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, expiring in 2016. 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 expiring in 2017. 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, expiring in 2040. FES has unconditionally and irrevocably guaranteed all of FG’s obligations under each of the leases. In 2013, FG acquired the remaining lessor interests in Bruce Mansfield Units 1, 2 and 3, which were part of the leases entered into by CEI and TE in 1987.

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. On June 24, 2014, OE exercised its irrevocable right to repurchase from the remaining owner participants the lessors' interests in Beaver Valley Unit 2 at the end of the lease term (June 1, 2017), which right to repurchase was assigned to NG. Additionally, on June 24, 2014, NG entered into a purchase agreement with an owner participant to purchase its lessor equity interests of the remaining non-affiliated leasehold interest in Perry Unit 1 on May 23, 2016, which is just prior to the end of the lease term. In November 2014, NG repurchased 55.3 MW of lessor equity interests in OE's existing sale and leaseback of Perry Unit 1 for approximately $87 million. OE and TE continue to lease these MW under their respective sale and leaseback arrangements and the related lease debt remains outstanding.

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, 2014, FirstEnergy's leasehold interest was 3.75% of Perry Unit 1, 93.83% of Bruce Mansfield Unit 1 and 2.60% of Beaver Valley Unit 2.

Operating lease expense for 2014, 2013 and 2012, is summarized as follows:



(In millions)	2014	2013	2012

FirstEnergy	199	224	291
FES	95	97	140

The future minimum capital lease payments as of December 31, 2014 are as follows:



Capital leases	FirstEnergy			FES
	(In millions)
2015	$	39		$	6
2016	35			6
2017	30			5
2018	23			2
2019	18			—
Years thereafter	40			—
Total minimum lease payments	185			19
Interest portion	(25		)	(1		)
Present value of net minimum lease payments	160			18
Less current portion	34			5
Noncurrent portion	$	126		$	13

FirstEnergy's future minimum consolidated operating lease payments as of December 31, 2014, are as follows:



	FirstEnergy
Operating Leases	Lease Payments		PNBV		Net
	(In millions)
2015	$	245	$	40	$	205
2016	197		13		184
2017	122		3		119
2018	128		—		128
2019	109		—		109
Years thereafter	1,482		—		1,482
Total minimum lease payments	$	2,283	$	56	$	2,227

FES' future minimum operating lease payments as of December 31, 2014, are as follows:



Operating Leases	Lease Payments
	(In millions)
2015	$	142
2016	131
2017	81
2018	101
2019	97
Years thereafter	1,383
Total minimum lease payments	$	1,935