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FirstEnergy'sfutureminimumconsolidatedoperatingleasepaymentsasofDecember31,2015,areasfollows:
FirstEnergy
OperatingLeases
LeasePayments
PNBV
Net
(Inmillions)
2016
$
197
$
13
$
184
2017
122
3
119
2018
135
—
135
2019
116
—
116
2020
91
—
91
Yearsthereafter
1,438
—
1,438
Totalminimumleasepayments
$
2,099
$
16
$
2,083
FES'futureminimumoperatingleasepaymentsasofDecember31,2015,areasfollows:
OperatingLeases
LeasePayments
(Inmillions)
2016
$
131
2017
82
2018
101
2019
97
2020
68
Yearsthereafter
1,315
Totalminimumleasepayments
$
1,794
7.INTANGIBLEASSETS
AsofDecember31,2015,intangibleassetsclassifiedinOtherDeferredChargesonFirstEnergy’sConsolidatedBalanceSheet,
includethefollowing:
IntangibleAssets
AmortizationExpense
Actual
Estimated
(Inmillions)
Gross
Accumulated
Amortization
Net 2015
2016 2017
2018
2019
2020
Thereafter
NUGcontracts(1)
$
124
$
25
$
99
$
5
$
5
$
5
$
5
$
5
$
5
$
74
OVEC
54
9
45
2
2
2
2
2
2
35
Coalcontracts(2)(3)(4)
556
430
126
116
38
32
17
17
6
—
FEScustomercontracts
148
87
61
17
17
16
14
13
1
—
$
882
$
551
$
331
$
140
$
62
$
55
$
38
$
37
$
14
$
109
(1)NUGcontractsaresubjecttoregulatoryaccountingandtheiramortizationdoesnotimpactearnings.
(2)Agrossamountof$40million($23million,net)ofthecoalcontractsisrelatedtoFES.The2015andestimated2016to2019amortization
expenseforFESis$5.7millionannually.
(3)Agrossamountof$102million($16million,net)ofthecoalcontractswasrecordedwitharegulatoryoffsetandtheamortizationdoesnot
impactearnings.Accordingly,theamortizationexpenseforthesecoalcontractsisexcludedfromtableabove.
(4)Amortizationexpensein2015,includesa$67millionimpairmentofacoalcontractintangibleassetassociatedwiththeterminationofacoal
supplycontract,whichimpactedearnings.
FESacquiredcertaincustomercontractrightswhichwerecapitalizedasintangibleassets.TheserightsallowFEStosupplyelectric
generationtocustomers,andtherecordedvalueisbeingamortizedratablyoverthetermoftherelatedcontracts.
8.VARIABLEINTERESTENTITIES
FirstEnergyperformsqualitativeanalysesbased oncontrolandeconomicstodeterminewhetheravariableinterestclassifies
FirstEnergyastheprimarybeneficiary(acontrollingfinancialinterest)ofaVIE.Anenterprisehasacontrollingfinancialinterestifit
hasbothpowerandeconomiccontrol,suchthatanentityhas(i)thepowertodirecttheactivitiesofaVIEthatmostsignificantly
impacttheentity’seconomicperformance,and(ii)theobligationtoabsorblossesoftheentitythatcouldpotentiallybesignificantto
97
theVIEortherighttoreceivebenefitsfromtheentitythatcouldpotentiallybesignificanttotheVIE.FirstEnergyconsolidatesaVIE
whenitisdeterminedthatitistheprimarybeneficiary.
The caption "noncontrolling interest" within the consolidated financial statements is used to reflect the portion of a VIE that
FirstEnergyconsolidates,butdoesnotown.
InordertoevaluatecontractsforconsolidationtreatmentandentitiesforwhichFirstEnergyhasaninterest,FirstEnergyaggregates
variableinterestsintocategoriesbasedonsimilarriskcharacteristicsandsignificance.
ConsolidatedVIEs
VIEsinwhichFirstEnergyistheprimarybeneficiaryconsistofthefollowing(includedinFirstEnergy’sconsolidatedfinancial
statements):
•PNBVPNBV a businesstrustestablishedbyOE in1996, issuedcertainbeneficialinterestsandnotestofundthe
acquisitionofaportionofthebondsissuedbycertainownertrustsinconnectionwiththesaleandleasebackin1987ofa
portionofOE'sinterestinthePerryPlantandBeaverValleyUnit2.OEuseddebtandavailablefundstopurchasethenotes
issuedbyPNBV.ThebeneficialownershipofPNBVincludesa3%interestbyunaffiliatedthirdparties.
