-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SLyuKQ5+9fOgdU+TRIEruGNrHB9asoXqGqEd9Hha2hvWHU483DsG7rbYu3Sn8NHR UOiPK92riZGEJ3OMkI8vaQ== 0000950123-01-505322.txt : 20010813 0000950123-01-505322.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950123-01-505322 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-09941 FILM NUMBER: 1703752 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 U-1 1 l88100u-1.txt FIRSTENERGY CORP. 1 FILE NO. _______________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________ FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 FIRSTENERGY CORP. 76 SOUTH MAIN STREET AKRON, OHIO 44308 (NAMES OF COMPANIES FILING THIS STATEMENT AND ADDRESSES OF PRINCIPAL EXECUTIVE OFFICES) LEILA L. VESPOLI VICE PRESIDENT AND GENERAL COUNSEL FIRSTENERGY CORP. 76 SOUTH MAIN STREET AKRON, OHIO 44308 (NAMES AND ADDRESSES OF AGENTS FOR SERVICE) The Commission is requested to send copies of all notices, orders and communications in connection with this Application/Declaration to: MICHAEL F. CUSICK Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 (212) 326-3939 JOHN H. BYINGTON, JR. Pillsbury Winthrop LLP One Battery Park Plaza New York, New York 10004 (212) 858-1000 2 TABLE OF CONTENTS
Page ---- ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.................................................... 1 INTRODUCTION A. DESCRIPTION OF PARTIES TO THE TRANSACTION............................................ 2 1. General Description of FirstEnergy and Its Affiliates.......................... 2 2. Description of Utility Operations of the FirstEnergy Operating Companies....... 6 B. DESCRIPTION OF THE TRANSACTION....................................................... 10 C. REASONS FOR AND ANTICIPATED EFFECTS OF THE TRANSACTION.......................................................................... 11 D. ADDITIONAL INFORMATION............................................................... 11 ITEM 2. FEES, COMMISSIONS AND EXPENSES......................................................... 12 ITEM 3. APPLICABLE STATUTORY PROVISIONS A. SECTION 10(b)........................................................................ 12 1. Section 10(b)(1)............................................................... 13 2. Section 10(b)(2) -- Fairness of Consideration and Fees......................... 14 3. Section 10(b)(3)............................................................... 14 B. SECTION 10(c)........................................................................ 15 1. Section 10(c)(1)............................................................... 15 2. Section 10(c)(2). Efficiencies and Economies.................................. 16 3. Integrated Gas Utility System.................................................. 17 4. Section 11 Analysis - ABC Clauses.............................................. 17 C. SECTION 10(f)........................................................................ 20 ITEM 4. REGULATORY APPROVALS................................................................... 20
i 3 ITEM 5. PROCEDURE.............................................................................. 20 ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS A. EXHIBITS............................................................................. 20 B. FINANCIAL STATEMENTS................................................................. 21 ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS................................................ 22
ii 4 ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION INTRODUCTION Pursuant to Sections (9)(a)(2) and 10 of the Public Utility Holding Company Act of 1935 (the "1935 Act" or the "Act"), FirstEnergy Corp., an Ohio corporation ("FirstEnergy" or the "Applicant") hereby requests that the Securities and Exchange Commission (the "Commission") issue an order approving the acquisition of all of the issued and outstanding voting securities of Northeast Ohio Natural Gas Corp. ("NONGC"), a gas utility company, and granting such other authorizations as may be necessary in connection therewith. FirstEnergy is a holding company exempt from the registration requirements of the 1935 Act. FirstEnergy has claimed an exemption from all provisions of the 1935 Act (except for Section 9(a)(2) thereof) pursuant to Rule 2 thereunder.(1) FirstEnergy directly owns all of the issued and outstanding voting securities of Ohio Edison Company, an Ohio corporation ("Ohio Edison"), American Transmission Systems, Incorporated, an Ohio corporation ("ATSI"), The Cleveland Electric Illuminating Company, an Ohio corporation ("Cleveland Electric"), and The Toledo Edison Company, an Ohio corporation ("Toledo Edison"), and indirectly owns all of the issued and outstanding voting securities of Pennsylvania Power Company, a Pennsylvania corporation ("Penn Power") and NONGC. Herein, "FirstEnergy Operating Companies" refers to Ohio Edison, Cleveland Electric, Toledo Edison and Penn Power, collectively. The FirstEnergy Operating Companies, ATSI, NONGC, Ohio Valley Electric Corporation, an Ohio corporation ("OVEC") and Indiana-Kentucky Electric Corporation ("IKEC"), an Indiana corporation, are all "public-utility companies" as defined in the 1935 Act. Ohio Edison owns all of the issued and outstanding voting securities of Penn Power and is also a "holding company" as defined in the 1935 Act. Ohio Edison is currently exempt from the registration and other requirements of the 1935 Act, other than from Section 9(a)(2) thereof, pursuant to Section 3(a)(2) thereof.(2) FirstEnergy hereby requests an order approving the acquisition of all of the issued and outstanding voting securities of NONGC, which it will hold through one of its wholly owned subsidiaries, MARBEL Energy Corporation ("MARBEL"). As discussed below, FirstEnergy's structure will not be unnecessarily complicated by the acquisition of such securities. MARBEL will claim an exemption from all provisions of the 1935 Act (except for Section 9(a)(2)) thereof pursuant to Section 3(a)(1) and Rule 2 thereunder).(3) - ---------- (1) See FirstEnergy Form U-3A-2, "Statement by Holding Company Claiming Exemption Under Rule U-2 from the Provisions of the Public Utility Holding Company Act of 1935," dated February 28, 2001, filed as Exhibit E-1 hereto. (2) See Ohio Edison Company, Holding Co. Act Release No. 21019 (April 26, 1979). (3) FirstEnergy will register as a holding company following the completion of its proposed merger with GPU, Inc. (the "FirstEnergy-GPU Merger"), for which it has filed a separate U-1 Application/Declaration, File No. 70-9793. 5 A. DESCRIPTION OF PARTIES TO THE TRANSACTION 1. General Description of FirstEnergy and Its Affiliates. (a) FirstEnergy. FirstEnergy was organized under Ohio law in 1996 and became a holding company after the merger of Ohio Edison and Centerior Energy Corporation in November 1997. The principal executive offices of FirstEnergy are located in Akron, Ohio. FirstEnergy's principal business is the holding of all of the issued and outstanding voting securities of the following 14 direct active subsidiaries: ATSI; Ohio Edison; Cleveland Electric; Toledo Edison; FirstEnergy Properties, Inc. ("FirstEnergy Properties"); FirstEnergy Ventures Corp. ("FirstEnergy Ventures"); FirstEnergy Securities Transfer Company ("FirstEnergy Transfer"); FirstEnergy Facilities Services Group, LLC ("FirstEnergy Facilities"); MARBEL; FirstEnergy Solutions Corp. ("FirstEnergy Solutions"); FE Acquisition Corp. ("FE Acquisition"); FirstEnergy Nuclear Operating Company ("FENOC"); FELHC, Inc. ("FELHC"); and The Alliance Participants Administrative and Startup Activities Company, LLC ("BridgeCo"); and all of the issued and outstanding voting securities of the following four direct inactive subsidiaries: Centerior Service Company, Centerior Indemnity Trust, FE Holdings, L.L.C. and FirstEnergy Service Company. Unless otherwise noted, all these subsidiaries are incorporated in the State of Ohio and have their principal offices in Akron, Ohio. FirstEnergy also owns a 31.08% interest in First Communications, LLC ("First Communications"), with options to acquire up to a 50% interest, and a 5.38% interest in Pantellos Corporation ("Pantellos"). First Communications provides telecommunications services utilizing a nationwide fiber optic network. First Communications offers a full plan of services including long distance, toll free services, advanced data solutions (including Digital Subscriber Line, private line service and network applications) and Personal Communications Service wireless. Pantellos operates and manages an open, independent Internet e-marketplace for the purchase of goods and services between the energy industry and its suppliers. FirstEnergy maintains other interests in non-utility businesses. Such interests are outlined in Exhibit H-2 hereto. (b) ATSI. ATSI was organized under Ohio law in 1998. ATSI is a "public-utility company" as defined in the Act. ATSI acquired certain transmission assets on September 1, 2000 from the FirstEnergy Operating Companies. ATSI owns and operates certain major, high voltage transmission facilities, which consist of approximately 7,100 circuit miles (5,752 "pole" miles)of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV. There are 37 interconnections with six neighboring control areas. ATSI's transmission system offers gateways into the East via high capacity ties with Pennsylvania-New Jersey-Maryland Interconnection LLC ("PJM") through Penelec, Duquesne Light Company ("Duquesne Light") and Allegheny Energy, Inc. ("Allegheny Energy"), into the North through multiple 345 kV high-capacity ties with Michigan Electric Coordination Systems ("MECS"), and into the South through ties with American Electric Power Company, Inc. ("AEP") and Dayton Power & Light Company ("Dayton Power"). In addition, ATSI is the 2 6 control area operator for the FirstEnergy system. ATSI plans, operates and maintains the transmission system in accordance with the requirements of the North American Electric Reliability Council and applicable regulatory agencies to ensure reliable service to FirstEnergy's customers. (c) Ohio Edison. Ohio Edison was organized under Ohio law in 1930 and is both a public utility and a public utility holding company which is exempt from regulation by the Commission under the 1935 Act (except for Section 9(a)(2) thereof). Ohio Edison engages in the distribution and sale of electric energy to approximately 1,000,000 customers within a 7,500 square-mile area of central and northeastern Ohio. Ohio Edison owns all of the issued and outstanding voting securities of Penn Power. Ohio Edison also owns directly 16.5% of the issued and outstanding voting securities of OVEC (which, in turn, owns all of the issued and outstanding voting securities of IKEC). OVEC is a public utility company organized under Ohio law in 1952. On the same date, IKEC was organized under Indiana law. The two companies were formed by 15 independent investor-owned public utilities (including Ohio Edison, Penn Power and Toledo Edison) to furnish electric service in the Ohio River Valley for the purpose of providing the large electric power requirements projected for the major uranium enrichment complex near Portsmouth, Ohio, then being built by the Atomic Energy Commission, the predecessor to the Nuclear Regulatory Commission ("NRC"). Upon consent of the other owners, Ohio Edison will transfer its interest in OVEC to FirstEnergy Generation Corp. ("GenCo"). In addition to Penn Power, Ohio Edison has seven other wholly owned subsidiaries organized, unless otherwise noted, under Ohio law: (i) OES Capital, Incorporated, re-organized in December 1999 under Delaware law; (ii) OES Fuel, Incorporated; (iii) OES Finance, Incorporated; (iv) Ohio Edison Financing Trust, organized under Delaware law; (v) Ohio Edison Financing Trust II, organized under Delaware law;(4) (vi) OES Nuclear, Incorporated; and (vii) OES Ventures, Incorporated ("OES Ventures"). These subsidiaries manage and finance nuclear fuel for Ohio Edison and Penn Power, finance certain electric accounts receivable, provide structures for investment in energy-related projects and the raising of capital by Ohio Edison, finance and manage business opportunities not directly related to the provision of electric service, or provide other energy-related products and services. OES Ventures has a 49% beneficial interest in PNBV Capital Trust, a Delaware corporation, which was formed to acquire the publicly held bond indebtedness for the acquisition of lease obligation bonds relating to Ohio Edison's sale and leaseback of individual interests in Beaver Valley Nuclear Power Station Unit No. 2 and Perry Nuclear Power Plant Unit No. 1 and the resultant reduction in effective cost to Ohio Edison under those leases. Finally, Ohio Edison has a 49% interest in FirstEnergy Engineering, Incorporated, an Ohio corporation, which provides engineering services at cost as a subcontractor on construction projects undertaken by FirstEnergy's subsidiaries. (d) Penn Power. Penn Power was organized under Pennsylvania law in 1930. Penn Power is also authorized to do business and owns property in Ohio. Penn Power - ---------- (4) Ohio Edison Financing Trust II is inactive. 3 7 is a public utility furnishing electric service to approximately 138,000 customers in a 1,500 square mile area of western Pennsylvania. (e) Cleveland Electric. Cleveland Electric was organized under Ohio law in 1892 and is a public utility engaged primarily in the distribution and sale of electric energy to approximately 741,000 customers in an area of approximately 1,700 square miles in northeastern Ohio, including the City of Cleveland. It has one subsidiary, Centerior Funding Corporation, which is a Delaware corporation organized in 1996 that factors accounts receivable. It also owns 10% of The Toledo Edison Capital Corporation ("TECC"), which is a Delaware corporation organized in 1997 that makes equity investments in Delaware business trusts that hold lessor debt instruments issued in connection with Cleveland Electric's and Toledo Edison's sale and leaseback of interests in the Bruce Mansfield Plant. (f) Toledo Edison. Toledo Edison was organized under Ohio law in 1901 and is a public utility engaged primarily in the generation, distribution and sale of electric energy to approximately 303,000 customers in an area of approximately 2,500 square miles in northwestern Ohio, including the City of Toledo. It owns 90% of TECC. Toledo Edison owns directly 4% of the issued and outstanding voting securities of OVEC. Upon consent of the other owners, Toledo Edison will transfer its interest in OVEC to GenCo. (g) FirstEnergy Properties. FirstEnergy Properties was organized in 1929 and owns non-utility land and coal rights held for sale, investment or potential development, office buildings rented to affiliated companies and third parties, and also holds former Centerior Energy Corporation's partnership share of investments in economic development investments. It has one subsidiary, BSG Properties, Inc., ("BSG Properties"), organized in 1996; BSG Properties owned a commercial building, which it sold and is engaged in post closing matters. (h) FirstEnergy Ventures. FirstEnergy Ventures was organized in 1971. Its principal business involves the ownership of stock investments in certain unregulated enterprises and business ventures. It has eight subsidiaries organized under Ohio law: (i) Centerior Power Enterprises, Inc., which will be dissolved upon the planned cancellation of a contract which required it (together with CPICOR Management LLC, a non-affiliate) to implement the Department of Energy clean coal project; (ii) Centerior Energy Services, Inc., which provides various consulting services related to energy management and procurement under the registered trade name "The E Group"; (iii) Advanced Technologies Development Corp., which owns fiber optics cables, communications towers and electronics for cell siting operations, as well as some proprietary software for telecommunications services; (iv) Centerior Communications Holdings, Inc., which holds an interest in Fiber Venture Equity, Inc. ("Fiber Venture");(5) (v) Bay Shore Power Company ("Bay Shore"), which is undergoing start-up operations and will own and operate a petroleum coke disposal facility that will supply steam to GenCo for the operation of turbines at the Bay Shore Power Plant and to BP Amoco - ---------- (5) Fiber Venture owns a 6.5% interest in AFN, LLC ("AFN"). AFN is a super-regional fiber optics joint venture of six energy and telecommunications companies initially offering 7,000 route miles of high-speed fiber connecting major markets in the eastern and central United States. 