Allegheny Power 2015 Annual Report Download - page 113

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
96
FirstEnergy'sfutureminimumconsolidatedoperatingleasepaymentsasofDecember31,2015,areasfollows:
FirstEnergy
OperatingLeases LeasePayments PNBV Net
(Inmillions)
2016 $ 197
$ 13
$ 184
2017 122
3
119
2018 135
—
135
2019 116
—
116
2020 91
—
91
Yearsthereafter 1,438
—
1,438
Totalminimumleasepayments $ 2,099
$ 16
$ 2,083

FES'futureminimumoperatingleasepaymentsasofDecember31,2015,areasfollows:

OperatingLeases LeasePayments
(Inmillions)
2016 $ 131
2017 82
2018 101
2019 97
2020 68
Yearsthereafter 1,315
Totalminimumleasepayments $ 1,794
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7.INTANGIBLEASSETS

AsofDecember31,2015,intangibleassetsclassifiedinOtherDeferredChargesonFirstEnergy’sConsolidatedBalanceSheet,
includethefollowing:
IntangibleAssets AmortizationExpense
Actual Estimated
(Inmillions)Gross
Accumulated
AmortizationNet201520162017201820192020Thereafter
NUGcontracts(1) $ 124
$ 25
$ 99
$ 5
$ 5
$ 5
$ 5
$ 5
$ 5
$ 74
OVEC 54
9
45
2
2
2
2
2
2
35
Coalcontracts(2)(3)(4) 556
430
126
116
38
32
17
17
6
—
FEScustomercontracts 148
87
61
17
17
16
14
13
1
—
$ 882
$ 551
$ 331
$ 140
$ 62
$ 55
$ 38
$ 37
$ 14
$ 109

(1)NUGcontractsaresubjecttoregulatoryaccountingandtheiramortizationdoesnotimpactearnings.
(2)Agrossamountof$40million($23million,net)ofthecoalcontractsisrelatedtoFES.The2015andestimated2016to2019amortization
expenseforFESis$5.7millionannually.
(3)Agrossamountof$102million($16million,net)ofthecoalcontractswasrecordedwitharegulatoryoffsetandtheamortizationdoesnot
impactearnings.Accordingly,theamortizationexpenseforthesecoalcontractsisexcludedfromtableabove.
(4)Amortizationexpensein2015,includesa$67millionimpairmentofacoalcontractintangibleassetassociatedwiththeterminationofacoal
supplycontract,whichimpactedearnings.

FESacquiredcertaincustomercontractrightswhichwerecapitalizedasintangibleassets.TheserightsallowFEStosupplyelectric
generationtocustomers,andtherecordedvalueisbeingamortizedratablyoverthetermoftherelatedcontracts.
8.VARIABLEINTERESTENTITIES

FirstEnergyperformsqualitativeanalysesbased oncontrolandeconomicstodeterminewhetheravariableinterestclassifies
FirstEnergyastheprimarybeneficiary(acontrollingfinancialinterest)ofaVIE.Anenterprisehasacontrollingfinancialinterestifit
hasbothpowerandeconomiccontrol,suchthatanentityhas(i)thepowertodirecttheactivitiesofaVIEthatmostsignificantly
impacttheentity’seconomicperformance,and(ii)theobligationtoabsorblossesoftheentitythatcouldpotentiallybesignificantto

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97
theVIEortherighttoreceivebenefitsfromtheentitythatcouldpotentiallybesignificanttotheVIE.FirstEnergyconsolidatesaVIE
whenitisdeterminedthatitistheprimarybeneficiary.

The caption "noncontrolling interest" within the consolidated financial statements is used to reflect the portion of a VIE that
FirstEnergyconsolidates,butdoesnotown.

InordertoevaluatecontractsforconsolidationtreatmentandentitiesforwhichFirstEnergyhasaninterest,FirstEnergyaggregates
variableinterestsintocategoriesbasedonsimilarriskcharacteristicsandsignificance.

