CAPITALIZATION

COMMON STOCK

Retained Earnings and Dividends

As of December 31, 2013, FirstEnergy’s unrestricted retained earnings were $2.6 billion. Dividends declared in 2013 were $1.65 per share, which included dividends of $0.55 per share paid in the second, third and fourth quarters of 2013. Dividends declared in 2012 were $2.20 per share, which included dividends of $0.55 per share paid in the second, third and fourth quarter of 2012 and dividends of $0.55 per share paid in the first quarter of 2013. 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. On January 21, 2014 the Board of Directors declared a quarterly dividend of $0.36 per share to be paid in the first quarter of 2014.

In addition to paying dividends from retained earnings, OE, CEI, TE, Penn, JCP&L, ME and PN have authorization from the FERC to pay cash dividends to FirstEnergy from paid-in capital accounts, as long as their FERC-defined equity to total capitalization ratio 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 FERC-defined equity to total capitalization ratio 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, 2013.

SIP/DRIP Program

On September 25, 2013, FE filed a registration statement with the SEC to register 4 million shares of common stock to be issued to registered shareholders and its employees and the employees of its subsidiaries under its Stock Investment Plan. In addition, during December 2013, FE began fulfilling certain share-based benefit plan obligations through the issuance of authorized but unissued common stock.

PREFERRED AND PREFERENCE STOCK

FirstEnergy and the Utilities were authorized to issue preferred stock and preference stock as of December 31, 2013, 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
ME	10,000,000	no par
PN	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, 2013, and 2012, there were no preferred 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 and FES as of December 31, 2013 and 2012:



	As of December 31, 2013		As of December 31
(Dollar amounts in millions)	Maturity Date	Interest Rate	2013			2012
FirstEnergy:
FMBs	2014 - 2043	3.340% - 9.740%	$	3,166		$	2,587
Secured notes - fixed rate	2017 - 2037	6.150% - 7.880%	1,804			2,113
Secured notes - variable rate			—			50
Total secured notes			1,804			2,163
Unsecured notes - fixed rate	2014 - 2039	3.500% - 7.350%	11,076			11,145
Unsecured notes - variable rate	2014 - 2015	0.020% - 1.665%	959			959
Total unsecured notes			12,035			12,104
Capital lease obligations			188			176
Unamortized debt premiums			9			45
Unamortized fair value adjustments			44			103
Currently payable long-term debt			(1,415		)	(1,999		)
Total long-term debt and other long-term obligations			$	15,831		$	15,179

FES:
Secured notes - fixed rate	2015 - 2017	5.150% - 12.000%	$	188		$	689
Secured notes - variable rate			—			50
Total secured notes			188			739
Unsecured notes - fixed rate	2014 - 2039	2.150% - 6.800%	2,077			2,769
Unsecured notes - variable rate	2014 - 2015	0.130% - 0.160%	736			686
Total unsecured notes			2,813			3,455
Capital lease obligations			22			27
Unamortized debt discounts			(1		)	(1		)
Currently payable long-term debt			(892		)	(1,102		)
Total long-term debt and other long-term obligations			$	2,130		$	3,118

On March 5, 2013, FE issued in aggregate $1.5 billion of senior unsecured notes in two series: $650 million of 2.75% senior notes due March 15, 2018 and $850 million of 4.25% senior notes due March 15, 2023. The stated interest rates are subject to adjustments based upon changes in the credit ratings of FirstEnergy but will not decrease below the issued rates. The proceeds were used to repay short-term borrowings and to invest in the money pool for FES and AE Supply's use in funding a portion of their concurrent tender offers.

On March 28, 2013, pursuant to tender offers launched in February 2013, FES and AE Supply repurchased $369 million and $294 million, respectively, of outstanding senior notes with interest rates ranging from 5.75% to 6.8%. The $369 million of FES repurchases consisted of original maturities of $252 million due 2021 and $117 million due 2039. The $294 million of AE Supply repurchases consisted of original maturities of $194 million due 2019 and $100 million due 2039. FES and AE Supply paid $67 million and $43 million, respectively, in tender premiums to repurchase the tendered senior notes. FirstEnergy recorded a loss on debt redemption of $119 million (FES - $71 million), including such premiums and other related expenses. The tender premiums paid are included in cash flows from financing activities in the Consolidated Statement of Cash Flows.

In March 2013, ME issued $300 million of 3.50% senior unsecured notes due March 15, 2023. Proceeds from this offering were used to repay $150 million of ME 4.95% senior unsecured notes that matured in March 2013 and short-term borrowings.

On April 15, 2013, FES redeemed $400 million of its 4.80% senior notes due 2015 and recorded a loss on debt redemption of $32 million including $31 million of make-whole premiums paid. The make-whole premiums paid are included in cash flows from operating activities in the Consolidated Statement of Cash Flows.

On May 8, 2013, FE, FES, AE Supply and FE's other borrowing subsidiaries entered into extensions and amendments to the three existing multi-year syndicated revolving credit facilities. Each facility was extended until May 2018, unless the lenders agree, at the request of the applicable borrowers, to an additional one-year extension. The FE Facility was amended to increase the lending banks' commitments under the facility by $500 million to a total of $2.5 billion and to increase the individual borrower sub-limits for FE by $500 million to a total of $2.5 billion and for JCP&L by $175 million to a total of $600 million.

