CAPITALIZATION

COMMON STOCK

Retained Earnings and Dividends

As of December 31, 2011, FirstEnergy’s unrestricted retained earnings were $3.0 billion. Dividends declared in 2011 were $2.20 per share, which includes dividends of $0.55 per share paid in the second, third and fourth quarters of 2011 and dividends of $0.55 per share payable in the first quarter of 2012. Dividends declared in 2010 were $2.20 per share, which includes dividends of $0.55 per share paid in the second, third and fourth quarter of 2010 and dividends of $0.55 per share paid in the first quarter of 2011. The amount and timing of all dividend declarations are subject to the discretion of the Board of Directors and its consideration of business conditions, results of operations, financial condition and other factors.

In addition to paying dividends from retained earnings, OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec have authorization from the FERC to pay cash dividends to FirstEnergy from paid-in capital accounts, as long as their equity to total capitalization ratio (without consideration of retained earnings) remains above 35%. In addition, TrAIL and AGC have authorization from the FERC to pay cash dividends to FE from paid-in capital accounts, as long as their equity to total capitalization ratio (without consideration of retained earnings) remains above 50% and 45%, respectively. The articles of incorporation, indentures, regulatory limitations and various other agreements relating to the long-term debt of certain FirstEnergy subsidiaries contain provisions that could further restrict the payment of dividends on their common stock. None of these provisions materially restricted FirstEnergy’s subsidiaries’ abilities to pay cash dividends to FirstEnergy as of December 31, 2011.

As described in Note 1, Organization Basis of Presentation and Significant Accounting Policies, FirstEnergy elected to change its method of recognizing actuarial gains and losses for its defined benefit pension plans and other postemployment benefit plans and applied this change retrospectively to all periods presented. The retrospective application of this change caused accumulated deficits for certain of the Utility Registrants during those prior periods, including periods when dividends were paid from retained earnings. Previous to this accounting change, retained earnings were sufficient for those dividends that were declared and paid.

PREFERRED AND PREFERENCE STOCK

FirstEnergy and the Utilities were authorized to issue preferred stock and preference stock as of December 31, 2011, as follows:



	Preferred Stock		Preference Stock
	Shares Authorized	Par Value	Shares Authorized	Par Value
FirstEnergy	5,000,000	$100
OE	6,000,000	$100	8,000,000	no par
OE	8,000,000	$25
Penn	1,200,000	$100
CEI	4,000,000	no par	3,000,000	no par
TE	3,000,000	$100	5,000,000	$25
TE	12,000,000	$25
JCP&L	15,600,000	no par
Met-Ed	10,000,000	no par
Penelec	11,435,000	no par
MP	940,000	$100
PE	10,000,000	$0.01
WP	32,000,000	no par

As of December 31, 2011, and 2010, there were no preferred shares or preference shares outstanding.

LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

The following tables present outstanding long-term debt and capital lease obligations for FirstEnergy, FES and the Utility Registrants as of December 31, 2011 and 2010:



	As of December 31, 2011		As of December 31,
(Dollar amounts in millions)	Maturity Date	Interest Rate	2011			2010
FirstEnergy:
FMBs	2012 - 2038	5.125% - 9.740%	$	2,487		$	1,023
Secured notes - fixed rate	2012 - 2037	3.000% - 7.880%	2,725			2,727
Secured notes - variable rate	2012	0.090%	50			57
Total secured notes			2,775			2,784
Unsecured notes - fixed rate	2012 - 2039	2.225% - 8.250%	10,961			9,351
Unsecured notes - variable rate	2012 - 2013	0.030% - 2.918%	782			770
Total unsecured notes			11,743			10,121
Capital lease obligations			108			54
Unamortized debt premiums			64			83
Unamortized merger fair value adjustments			160			—
Currently payable long-term debt			(1,621		)	(1,486		)
Total long-term debt and other long-term obligations			$	15,716		$	12,579

FES:
Secured notes - fixed rate	2012 - 2018	3.000% - 7.250%	$	899		$	838
Secured notes - variable rate	2012	0.090%	50			434
Total secured notes			949			1,272
Unsecured notes - fixed rate	2012 - 2039	2.250% - 6.800%	2,218			2,562
Unsecured notes - variable rate	2012	0.040% - 0.090%	508			445
Total unsecured notes			2,726			3,007
Capital lease obligations			31			36
Unamortized debt discounts			(2		)	(2		)
Currently payable long-term debt			(905		)	(1,132		)
Total long-term debt and other long-term obligations			$	2,799		$	3,181

OE:
FMBs	2012 - 2038	8.250%	$	407		$	408
Unsecured notes - fixed rate	2015 - 2038	5.450% - 6.875%	750			750
Capital lease obligations			11			7
Unamortized debt discounts			(11		)	(12		)
Currently payable long-term debt			(2		)	(1		)
Total long-term debt and other long-term obligations			$	1,155		$	1,152