•OhioSecuritizationInSeptember2012,theOhioCompaniescreatedseparate,whollyownedlimitedliabilitycompanies
(SPEs)whichissuedphaseinrecoverybondstosecuritizetherecoveryofcertainallelectriccustomerheatingdiscounts,
fuelandpurchasedpowerregulatoryassets.Thephaseinrecoverybondsarepayableonlyfrom,andsecuredby,phasein
recoverypropertyownedbytheSPEs.ThebondholderhasnorecoursetothegeneralcreditofFirstEnergyoranyofthe
OhioCompanies.EachoftheOhioCompanies,asservicerofitsrespectiveSPE,managesandadministersthephasein
recovery property including the billing, collection and remittance of usagebased charges payable by retail electric
customers. In the aggregate, the Ohio Companies are entitled to annual servicing fees of $445 thousand that are
recoverablethroughtheusagebasedcharges.AsofDecember31,2015andDecember31,2014,$362millionand$386
millionofthephaseinrecoverybondswereoutstanding,respectively.
•JCP&LSecuritizationInJune2002,JCP<ransitionFundingsoldtransitionbondstosecuritizetherecoveryofJCP&L’s
bondablestrandedcostsassociatedwiththepreviouslydivestedOysterCreekNuclearGeneratingStation.InAugust2006,
JCP<ransitionFundingIIsoldtransitionbondstosecuritizetherecoveryofdeferredcostsassociatedwithJCP&L’s
supplyofBGS.JCP&Ldidnotpurchaseanddoesnotownanyofthetransitionbonds,whichareincludedaslongtermdebt
onFirstEnergy’sandJCP&L’sConsolidatedBalanceSheets.Thetransitionbonds arethe soleobligationsofJCP&L
TransitionFundingandJCP<ransitionFundingIIandarecollateralizedbyeachcompany’sequityandassets,which
consistprimarilyofbondabletransitionproperty.AsofDecember31,2015andDecember31,2014,$128millionand$168
millionofthetransitionbondswereoutstanding,respectively.
•MPandPEEnvironmentalFundingCompaniesTheentitiesissuedbondsofwhichtheproceedswereusedtoconstruct
environmentalcontrolfacilities.Thespecialpurposelimitedliabilitycompaniesowntheirrevocablerighttocollectnon
bypassableenvironmentalcontrolchargesfromallcustomerswhoreceiveelectricdeliveryserviceinMP'sandPE'sWest
Virginiaserviceterritories.Principalandinterestowedontheenvironmentalcontrolbondsissecuredby,andpayablesolely
from,theproceedsoftheenvironmentalcontrolcharges.CreditorsofFirstEnergy,otherthanthespecialpurposelimited
liabilitycompanies,havenorecoursetoanyassetsorrevenuesofthespecialpurposelimitedliabilitycompanies.Asof
December31,2015and December31,2014,$429millionand$450millionoftheenvironmentalcontrolbondswere
outstanding,respectively.
UnconsolidatedVIEs
FirstEnergyisnottheprimarybeneficiaryofthefollowingVIEs:
•GlobalHoldingFEVholdsa331/3%equityownershipinGlobalHolding,theholdingcompanyforajointventureinthe
SignalPeakminingandcoaltransportationoperationswithcoalsalesinU.S.andinternationalmarkets.FEVisnotthe
primarybeneficiaryofthejointventure,asitdoesnothavecontroloverthesignificantactivitiesaffectingthejointventure's
economicperformance.FEV'sownershipinterestissubjecttotheequitymethodofaccounting.SeeNote1,Organization,
Basis of Presentation and SignificantAccounting Policies Investments, for additional information regarding FEV's
investmentinGlobalHolding.
AsdiscussedinNote15,Commitments,GuaranteesandContingencies,FEistheguarantorunderGlobalHolding's$300
milliontermloanfacility.FailurebyGlobalHoldingtomeetthetermsandconditionsunderitstermloanfacilitycouldrequire
FEtobeobligatedundertheprovisionsofitsguarantee,resultinginconsolidationofGlobalHoldingbyFE.
•PATHWVPATHisaserieslimitedliabilitycompanythatiscomprisedofmultipleseries,eachofwhichhasseparaterights,
powersanddutiesregardingspecifiedpropertyandtheseriesprofitsandlossesassociatedwithsuchproperty.Asubsidiary
ofFEowns100%oftheAlleghenySeries(PATHAllegheny)and50%oftheWestVirginiaSeries(PATHWV),whichisa
jointventurewithasubsidiaryofAEP.FirstEnergyisnottheprimarybeneficiaryofPATHWV,asitdoesnothavecontrol
overthesignificantactivitiesaffectingtheeconomicsofPATHWV.FirstEnergy'sownershipinterestinPATHWVissubject
totheequitymethodofaccounting.