Allegheny Power 2015 Annual Report Download - page 51

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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.
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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.