CEI:
FMBs	2018 - 2024	5.500% - 8.875%	$	600		$	600
Secured notes - fixed rate	2017	7.880%	300			300
Unsecured notes - fixed rate	2013 - 2036	5.650% - 5.950%	850			850
Unsecured notes due to affiliates	2012 - 2016	7.663%	81			103
Capital lease obligations			8			3
Unamortized debt discounts			(3		)	(3		)
Currently payable long-term debt			(1		)	—
Total long-term debt and other long-term obligations			$	1,835		$	1,853



	As of December 31, 2011		As of December 31,
(Dollar amounts in millions)	Maturity Date	Interest Rate	2011			2010
TE:
Secured notes - fixed rate	2020 - 2037	6.150% - 7.250%	$	600		$	600
Capital lease obligations			1			3
Unamortized debt discounts			(2		)	(3		)
Total long-term debt and other long-term obligations			$	599		$	600

JCP&L:
Secured notes - fixed rate	2012 - 2021	5.250% - 6.160%	$	277		$	310
Unsecured notes - fixed rate	2016 - 2037	4.800% - 7.350%	1,500			1,500
Unamortized debt discounts			(7		)	(8		)
Currently payable long-term debt			(34		)	(32		)
Total long-term debt			$	1,736		$	1,770

Met-Ed:
FMBs			$	—		$	14
Unsecured notes - fixed rate	2013 - 2019	4.875% - 7.700%	700			700
Unsecured notes - variable rate	2012	0.090%	29			29
Total unsecured notes			729			729
Capital lease obligations			4			5
Currently payable long-term debt			(29		)	(29		)
Total long-term debt and other long-term obligations			$	704		$	719

Penelec:
Unsecured notes - fixed rate	2014 - 2038	5.125% - 6.625%	$	1,075		$	1,100
Unsecured notes - variable rate	2012	0.030% - 0.090%	45			20
Total unsecured notes			1,120			1,120
Capital lease obligations			4			—
Unamortized debt discounts			(2		)	(3		)
Currently payable long-term debt			(46		)	(45		)
Total long-term debt and other long-term obligations			$	1,076		$	1,072

See Note 6, Leases for additional information related to capital leases.

Securitized Bonds

Environmental Control Bonds

The consolidated financial statements of FirstEnergy include environmental control bonds issued by two bankruptcy remote, special purpose limited liability companies that are indirect subsidiaries of MP and PE. Proceeds from the bonds were used to construct environmental control facilities. The special purpose limited liability companies own the irrevocable right to collect non-bypassable environmental control charges from all customers who receive electric delivery service in MP's and PE's West Virginia service territories. Principal and interest owed on the environmental control bonds is secured by, and payable solely from, the proceeds of the environmental control charges. The right to collect environmental control charges is not included on FirstEnergy's consolidated balance sheets. Creditors of FirstEnergy, other than the special purpose limited liability companies, have no recourse to any assets or revenues of the special purpose limited liability companies. As of December 31, 2011, $513 million of environmental control bonds were outstanding.

Transition Bonds

The consolidated financial statements of FirstEnergy and JCP&L include the accounts of JCP&L Transition Funding and JCP&L Transition Funding II, wholly owned limited liability companies of JCP&L. In June 2002, JCP&L Transition Funding sold transition bonds to securitize the recovery of JCP&L’s bondable stranded costs associated with the previously divested Oyster Creek Nuclear Generating Station. In August 2006, JCP&L Transition Funding II sold transition bonds to securitize the recovery of deferred costs associated with JCP&L’s supply of BGS. JCP&L did not purchase and does not own any of the transition bonds, which are included as long-term debt on FirstEnergy’s and JCP&L’s Consolidated Balance Sheets, and the transition bonds are the sole obligations of JCP&L Transition Funding and JCP&L Transition Funding II and are collateralized by each company’s equity and assets, which consist primarily of bondable transition property. As of December 31, 2011, $287 million of the transition bonds were outstanding.

Bondable transition property represents the irrevocable right under New Jersey law of a utility company to charge, collect and receive from its customers, through a non-bypassable TBC, the principal amount and interest on transition bonds and other fees and expenses associated with their issuance. JCP&L sold its bondable transition property to JCP&L Transition Funding and JCP&L Transition Funding II and, as servicer, manages and administers the bondable transition property, including the billing, collection and remittance of the TBC, pursuant to separate servicing agreements with JCP&L Transition Funding and JCP&L Transition Funding II. For the two series of transition bonds, JCP&L is entitled to aggregate annual servicing fees of up to $628 thousand that are payable from TBC collections.