4 8 Corporation; (vi) FirstEnergy Fuel Marketing Company, which provides products and services to electricity generators and industrial fuel suppliers, including logistics services, contract administration, inventory management and fuel blending; (vii) FirstEnergy Telecommunications Corp. ("FirstEnergy Telecommunications"), which will be a competitive telecommunications services provider offering services only in the regulated activities area;(6) and (viii) Warrenton River Terminal, Ltd., which owns facilities for the transloading of bulk materials on the Ohio River, including primarily coal. FirstEnergy Ventures is also part owner of two Ohio limited liability companies: Eastroc Technologies, LLC ("Eastroc Technologies") and Engineered Processes, Ltd. ("Engineered Processes"), which own or apply technologies for the production of gypsum products. (i) FirstEnergy Transfer. FirstEnergy Transfer is an Ohio corporation organized in 1997 to act as transfer agent and registrar for the securities of FirstEnergy and its direct and indirect subsidiaries. It does not act as a transfer agent or registrar for nonaffiliated companies. (j) FirstEnergy Facilities. FirstEnergy Facilities is the parent company of 11 direct subsidiaries, which provide mechanical contracting, facilities management and energy management services to a diverse group of regional and national customers. These subsidiaries consist of the following: (i) Ancoma, Inc. of Rochester New York (a New York corporation); (ii) Colonial Mechanical Corporation of Richmond, Virginia (a Virginia corporation); (iii) Webb Technologies, Inc. of Norfolk, Virginia (a Virginia corporation); (iv) Dunbar Mechanical Inc. of Toledo, Ohio (an Ohio corporation); (v) Edwards Electrical & Mechanical, Inc. of Indianapolis, Indiana (an Indiana corporation); (vi) Elliott-Lewis Corporation ("Elliot-Lewis") of Philadelphia, Pennsylvania (a Pennsylvania corporation);(7) (vii) L.H. Cranston and Sons, Inc. of Timonium, Maryland (a Maryland corporation); (viii) Roth Bros., Inc. of Youngstown, Ohio (an Ohio corporation); (ix) The Hattenbach Company of Cleveland, Ohio (an Ohio corporation); (x) R. P. C. Mechanical, Inc. of Cincinnati, Ohio (an Ohio corporation); and (xi) Spectrum Controls Systems, Inc. of Cincinnati, Ohio (an Ohio corporation). (k) MARBEL. MARBEL is a parent company of a natural gas pipeline company. In addition, MARBEL is the contracting party to two gas supply agreements. MARBEL's subsidiaries include NONGC and Marbel Holdco, Inc. ("Marbel Holdco"). Marbel Holdco holds FirstEnergy's 50% ownership in Great Lakes Energy Partners, LLC ("Great Lakes"). Great Lakes is an oil and gas exploration and production company in a joint - ---------- (6) FirstEnergy Telecommunications applied to the Public Utilities Commission of Ohio ("PUCO") on October 18, 2000 for approval to operate as a public utility within the definition of "utilities" in the State of Ohio. Approval from PUCO and the Federal Communications Commission ("FCC") was received on December 24, 2000. On October 20, 2000, FirstEnergy Telecommunications applied for "exempt telecommunications company" ("ETC") approval from the FCC; ETC status was effective as of the date of the filing. (7) Elliot-Lewis owns all of the issued and outstanding stock of A.A. Duckett, Inc., Sautter Crane Rental, Inc. and E-L Enterprises, Inc. ("E-L Enterprises"). E-L Enterprises owns all of the issued and outstanding stock of R.L. Anderson, Inc. and Modern Air Conditioning, Inc. ("Modern AC"). Modern AC owns all of the issued and outstanding stock of Airdex Air Conditioning Corporation. 5 9 venture with Range Resources Corporation and holds a majority of its assets in the Appalachian Basin, including more than 7,700 oil and natural gas wells, drilling rights on nearly one million acres, proven resources of 450 billion cubic feet equivalent of natural gas and oil, and 5,000 miles of pipeline. Great Lakes also owns intrastate gas pipelines and a small interstate pipeline between Ohio and West Virginia. MARBEL owns all of the issued and outstanding shares of NONGC. NONGC provides gas distribution and transportation service to approximately 5,000 customers located in ten counties in central and northeast Ohio. It owns and operates approximately 420 miles of distribution and transportation pipeline. (l) FirstEnergy Solutions. FirstEnergy Solutions is an unregulated natural gas and power marketer in both wholesale and retail markets. FirstEnergy Solutions has two wholly owned subsidiaries, Penn Power Energy, Inc. ("Penn Power Energy") and GenCo. Penn Power Energy is a licensed electric supplier providing retail electricity service in Pennsylvania. GenCo is an exempt wholesale generator within the meaning of Section 32 of the 1935 Act and operates fossil fuel plants and the Seneca pumped storage plant, all of the output of which is sold at wholesale prices to FirstEnergy Solutions. Most of the generating facilities operated by GenCo are leased from the FirstEnergy Operating Companies. (m) FE Acquisition. FE Acquisition holds all of the outstanding shares of Mid-Atlantic Energy Development Co. ("Mid-Atlantic"), an inactive holding company. Mid-Atlantic owned three 130 megawatts ("MW") gas-fired peaking turbines at Richland, Ohio. Mid-Atlantic sold those turbines to GenCo effective January 1, 2001, prior to their going into service. The output of these turbines is sold as described in the preceding paragraph. (n) FENOC. FENOC operates the Davis-Besse Nuclear Power Station, the Perry Nuclear Power Plant and the Beaver Valley Nuclear Power Station under the supervision and direction of the owners of those facilities. (o) FELHC. FELHC serves as a licensee on all FCC radio licenses for the FirstEnergy Operating Companies. (p) BridgeCo. FirstEnergy owns a 10% interest in BridgeCo. BridgeCo is an entity created to manage the financial and other affairs of the ten members of the Alliance Regional Transmission Organization only until that company begins operations, anticipated to be late 2001, when BridgeCo will be dissolved. 2. Description of Utility Operations of the FirstEnergy Operating Companies. (a) FirstEnergy Operating Companies' Electric Utility Operations. FirstEnergy does not own directly any utility properties or perform any utility operations. The FirstEnergy Operating Companies' electric utility operations are described in detail below. 6 10 (i) Ohio Edison and Penn Power. Ohio Edison furnishes electric service to communities in a 7,500 square mile area of central and northeastern Ohio. Ohio Edison has ownership interests in certain generating facilities located in Pennsylvania. It also engages in the sale, purchase and interchange of electric energy with other electric companies. During the 12 months ended December 31, 2000, the principal source of Ohio Edison's operating revenues was derived from the sale of electricity. Penn Power furnishes electric service to communities in a 1,500 square mile area of western Pennsylvania. During the 12 months ended December 31, 2000, the principal source of Penn Power's operating revenues was derived from the sale of electricity. Ohio Edison and Penn Power own or lease all or a portion of 31 electric generating units, consisting of 13 coal-fired units, three nuclear units, six oil-fired units, one gas/oil-fired unit and eight diesel generators (located at two sites), which have total net generating capacity of 6,075 MW. All of the electric properties owned by Ohio Edison and Penn Power are located in Ohio and Pennsylvania. Nine of the 13 coal-fired units are 100% owned by Ohio Edison, and all such units are located in Ohio. Four of the 13 coal-fired units are held in a combined Ohio Edison-Penn Power ownership along with Toledo Edison and Cleveland Electric. The three nuclear units consist of (i) Beaver Valley 1 (810 MW), located in Pennsylvania, (ii) Beaver Valley 2, also located in Pennsylvania and representing a 456 MW share from a combined Ohio Edison-Penn Power ownership and leasehold interest of 55.61%, and (iii) Perry Unit 1, located in Ohio and representing a 439 MW share from a combined Ohio Edison-Penn Power ownership and leasehold interest of 35.24%. The six oil-fired units are also located in Ohio and are held in a combined Ohio Edison-Penn Power ownership. The gas/oil-fired unit is located in Ohio and is 100% owned by Ohio Edison. The two diesel generator sites are located in Ohio and are held in a combined Ohio Edison-Penn Power ownership. Ohio Edison and Penn Power own the distribution facilities located in their service territories in central and northeastern Ohio and western Pennsylvania, respectively, for distributing electric energy to its customers. These distribution facilities consist primarily of distribution lines and distribution substations and related service facilities. (ii) OVEC and IKEC. OVEC owns the Kyger Creek Plant at Cheshire, Ohio, which is a coal-fired facility with a capacity of 1,075 MW. IKEC owns the Clifty Creek Plant at Madison, Indiana, which is a coal-fired facility with a capacity of 1,290 MW. These plants are connected by a 780-mile 345 kV transmission network and are interconnected with the major transmission systems of OVEC's sponsor companies, although OVEC's generation facilities do not interconnect directly with ATSI's transmission system. (iii) Cleveland Electric. Cleveland Electric is engaged primarily in the generation, distribution and sale of electric energy to an area of approximately 1,700 square miles in northeastern Ohio, including the City of Cleveland. Cleveland Electric also has ownership interests in certain generating facilities located in the Commonwealth of 7 11 Pennsylvania. Cleveland Electric also engages in the sale, purchase and interchange of electric energy with other electric companies. During the 12 months ended December 31, 2000, the principal source of Cleveland Electric's operating revenues was derived from the sale of electricity. Cleveland Electric's generating properties consist of all or a portion of: (i) ten units at four fossil fuel plants including the Sammis Plant, located in Stratton, Ohio, the Lake Shore Plant, located in Cleveland, Ohio, the Eastlake Plant, located in Eastlake, Ohio, and the Ashtabula Plant, located in Ashtabula, Ohio; (ii) a 454 MW (51.38%) share of Davis-Besse Nuclear Power Station located in Oak Harbor, Ohio; and (iii) the 435 MW Seneca pumped storage hydroelectric plant located in Warren, Pennsylvania. These Cleveland Electric-owned plants have a net demonstrated capacity of 2,930 MW. Cleveland Electric and Toledo Edison, as co-lessees, have leasehold interests of 6.5% (51 MW), 47.56% (371 MW) and 44.38% (355 MW) of Units 1, 2, and 3, respectively, of the coal-fired Bruce Mansfield Plant located in Pennsylvania. Cleveland Electric also has a 44.81% ownership share (561 MW) of Perry Unit 1 located in Ohio, and 24.47% (201 MW) of Beaver Valley 2 located in Pennsylvania, and leases, as co-lessee with Toledo Edison, another 19.88% (163 MW) of Beaver Valley 2. Cleveland Electric owns the distribution facilities located in its service territory in northeastern Ohio for distributing electric energy to its customers. These distribution facilities consist primarily of distribution lines and distribution substations and related service facilities. (iv) Toledo Edison. Toledo Edison is engaged primarily in the generation, distribution and sale of electric energy to an area of approximately 2,500 square miles in northwestern Ohio, including the City of Toledo. Toledo Edison also has ownership interests in certain generating facilities located in Pennsylvania. Toledo Edison also engages in the sale, purchase and interchange of electric energy with other electric companies. During the 12 months ended December 31, 2000, the principal source of Toledo Edison's operating revenues was derived from the sale of electricity. Toledo Edison's generating facilities consist of: (i) a wholly owned fossil fuel electric generating station (631 MW), Bay Shore, located in Lucas County, Ohio; (ii) a 429 MW share of Davis-Besse Nuclear Power Station located in Oak Harbor, Ohio; and (iii) internal combustion turbine generator units with an aggregate capability of 467 MW located in northwestern Ohio. These plants have a net capacity of 1,527 MW. Toledo Edison and Cleveland Electric, as co-lessees, have leasehold interests of 6.5% (51 MW), 47.56% (371 MW) and 44.38% (355 MW) of Units 1, 2 and 3, respectively, of the coal-fired Bruce Mansfield Plant located in Pennsylvania. Toledo Edison also has a 19.91% ownership share (248 MW) of Perry Unit 1. Toledo Edison has a tenant-in-common interest and leasehold interest (with Cleveland Electric as co-lessee with respect to 150 MW) in 19.91% (163 MW) of Beaver Valley 2. 8 12 Toledo Edison owns the distribution facilities located in its service territory in northwestern Ohio for distributing electric energy to its customers. These distribution facilities consist primarily of distribution lines and distribution substations and related service facilities. (b) Transmission System. The FirstEnergy system consists of approximately 12,515 MW of generation resources that are connected directly to certain transmission facilities that they transferred to ATSI on September 1, 2000. ATSI owns and operates transmission facilities which currently operate at voltages of generally 345 kV and 138 kV (the "Bulk Transmission System"), and 69 kV facilities (the "Area Transmission System," and together with the Bulk Transmission System, the "Transmission System"). The primary function of the Transmission System is to integrate FirstEnergy's generation resources with the FirstEnergy Operating Companies' native retail and wholesale loads. To perform this network function, the Bulk Transmission System and the Area Transmission System are integrated and operate in a parallel manner to each other. The FirstEnergy Operating Companies also operate low voltage 23, 33, 34.5 and 36 kV facilities. The Transmission System consists of over 7,100 circuit miles (5,752 "pole" miles) of transmission lines with nominal voltages of 345 kV, 138 kV and 69 kV. The Transmission System services over 2.2 million customers in a 13,200 square mile area in northern and central Ohio and western Pennsylvania. The Transmission System has 37 interconnections at voltages of 69 kV or higher with six neighboring control areas. The Transmission System is connected to other systems to the East via ties with PJM, Duquesne Light and Allegheny Energy. The Transmission System is connected to other systems to the North through ties with the MECS, and is connected to other systems to the South through ties with AEP and Dayton Power. The electric service areas of the FirstEnergy Operating Companies are adjacent to, and directly interconnected with, one another. See Map filed as Exhibit C-1. (c) Gas Operations. NONGC provides gas distribution and transportation service to approximately 5,000 customers located in central and northeast Ohio. It operates approximately 420 miles of distribution and transportation pipeline and ancillary facilities. It receives its gas supplies from local gas producers as well as from interstate pipeline companies. Its principal source of operating revenues is derived from the distribution and transportation of natural gas. (d) Utility Regulation. Ohio Edison, Cleveland Electric and Toledo Edison are subject to broad regulation as to rates and other matters by the PUCO. Under Ohio law, municipalities may regulate rates, subject to appeal to the PUCO, if not acceptable to the utility. NONGC is also subject to PUCO regulation concerning rates and other matters. Penn Power is subject to broad regulation as to rates and other matters by the Pennsylvania Public Utility Commission (the "PPUC"). ATSI, the FirstEnergy Operating Companies and FirstEnergy Solutions are also subject to the jurisdiction of the Federal Energy Regulatory Commission (the "FERC") under the Federal Power Act ("FPA") with respect to wholesale electric rates, transmission service and 9 13 other matters. Construction and operation of nuclear generating units are subject to the regulatory jurisdiction of the NRC. B. DESCRIPTION OF THE TRANSACTION Effective June 4, 1998, FirstEnergy acquired all of the outstanding shares of MARBEL (the "MARBEL Acquisition"). The MARBEL Acquisition expanded FirstEnergy's products and services to include the exploration, production, distribution, transmission and marketing of natural gas and oil. Prior to the closing of the MARBEL Acquisition, an internal reorganization took place within the MARBEL system, as a result of which Northeast Ohio Natural Gas Corp. - the only company in the MARBEL system that was a public utility company under the 1935 Act - was merged into a sister company known as Gas Transport, Inc. ("Gas Transport"). As a result of the application of Rule 7(a) under the 1935 Act, Gas Transport was not a gas utility company; thus the MARBEL Acquisition did not require prior approval of the Commission under Section 9(a)(2) of the 1935 Act. On May 24, 2000, the assets of the local gas distribution ("LDC") division of Gas Transport were transferred to The Northeast Ohio Operating Companies, Inc. ("NOOCI"). On May 25, 2000, Gas Transport merged into Great Lakes Gas Transport, LLC ("GLGT"), a wholly owned subsidiary of NOOCI. On May 30, 2000, all of the membership units of GLGT were transferred to Great Lakes. The post-closing transfer of GLGT to Great Lakes is referred to herein as the "Great Lakes Transaction."(8) A copy of the agreement governing the transfer entitled "General Assignment, Bill of Sale and Conveyance," dated July 1, 2000, is filed as Exhibit B-1 hereto. There was no intercompany consideration paid; rather the transaction was part of a corporate reorganization. The assets were transferred at the book value assigned to such assets at the time of the MARBEL Acquisition. The fair market value calculations were prepared by Arthur Andersen LLP ("Arthur Andersen").