LEASES

FirstEnergy leases certain generating facilities, office space and other property and equipment under cancelable and noncancelable leases.

In 1987, OE sold portions of its ownership interests in Perry Unit 1 and Beaver Valley Unit 2 and entered into operating leases on the portions sold for basic lease terms of approximately 29 years. In that same year, CEI and TE also sold portions of their ownership interests in Beaver Valley Unit 2 and Bruce Mansfield Units 1, 2 and 3 and entered into similar operating leases for lease terms of approximately 30 years. During the terms of their respective leases, OE, CEI and TE are responsible, to the extent of their leasehold interests, for costs associated with the units including construction expenditures, operation and maintenance expenses, insurance, nuclear fuel, property taxes and decommissioning. They have the right, at the expiration of the respective basic lease terms, to renew their respective leases. They also have the right to purchase the facilities at the expiration of the basic lease term or any renewal term at a price equal to the fair market value of the facilities. The basic rental payments are adjusted when applicable federal tax law changes.

In 2007, FG completed a sale and leaseback transaction for its 93.825% undivided interest in Bruce Mansfield Unit 1 and entered into operating leases for basic lease terms of approximately 33 years. FES has unconditionally and irrevocably guaranteed all of FG’s obligations under each of the leases.

During 2008, NG purchased 56.8 MW of lessor equity interests in the OE 1987 sale and leaseback of the Perry Plant and approximately 43.5 MW of lessor equity interests in the OE 1987 sale and leaseback of Beaver Valley Unit 2. In addition, NG purchased 158.5 MW of lessor equity interests in the TE and CEI 1987 sale and leaseback of Beaver Valley Unit 2. The Ohio Companies continue to lease these MW under their respective sale and leaseback arrangements and the related lease debt remains outstanding.

During 2012, NG repurchased 70.1 MW of lessor equity interests in OE's existing sale and leaseback of Beaver Valley Unit 2 for $129 million and FG acquired 441.9 MW of certain equity and other lessor interests in connection with the 1987 Bruce Mansfield Plant sale and leaseback transactions for approximately $262 million. In March of 2013, FG acquired the remaining lessor interests in the Bruce Mansfield sale and leaseback transaction for approximately $221 million. During 2013, NG purchased 12.2 MW of lessor equity interests in OE's existing sale and leaseback of Beaver Valley Unit 2 for $23 million. Additionally, in February 2014, NG purchased 47.7 MW of lessor equity interests in OE's existing sale and leaseback of Beaver Valley Unit 2 for approximately $94 million.

Established by OE in 1996, PNBV purchased a portion of the lease obligation bonds issued on behalf of lessors in OE’s Perry Unit 1 and Beaver Valley Unit 2 sale and leaseback transactions. Similarly, CEI and TE established Shippingport in 1997 to purchase the lease obligation bonds issued on behalf of lessors in their Bruce Mansfield Units 1, 2 and 3 sale and leaseback transactions. During 2013, the investments held at Shippingport were liquidated. The PNBV arrangements effectively reduce lease costs related to those transactions (see Note 8, Variable Interest Entities).

As of December 31, 2013, FirstEnergy's leasehold interest was 8.11% of Perry Unit 1 and 93.83% of Bruce Mansfield Unit 1. After NG's purchase in February 2014, as discussed above, FirstEnergy's leasehold interest was 2.60% of Beaver Valley Unit 2.

Operating lease expense for 2013, 2012 and 2011, is summarized as follows:



(In millions)	2013		2012		2011

FirstEnergy	$	224	$	291	$	319
FES	97		140		154

The future minimum capital lease payments as of December 31, 2013 are as follows:



Capital leases	FirstEnergy			FES
	(In millions)
2014	$	40		$	6
2015	38			6
2016	34			5
2017	30			5
2018	23			2
Years thereafter	57			—
Total minimum lease payments	222			24
Interest portion	(34		)	(2		)
Present value of net minimum lease payments	188			22
Less current portion	34			5
Noncurrent portion	$	154		$	17

FirstEnergy's future minimum consolidated operating lease payments as of December 31, 2013, are as follows:



	FirstEnergy
Operating Leases	Lease Payments		Capital Trust		Net
	(In millions)
2014	$	250	$	48	$	202
2015	245		40		205
2016	213		13		200
2017	128		3		125
2018	126		—		126
Years thereafter	1,564		—		1,564
Total minimum lease payments	$	2,526	$	104	$	2,422

FES' future minimum operating lease payments as of December 31, 2013, are as follows:



Operating Leases	Lease Payments
	(In millions)
2014	$	143
2015	142
2016	130
2017	82
2018	101
Years thereafter	1,480
Total minimum lease payments	$	2,078