ConsolidatedVIEs
VIEsinwhichFirstEnergyistheprimarybeneficiaryconsistofthefollowing(includedinFirstEnergy’sconsolidatedfinancial
statements):
•PNBVPNBV, abusiness trustestablishedby OEin1996,issuedcertainbeneficialinterestsand notesto fundthe
acquisitionofaportionofthebondsissuedbycertainownertrustsinconnectionwiththesaleandleasebackin1987ofa
portionofOE'sinterestinthePerryPlantandBeaverValleyUnit2.OEuseddebtandavailablefundstopurchasethenotes
issuedbyPNBV.ThebeneficialownershipofPNBVincludesa3%interestbyunaffiliatedthirdparties.
•OhioSecuritizationInSeptember2012,theOhioCompaniescreatedseparate,whollyownedlimitedliabilitycompanies
(SPEs)whichissued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arepayableonlyfrom,andsecuredby,phasein
recoverypropertyownedbytheSPEs.ThebondholderhasnorecoursetothegeneralcreditofFirstEnergyoranyofthe
OhioCompanies.EachoftheOhioCompanies,asservicerofitsrespectiveSPE,managesandadministersthephasein
recovery property including the billing, collection and remittance of usagebased charges payable by retail electric
customers. In the aggregate, the Ohio Companies are entitled to annual servicing fees of $445 thousand that are
recoverablethroughtheusagebasedcharges.AsofDecember31,2015andDecember31,2014,$362millionand$386
millionofthephaseinrecoverybondswereoutstanding,respectively.
•JCP&LSecuritization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,2015andDecember31,2014,$128millionand$168
millionofthetransitionbondswereoutstanding,respectively.
•MPandPEEnvironmentalFundingCompaniesTheentitiesissuedbondsofwhichtheproceedswereusedtoconstruct
environmentalcontrolfacilities.Thespecialpurposelimitedliabilitycompaniesowntheirrevocablerighttocollectnon
bypassableenvironmentalcontrolchargesfromallcustomerswhoreceiveelectricdeliveryserviceinMP'sandPE'sWest
Virginiaserviceterritories.Principalandinterestowedontheenvironmentalcontrolbondsissecuredby,andpayablesolely
from,theproceedsoftheenvironmentalcontrolcharges.CreditorsofFirstEnergy,otherthanthespecialpurposelimited
liabilitycompanies,havenorecoursetoanyassetsorrevenuesofthespecialpurposelimitedliabilitycompanies.Asof
December31,2015and December31,2014,$429millionand$450millionoftheenvironmentalcontrolbondswere
outstanding,respectively.
UnconsolidatedVIEs
FirstEnergyisnottheprimarybeneficiaryofthefollowingVIEs:
•GlobalHoldingFEVholdsa331/3%equityownershipinGlobalHolding,theholdingcompanyforajointventureinthe
SignalPeakminingandcoaltransportationoperationswithcoalsalesinU.S.andinternationalmarkets.FEVisnotthe
primarybeneficiaryofthejointventure,asitdoesnothavecontroloverthesignificantactivitiesaffectingthejointventure's
economicperformance.FEV'sownershipinterestissubjecttotheequitymethodofaccounting.SeeNote1,Organization,
Basis of Presentation and SignificantAccounting Policies  Investments, for additional information regarding FEV's
investmentinGlobalHolding.
AsdiscussedinNote15,Commitments,GuaranteesandContingencies,FEistheguarantorunderGlobalHolding's$300
milliontermloanfacility.FailurebyGlobalHoldingtomeetthetermsandconditionsunderitstermloanfacilitycouldrequire
FEtobeobligatedundertheprovisionsofitsguarantee,resultinginconsolidationofGlobalHoldingbyFE.

•PATHWVPATHisaserieslimitedliabilitycompanythatiscomprisedofmultipleseries,eachofwhichhasseparaterights,
powersanddutiesregardingspecifiedpropertyandtheseriesprofitsandlossesassociatedwithsuchproperty.Asubsidiary
ofFEowns100%oftheAlleghenySeries(PATHAllegheny)and50%oftheWestVirginiaSeries(PATHWV),whichisa
jointventurewithasubsidiaryofAEP.FirstEnergyisnottheprimarybeneficiaryofPATHWV,asitdoesnothavecontrol
overthesignificantactivitiesaffectingtheeconomicsofPATHWV.FirstEnergy'sownershipinterestinPATHWVissubject
totheequitymethodofaccounting.