(9) - ---------- (8) The Great Lakes Transaction was part of a larger transaction that had occurred in 1999. Effective September 30, 1999, FirstEnergy and Range Resources Corp. formed Great Lakes, a 50/50 joint venture primarily designed to consolidate and integrate both companies' oil and gas exploration operations in the Appalachian Basin, including properties in Ohio, Pennsylvania, West Virginia, Kentucky and Tennessee. The joint venture was created to reduce operating costs associated with exploration of reserves and serving the oil and gas properties. The Great Lakes Transaction was structured in the manner described above for tax reasons and to allow sufficient time to secure approval from the FERC for the merger of Gas Transport into GLGT. Thus, the LDC division remained within the FirstEnergy system. Permission for the Great Lakes Transaction was sought and received from the FERC on or about March 15, 2000. FERC approval was not sought, nor was it required, in connection with the LDC Transaction. No filings were required with the local regulatory bodies for either the Great Lakes Transaction or the LDC Transaction. (9) Arthur Andersen prepared an appraisal of all of the MARBEL assets, which included the NONGC assets (in its original corporate form before its merger with Gas Transport and NEO Construction), for FirstEnergy to allocate the purchase price to the fair market value of the acquired assets for financial reporting purposes. NONGC was not specifically identified as a separate line item valuation, but was included in the category of "Regulated Assets" in the appraisal report. 10 14 On July 1, 2000, NOOCI transferred the assets of the LDC division to NEO Construction Company ("NEO Construction"), a wholly owned subsidiary of NOOCI (the "LDC Transaction"). Upon the asset transfer to NEO Construction, NEO Construction became a gas utility company under the 1935 Act. Thereafter, on July 7, 2000, NEO Construction changed its name to "Northeast Ohio Natural Gas Corp."(10) On March 30, 2001, NOOCI was merged into its parent, MARBEL (the "MARBEL Merger"). As a result, the assets of NOOCI, which include all of the issued and outstanding stock of NONGC, are now owned by MARBEL. By virtue of the MARBEL Merger, all of the obligations and contractual rights of NOOCI, including those that arise under two gas supply contracts (with year 2000 revenues in excess of $7.5 million) are rights and obligations of MARBEL. C. REASONS FOR AND ANTICIPATED EFFECTS OF THE TRANSACTION The LDC Transaction occurred as part of a corporate reorganization after the Great Lakes Transaction. The LDC Transaction is expected to result in a number of benefits to the FirstEnergy system. These benefits are discussed in Item 3.B.2. D. ADDITIONAL INFORMATION No associate company or affiliate of FirstEnergy or any affiliate of any such associate company has any direct or indirect material interest in the acquisition of all of the issued and outstanding voting securities of NONGC except as stated herein. - ---------- (10) NONGC has interconnects with and receives some gas from Ohio Interstate Gas Transmission Company ("OIGTC"). OIGTC was wholly owned by NOOCI and was a sister company of NONGC. However, it was one of the companies contributed by MARBEL to form Great Lakes on September 30, 1999. At present, it is affiliated through MARBEL's 50% ownership of Great Lakes. In addition, NONGC receives gas from direct interconnects with gathering pipelines owned by Great Lakes. 11 15 ITEM 2. FEES, COMMISSIONS AND EXPENSES The fees, commissions and expenses to be paid or incurred, directly or indirectly, in connection with the transaction contemplated herein, including other related matters, are estimated as follows: Legal fees and expenses relating to the Act......................... $ 75,000 Miscellaneous....................................................... $ 25,000 TOTAL............................................................... $100,000
* To be filed by amendment. ITEM 3. APPLICABLE STATUTORY PROVISIONS It is believed that Sections 9(a)(2) and 10 of the Act are applicable to the transaction described herein. To the extent that the transaction described herein is considered by the Commission to require authorization, approval or exemption under any section of the Act or provision of the rules or regulations thereunder other than those specifically referred to herein, request for such authorization, approval or exemption is hereby made. NONGC is a "gas utility company" as defined in Section 2(a)(4) of the Act as well as a "public-utility company" as defined in Section 2(a)(5) of the Act. Because FirstEnergy will, as a result of the transactions contemplated herein, be directly acquiring five percent or more of the outstanding voting securities of NONGC, the acquisition of such shares is subject to Section 9(a)(2) of the Act. FirstEnergy believes that the proposed transaction cannot proceed without the Commission's approval pursuant to Section 10 of the Act. The relevant statutory standards to be satisfied are set forth in Sections 10(b), 10(c), and 10(f) of the Act. FirstEnergy's acquisition of NEO Construction, which became NONGC, even though it was created out of assets already owned by FirstEnergy's subsidiaries, is, in the view of the Staff of the Commission, subject to the prior approval of the Commission under Section 9(a)(2) of the 1935 Act. FirstEnergy respectfully submits this U-1 Application/Declaration seeking approval for the acquisition of all of the issued and outstanding voting securities of NONGC. A. SECTION 10(b) Section 10(b) of the 1935 Act provides that, if the requirements of Section 10(f) are satisfied, the Commission shall approve an acquisition under Section 9(a) unless the Commission finds that: (1) such acquisition will tend towards interlocking relations or the concentration of control of public utility companies, of a kind or to an extent detrimental to the public interest or the interest of investors or consumers; (2) in case of the acquisition of securities or utility assets, the consideration, including all fees, commissions, and other remuneration, to whomsoever paid, to be given, directly or indirectly, in connection with such 12 16 acquisition is not reasonable or does not bear a fair relation to the sums invested in or the earning capacity of the utility assets to be acquired or the utility assets underlying the securities to be acquired; or (3) such acquisition will unduly complicate the capital structure of the holding company system of the applicant or will be detrimental to the public interest of consumers or the proper functioning of such holding company system. The acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC and the requests contained in this Application/Declaration are well within the precedent of transactions approved by the Commission as consistent with the 1935 Act. As demonstrated below, the acquisition by FirstEnergy of all of the issued and outstanding voting securities of the NONGC will benefit both consumers and stockholders of FirstEnergy. 1. Section 10(b)(1). (a) Interlocking Relations. The acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC will not tend towards interlocking relations or the concentration of control of public utility companies, of a kind or to an extent detrimental to the public interest or the interest of investors or consumers. As in the case of virtually every transaction subject to Section 9(a)(2), there may exist among FirstEnergy and its public utility subsidiaries interlocking directors and officers only of such nature and to such extent as normally exist in public utility holding company systems among affiliated and associated companies. See CIPSCO Incorporated, Holding Co. Act Release No. 25152 (Sept. 18, 1990). Although there are two directors in common between FirstEnergy and NONGC of three total directors for each Board of Directors, there are only two officers in common of the 19 for FirstEnergy and the four for NONGC. (b) Concentration of Control. It is well settled that the public interest is to be judged primarily in the context of the problems with which the 1935 Act was designed to deal, as set forth in Section 1(b) thereof. Vermont Yankee Nuclear Power Corporation, Holding Co. Act Release No. 15958, (Feb. 6, 1968), rev'd on other grounds sub. nom., Municipal Electric Ass'n of Mass. v. S.E.C., 413 F.2d 1052 (D.C. Cir. 1969). Viewed from this perspective, the acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC in no way contradicts the requirements of Section 10(b)(1). Section 10(b)(1) is intended to avoid "an excess of concentration and bigness" while preserving the "opportunities for economies of scale, the elimination of duplicate facilities and activities, the sharing of production capacity and reserves and generally more efficient operations" afforded by the coordination of local utilities into an integrated system. American Electric Power Company, Inc., Holding Co. Act Release No. 20633 (July 21, 1978). In applying Section 10(b)(1) to utility acquisitions, the Commission must determine whether the acquisition will create "the type of structures and combinations at which the Act was specifically directed." Id. As discussed below, the acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC will not create a "huge, complex, and irrational system" of a type at 13 17 which the 1935 Act is directed, but rather will afford the opportunity to achieve economies of scale and efficiencies which are expected to benefit investors and consumers. Id. The acquisition of all of the issued and outstanding voting services of NONGC will not lead to the type of concentration of control over utilities, unrelated to operating efficiencies, that Section 10(b)(1) was intended to prevent. 2. Section 10(b)(2) -- Fairness of Consideration and Fees. (a) Fairness of Consideration. Section 10(b)(2) of the 1935 Act requires the Commission to determine whether the consideration in connection with a proposed acquisition of securities is reasonable and whether it bears a fair relation to the investment in and the earning capacity of the utility assets underlying the securities being acquired. The LDC Transaction was part of a corporate reorganization. The assets were transferred at the book value assigned to such assets at the time of the MARBEL Acquisition. The fair market value calculations were prepared by Arthur Anderson as described in Item 1.B. Thus, FirstEnergy believes such fair value calculations were fair and that the transfer at book value was reasonable. (b) Reasonableness of Fees. An estimate of the fees and expenses to be paid in connection with the transaction is set forth in Item 2 hereof. The estimated amounts to be paid are fees for necessary professional services and other expenses incurred or to be incurred in connection with carrying out the transaction. FirstEnergy believes that such fees and expenses are reasonable and fair in light of the size and nature of the transaction and comparable transactions, and the standards of Section 10(b)(2) are thus satisfied. 3. Section 10(b)(3). Section 10(b)(3) requires the Commission to determine whether the proposed transactions will unduly complicate FirstEnergy's capital structure, or will be detrimental to the public interest, the interest of investors or consumers or the proper functioning of the combined gas and electric systems. (a) Capital Structure. The corporate capital structure of FirstEnergy after the LDC Transaction will not be unduly complicated. As a result of the transaction, FirstEnergy will acquire all of the issued and outstanding voting securities of NONGC. There will be no minority interest in NONGC following the LDC Transaction. There will be no change to NONGC's securities. FirstEnergy will hold all of the 100 shares of issued and outstanding common stock, no par value, of the 750 authorized shares. The number of votes per share is one. See New Century Energies, Inc., Holding Co. Act Release No. 27212 (Aug. 16, 2000). (b) Public Interest, Interest of Investors and Consumers, and Proper Functioning of Holding Company System. Section 10(b)(3) also requires the Commission to determine whether the acquisition of all of the issued and outstanding voting securities of NONGC by FirstEnergy will be detrimental to the interests of the general public, investors or consumers, or the proper functioning of the combined system. As set forth more fully in Item 3.B.2, the acquisition of all of the issued and outstanding voting securities of NONGC is expected to result in a number of benefits to both the public and 14 18 consumers and will not impair the proper functioning of the gas and electric systems operated within the holding company structure. B. SECTION 10(c) Section 10(c) of the 1935 Act provides that: Notwithstanding the provisions of subsection (b), the Commission shall not approve: (1) an acquisition of securities or utility assets, or of any other interest, which is unlawful under the provisions of Section 8 or is detrimental to the carrying out of the provisions of Section 11; or (2) the acquisition of securities or utility assets of a public utility or holding company unless the Commission finds that such acquisition will serve the public interest by tending towards the economical and the efficient development of an integrated public utility system . . . . 1. Section 10(c)(1). Consistent with the standards set forth in Section 10(c)(1) of the Act, the proposed acquisition of securities will not be unlawful under the provisions of Section 8 of the Act (inasmuch as Section 8 applies only to registered holding companies), or detrimental to the carrying out of the provisions of Section 11 of the 1935 Act, which also applies, by its terms, only to registered holding companies.(11) FirstEnergy believes that, following the consummation of the LCD Transaction described herein, FirstEnergy will be a holding company entitled to an exemption under Section 3(a)(1) of the 1935 Act from all of the provisions of the 1935 Act (except for Section 9(a)(2) thereof), including provisions relating to registration. (a) Section 8 Analysis. Section 8 prohibits a registered holding company or any of its subsidiaries from acquiring, owning interests in or operating both a gas utility company and an electric utility company serving substantially the same area if prohibited by state law. Ohio law does not prohibit the ownership or operation by a single company of the utility assets of electric and gas utilities serving substantially the same territory. Moreover, the PUCO already regulates FirstEnergy and NONGC. Accordingly, FirstEnergy's acquisition of all of the issued and outstanding voting securities of NONGC will not be unlawful under the provisions of Section 8. (b) Section 11 Analysis. (i) Integration. Section 10(c)(1) also requires that an acquisition not be detrimental to carrying out the provisions of Section 11 of the Act. Section 11(b)(1), in pertinent part, requires, with limited exceptions, a registered holding company and its subsidiaries to limit their operations to "a single integrated public-utility system." FirstEnergy is - ---------- (11) Although FirstEnergy will register as a holding company following the completion of the FirstEnergy-GPU Merger, the LDC Transaction described herein does not implicate a registered holding company analysis. 15 19 currently a single integrated public utility system. See FirstEnergy Corp., Holding Co. Act Release No. 27221 (Aug. 22, 2000). (ii) Structure and Voting Power. Section 11(b)(2) of the Act directs the Commission "to ensure that the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of such holding-company system." The acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC is consistent with Section 11(b)(2). The resulting capital structure was not unduly complicated, as discussed in Item 3.A.3. See Sierra Pacific Resources, Holding Co. Act Release No. 24566 (Jan. 28, 1988), aff'd sub nom, Environmental Action, Inc. v. S.E.C., 895 F.2d 1255 (9th Cir. 1990) (the Commission incorporates its Section 10(b)(3) capital structure analysis into its Section 11(b)(2) corporate structure analysis). Section 11(b)(2) also requires FirstEnergy to have a simple corporate structure. In particular, Section 11(b)(2) limits a registered holding company to no more than two tiers of holding companies and directs the Commission to evaluate the facts and circumstances "to ensure that the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the structure . . . of such holding-company system." FirstEnergy has remained within the requirements of Section 11(b)(2). FirstEnergy, Ohio Edison, MARBEL and, upon completion of the FirstEnergy-GPU Merger, Met-Ed and Penelec, are the only holding companies within the FirstEnergy system. FirstEnergy is a holding company exempt under the Act, and only Ohio Edison, MARBEL and, upon completion of the FirstEnergy-GPU Merger, Met-Ed and Penelec, will have any utility company subsidiaries. In prior proceedings, the Commission has determined that the existence of a second tier holding company satisfies the Section 11(b)(2) test. See, e.g., Entergy Corporation, Holding Co. Act Release No. 25952 (Dec. 17,1993) (Commission found that addition of an exempt sub-holding company to a registered holding company system did not create an undue or unnecessary corporate complexity). 