Allegheny Power 2015 Annual Report Download - page 50

34
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.
Aspartofanongoingefforttomanagecosts,FirstEnergyidentifiedbothimmediateandlongtermsavingsopportunitiesthroughits
cashflowimprovementplan.Thecashflowimprovementplanidentifiedtargetedcashsavingsofapproximately$58millionin2015,
$155millionin2016and$240millionannuallyby2017,withreductionsinoperatingexpensesrepresentingapproximately65%ofthe
savingsoverthethreeyearperiod.
AnyfinancingplansbyFirstEnergy,includingtheissuanceofequity,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issuances,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.
AsofDecember31,2015,FirstEnergy’snetdeficitinworkingcapital(currentassetslesscurrentliabilities)wasdueinlargepartto
currentlypayablelongtermdebtandshorttermborrowings.CurrentlypayablelongtermdebtasofDecember31,2015,includedthe
following:
CurrentlyPayableLongTermDebt
(Inmillions)
PCRBssupportedbybankLOCs
(1)

$
92
FMBs
245
Unsecurednotes
300
UnsecuredPCRBs
(1)

391
Collateralizedleaseobligationbonds
23
Sinkingfundrequirements
87
Othernotes
28
$
1,166
(1)
ThesePCRBsareclassifiedascurrentlypayablelongtermdebtbecausetheapplicableinterestrate
modepermitsindividualdebtholderstoputtherespectivedebtbacktotheissuerpriortomaturity.
ShortTermBorrowings/RevolvingCreditFacilities
FEandcertainofitssubsidiariesparticipateinthreefiveyearsyndicatedrevolvingcreditfacilitieswithaggregatecommitmentsof
$6.0billion(Facilities),whichareavailableuntilMarch31,2019.FirstEnergyhad$1,708millionand$1,799millionofshortterm
borrowingsasofDecember31,2015and2014,respectively.FirstEnergy’savailableliquidityundertheFacilitiesasofJanuary31,
2016wasasfollows:
Borrower(s)
Type
Maturity
Commitment
Available
Liquidity
(Inmillions)
FirstEnergy
(1)

Revolving
March2019
$
3,500
$
1,595
FES/AESupply
Revolving
March2019
1,500
1,442
FET
(2)

Revolving
March2019
1,000
1,000
Subtotal
$
6,000
$
4,037
Cash
—
63
Total
$
6,000
$
4,100
(1)
FEandtheUtilities.

(2)
IncludesFET,ATSIandTrAIL.
Generally,borrowingsundereachoftheFacilitiesareavailabletoeachborrowerseparatelyandmatureontheearlierof364days
fromthedateofborrowingorthecommitmentterminationdate,asthesamemaybeextended.EachoftheFacilitiescontains
financialcovenantsrequiringeachborrowertomaintainaconsolidateddebttototalcapitalizationratio(asdefinedundereachofthe
Facilities)ofnomorethan65%,and75%forFET,measuredattheendofeachfiscalquarter.
35
The following table summarizes the borrowing sublimits for each borrower under the Facilities, the limitations on shortterm
indebtedness applicable to each borrower under current regulatory approvals andapplicablestatutory and/or charter limitations,as of
December 31, 2015:
Borrower
FirstEnergy
Revolving
CreditFacility
SubLimit
FES/AE Supply
Revolving
CreditFacility
SubLimit
FETRevolving
CreditFacility
SubLimit
Regulatoryand
Other ShortTerm
Debt Limitations
(In millions)
FE $ 3,500 $ — $ — $ — (1)
FES —1,500 — — (2)
AE Supply —1,000 — — (2)
FET — — 1,000 —(1)
OE 500 — — 500 (3)
CEI 500 — — 500 (3)
TE 500 — — 500 (3)
JCP&L 600 — — 500 (3)
ME 300 — — 500 (3)
PN 300 — — 300 (3)
WP 200 — — 200 (3)
MP 500 — — 500 (3)
PE 150 — — 150 (3)
ATSI — — 500 500 (3)
Penn 50 — — 100 (3)
TrAIL — — 400 400 (3)
(1) Nolimitations.
(2) Nolimitationbaseduponblanket financingauthorizationfrom theFERC under existingmarketbasedratetariffs.
(3) Includesamountswhichmaybeborrowedunder theregulatedcompanies' money pool.
Theentireamount of theFES/AE Supply Facility, $600millionof theFE Facility and$225millionof theFET Facility, subject to each
borrower’s sublimit, is availablefor theissuanceof LOCs (subject toborrowings drawnunder theFacilities) expiringuptooneyear
from the date of issuance. The stated amount of outstandingLOCswill count against total commitmentsavailable under each of the
Facilities andagainst theapplicableborrower’s borrowingsublimit.
TheFacilities donot containprovisions that restrict the abilityto borrow or accelerate payment of outstanding advancesin the event
of any changeincredit ratings of theborrowers. Pricingis definedin“pricinggrids,” whereby thecost of funds borrowedunder the
Facilities is related to thecredit ratings of thecompany borrowingthefunds, other thantheFET Facility, whichis basedonits
subsidiaries' credit ratings. Additionally, borrowings under eachof theFacilities aresubject totheusual andcustomary provisions for
accelerationupontheoccurrenceof events of default, includingacrossdefault for other indebtedness inexcess of $100million.
As of December 31, 2015, theborrowers wereincompliancewiththeapplicabledebt tototal capitalization ratiocovenants under the
respective Facilities.
Term Loans
FE has a$1billionvariablerateterm loancredit agreement withamaturity dateof March31, 2019. Theinitial borrowingunder the
term loan, whichtook theform of aEurodollar rateadvance, may beconvertedfrom timetotime, inwholeor inpart, toalternatebase
rateadvances or other Eurodollar rateadvances. Theproceeds from this term loanreducedborrowings under theFE Facility.
Additionally, FE has a$200millionvariablerateterm loanwithamaturity dateof May 29, 2020. Eachof theterm loans contains
covenants andother terms andconditions substantially similar tothoseof theFE Facility describedabove, includingthesame
consolidateddebt tototal capitalizationratiorequirement.
As of December 31, 2015, FE wasin compliance with the applicable consolidated debt tototal capitalization ratio covenantsunder
eachof theseterm loans.