Other Long-term Debt

The Ohio Companies, Penn, FGCO and NGC each have a first mortgage indenture under which they can issue FMBs secured by a direct first mortgage lien on substantially all of their property and franchises, other than specifically excepted property.

Based on the amount of FMBs authenticated by the respective mortgage bond trustees as of December 31, 2011, the sinking fund requirement for all FMBs issued under the various mortgage indentures amounted to payments, all of which relate to Penn, was $6 million in 2011. Penn expects to meet its 2011 annual sinking fund requirement with a replacement credit under its mortgage indenture.

As of December 31, 2011, FirstEnergy’s currently payable long-term debt includes approximately $632 million (FES — $558 million, Penelec — $45 million and Met-Ed — $29 million) of variable interest rate PCRBs, the bondholders of which are entitled to the benefit of irrevocable direct pay bank LOCs. The interest rates on the PCRBs are reset daily or weekly. Bondholders can tender their PCRBs for mandatory purchase prior to maturity with the purchase price payable from remarketing proceeds, or if the PCRBs are not successfully remarketed, by drawings on the irrevocable direct pay LOCs. The subsidiary obligor is required to reimburse the applicable LOC bank for any such drawings or, if the LOC bank fails to honor its LOC for any reason, must itself pay the purchase price.

The following table presents scheduled debt repayments for outstanding long-term debt, excluding capital leases, fair value purchase accounting adjustments and unamortized debt discounts and premiums, for the next five years as of December 31, 2011. TE does not have any long-term debt payments due during the next five years. PCRBs that can be tendered for mandatory purchase prior to maturity are reflected in 2012.



Year	FirstEnergy		FES		OE		CEI		JCP&L		Met-Ed		Penelec
	(In millions)
2012	$	1,605	$	896	$	—	$	—	$	34	$	29	$	45
2013	1,314		310		—		300		36		150		—
2014	878		125		—		—		38		250		150
2015	1,638		762		150		—		41		—		—
2016	1,050		191		250		—		343		—		—

The following table classifies the outstanding variable rate put bond PCRBs and variable rate PCRBs by year, excluding unamortized debt discounts and premiums, for the next five years based on the next date on which the debt holders may exercise their right to tender their PCRBs. The Ohio Companies and JCP&L did not have any outstanding PCRBs as of December 31, 2011.



Year	FirstEnergy		FES		Met-Ed		Penelec
	(In millions)
2012	$	901	$	828	$	28	$	45
2013	235		235		—		—
2014	26		26		—		—
2015	313		313		—		—
2016	170		170		—		—

Obligations to repay certain PCRBs are secured by several series of FMBs. Certain PCRBs are entitled to the benefit of irrevocable bank LOCs , to pay principal of, or interest on, the applicable PCRBs. To the extent that drawings are made under the LOCs, FGCO, NGC and the applicable Utilities are entitled to a credit against their obligation to repay those bonds. FGCO, NGC and the applicable Utilities pay annual fees based on the amounts of the LOCs to the issuing banks and are obligated to reimburse the banks or insurers, as the case may be, for any drawings thereunder. The insurers hold FMBs as security for such reimbursement obligations. In addition, OE has LOCs of $116 million and $37 million in connection with the sale and leaseback of Beaver Valley Unit 2 and Perry Unit 1, respectively.

The amounts and annual fees for PCRB-related LOCs for FirstEnergy, FGCO, NGC, Met-Ed and Penelec as of December 31, 2011, are as follows:



	Aggregate LOC Amount		Annual Fees
	(In millions)
FGCO	$	365	1.71% to 3.30%
NGC	200		1.71%
Met-Ed	29		1.75%
Penelec	45		1.71% to 1.75%
	$	639

Debt Covenant Default Provisions

FirstEnergy has various debt covenants under certain financing arrangements, including its revolving credit facilities. The most restrictive of the debt covenants relate to the nonpayment of interest and/or principal on such debt and the maintenance of certain financial ratios. The failure by FirstEnergy to comply with the covenants contained in its financing arrangements could result in an event of default, which may have an adverse effect on its financial condition.

Additionally, there are cross-default provisions in a number of the financing arrangements. These provisions generally trigger a default in the applicable financing arrangement of an entity if it or any of its significant subsidiaries default under another financing arrangement in excess of a certain principal amount, typically $100 million. Although such defaults by any of the Utilities, ATSI or TrAIL would generally cross-default FirstEnergy financing arrangements containing these provisions, defaults by any of AE Supply, FES, FGCO or NGC would generally not cross-default to applicable financing arrangements of FirstEnergy. Also, defaults by FirstEnergy would generally not cross-default applicable financing arrangements of any of FirstEnergy’s subsidiaries. Cross-default provisions are not typically found in any of the senior notes or FMBs of FirstEnergy, FGCO, NGC or the Utilities.