2. Section 10(c)(2). Efficiencies and Economies. As the following discussion will demonstrate, the transaction described herein will serve the public interest by tending towards the economical and efficient development of an integrated public-utility system, as required by Section 10(c)(2) of the Act. MORE CUSTOMERS SERVED. NONGC provides a competitive alternative to many large commercial and industrial customers that may be served by competing gas utilities. It also provides gas service to many rural residential customers which previously were not served by other gas utilities. This is possible due to the management and cost efficiencies realized as a result of being part of FirstEnergy's larger infrastructure. Competitive financing and lower overhead are available to NONGC by being part of the FirstEnergy system. These efficiencies translate into lower rates to NONGC's customers and allow NONGC to provide service to many customers otherwise not served. SHARED MANAGEMENT. As a part of the FirstEnergy system with its large infrastructure, NONGC can provide its gas services at very competitive rates. NONGC has 16 20 access to the expertise of FirstEnergy's senior management as well as all of FirstEnergy's corporate services including, but not limited to, Human Resources, Controller, Information Services, Business Planning and Legal. NONGC enjoys the economies of scale created by sharing these services with other FirstEnergy entities. SKILLED PRODUCT DEVELOPMENT. FirstEnergy benefits from NONGC's expertise in gas management skills. For example, FirstEnergy recently utilized the expertise of NONGC in designing and constructing the natural gas pipeline and ancillary facilities needed to serve its gas-fired turbines located at its Richland and West Lorain, Ohio sites. NONGC was also involved in negotiations on FirstEnergy's behalf to secure long term gas transportation contracts with interstate pipelines to provide gas service to those facilities. In addition, NONGC often provides gas consulting services to FirstEnergy electric customers which enhances the portfolio of energy services offered by FirstEnergy. ECONOMIES OF SCALE. As part of the FirstEnergy system, NONGC has greater buying power with vendors and more credit resulting in more efficient operations and ultimately savings for the consumer. These economies, as well as those created by sharing management services referred to above, translate into lower rates for NONGC's customers and also allow further expansion of NONGC's pipeline system to serve new customers. 3. Integrated Gas Utility System. As applied to gas utility companies, the term "integrated public-utility system" is defined in Section 2(a)(29)(B) of the Act as: a system consisting of one or more gas utility companies which are so located and related that substantial economies may be effectuated by being operated as a single coordinated system confined in its operations to a single area or region, in one or more States, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized management, efficient operation, and the effectiveness of regulation: Provided, that gas utility companies deriving natural gas from a common source of supply may be deemed to be included in a single area or region. NONGC's gas utility operations, which FirstEnergy acquired in 1998 when such operations were conducted by NOOCI, which met the requirements of Rule 7(a), are located in a ten-county territory within the State of Ohio and are currently integrated. The properties of NONGC used for the DISTRIBUTION of gas are located solely within the State of Ohio. 4. Section 11 Analysis - ABC Clauses. Although Section 11(b)(1) generally limits a registered holding company to ownership of a single integrated system, an exception to this requirement is provided in Section 11(b)(1)(A-C) ("ABC Clauses"). A registered holding company may own one or more additional systems, if each system meets the criteria of these clauses. Specifically, the Commission must find that: (A) the additional system "cannot be operated as an independent system without the loss of substantial economies which can be secured by the retention of control by such holding company of such system"; (B) the additional system is located in one state or adjoining states; and (C) the combination of systems under the 17 21 control of a single holding company is "not so large ... as to impair the advantages of localized management, efficient operation, or the effectiveness of regulation." The Commission has repeatedly held that a registered holding company cannot own properties that are not part of its principal integrated system unless they satisfy the ABC clauses. See Allegheny Energy, Inc., Holding Co. Act Release No. 27121 (Dec. 23, 1999); Dominion Resources Inc., Holding Co. Act Release No. 27113 (Dec. 15, 1999). The Commission has also previously held that a holding company may acquire additional utility assets that will not, when combined with its existing utility assets, make up an integrated system or comply fully with the ABC Clauses, provided that there is de facto integration of contiguous utility properties and the holding company will be exempt from registration under Section 3(a) of the Act following the acquisition. See TUC Holding Co. Inc., Holding Co. Act Release No. 26749 (Aug. 1, 1997); BL Holding Corp., Holding Co. Act Release No. 26875 (May 15, 1998); CMP Group, Inc., Holding Co. Act Release No. 26977 (Feb. 12, 1999). With FirstEnergy's acquisition of all of the issued and outstanding voting securities of NONGC, FirstEnergy owned and operated an integrated gas system, in addition to its integrated electric system. FirstEnergy will register as a public utility holding company following the consummation of the FirstEnergy-GPU Merger. FirstEnergy submits that, with respect to its ownership of all of the issued and outstanding voting securities of NONGC, it meets the standards of the ABC Clauses and, a fortiori, FirstEnergy meets the lesser standard of de facto integration. See NIPSCO Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10, 1999). (i) Requirements of Clause A. The Commission has stated that the Act does not prohibit ownership of combination gas and electric systems, but rather specifies the showing that must be made by an applicant to justify ownership of such properties. The Commission has addressed, in many cases, the question of retainability by an electric registered holding company system of additional integrated gas systems, and has reached its findings under Clause A on a case-by-case basis in light of the particular facts presented. The principal issue under Clause A is whether there would be a loss of substantial economies if the additional system were divested. As discussed above in Item 3.B.2, there are significant economies of scale obtained by combination of the companies. If NONGC were required to operate independently of the FirstEnergy system, prices would have to be increased, possibly resulting in a loss of affordable gas services for a number of customers. Moreover, with only 5,000 customers, NONGC is not of sufficient size to enjoy the economies of scale required to effectively manage the legal, regulatory and financial burdens placed upon regulated gas companies. The Commission should consider this factor when determining whether the LDC transaction is permitted. See New Century Energies, Inc., supra, Holding Co. Act Release No. 27212; see also Exelon Corporation, Holding Co. Act Release No. 27256 (Oct. 19, 2000), as modified, Holding Co. Act Release No. 27259 (Oct. 20, 2000). FirstEnergy has conducted an in-house study to compare the annual costs incurred by NONGC for shared services within the FirstEnergy system with costs estimated to be incurred if NONGC were operating on a stand-alone basis. 18 22 INCREMENTAL COSTS IF NONGC OPERATED AS STAND-ALONE COMPANY
SERVICE FIRSTENERGY* STAND-ALONE - ------- ------------ ----------- Management Services $ 162,591 $ 300,000 Administrative Services 82,800 100,000 Business Planning 23,597 50,000 Communications 3,629 5,000 Controller 60,596 100,000 Environmental 25,000 100,000 Enterprise Risk Management 75,000 0 Human Resources 70,000 100,000 Industrial Relations 30,000 0 Information Services 10,307 100,000 Legal 42,408 75,000 Total $ 520,536 $ 930,000
*Based on 2001 Operating Budget. While NONGC has its own local President and VP-Operations, the senior management positions such as Chief Financial Officer, Treasurer, Corporate Secretary and legal counsel are provided by FirstEnergy; these shared services are supplied by FirstEnergy's employees and are charged to NONGC accordingly. Additionally, NONGC does not have the expenses associated with public shareholders because of its affiliation with FirstEnergy. The cost for all of the above services is currently allocated to NONGC from FirstEnergy. The stand-alone costs represent an estimate of replacing these services, if NONGC were not affiliated with FirstEnergy. FirstEnergy estimates the incremental cost to be approximately $409,000 or 79% higher than NONGC's current costs, given that its budgeted revenues, expenses and net income for 2001 are approximately $7.8 million, $4.0 million (excluding cost of gas sold) and $340 thousand, respectively. As the above chart demonstrates, NONGC could not effectively compete in the market if it were required to operate on a stand-alone basis. (ii) Requirements of Clauses B and C. The ownership and operation by FirstEnergy of both integrated electric and gas systems does not raise any issues under Clause B or C. With respect to Clause B, the retail electric operations are located only in Ohio, Pennsylvania and, upon completion of the FirstEnergy-GPU Merger, New Jersey, as well as a single community in Waverly, New York, and the retail gas operations are located only in the State of Ohio. As required by Clause C, the combination of systems under the ownership of FirstEnergy will not be "so large ... as to impair the advantages of localized management, efficient operation, or the effectiveness of regulation." NONGC is a small gas utility company operated solely within the State of Ohio as an adjunct to an affiliated intrastate pipeline. Thus, all the benefits of localized management are maintained with respect to the addition of the gas utility. See, e.g., CP&L Energy, Inc., Holding Co. Act Release No. 27284 (Nov. 27, 2000) (gas system exclusively in North Carolina). 19 23 C. SECTION 10(f) Section 10(f) provides that The Commission shall not approve any acquisition as to which an application is made under this section unless it appears to the satisfaction of the Commission that such State laws as may apply in respect of such acquisition have been complied with, except where the Commission finds that compliance with such State laws would be detrimental to the carrying out of the provisions of section 11. As described in Item 4 of this Application/Declaration, FirstEnergy has complied with all applicable state laws related to the acquisition by FirstEnergy of all of the issued and outstanding voting securities of NONGC. ITEM 4. REGULATORY APPROVALS No other regulatory approvals were required in connection with FirstEnergy's acquisition of all of the issued and outstanding voting securities of NONGC. No state or local regulatory body or agency, and no federal commission or agency, other than the Commission, has jurisdiction over the transactions proposed herein. ITEM 5. PROCEDURE The Applicant requests that there be no 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. The Applicant submits that a recommended decision by a hearing or other responsible officer of the Commission is not needed with respect to the proposed transaction and that the Division of Investment Management may assist with the preparation of the Commission's decision and/or order in this matter unless such Division opposes the matters covered hereby. ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS A. EXHIBITS EXHIBIT A-1 Amended Articles of Incorporation of FirstEnergy - Incorporated by reference to Exhibit (3)-1, Form S-4 Registration Statement filed on February 3, 1997, SEC File No. 333-21011. A-2 FirstEnergy Amended Code of Regulations - Incorporated by reference to Exhibit (3)-2, Form S-4 Registration Statement filed on February 3, 1997, SEC File No. 333-21011. A-3 Articles of Incorporation of NEO Construction Company. 20 24 EXHIBIT A-4 Certificate of Amendment By Shareholders to the Articles of Incorporation of NEO Construction Company. A-5 By-Laws of NEO Construction Company. B-1 General Assignment, Bill of Sale and Conveyance, dated July 1, 2000. C-1 Map of FirstEnergy system as of December 31, 2000.+ D-1 Preliminary Opinion of Counsel.* D-2 Past Tense Opinion of Counsel (to be filed with certificate of notification).* E-1 FirstEnergy Form U-3A-2, "Statement by Holding Company Claiming Exemption under Rule U-2 from the Provisions of the Public Utility Holding Company Act of 1935," dated February 28, 2001 - Incorporated by reference to such filing, File No. 69-00423. F-1 Form of Notice of Application.* G-1 Form 10-K Annual Report of FirstEnergy for the year ended December 31, 2000 - Incorporated by reference to such filing, SEC File No. 333-21011. H-1 Organizational Chart of FirstEnergy.+ H-2 List of FirstEnergy's non-utility subsidiaries. - ---------------------- *To be filed by amendment. +To be filed by paper copy. B. FINANCIAL STATEMENTS EXHIBIT FS-1 FirstEnergy Consolidated Balance Sheet as of December 31, 2000 - Incorporated by reference to Form 10-K Annual Report for the year ended December 31, 2000, Exhibit G-1 hereto. FS-2 FirstEnergy Consolidated Statements of Income for fiscal years 1998, 1999 and 2000 - Incorporated by reference to Form 10-K Annual Report for the year ended December 31, 2000, Exhibit G-1 hereto. FS-3 NONGC Balance Sheets as of December 31, 2000 and June 30, 2001. FS-4 NONGC Statement of Income as of December 31 for the following years: 1996, 1997, 1998, 1999 and 2000. 21 25 There have been no material changes, not in the ordinary course of business, to the aforementioned balance sheets from December 31, 2000, to the date of this Application/Declaration. ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS The transaction described herein does not involve "major federal actions" significantly affecting the quality of the human environment" as set forth in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Sec. 4321 et seq. The acquisition of all of the issued and outstanding voting securities of NONGC by FirstEnergy will not result in changes in the operations of FirstEnergy that would have any impact on the environment. No federal agency is preparing an environmental impact statement with respect to this matter. SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned company has duly caused this U-1 Application/ Declaration to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 10, 2001 FIRSTENERGY CORP. By: /s/ H. Peter Burg ------------------------------------ H. Peter Burg Chairman and Chief Executive Officer 22 EX-99.A.3 3 l88100ex99-a_3.txt ARTICLES OF INCORPORATION 1 Exhibit A3 ARTICLES OF INCORPORATION OF NEO CONSTRUCTION COMPANY The undersigned, a majority of whom are citizens of the United States, desiring to form a corporation for profit, under Sections 1701.01 et seg. of the Revised Code of Ohio, do hereby certify: FIRST. The name of said corporation shall be NEO CONSTRUCTION COMPANY. SECOND. The place in Ohio where its principal office is to be located is 132 East Main Street, Lancaster, Ohio 43130, Fairfield County. THIRD. The purpose for which the corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98 of the Ohio Revised Code. FOURTH. The number of shares which the corporation is authorized to have outstanding is 750 shares, each of which shall have a No Par Value. FIFTH. A director of this corporation shall not be disqualified by his office from dealing or contracting with the corporation as a vendor, purchaser, employee, agent or otherwise; nor shall any transaction or contract or act of this corporation be void or voidable or any way affected or invalidated by reason of the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder or director is any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation is so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken; nor shall any such director be accountable or responsible to the corporation or in respect to any such transaction or contract or act of this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder or director is interested in such transaction or contract or act; and any such director may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the corporation which shall authorize or take action in respect to any such contract or transaction or act, and may vote thereto to authorize, ratify or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder or director were not interested in such transaction or contract or act. Page 1 2 SIXTH. Any compensation of any nature, salary, bonus or otherwise, paid to any officer, director or employee of this company which is deemed by the Internal Revenue Service or any other government agency to be other than reasonable compensation shall be repaid to said company by said officer, director or employee, and such sums shall be deemed a debt of such person to the corporation immediately due and payable upon such determination. SEVENTH. The amount of stated capital with which the corporation shall begin business is Five Hundred and no/100 Dollars ($500.00). IN WITNESS WHEREOF, we have hereunto subscribed our names this 20th day of December, 1991. NEO CONSTRUCTION COMPANY /s/ Thomas G. Booth -------------------------------------------- THOMAS G. BOOTH /s/ Bryan K. Robinson -------------------------------------------- BRYAN K. ROBINSON /s/ Judith H. Woods -------------------------------------------- JUDITH H. WOODS INCORPORATORS Page 2 EX-99.A.4 4 l88100ex99-a_4.txt CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORP 1 Exhibit A4 CERTIFICATE OF AMENDMENT BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF NEO CONSTRUCTION COMPANY Ohio Charter Number 809172 Lawrence P. Haren, the President of NEO Construction Company, an Ohio for profit corporation (the "Corporation"), does hereby certify that the holders of all the issued and outstanding shares of the Corporation entitled to vote on the proposal to amend the Articles of Incorporation adopted the following resolution to amend the Articles, by unanimous written action without a meeting on July 1, 2000, pursuant to Sections 1701.54 and 1701.71 of the Ohio Revised Code. "BE IT HEREBY RESOLVED, that Article FIRST of the Articles of Incorporation of the Corporation shall be deleted in its entirety, and the following shall be adopted in its place: FIRST: The name of this Corporation shall be NORTHEAST OHIO NATURAL GAS CORP." Except for the foregoing amendment, the Articles of Incorporation shall otherwise remain in full force and effect. IN WITNESS WHEREOF, the above-named officer, acting for and on behalf of the Corporation, has hereunto subscribed his name on the date set forth above. /s/ Lawrence P. Haren ------------------------------------------ Lawrence P. Haren, President EX-99.A.5 5 l88100ex99-a_5.txt BY-LAWS 1 Exhibit A5 BY-LAWS OF NEO CONSTRUCTION COMPANY ARTICLE I - OFFICES ------------------- The office of the Corporation shall be located in the City and State designated in the Articles of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF SHAREHOLDERS ------------------------------------ Section 1 - Annual Meetings: - --------------------------- The annual meeting of the shareholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ---------------------------- Special meetings of the shareholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten per cent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Business Corporation Act. Section 3 - Place of Meetings: - ------------------------------ All meetings of shareholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. 