On June 3, 2013, FG exercised a mandatory put option and repurchased approximately $235 million of PCRBs due 2023, which FG is currently holding for remarketing subject to future market and other conditions.

As discussed in Note 8, Variable Interest Entities, in June 2013, the SPEs formed by the Ohio Companies issued approximately $445 million of pass-through trust certificates supported by phase-in recovery bonds with a weighted average coupon of 2.48% to securitize the recovery of certain all electric customer heating discounts, fuel and purchased power regulatory assets. The phase-in recovery bonds were sold to a trust that concurrently sold a like aggregate amount of its pass through trust certificates to public investors. The proceeds were primarily used to redeem $410 million in existing taxable bonds of the Ohio Companies with a weighted average coupon of 5.71%, including $30 million of make-whole premiums. The securitization effectively allows for the recovery of the make-whole premiums and transactional costs through the imposition of non-bypassable phase-in recovery charges on retail electric customers of the Ohio Companies pursuant to Ohio law. The $410 million of redemption consisted of original maturities of $225 million due 2013, $150 million due 2015 and $35 million due 2020. The make-whole premiums paid are included in cash flows from operating activities in the Consolidated Statement of Cash Flows.

During August, the Ohio Companies redeemed an additional $660 million of long-term debt with interest rates ranging from 5.65% to 7.25% and paid approximately $120 million of make-whole premiums which were deferred as a regulatory asset and will be amortized over the original life of the redeemed debt. The make-whole premiums paid are included in cash flows from operating activities in the Consolidated Statement of Cash Flows. Additionally, during August, JCP&L issued $500 million of 4.7% unsecured notes due April 2024 and used the proceeds to pay down a portion of its short-term debt obligations.

On November 15, 2013, AE Supply optionally redeemed $235 million of its 7.00% PCRBs due July 15, 2039 at 100% of the principal amount in connection with the deactivation of operations at Hatfield's Ferry.

On November 27, 2013, MP issued $400 million of 4.10% FMBs due April 15, 2024 and $600 million of 5.40% FMBs due December 15, 2043. Proceeds from this offering were used by MP to: (i) repay at maturity $300 million of its FMBs, 7.95% Series due December 15, 2013; (ii) redeem $120 million of its FMBs, 6.70% Series due June 15, 2014; (iii) repay a $572.7 million short-term promissory note originally issued on October 9, 2013 to its affiliate, AE Supply in connection with MP’s acquisition of the remaining ownership of the Harrison Power Station; and (iv) for working capital needs and other general corporate purposes.

During December of 2013, FE entered into an agreement to extend and amend its $150 million term loan agreement with a maturity date of December 31, 2014. The maturity of the loan was extended to December 31, 2015 and the principal amount was increased to $200 million. On December 26, 2013, PN redeemed $150 million of its 5.13% Senior Notes due April 1,2014 and ME redeemed $100 million of its 4.88% Senior Notes due April 1, 2014.

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 as an asset 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, 2013 and 2012, $472 million and $493 million of environmental control bonds were outstanding, respectively.

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. 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, 2013 and 2012, $207 million and $243 million of the transition bonds were outstanding, respectively.

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.

Phase-In Recovery Bonds

In June 2013, the SPEs formed by the Ohio Companies issued approximately $445 million of pass-through trust certificates supported by phase-in recovery bonds with a weighted average coupon of 2.48% to securitize the recovery of certain all electric customer heating discounts, fuel and purchased power regulatory assets. The phase-in recovery bonds were sold to a trust that concurrently sold a like aggregate amount of its pass through trust certificates to public investors.

Other Long-term Debt

The Ohio Companies, Penn, FG and NG 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, 2013, the sinking fund requirement for all FMBs issued under the various mortgage indentures amounted to payments of $7 million in 2013, all of which relate to Penn. Penn expects to meet its 2013 annual sinking fund requirement with a replacement credit under its mortgage indenture.

As of December 31, 2013, FirstEnergy’s currently payable long-term debt included approximately $809 million (FES — $736 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, 2013. PCRBs that can be tendered for mandatory purchase prior to maturity are reflected in 2014.



Year	FirstEnergy		FES
	(In millions)
2014	$	1,376	$	887
2015	1,264		391
2016	1,041		417
2017	1,641		163
2018	1,453		266

The following table classifies the outstanding fixed rate put 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.



Year	FirstEnergy		FES
	(In millions)
2014	$	835	$	762
2015	313		313
2016	391		391
2017	130		130
2018	125		125

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, FG, NG and the applicable Utilities are entitled to a credit against their obligation to repay those bonds. FG, NG 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.

The amounts and annual fees for PCRB-related LOCs for FirstEnergy and FES as of December 31, 2013, are as follows:



	Aggregate LOC Amount		Annual Fees
	(In millions)
FirstEnergy	$	818	1.65% to 3.30%
FES	744		1.65% to 3.30%

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. As of December 31, 2013, FirstEnergy and FES remain in compliance with all debt covenant provisions.

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, FG or NG 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, FG, NG or the Utilities.