts to refinance the new facility no later than July 20, 2015, which reflects
the terms of an amendment dated August 14, 2013, on a non-recourse basis so that FirstEnergy's guaranty can be terminated and/
or released. If that refinancing does not occur, FirstEnergy may require each co-owner to lend to Global Holding, on a pro rata
basis, funds sufficient to prepay the new facility in full. In lieu of providing such funding, the co-owners, at FirstEnergy's option, may
provide their several guaranties of Global Holding's obligations under the facility. FirstEnergy receives a fee for providing its guaranty,
payable semiannually, which accrued at a rate of 4% through December 31, 2012, and accrues at a rate of 5% from January 1,
2013 through October 18, 2015, which amends the rate in the prior agreement, in each case based upon the average daily outstanding
aggregate commitments under the facility for such semiannual period.
OFF-BALANCE SHEET ARRANGEMENTS
FES and certain of the Ohio Companies have obligations that are not included on their Consolidated Balance Sheets related to the
Perry Unit 1, Beaver Valley Unit 2, and 2007 Bruce Mansfield Unit 1 sale and leaseback arrangements, which are satisfied through
operating lease payments. The total present value of these sale and leaseback operating lease commitments, net of trust investments,
was $1 billion as of December 31, 2014 and primarily relates to the 2007 Bruce Mansfield Unit 1 sale and leaseback arrangement
expiring in 2040. From time to time FirstEnergy and these companies enter into discussions with certain parties to the arrangements
regarding acquisition of owner participant and other interests. However, FirstEnergy cannot provide assurance that any such
acquisitions will occur on satisfactory terms or at all.
In February 2014, NG purchased lessor equity interests in OE's existing sale and leaseback of Beaver Valley Unit 2 for approximately
$94 million. In November 2014, NG repurchased lessor equity interests in OE's existing sale and leaseback of Perry Unit 1 for
approximately $87 million. As of December 31, 2014, FirstEnergy's leasehold interest was 3.75% of Perry Unit 1, 93.83% of Bruce
Mansfield Unit 1 and 2.60% of Beaver Valley Unit 2.
On June 24, 2014, OE exercised its irrevocable right to repurchase from the remaining owner participants the lessors' interests in
Beaver Valley Unit 2 at the end of the lease term (June 1, 2017), which right to repurchase was assigned to NG. Additionally, on
June 24, 2014, NG entered into a purchase agreement with an owner participant to purchase its lessor equity interests of the
remaining non-affiliated leasehold interest in Perry Unit 1 on May 23, 2016, which is just prior to the end of the lease term.