2 Section 4 - Notice of Meetings: - ------------------------------- (a) Except as otherwise provided by Statute, written notice of each meeting of shareholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than fifty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle shareholders to receive payment for their shares pursuant to Statute, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the shareholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of shareholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------- (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of shareholders of the Corporation, the presence at the commencement of such meetings in person or by proxy of shareholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, By-Laws - 2 3 shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of shareholders, the shareholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting as originally called if a quorum had been present. Section 6 - Voting: - ------------------- (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the shareholders, shall be authorized by a majority of votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of shareholders, each holder of record of stock of the Corporation entitled to vote thereat, shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each shareholder entitled to vote or to express consent or dissent without a meeting, may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. By-Laws - 3 4 (d) Any resolution in writing, signed by all of the shareholders entitled to vote thereon, shall be and constitute action by such shareholders to the effect therein expressed, with the same force and effect as if the same had been duly passed by unanimous vote at a duly called meeting of shareholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS Section 1 - Number, Election and Term of Office: - ------------------------------------------------ (a) The number of the directors of the Corporation shall be seven (7), unless and until otherwise determined by vote of a majority of the entire Board of Directors. The number of Directors shall not be less than three, unless all of the outstanding shares are owned beneficially and of record by less than three shareholders, in which event the number of directors shall not be less than the number of shareholders permitted by statute. (b) Except as may otherwise be provided herein or in the Certificate of Incorporation, the members of the Board of Directors of the Corporation, who need not be shareholders, shall be elected by a majority of the votes cast at a meeting of shareholders, by the holders of shares, present in person or by proxy, entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the shareholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ------------------------------ The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the shareholders. Section 3 - Annual and Regular Meetings; Notice: - ------------------------------------------------ (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders, at the place of such annual meeting of shareholders. By-Laws - 4 5 (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: - ------------------------------------- (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of special meetings shall be mailed directly to each director, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notices of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - ----------------------- At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the directors shall preside. By-Laws - 5 6 Section 6 - Quorum and Adjournments: - ------------------------------------ (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: - ----------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - ---------------------- Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the shareholders shall be filled by the shareholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ------------------------ Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. By-Laws - 6 7 Section 10 - Removal: - --------------------- Any director may be removed with or without cause at any time by the affirmative vote of shareholders holding of record in the aggregate at least a majority of the outstanding shares of the Corporation at a special meeting of the shareholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Salary: - -------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12 - Contracts: - ----------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall By-Laws - 7 8 not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ------------------------ The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election and Term of Office: - ---------------------------------------------------------------- (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including a Chairman of the Board of Directors, and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: - ------------------------ Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. By-Laws - 8 9 Section 3 - Removal: - -------------------- Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: - ---------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. Section 5 - Duties of Officers: - ------------------------------- Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these by-laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the Corporation. Section 6 - Sureties and Bonds: - ------------------------------- In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: - ----------------------------------------- Whenever the Corporation is the holder of shares of any other Corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK --------------------------- Section 1 - Certificate of Stock: - --------------------------------- (a) The certificates representing shares of the Corporation shall By-Laws - 9 10 be in such form as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number of shares, and shall be signed by (i) the Chairman of the Board or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefor has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance subject to such conditions as may be permitted by law, of scrip in registered or bearer form cover the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------ The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. By-Laws - 10 11 Section 3 - Transfers of Shares: - -------------------------------- (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only by the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ----------------------- In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of shareholders entitled to receive notice of, or to vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. By-Laws - 11 12 ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Shareholders: - --------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of shareholders holding of record in the aggregate at least a majority of the outstanding shares entitled to vote in the election of directors at any annual or special meeting of shareholders, provided that the notice or waiver of notice of such meeting shall have summarized or set forth in full therein, the proposed amendment. Section 2 - By Directors: - ------------------------- The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the shareholders entitled to vote with respect thereto as in this Article IX above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of shareholders or of the Board of Directors, or to change any provisions of the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the shareholders. If any by-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors, the by-law so adopted, amended or repealed, together with a concise statement of the changes made. By-Laws - 12 EX-99.B.1 6 l88100ex99-b_1.txt GENERAL ASSIGNMENT, BILL OF SALE AND CONVEYANCE 1 Exhibit B1 GENERAL ASSIGNMENT, BILL OF SALE, AND CONVEYANCE ------------------------------------------------ THIS GENERAL ASSIGNMENT, BILL OF SALE, AND CONVEYANCE (this "Assignment"), effective as of 12:00:01 a.m., July 1, 2000 (the "Effective Time"), is made from The Northeast Ohio Operating Companies, Inc., an Ohio corporation, ("Assignor") to NEO Construction Company, an Ohio corporation and a wholly-owned subsidiary of Assignor ("Assignee"). ARTICLE I GRANTING AND HABENDUM CLAUSES ----------------------------- For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby grant, transfer, convey, assign and deliver unto Assignee, subject to the matters set forth herein, all of Assignor's right, title, and interest in and to the properties and assets described on Exhibit A attached hereto, (collectively, such interests in such assets are referred to as the "Assets"). To have and to hold the Assets unto Assignee and its successors and assigns, forever, subject to the matters set forth herein. ARTICLE II MISCELLANEOUS ------------- 2.1 Further Assurances. Assignor covenants and agrees to execute and deliver to Assignee all such other and additional conveyances, instruments and other documents and to do all such other acts and things as may be necessary more fully to vest in Assignee record title to all of the Assets and the respective properties, rights and interests herein granted or intended to be granted, and to put Assignee in actual possession of the assets, including, without limitation, any assignment acceptable for filing with governmental authorities, if applicable (a "Governmental Form Assignment"). In the event any term or provision of any Governmental Form Assignment should be inconsistent with or conflict with the terms or provisions of this Assignment, the terms and provisions of this Assignment shall control and shall govern the rights, obligations and interests of the parties hereto, their successors and assigns. All Governmental Form Assignments (if any) and this Assignment shall, when taken together, be deemed to constitute but one conveyance and assignment by Assignor to Assignee of all of the Assets. 2.2 Assumption. Assignee expressly assumes all obligations and liabilities that are attributable to the ownership and/or operation of Assets, which assumption by Assignee shall be made regardless of whether any such obligation or liability is attributable to events or periods of time prior to or after the Effective Time. 2 2.3 Counterparts. This Assignment may be executed in any number of counterparts, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but on conveyance. 2.4 Successors and Assigns. This Assignment shall bind and inure to the benefit of Assignor and Assignee and their respective successors and assigns. 2.5 Exhibits. Reference is made to the Exhibits attached hereto and made a part hereof for all purposes. References in Exhibit A to instruments on file in the public records are made a part hereof for all purposes. IN WITNESS WHEREOF, the parties have subscribed their names effective on the date set forth above. ASSIGNOR: THE NORTHEAST OHIO OPERATING COMPANIES, INC. By: /s/ Lawrence P. Haren ------------------------------------- Lawrence P. Haren, President ASSIGNEE: NEO CONSTRUCTION COMPANY By: /s/ Lawrence P. Haren ------------------------------------- Lawrence P. Haren, President -2- 3 EXHIBIT A -3- 4 NORTHEAST OHIO NATURAL GAS CORP. BALANCE SHEETS AS OF MAY 31, 2000 AND MAY 31, 1999 (UNAUDITED)
Year-To-Date As Of Comparative As Of 05/31/2000 05/31/1999 ASSETS PROPERTY, PLANT & EQUIPMENT $11,327,500.65 $9,157,677.39 LESS: Accumulated deprec. (2,807,088.84) (2,293,561.77) -------------- ------------- Net plant 8,520,411.81 6,864,115.62 -------------- ------------- CONSTRUCTION WORK IN PROG. 1,496,538.20 883,533.45 -------------- ------------- Total Plant 10,016,950.01 7,747,649.07 -------------- ------------- CURRENT ASSETS: Cash (1,427,241.49) 383,400.09 Accounts receivable, net 529,583.15 404,488.87 Intercompany receivables (458,947.66) (179,426.55) Interdivision receivable 23,113.04 .00 Interco. note receivable .00 .00 Materials & supplies inv. 147,910.25 100,431.95 Prepayments .00 19,524.99 Other 22,825.77 (272,517.64) -------------- ------------- Total current assets (1,162,756.94) 455,901.71 -------------- ------------- OTHER ASSETS: Interco. note receivable .00 .00 Deferred charges 216,453.78 138,498.22 Deferred taxes .00 .00 Other 1,251.04 1,251.04 ------------- ------------- Total other assets 217,704.82 139,749.26 ------------- ------------- TOTAL ASSETS 9,071,897.89 8,343,300.04 ============= =============
5 NORTHEAST OHIO NATURAL GAS CORP. BALANCE SHEETS AS OF MAY 31, 2000 AND MAY 31, 1999 (UNAUDITED)
Year-To-Date As Of Comparative As Of 05/31/2000 05/31/1999 SHAREHOLDER'S EQUITY AND LIABILITIES SHAREHOLDER'S EQUITY: Common stock $ 591,000.00 $ 591,000.00 Paid-in capital 3,325,764.00 2,574,000.00 Retained earnings 504,032.20 412,058.70 Year-to-date net income 71,226.97 140,545.89 ------------- ------------- Total shareholder's equity 4,492,023.17 3,717,604.59 ------------- ------------- LONG TERM OBLIGATIONS: Payables 9,020.88 .00 Debt 4,272,500.00 1,805,000.00 Capitalized leases .00 .00 Other .00 .00 ------------- ------------- Tot. long-term obligations 4,281,520.88 1,805,000.00 ------------- ------------- CURRENT LIABILITIES: Accounts payable 162,441.90 194,627.09 Interco. accounts payable .00 .00 Note payable .00 .00 Current port. of LT payable .00 .00 Current portion of LT debt 34,857.44 2,542,733.48 Current port. - cap. leases .00 .00 Acc. taxes & taxes payable 260,273.25 379,903.06 Accrued liabilities 80,751.07 53,916.55 Accrued interest & other 7,165.80 15,854.73 ------------- ------------- Total current liabilities 545,489.46 3,187,034.91 ------------- ------------- DEFERRED CREDITS: Deferred taxes (247,135.62) (366,339.46) ------------- ------------- TOTAL EQUITY & LIABILITIES 9,071,897.89 8,343,300.04 ============= =============
EX-99.H.2 7 l88100ex99-h_2.txt LIST OF NON-UTILITY SUBSIDIARIES 1 EXHIBIT H-2 The following is a description of the non-utility businesses in which FirstEnergy Corp. ("FirstEnergy") and its subsidiaries are engaged: A. FINANCING SUBSIDIARIES 1. OES Capital, Incorporated OES Capital, Incorporated ("OES Capital") is a wholly owned subsidiary of Ohio Edison Company ("Ohio Edison"). OES Capital is a financing company for the FirstEnergy Companies (as defined in the U-1 Application/Declaration), which may borrow up to $170 million under a receivables financing arrangement expiring in 2002, with loans at rates based on certain bank and commercial paper, and is required to pay an annual fee of 0.20% of the amount of the entire finance limit. OES Capital also makes loans to customers (currently representing less than 10% of its loan portfolio) to finance certain energy efficiency projects undertaken by such customers. 2. OES Finance, Incorporated OES Finance, Incorporated ("OES Finance") is a wholly owned subsidiary of Ohio Edison. OES Finance maintains deposits pledged as collateral to secure certain reimbursement obligations relating to certain letters of credit supporting Ohio Edison's obligations to lessors under certain Beaver Valley 2 sale and lease-back arrangements. 3. Ohio Edison Financing Trust Ohio Edison Financing Trust is a wholly owned subsidiary of Ohio Edison. Ohio Edison Financing Trust provides financing to Ohio Edison through the issuance of preferred securities. 4. Centerior Funding Corporation Centerior Funding Corporation ("Centerior Funding") is a wholly owned subsidiary of The Cleveland Electric Illuminating Company ("Cleveland Electric"). Centerior Funding factors accounts receivable for Cleveland Electric and The Toledo Edison Company ("Toledo Edison"). 5. OES Nuclear, Incorporated OES Nuclear, Incorporated ("OES Nuclear") is a wholly owned subsidiary of Ohio Edison. OES Nuclear owns and leases to Ohio Edison 17.42% of the improvements, fixtures, equipment and other tangible property constituting the Perry Nuclear Power Plant located in Lake County, Ohio. 2 6. FirstEnergy Securities Transfer Company FirstEnergy Securities Transfer Company ("FirstEnergy Transfer") is a wholly owned subsidiary of FirstEnergy. FirstEnergy Transfer acts as a transfer agent and registrar for the securities of FirstEnergy and its direct and indirect subsidiaries. It does not act as a transfer agent or registrar for nonaffiliated companies. 7. PNBV Capital Trust OES Ventures, Incorporated ("OES Ventures") is a wholly owned subsidiary of Ohio Edison. OES Ventures has a 49% beneficial interest in PNBV Capital Trust ("PNBV"), a Delaware corporation, which was formed to acquire the publicly held bond indebtedness for the acquisition of lease obligation bonds relating to Ohio Edison's sale and leaseback of individual interests in Beaver Valley Nuclear Power Station Unit No. 2 and Perry Nuclear Power Plant Unit No. 1 and the resultant reduction in effective cost to Ohio Edison under those leases. 8. The Toledo Edison Capital Corporation Toledo Edison holds a 90% interest, together with Cleveland Electric's 10% interest, in The Toledo Edison Capital Corporation ("TECC"). TECC makes equity investments in Delaware business trusts that hold lessor debt instruments issued in connection with Cleveland Electric's and Toledo Edison's sale and leaseback of interests in the Bruce Mansfield Plant. B. REAL ESTATE 1. FirstEnergy Properties, Inc. FirstEnergy Properties, Inc. ("FirstEnergy Properties") is a wholly owned subsidiary of FirstEnergy. FirstEnergy Properties owns non-utility land and coal rights held for sale, investment or potential development, office buildings rented to affiliated companies and third parties, and also holds the former Centerior Energy Corporation's partnership share of investments in economic development investments. In 2000, 98.1% of FirstEnergy Properties' rental income was received from intercompany rentals; the remaining 1.9% was received from third party rentals. In 2001, 92.3% of FirstEnergy Properties rental income is projected to be received from intercompany rentals; the remaining 7.7% is scheduled to be received from third party rentals. FirstEnergy Properties has one subsidiary, BSG Properties, Inc. ("BSG Properties"). 2. BSG Properties, Inc. BSG Properties is a wholly owned subsidiary of FirstEnergy Properties. BSG Properties owned a commercial building, which it sold, and is engaged in post-closing matters. BSG owns a parcel of approximately eleven acres of vacant land which is currently for sale in Seven Hills, Ohio. The book value of the parcel if $1,692,336. 2 3 3. Cleveland Development Partnership I FirstEnergy Properties owns a 1.47% limited partnership interest in Cleveland Development Partnership I ("Cleveland Development"). Cleveland Development is a partnership created to provide a source of private sector funding for real estate development in the City of Cleveland. 4. Cleveland Civic Vision Housing Fund, L.L.C. FirstEnergy owns a 5.5% limited partnership interest in the Cleveland Civic Vision Housing Fund, L.L.C. ("Cleveland Civic"). Cleveland Civic is an investment fund serving as a source of private sector financing for real estate development in the City of Cleveland. 5. McDonald Corporate Tax Credit Fund Limited Partnership Ohio Edison owns a 12.37% limited partnership interest in McDonald Corporate Tax Credit Fund Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 94% of the investment activity is in Ohio; and 6% is in Illinois. 6. McDonald Corporate Tax Credit Fund - 1995 Limited Partnership Ohio Edison owns a 9.0% limited partnership interest in McDonald Corporate Tax Credit Fund - 1995 Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 42% of the investment activity in Ohio; 25% is in Illinois; 5% is in Iowa; and 28% is in Texas. 7. McDonald Ohio Tax Credit Fund - 1996 Limited Partnership Ohio Edison owns a 42.13% limited partnership interest in McDonald Ohio Tax Credit Fund - 1996 Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 91% of the investment activity is in Ohio; and 9% is in Indiana. 8. McDonald Ohio Tax Credit Fund - 1998 Limited Partnership Ohio Edison owns a 30.94% limited partnership interest in McDonald Ohio Tax Credit Fund - 1998 Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 53% of the investment activity is in Ohio; 18% is in Illinois; and 29% is in Texas. 3 4 9. Ohio Equity Fund For Housing Limited Partnership II Ohio Edison owns a 7.62% limited partnership interest in Ohio Equity Fund For Housing Limited Partnership II. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986, in Ohio. 10. USA Institutional Tax Credit Fund VII, L.P. Ohio Edison owns an 8.11% limited partnership interest in USA Institutional Tax Credit Fund VII, L.P. ("USA ITCF"). USA ITCF is a low income housing tax credit limited partnership investing primarily in residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 8% of the investment activity is in California; 14% is in Illinois; 7% is in Maryland; 6% is in Massachusetts; 7% is in Michigan; 2% is in Mississippi; 14% is in New Jersey; 12% is in New York; 3% is in Puerto Rico; 1% is in Tennessee; 22% is in Texas; and 4% is in Virginia. 11. Boston Financial Institutional Tax Credits III, a Limited Partnership Ohio Edison owns a 5.38% limited partnership interest in Boston Financial Institutional Tax Credits III, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 8% of the investment activity is in Ohio; 5% is in Alabama; 6% is in Arkansas; 8% is in California; 8% is in Connecticut; 19% is in Florida; 7% is in Kentucky; 6% is in Maryland; 4% is in Michigan; 2% is in Minnesota; 2% is in Mississippi; 2% is in New York; 1% is in North Carolina; 5% is in Oregon; 4% is in Pennsylvania; 2% is in Puerto Rico; 2% is in Utah; 6% is in Virginia; and 3% is in West Virginia. 12. Boston Financial Institutional Tax Credits V, a Limited Partnership Ohio Edison owns a 3.24% limited partnership interest in Boston Financial Institutional Tax Credits V, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 6% of the investment activity is in Ohio; 18% is in California; 33% is in Florida; 5% is in Illinois; 4% is in Nevada; 8% is in New Mexico; 7% is in Puerto Rico; 1% is in South Carolina; 7% is in Tennessee; and 11% is in Virginia. 13. Boston Financial Institutional Tax Credits XVI, a Limited Partnership Ohio Edison owns a 5.83% limited partnership interest in Boston Financial Institutional Tax Credits XVI, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 29% of the investment activity is in California; 27% is in Florida; 2% is in Iowa; 5% is in Maryland; 6% is in Massachusetts; 1% is in Minnesota; 1% is in Missouri; 4% is in Nevada; 3% is in New York; 4 5 3% is in Pennsylvania; 2% is in Utah; 11% is in Virginia; 1% is in Washington; and 5% is in Wisconsin. 14. Apollo Tax Credit Fund III, L.P. Ohio Edison owns a 33.33% limited partnership interest in Apollo Tax Credit Fund III, L.P. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 69% of the investment activity is in Ohio; 9% is in Iowa; 7% is in Kentucky; and 15% is in Wisconsin. 15. Apollo Tax Credit Fund - IX, Limited Partnership Ohio Edison owns a 99.99% limited partnership interest in Apollo Tax Credit Fund - IX, Limited Partnership. The general partner is Apollo Housing II LLC which owns the remaining .01%. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986; 44% of the investment activity is in Ohio; 12% is in Indiana; 4% is in Iowa; 11% is in Kansas; 9% is in New York; 7% is in Virginia; and 13% is in Wisconsin. 16. Boston Capital Corporate Tax Credit Fund IV, a Limited Partnership Ohio Edison owns a 2.95% limited partnership interest in Boston Capital Corporate Tax Credit Fund IV, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 9% of the investment activity is in Arkansas; 3% is in California; 2% is in Colorado; 5% is in Delaware; 14% is in Florida; 7% is in Georgia; 7% is in Illinois; 5% is in Iowa; 4% is in Kansas; 6% is in Louisiana; 4% is in Maine; 3% is in Maryland; 11% is in Michigan; 2% is in Mississippi; 9% is in Missouri; 2% is in Nebraska; and 7% is in New York. 17. Boston Capital Corporate Tax Credit Fund X, a Limited Partnership Ohio Edison owns a 10.93% limited partnership interest in Boston Capital Corporate Tax Credit Fund X, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 2% of the investment activity is in Arkansas; 16% is in Georgia; 8% is in Indiana; 2% is in Maryland; 24% is in New York; 9% is in North Carolina; 16% is in Ohio; 3% is in Oklahoma; 7% is in Texas; 10% is in Virginia; and 3% is in West Virginia. 18. Boston Capital Corporate Tax Credit Fund XIV, a Limited Partnership Ohio Edison owns a 20.00% limited partnership interest in Boston Capital Corporate Tax Credit Fund XIV, a Limited Partnership. This investment is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants as qualified under Section 42 of the Internal Revenue Code of 1986; 1% of the 5 6 investment activity is in Alabama; 2% is in Arkansas; 6% is in Florida; 7% is in Georgia; 6% is in Indiana; 3% is in Kansas; 5% is in Kentucky; 5% is in Louisiana; 8% is in Massachusetts; 11% is in Michigan; 1% is in Mississippi; 2% is in New Hampshire; 15% is in New Jersey; 3% is in Oklahoma; 7% is in Pennsylvania; 2% is in Tennessee; 7% is in Texas; 1% is in Vermont; 3% is in Virginia; and 5% is in West Virginia. 19. Marion Senior Housing Limited Partnership FirstEnergy owns a 29.21% limited partnership interest in Marion Senior Housing Limited Partnership ("Marion"). Marion is a low income housing tax credit limited partnership investing in primarily residential real estate targeted for lower income occupants, as qualified under Section 42 of the Internal Revenue Code of 1986, in Ohio. 20. Cranberry Square Associates, L.P. Penn Power owns a 50% limited partnership interest in Cranberry Square Associates, L.P. ("Cranberry Square"). Cranberry Square is a limited partnership with the purpose of acquiring, developing, constructing, owning, operating, improving, leasing or otherwise managing a strip shopping center containing approximately 215,000 square feet of rentable space and other incidental improvements on approximately 24 acres located in Cranberry Township, Butler County, Pennsylvania. C. TELECOMMUNICATIONS 1. Advanced Technologies Development Corp. Advanced Technologies Development Corp. ("Advanced Technologies") is a wholly owned subsidiary of FirstEnergy Ventures Corp. ("FirstEnergy Ventures"). Advanced Technologies owns fiber optic cables, communications towers and electronics for cell siting operations, as well as some proprietary software for telecommunications services. On October 20, 2000, Advanced Technologies applied for approval from the Federal Communications Commission ("FCC") as an "exempt telecommunications company" ("ETC"); ETC status is deemed effective as of the date of the filing. 2. FirstEnergy Telecommunications Corp. FirstEnergy Telecommunications Corp. ("FirstEnergy Telecommunications") is a wholly owned subsidiary of FirstEnergy Ventures. FirstEnergy Telecommunications is a competitive telecommunications services provider offering services only in the regulated activities area. FirstEnergy Telecommunications applied to the Public Utilities Commission of Ohio (the "PUCO") on October 18, 2000, for approval to operate as a public utility within the definition of "utilities" in the State of Ohio. Approval from the PUCO and the FCC was received on December 24, 2000. On October 20, 2000, FirstEnergy Telecommunications applied for ETC approval from the FCC; ETC status is deemed effective as of the date of the filing. 6 7 3. Fiber Venture Equity, Inc. Centerior Communications Holdings, Inc. ("Centerior Communications") owns 100% of Fiber Venture Equity, Inc. ("Fiber Venture"). Fiber Venture owns a 6.5% interest in AFN, LLC ("AFN"). AFN applied for ETC approval on October 25, 2000; ETC status is deemed effective as of the date of the filing. 4. FELHC, Inc. FELHC, Inc. ("FELHC") is a wholly owned subsidiary of FirstEnergy. FELHC serves as a licensee on all FCC radio licenses for the FirstEnergy Operating Companies (as defined in the U-1 Application/Declaration). An application was made by FELHC on January 18, 2001 for FCC approval as an ETC; ETC status is deemed effective as of the date of the filing. 5. First Communications, LLC FirstEnergy owns a 31.08% interest in First Communications, LLC ("First Communications"), with options to acquire up to a 50% interest. First Communications provides telecommunications services utilizing a nationwide fiber optic network. First Communications offers a full plan of services including long distance, toll free services, advanced data solutions (including Digital Subscriber Line, private line service and network applications) and Personal Communications Service wireless. An application was made by First Communications to the FCC on November 29, 2000 for FCC approval as an ETC; ETC status is deemed effective as of the date of the filing. 6. Pantellos Corporation FirstEnergy owns a 5.38% interest in Pantellos Corporation ("Pantellos"). Pantellos operates and manages an open, independent Internet e-marketplace for the purchase of goods and services between the energy industry and its suppliers. An application was made by Pantellos on June 1, 2000 for FCC approval as an ETC; ETC status is deemed effective as of the date of the filing. 7. AFN Finance Company No. 3, LLC AFN Finance Company No. 3, LLC ("AFN No. 3") is a wholly owned subsidiary of Fiber Venture. AFN No. 3 was created for the exclusive purpose of seeking financing for the provision of radio communications, telecommunications services and information services. An application is expected to be made by AFN No. 3 to the FCC in late July, 2001 for FCC approval as an ETC; ETC status will be deemed effective as of the date of the filing. D. EXEMPT WHOLESALE GENERATORS 1. FirstEnergy Generation Corp. FirstEnergy Generation Corp. ("GenCo") is a wholly owned subsidiary of FirstEnergy Solutions Corp. ("FirstEnergy Solutions"). GenCo is an exempt wholesale generator within the meaning of Section 32 of the 1935 Act ("EWG") and operates fossil fuel plants and 7 8 the Seneca pumped storage plant, all of the output of which is sold at wholesale prices to FirstEnergy Solutions. Most of the generating facilities operated by GenCo are leased from the FirstEnergy operating companies. GenCo was approved by FERC as an EWG on April 6, 2001. 95 FERC P. 62,018 (2001). E. ENERGY RELATED ACTIVITIES 1. FirstEnergy Solutions Corp. FirstEnergy Solutions is an unregulated wholly owned subsidiary of FirstEnergy. FirstEnergy Solutions is a natural gas and power marketer in both wholesale and retail markets. FirstEnergy Solutions has two wholly-owned subsidiaries, Penn Power and GenCo. A filing was made with the FERC and approval received on or about December 15, 2000 to merge FirstEnergy's wholesale trading function done through FirstEnergy Trading Services, Inc. ("FirstEnergy Trading") into FirstEnergy Solutions. The merger of FirstEnergy Trading and FirstEnergy Solutions was consummated on December 31, 2000. 2. FirstEnergy Fuel Marketing Company FirstEnergy Fuel Marketing Company ("FirstEnergy Fuel Marketing") is a wholly owned subsidiary of FirstEnergy Ventures. FirstEnergy Fuel Marketing provides products and services to electricity generators and industrial fuel suppliers, including logistics services, contract administration, inventory management and fuel blending. 3. Utility.com, Inc. FirstEnergy owns a 5.0% interest in Utility.com, Inc. ("Utility.com"), represented by 192,308 shares owned and warrants for 23,077 shares of Series E preferred stock. Utility.com is currently registered to provide electricity in 10 states. Utility.com sells electricity to customers using the same lines and poles that are in place now with no interruption in service, but seeks to provide customers with savings over their existing electricity provider. 4. Penn Power Energy, Inc. Penn Power Energy, Inc. ("Penn Power") is a wholly owned subsidiary of FirstEnergy Solutions. Penn Power Energy is an energy marketing company which provides service to Pennsylvania customers under Pennsylvania's Electric Choice Program. Penn Power Energy is a licensed electric supplier providing retail electricity service in Pennsylvania. 5. Centerior Energy Services, Inc. (d/b/a "The E Group") Centerior Energy Services, Inc. ("Centerior Energy Services") is a wholly owned subsidiary of FirstEnergy Ventures. Centerior Energy Services provides various consulting services related to energy management and procurement under the registered trade name "The E Group." 8 9 6. OES Fuel, Incorporated OES Fuel, Incorporated ("OES Fuel") is a wholly owned subsidiary of Ohio Edison. OES Fuel finances and manages fuel inventories for Ohio Edison and Penn Power. 7. Bay Shore Power Company Bay Shore Power Company ("Bay Shore") is a wholly owned subsidiary of FirstEnergy Ventures. Bay Shore is undergoing start-up operations and will own and operate a petroleum coke disposal facility that will supply steam for GenCo for Bay Shore's turbines as fuel for the operation of the Bay Shore Power Plant and to BP Amoco Corporation. 8. Ancoma, Inc. Ancoma, Inc. ("Ancoma") is a wholly owned subsidiary of FirstEnergy Facilities Services Group, LLC ("FirstEnergy Facilities"). Ancoma provides HVAC equipment installation and service, process piping, plumbing, fire protection, refrigeration and energy management systems to the Rochester, New York area. 9. Colonial Mechanical Corporation Colonial Mechanical Corporation ("Colonial Mechanical") is a wholly owned subsidiary of FirstEnergy Facilities. Colonial Mechanical provides HVAC equipment installation and service, sheet metal fabrication, plumbing installation and service, process piping and electrical and pre-construction services to the Richmond, Virginia area. 10. Webb Technologies, Inc. Webb Technologies, Inc. ("Webb Technologies") is a wholly owned subsidiary of FirstEnergy Facilities. Webb Technologies provides installation and service of low-temperature refrigeration systems and HVAC equipment installation and service in the greater Norfolk, Virginia area. 11. Dunbar Mechanical Inc. Dunbar Mechanical Inc. ("Dunbar Mechanical") is a wholly owned subsidiary of FirstEnergy Facilities. Dunbar Mechanical provides HVAC equipment and plumbing installation and service, process and utility piping, equipment moving, rigging and setting, material handling, equipment installation and mechanical system maintenance to the greater Toledo, Ohio market. 12. Edwards Electrical & Mechanical, Inc. Edwards Electrical & Mechanical, Inc. ("Edwards E&M") is a wholly owned subsidiary of FirstEnergy Facilities. Edwards E&M provides HVAC equipment installation and service, refrigeration, electrical service, sheet metal fabrication, process piping, automation controls, plumbing and certified welding to customers in Indianapolis, Indiana and the surrounding areas. 9 10 13. Elliott-Lewis Corporation Elliott-Lewis Corporation ("Elliot-Lewis") is a wholly owned subsidiary of FirstEnergy Facilities. Elliott Lewis provides HVAC equipment installation and service, energy management, facilities management and plumbing services to the greater Philadelphia, Pennsylvania markets. In addition, Elliot-Lewis owns all of the issued and outstanding shares of the following companies providing such services: A.A. Duckett, Inc. ("Duckett"), Sautter Crane Rental, Inc. ("Sautter Crane") and E-L Enterprises, Inc. ("E-L Enterprises"). 14. L. H. Cranston and Sons, Inc. L. H. Cranston and Sons, Inc. ("Cranston and Sons") is a wholly owned subsidiary of FirstEnergy Facilities. Cranston and Sons installs and maintains HVAC equipment and electrical, plumbing and refrigeration systems in the Timonium, Maryland area. 15. Roth Bros., Inc. Roth Bros., Inc. ("Roth Bros.") is a wholly owned subsidiary of FirstEnergy Facilities. Roth Bros. provides HVAC equipment installation and service, building automation control systems and monitoring services, roofing installation and maintenance, sheet metal and industrial metal fabrication and lighting retrofits in the Youngstown, Ohio area. 16. The Hattenbach Company The Hattenbach Company ("Hattenbach") is a wholly owned subsidiary of FirstEnergy Facilities. Hattenbach provides refrigeration sales and service to commercial entities in the Cleveland, Ohio market. 17. R. P. C. Mechanical, Inc. R. P. C. Mechanical, Inc. ("R. P. C. Mechanical") is a wholly owned subsidiary of FirstEnergy Facilities. R. P. C. Mechanical provides HVAC equipment installation and service, process piping and energy management and control systems in the greater Cincinnati, Ohio area. 18. Spectrum Controls Systems Spectrum Controls Systems, Inc. ("Spectrum") is a wholly owned subsidiary of FirstEnergy Facilities. Spectrum provides installation and service of HVAC control systems to customers in the Cincinnati, Ohio area. 19. FirstEnergy Nuclear Operating Company FirstEnergy Nuclear Operating Company ("FENOC") is a wholly owned subsidiary of FirstEnergy. FENOC is not an electric utility within the meaning of the 1935 Act. FENOC operates the Davis-Besse Nuclear Power Station, the Perry Nuclear Power Plant and the Beaver Valley Nuclear Power Station (collectively, the "Power Stations") under the supervision and direction of the owners of those facilities. 10 11 20. Warrenton River Terminal, Ltd. Warrenton River Terminal, Ltd. ("Warrenton River") is a wholly owned subsidiary of FirstEnergy Ventures. Warrenton River owns facilities for the transloading of bulk materials on the Ohio River - primarily coal. The coal unloaded at Warrenton River is in part used by the FirstEnergy Operating Companies at various generation facilities, but not all transloaded materials handled at Warrenton River are for the use and benefit of FirstEnergy or any of FirstEnergy's subsidiaries; 64.32% of these materials are for the use and benefit of third parties. 21. FirstEnergy Engineering, Incorporated Ohio Edison holds a 49% interest FirstEnergy Engineering, Incorporated ("FirstEnergy Engineering"), which provides engineering services at cost as a subcontractor on construction projects undertaken by FirstEnergy's subsidiaries. The engineering services provided include, but are not limited to, mechanical, HVAC, electrical, and civil engineering applications. Substantially all of the services are provided to FirstEnergy's subsidiaries in support of FirstEnergy Solutions, GenCo and FENOC; the remainder are provided to various third parties. 22. Engineered Processes, Ltd. FirstEnergy Ventures has a 50% interest in Engineered Processes, Ltd. ("Engineered Processes"). Engineered Processes holds the patent on beta plaster, which is primarily used in wallboard applications. Beta plaster is manufactured using the by-products of coal-fired generating facilities to create wallboard material. FirstEnergy has a 20-year royalty agreement with Engineered Processes. 23. Eastroc Technologies, LLC FirstEnergy Ventures has a 50% interest in Eastroc Technologies, LLC ("Eastroc Technologies"). Eastroc Technologies holds the patent for alpha plaster, which is typically used in plaster of paris applications. Alpha plaster is manufactured using the by-products of coal-fired generation facilities to create plaster of paris materials. 24. MARBEL Energy Corporation MARBEL Energy Corporation ("MARBEL") is a wholly owned subsidiary of FirstEnergy. MARBEL is the parent company of a natural gas pipeline company, Northeast Ohio National Gas Corp., and a holding company, Marbel Holdco Inc. ("Marbel Holdco"). In addition, MARBEL is the contracting party to two large gas supply agreements. 25. Great Lakes Energy Partners, LLC Marbel Holdco owns a 50% interest in Great Lakes Energy Partners, LLC ("Great Lakes"). Great Lakes is an oil and gas exploration and production company in a joint venture with Range Resources Corporation and holds a majority of its assets in the Appalachian Basin, including more than 7,700 oil and natural gas wells, drilling rights on nearly one million acres, 11 12 proven resources of 450 billion cubic feet equivalent of natural gas and oil, and 5,000 miles of pipeline. Great Lakes also owns intrastate gas pipelines and a small interstate pipeline between Ohio and West Virginia. 26. PowerSpan Corp. FirstEnergy owns an 18.63% interest in PowerSpan Corp. ("PowerSpan") - - formerly Zero Emissions Technology, Inc. - on an as-converted, fully diluted basis.(1) PowerSpan utilizes advanced technology to reduce emissions of NO(x), SO(2) and particulate matter from utility generation facilities. PowerSpan's technologies are applied in coal, oil and gas-fired power generation facilities. The products reduce particulate emissions for a low cost and can provide a return on investment for the entity using the products. 27. A.A. Duckett, Inc. Duckett is a wholly owned subsidiary of Elliot-Lewis. Duckett provides commercial HVAC installation and ancillary services to third parties and affiliated companies in the New Jersey area. 28. Sautter Crane Rental, Inc. Sautter Crane is a wholly owned subsidiary of Elliot-Lewis which provides crane rental service to affiliated companies and third parties, including other utilities and mechanical contractors. 29. Modern Air Conditioning, Inc. Modern Air Conditioning, Inc. ("Modern AC") is a wholly owned subsidiary of E-L Enterprises and provides HVAC equipment installation and service, energy management, facilities management and plumbing services. 30. Airdex Air Conditioning Corporation Airdex Air Conditioning Corporation ("Airdex AC") is a wholly owned subsidiary of Modern AC and provides HVAC equipment installation and service, energy management, facilities management and plumbing services. 31. R.L. Anderson, Inc. R.L. Anderson, Inc. ("R.L. Anderson") is a wholly owned subsidiary of E-L Enterprises and provides HVAC equipment installation and service, energy management, facilities management and plumbing services. - ------------------ (1) FirstEnergy owns 2,000,000 shares of Series B Convertible Preferred Stock. FirstEnergy also has 100,000 warrants to acquire common stock at $4.74 per share and 150,000 warrants to acquire common stock at $7.50 per share. 12 13 32. Nth Power Technologies II, LLC FirstEnergy owns an 8.2% membership interest in Nth Power Technologies II, LLC ("Nth Power"), a venture capital fund. Nth Power invests in the energy industry with a focus on emerging technologies in the global energy industry. Nth Power was initially capitalized at $10,000,000. FirstEnergy's commitment for the fund is approximately $1,250,000. 33. Kinetic Ventures I, LLC (formerly Utility Competitive Advantage Fund I, LLC) FirstEnergy owns an 11.10% membership interest in Kinetic Ventures I, LLC ("KVI"), a venture capital fund. KVI's focus is on early stage companies involved in energy related fields and technology as well as communications technologies. KVI was initially capitalized at $90,000,000; FirstEnergy's commitment for the fund is approximately $10,000,000. 34. Kinetic Ventures II, LLC (formerly Utility Competitive Advantage Fund II, LLC) FirstEnergy owns a 17.63% membership interest in Kinetic Ventures II, LLC ("KVII"), a venture capital fund. KVII's focus is on energy related fields and energy related technology in early stage companies involved in energy related fields and technology as well as communications technologies. KVII was initially capitalized at $95,000,000; FirstEnergy's commitment is approximately $15,000,000. 35. Envirotech Investment Fund I, L.P. FirstEnergy owns a 6.36% partnership interest in Envirotech Investment Fund I, L.P. ("Envirotech"). Envirotech is a venture capital fund that invests assets in energy-related technologies relating to environmental issues. Envirotech was initially capitalized at $32,000,000, of which FirstEnergy's commitment is approximately $2,000,000. 36. Automated Power Exchange, Inc. FirstEnergy owns a 1.16% interest in Automated Power Exchange, Inc. ("APX"), represented by 1,000,000 shares of Series B-2 Preferred Stock and 218,975 shares of Series C Preferred Stock held through KVI. APX develops, owns and operates integrated low cost efficient internet-based electronic power exchanges and automated clearinghouses for the electric power industry. 37. Active Power, Inc. FirstEnergy owns less than one hundredth of a percent interest - 0.006% - in Active Power, Inc. ("Active Power"), represented by 92,378 shares of common stock of 39 million shares outstanding.(2) This investment represented a distribution by Envirotech. Active Power is a developer of flywheel energy storage system for use in uninterruptible power supply and other power quality applications. - ------------------------ (2) The market value of this stock, as of June 30, 2001, was $1,540,865. 13 14 38. The Alliance Participants Administrative and Startup Activities Company, LLC FirstEnergy owns a 10% interest in The Alliance Participants Administrative and Startup Activities Company, LLC ("BridgeCo"). BridgeCo is an entity created to manage the financial and other affairs of the ten members of the Alliance Regional Transmission Organization only until that company begins operations, anticipated to be late 2001, when BridgeCo will be dissolved. F. NON-UTILITY HOLDING COMPANIES 1. FirstEnergy Facilities Services Group, LLC FirstEnergy Facilities is a wholly owned subsidiary of FirstEnergy. FirstEnergy Facilities acts as the parent company for 11 direct subsidiaries engaged in mechanical contracting, facilities management and energy management services: (i) Ancoma; (ii) Colonial Mechanical; (iii) Webb Technologies; (iv) Dunbar Mechanical; (v) Edwards E&M; (vi) Elliott-Lewis; (vii) Cranston and Sons; (viii) Roth Bros.; (ix) Hattenbach; (x) R. P. C. Mechanical; and (xi) Spectrum. FirstEnergy Facilities is retainable because of all of its subsidiaries are, as set forth herein, engaged in retainable non-utility businesses. 2. FirstEnergy Ventures Corp. FirstEnergy Ventures is a wholly owned subsidiary of FirstEnergy. FirstEnergy Ventures owns equity investments in certain unregulated enterprises and business ventures, and has eight wholly-owned subsidiaries: (i) Centerior Power Enterprises, Inc. ("Centerior Power"); (ii) Centerior Energy Services; (iii) Advanced Technologies; (iv) Centerior Communications; (v) Bay Shore; (vi) FirstEnergy Fuel Marketing; (vii) FirstEnergy Telecommunications; and (viii) Warrenton River. FirstEnergy Ventures is a non-utility holding company that is retainable because of all of its subsidiaries are, as set forth herein, engaged in retainable non-utility businesses. FirstEnergy Ventures is part owner of two other companies: Eastroc Technologies and Engineered Processes. 3. FE Acquisition Corp. FE Acquisition Corp. ("FE Acquisition") is a wholly owned subsidiary of FirstEnergy. FE Acquisition holds all of the outstanding shares in Mid-Atlantic Energy Development Co. ("Mid-Atlantic"), an inactive holding company. 4. Marbel Holdco, Inc. Marbel Holdco is a wholly owned subsidiary of MARBEL. It holds FirstEnergy's 50% ownership in Great Lakes. Marbel Holdco is a non-utility holding company that is retainable because its investments are in retainable non-utility businesses. 14 15 5. OES Ventures, Incorporated OES Ventures is a wholly owned subsidiary of Ohio Edison. It holds PNBV. OES Ventures is a non-utility holding company that is retainable because its investments are in retainable non-utility businesses. 6. Centerior Communications Holdings, Inc. Centerior Communications is a wholly owned subsidiary of FirstEnergy Ventures. Centerior Communications was granted ETC status by the FCC in July 1997. Centerior Communications holds an interest in Fiber Venture. Centerior Communications is a non-utility holding company that is retainable because its investments are in retainable non-utility businesses. 7. E-L Enterprises, Inc. E-L Enterprises is a wholly owned subsidiary of Elliot-Lewis. E-L Enterprises holds all of the issued and outstanding stock of Modern AC and R.L. Anderson and, indirectly, Airdex AC. E-L Enterprises is a non-utility holding company that is retainable because its investments are in retainable non-utility businesses. G. INACTIVE NON-UTILITY SUBSIDIARIES 1. Centerior Service Company Centerior Service Company is a direct inactive subsidiary of FirstEnergy. 2. FE Holdings, L.L.C. FE Holdings, L.L.C. is a direct inactive subsidiary of FirstEnergy. 3. Ohio Edison Financing Trust II Ohio Edison Financing Trust II is a direct inactive subsidiary of Ohio Edison. 4. Centerior Indemnity Trust Centerior Indemnity Trust ("CIT") is a wholly owned subsidiary of FirstEnergy. CIT is the remnant of an executive compensation program that required the creation of a trust if the rating on Centerior Energy Corporation dropped below investment grade. That event did occur, and the trust was funded using short term debt instruments, but it is expected that the trust will cease to exist between December 2001 and June 2002. 5. CID Ohio Equity Capital, Limited Partnership Fund IV Ohio Edison owns a 10% limited partnership interest in CID Ohio Equity Capital, Limited Partnership Fund IV ("CID"), and FirstEnergy Properties owns a 5% interest in CID. CID was initiated in 1994 to invest in a portfolio of private equity and equity-related securities of start-up and early-stage growth companies operating principally in Ohio. The partnership, which 15 16 currently has three remaining portfolio companies, is winding down and is scheduled to dissolve in March 2004. 6. Centerior Power Enterprises, Inc. Centerior Power is a wholly owned subsidiary of FirstEnergy Ventures. Centerior Power is to be dissolved upon the planned cancellation of a contract, which required Centerior Power, together with CPICOR Management LLC (a non-affiliate), to implement the Department of Energy clean coal project. 7. Mid-Atlantic Energy Development Co. FE Acquisition holds all of the outstanding shares of Mid-Atlantic. Mid-Atlantic is an inactive subsidiary of FE Acquisition. Mid-Atlantic owned three 130 MW gas-fired peaking turbines at Richland, Ohio. Mid-Atlantic sold those turbines to GenCo effective January 1, 2001, prior to their going into service. 8. Cleveland Electric Financing Trust I Cleveland Electric Financing Trust I ("CEI Financing Trust I") is a wholly owned subsidiary of Cleveland Electric, which was formed to issue and sell up to $245 million liquidation amount of its preferred trust securities, the proceeds of which will be used, along with the proceeds of the concurrent issuance to Cleveland Electric of up to $7.6 million liquidation amount of CEI Financing Trust I's common trust securities, to purchase subordinated debentures of Cleveland Electric having an interest rate identical to the coupon on the preferred securities. CEI Financing Trust I's sole purpose will be to hold the Cleveland Electric subordinated debentures and to use the debt service thereon to pay distributions on its preferred trust securities. Although CEI Financing Trust I and Cleveland Electric jointly filed a Registration Statement on Form S-2 with the Commission on July 9, 2001 to register the preferred securities, the timing of the issuance and sale of the preferred trust securities is subject to, among other things, the Commission's review, if any, of the Form S-2 and general market conditions, and, therefore, is uncertain. Other than such registration and other ministerial activities in preparation for the offering of its preferred trust securities, CEI Financing Trust I is not currently engaged in any activities. 9. FirstEnergy Service Company FirstEnergy Service Company is a wholly owned subsidiary of FirstEnergy, which will act as a new service company for the FirstEnergy system following the merger with GPU, Inc. H. DE MINIMIS OR PASSIVE FINANCIAL INVESTMENTS 1. Corvis Corporation FirstEnergy owns less than one hundredth of a percentage interest - 0.007% - in Corvis Corporation ("Corvis") represented by 535,761 shares of common stock out of 94,311,463 authorized shares as of March 1, 2001.(3) This investment represented a distribution by KVI. Corvis is a developer of new technology for transmitting signals across fiber optic cables for optical switching equipment. - ------------------------- (3) The market value of this stock, as of June 30, 2001, was $2,351,991. 16 17 2. Cisco Systems Inc. FirstEnergy owns less than one hundredth of a percent interest - 0.002% - in Cisco Systems, Inc. ("Cisco"), represented by 13,451 shares of common stock out of 7,041,991,896 outstanding shares as of March 1, 2001.(4) This investment represents a distribution by KVI. Cisco is a world leader in networking solutions for the Internet providing end-to-end networking solutions to customers used to build a unified information infrastructure of their own or to connect to someone else's network.(5) 3. S1 Corporation FirstEnergy owns less than one hundredth of a percent interest - 0.004% - in S1 Corporation ("S1"), represented by 23,094 shares of common stock out of 56.14 million shares outstanding as of March 1, 2001.(6) This investment represented a distribution by KVI. S1 is a provider of eFinance solutions services centered on the banking, brokerage and insurance industries. S1 enables financial service providers to create a complete enterprise eFinance experience through all markets, delivery channels and lines of business.(7) 4. Smarthouse, Inc. Cleveland Electric owns 860 shares of common stock in Smarthouse, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(8) 5. Silas Creek Retail, Inc. Ohio Edison owns 104 shares of common stock in Silas Creek Retail, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(9) - ----------------------- (4) The market value of this stock, as of June 30, 2001, was $244,808. (5) FirstEnergy plans to liquidate this investment within three years of the date of the order in this proceeding. (6) The market value of this stock, as of June 30, 2001, was $323,316. (7) FirstEnergy plans to liquidate this investment within three years of the date of the order in this proceeding. (8) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (9) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 17 18 6. Smith International, Inc. Ohio Edison owns 17 warrants to acquire 17 shares of common stock in Smith International, Inc. ("Smith"). Smith makes premium drill bits, drilling fluids, and related products and offers drilling related services. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(10) 7. Steel City Products, Inc. FirstEnergy owns a 0.001% interest in Steel City Products, Inc., represented by 27 shares of common stock out of 3,238,061 outstanding shares in 2000. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(11) 8. Madisons of Columbus, Inc. Cleveland Electric owns 41 shares of common stock in Madisons of Columbus, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(12) 9. The Mason And Dixon Lines, Inc. Cleveland Electric owns 640 shares of Class B Preferred Stock of The Mason And Dixon Lines, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares - ------------------------ (10) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (11) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (12) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 18 19 will be surrendered for $640.00 in 2006. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership.(13) 10. Luckey Farmers, Inc. Toledo Edison owns 74 shares of Class C Preferred Stock of Luckey Farmers, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(14) 11. The Lionel Corp. Toledo Edison owns 72 shares of common stock in The Lionel Corp. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(15) 12. Jewel Recovery L.P. (d/b/a Zales Corp.) Ohio Edison owns 26.44 non-transferable limited partnership units in Jewel Recovery L.P. (d/b/a Zales Corp.), which represents less than 0.001%. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and this interest is worthless. There is no market for the interest held, and the interest is non-transferable.(16) 13. Hermans Sporting Goods, Inc. Ohio Edison owns 51 shares, Cleveland Electric owns 460 shares and Toledo Edison owns 69 shares of common stock in Hermans Sporting Goods, Inc., out of 5,285,000 outstanding shares, which represents less than one hundredth of a percent interest - 0.001%. This investment was obtained when this customer issued stock in lieu of payment for services - ----------------------------- (13) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (14) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (15) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (16) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 19 20 rendered pursuant to bankruptcy. This company is bankrupt and the shares are worthless. There is no market for the stock.(17) 14. Homeplace of America, Inc. Cleveland Electric owns 5,312 shares, Ohio Edison owns 623 shares and Penn Power owns 610 shares of common stock in Homeplace of America, Inc., out of 45,000,000 outstanding shares, which represents less than one hundredth of a percent interest - 0.001%. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. The stock has no value at the present time. There is no market for the stock.(18) 15. House of Fabrics, Inc. Toledo Edison owns 356 shares of common stock in House of Fabrics, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(19) 16. Federals, Inc. FirstEnergy owns 920 shares of common stock in Federals, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(20) 17. Country Spring Farms Co-Op, Inc. Toledo Edison has a Memoranda of Capital Credit in Country Spring Farmers Co-Op, Inc. in the amount of $174.00. This investment was obtained when this customer issued - ------------------------- (17) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (18) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (19) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (20) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 20 21 stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the interest is worthless. There is no market for the interest held by FirstEnergy.(21) 18. Cook United, Inc. Toledo Edison owns 16,373 shares of common stock in Cook United, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(22) 19. County Seat Stores, Inc. Toledo Edison owns 58 shares, Cleveland Electric owns 1,102 shares and Ohio Edison owns 793 shares of common stock in County Seat Stores, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. There is no market for these shares.(23) 20. Busy Beavers Building Centers, Inc. Ohio Edison owns 102 shares of common stock in Busy Beavers Building Centers, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(24) 21. Bulk Materials, Inc. Cleveland Electric owns 38 shares, Toledo Edison owns 20 shares and Ohio Edison owns 10 shares of cumulative preferred stock in Bulk Materials, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcies. FirstEnergy does not have a record of the total number of outstanding shares - ------------------------- (21) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (22) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (23) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (24) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 21 22 and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(25) 22. Best Products Co., Inc. FirstEnergy owns 1,699 shares of common stock in Best Products Co., Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. The stock has a present value of $0.17. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(26) 23. Value Merchants Inc. FirstEnergy owns 176 shares of common stock in Value Merchants Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. The stock has a present value of $0.01. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(27) 24. COLOROCS Corp. FirstEnergy owns 25 shares of common stock in COLOROCS Corp. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. The stock has no value at present. FirstEnergy does not have a record of the total number of outstanding shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(28) 25. Republic Technologies International, Inc. FirstEnergy owns 30,000 shares of Series C Convertible Preferred Stock (the "Series C Shares") in Republic Technologies International, Inc. ("Republic"). These shares are convertible at FirstEnergy's discretion. The Series C Shares would be converted to 429,478 shares of Common Stock representing a 5.3% equity ownership in Republic. At the present time, FirstEnergy has no intention to convert the shares to common stock. Republic is a large steel - -------------------------- (25) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (26) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (27) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (28) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 22 23 manufacturer combining the resources and expertise of Canadian Drawn Republic Steel Company, Inc., Bliss & Laughlin Steel, Republic Engineered Steels, Bar Technologies, and USS/KOBE. FirstEnergy's interest in Republic arises from FirstEnergy's subscription to purchase shares in Bar Technologies, Inc. ("Bar Tech"), a Delaware corporation renamed "Republic Technologies International, Inc." FirstEnergy's purchase of that stock, along with the investments of others, was used to finance certain debt of Bar Tech concerning a restructuring of Bar Tech.(29) Republic, BarTech and the above mentioned affiliated companies filed a consolidated Chapter 11 bankruptcy petition on April 2, 2001 in the Northern District of Ohio. Such case is pending and FirstEnergy's interest in the Series C Shares is uncertain at this time. At the present time, First Energy has no intention of converting its ownership interest into common stock assuming such action is permitted under the bankruptcy code. 26. United Merchants and Manufacturers, Inc. Ohio Edison owns 39 shares of common stock and 2 shares of Series 1 preferred stock in United Merchants and Manufacturers, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(30) 27. Edison Brothers Stores, Inc. Ohio Edison owns 69 shares of common stock in Edison Brothers Stores, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(31) 28. EBS Pension, L.L.C. Ohio Edison owns 71 units in EBS Pension, L.L.C. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the interests are worthless. There is no market for the interests.(32) - ------------------------------ (29) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (30) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (31) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (32) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 23 24 29. EBS Building, L.L.C. Ohio Edison owns 71 units in EBS Building, L.L.C. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the interests are worthless. There is no market for the interests.(33) 30. EBS Litigation, L.L.C. Ohio Edison owns 69 units in EBS Litigation, L.L.C. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the interests are worthless. There is no market for the interests.(34) 31. EnviroSource, Inc. Ohio Edison owns 66 shares of non-assignable Class B preferred stock in EnviroSource, Inc. This investment was obtained when this customer issued stock in lieu of payment for services rendered pursuant to bankruptcy. This Company is bankrupt, and the shares are worthless. FirstEnergy does not have a record of the total number of shares and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(35) 32. Oakhurst Capital, Inc. Ohio Edison owns 27 shares of common stock of Oakhurst Capital, Inc. ("Oakhurst"), which was a creditor of Heck's Inc. ("Heck's"). This investment was obtained when Heck's completed its bankruptcy in 1989. Oakhurst is also bankrupt, and the shares in Oakhurst are worthless. FirstEnergy does not have a record of the total number of shares of Oakhurst stock and therefore is unable to give an accurate percentage of ownership. There is no market for the stock.(36) - ------------------------------ (33) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (34) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (35) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. (36) In light of the fact that there is no market for this investment, FirstEnergy has no readily available outlet to dispose of it at this time. FirstEnergy plans to dispose of the investment when, and if, the investment becomes marketable. 24 EX-99.FS.3 8 l88100ex99-fs_3.txt NONGC BALANCE SHEETS 1 EXHIBIT FS-3 NORTHEAST OHIO NATURAL GAS CORP. BALANCE SHEET AS OF DECEMBER 31, 2000
ASSETS CURRENT ASSETS Cash and cash equivalents $ 315,100 Receivables: Trade accounts and advances 1,696,930 Intercompany accounts and notes (4,364,387) ----------- (2,667,457) Inventories 97,766 Prepaid expenses and other (162,743) ------------ TOTAL CURRENT ASSETS (2,417,334) PROPERTY, PLANT AND EQUIPMENT Regulated utility and other assets 12,534,976 Less accumulated depreciation (3,562,625) ----------- 8,972,351 Construction work in progress 11,624,758 ------------ Total regulated utility and other assets 20,597,109 OTHER ASSETS Deposits and others 1,251 Deferred charges 193,735 ------------ TOTAL OTHER ASSETS 194,986 TOTAL ASSETS $ 18,374,761 ============ LIABILITIES & SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable and advances $ 400,905 Accrued interest & expenses 29,760 Accrued taxes 145,808 Current maturities of long-term debt -- ------------ TOTAL CURRENT LIABILITIES 576,473 LONG TERM NOTES PAYABLE 13,534,044 OTHER LIABILITIES Deferred income taxes (247,934) SHAREHOLDERS' EQUITY Common stock 591,500 Additional paid-in-capital 3,350,264 Earnings retained in the business 457,430 Net income (loss) year-to-date 112,985 ------------ 4,512,178 TOTAL LIABILITIES & EQUITY $ 18,374,761 ============
2 EXHIBIT FS-3, PAGE 2 NORTHEAST OHIO NATURAL GAS CORP. BALANCE SHEET AS OF JUNE 30, 2001
ASSETS CURRENT ASSETS Cash and cash equivalents $ 32,654 Receivables: Trade accounts and advances 747,152 I/C FirstEnergy Trading Services -- OIGTC 1,000 MARBEL (578,303) ----------- 169,849 Inventories 92,528 Prepaid expenses and other 759,635 Deferred income Taxes -- ------------ TOTAL CURRENT ASSETS 1,054,665 PROPERTY, PLANT AND EQUIPMENT Regulated utility and other assets 12,772,466 Less accumulated depreciation (3,831,253) ----------- 8,941,212 Construction work in progress 15,161,441 ------------ Total regulated utility and other assets 24,102,653 OTHER ASSETS Deferred charges 162,334 ------------ TOTAL OTHER ASSETS 162,334 ------------ TOTAL ASSETS $ 25,319,652 ============ LIABILITIES & SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable and advances $ 211,744 Accrued expenses 13,179 Accrued taxes 306,873 Current maturities of long-term debt: BOBCAT LOAN 4,857 TRENCHER LOAN 19,759 ------------ TOTAL CURRENT LIABILITIES 556,412 LONG TERM NOTES PAYABLE FirstEnergy 4,522,988 MARBEL 16,050,000 ------------ 20,572,988 OTHER LIABILITIES Deferred income taxes (217,514) Other expenses -- ------------ (217,514) SHAREHOLDER'S EQUITY Common stock 591,500 Additional paid-in-capital 3,350,264 Earnings retained in the business 1/1/00 570,414 Net income (loss) year-to-date (104,413) ------------ 466,001 Treasury stock, 4.4 shares at cost -- ------------ 4,407,765 ------------ Total liabilities and equity $ 25,319,652 ============
2 EX-99.FS.4 9 l88100ex99-fs_4.txt NONGC STATEMENT OF INCOME 1 EXHIBIT FS-4 NORTHEAST OHIO NATURAL GAS INCOME STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996-2000
1996 1997 1998 1999 2000 OPERATING REVENUES Operating revenues & gas sales $ 4,299,942 $ 4,962,138 $ 4,246,222 $5,197,914 $6,006,457 Other 60,371 51,552 66,088 78,904 67,663 -------------------------------------------------------------------- TOTAL REVENUE 4,360,313 5,013,690 4,312,310 5,276,818 6,074,120 OPERATING EXPENSES Purchased gas cost 1,625,645 2,024,706 1,581,721 2,002,831 2,643,394 Operations 1,847,481 1,592,488 1,717,070 1,644,746 1,722,268 Depreciation, depletion & amortization 307,257 363,123 319,787 372,917 451,528 Amortization of fair market value adjustments -- -- -- 60,567 63,200 Maintenance 109,161 81,353 74,919 53,949 76,496 General taxes 470,196 680,141 696,348 699,855 557,417 Interest expense 160,655 148,306 139,891 211,549 356,071 -------------------------------------------------------------------- TOTAL EXPENSES 4,520,395 4,890,118 4,529,736 5,046,414 5,870,374 -------------------------------------------------------------------- OPERATING INCOME (160,082) 123,573 (217,426) 230,403 203,746 TAXES ON INCOME Current (54,147) 43,459 (64,288) 15,825 134,561 Deferred (9,637) 83,105 (43,800) -------------------------------------------------------------------- (54,147) 43,459 (73,925) 98,930 90,761 NET INCOME (LOSS) $ (105,934) $ 80,113 $ (143,501) $ 131,473 $ 112,985 ====================================================================
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