CAPITALIZATION

COMMON STOCK

Retained Earnings and Dividends

As of December 31, 2014, FirstEnergy’s unrestricted retained earnings were $2.3 billion. Dividends declared in 2014 were $1.44 per share, which included dividends of $0.36 per share paid in the first, second, third and fourth quarters of 2014. Dividends declared in 2013 were $1.65 per share, which included dividends of $0.55 per share paid in the second, third and fourth 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 20, 2015 the Board of Directors declared a quarterly dividend of $0.36 per share to be paid in the first quarter of 2015.

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 their respective parents from paid-in capital accounts, as long as their FERC-defined equity to total capitalization ratio remains above 45%. 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, 2014.

Stock Issuance

In 2014, FE issued approximately 2 million shares of common stock to registered shareholders and its employees and the employees of its subsidiaries under its Stock Investment Plan and certain share-based benefit plan obligations.

PREFERRED AND PREFERENCE STOCK

FirstEnergy and the Utilities were authorized to issue preferred stock and preference stock as of December 31, 2014, 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, 2014, and 2013, 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, 2014 and 2013:



	As of December 31, 2014		As of December 31
(Dollar amounts in millions)	Maturity Date	Interest Rate	2014			2013
FirstEnergy:
FMBs	2015 - 2044	3.340% - 9.740%	$	3,190		$	3,166
Secured notes - fixed rate	2015 - 2037	0.000% - 7.880%	1,793			1,804
Unsecured notes - fixed rate	2015 - 2044	2.150% - 7.700%	13,532			11,076
Unsecured notes - variable rate	2015 - 2019	0.030% - 1.920%	1,292			959
Total unsecured notes			14,824			12,035
Capital lease obligations			160			188
Unamortized debt premiums (discounts)			(8		)	9
Unamortized fair value adjustments			21			44
Currently payable long-term debt			(804		)	(1,415		)
Total long-term debt and other long-term obligations			$	19,176		$	15,831

FES:
Secured notes - fixed rate	2015 - 2017	0.000% - 12.000%	$	126		$	188
Unsecured notes - fixed rate	2015 - 2039	2.150% - 6.800%	2,879			2,077
Unsecured notes - variable rate	2015 - 2015	0.030% - 0.050%	92			736
Total unsecured notes			2,971			2,813
Capital lease obligations			18			22
Unamortized debt discounts			(1		)	(1		)
Currently payable long-term debt			(506		)	(892		)
Total long-term debt and other long-term obligations			$	2,608		$	2,130

On March 31, 2014, FE, FES, AE Supply, FET and FE's other borrower subsidiaries entered into extensions and amendments to the three existing multi-year syndicated revolving credit facilities. Each Facility was extended until March 31, 2019. The FE facility was amended to increase the lending banks' commitments under the facility by $1 billion to a total of $3.5 billion and to increase the individual borrower sublimit for FE by $1 billion to a total of $3.5 billion. The FES/AE Supply facility was amended to decrease the lending banks' commitments by $1 billion to a total of $1.5 billion. The lending banks' commitments under the FET facility remain at $1 billion and that facility was amended to increase ATSI's individual borrower sublimit to $500 million from $100 million and TrAIL's individual borrower sublimit to $400 million from $200 million. FirstEnergy expensed approximately $5 million (FES -$3 million) of unamortized debt expense as a result of the amendments, included in Loss on Debt Redemptions in the Consolidated Statement of Income for the year ended December 31, 2014.

On March 31, 2014, FE executed, and fully utilized, a new $1 billion variable rate term loan credit agreement with a maturity date of March 31, 2019. The initial borrowing under the term loan, which took the form of a Eurodollar rate advance, may be converted from time to time, in whole or in part, to alternate base rate advances or other Eurodollar rate advances. The proceeds from this term loan reduced borrowings under the FE Facility.

During the first quarter of 2014, FG and NG remarketed approximately $235 million and $182 million, respectively, of PCRBs, previously held by the companies. The NG PCRBs were remarketed with a fixed interest rate of 4% per annum and a mandatory put date of June 3, 2019 and the FG PCRBs were remarketed with a fixed interest rate of 3.75% per annum and a mandatory put date of December 3, 2018.

In addition, in the first quarter of 2014, FG and NG repurchased approximately $197 million and $16 million, respectively, of PCRBs, which were subject to a mandatory tender. The PCRBs have been remarketed in the second and third quarter as described below. Additionally, FG retired $50 million of PCRBs at maturity.

During the first quarter of 2014, AE Supply returned $500 million of capital to FE. Additionally, FE contributed $500 million of equity to FES.

On April 1, 2014, PN and ME repurchased approximately $45 million and $29 million of PCRBs, respectively, which were subject to a mandatory put on such date. The companies are currently holding the PCRBs for remarketing subject to future market and other conditions. Additionally, on April 1, 2014, ME retired $150 million of long-term debt at maturity.

On May 19, 2014, FET issued $600 million of 4.35% senior notes due 2025 and $400 million of 5.45% senior notes due 2044. Proceeds received from the issuance of the senior notes were used to (i) repay borrowings under its revolving credit facility and the FirstEnergy unregulated companies' money pool; (ii) fund a capital contribution to ATSI; and (iii) for working capital needs and other general business purposes.

On June 11, 2014, ME and PN issued $250 million of 4% senior notes due 2025 and $200 million of 4.15% senior notes due 2025, respectively. Proceeds received from the issuance of the senior notes were used to repay ME and PN's borrowings under the FirstEnergy revolving credit facility and the FirstEnergy regulated companies' money pool.

In addition, in the second quarter of 2014, FG and NG remarketed approximately $57 million and $164 million, respectively, of PCRBs previously held by the companies. The bonds were remarketed with a fixed interest rate of 3.50% per annum and a mandatory put date of June 1, 2020.

On September 25, 2014, ATSI issued $400 million of 5% senior notes due 2044. Proceeds received from the issuance of the senior notes were used: (i) to fund capital expenditures, including capital expenditures related to its transmission investment plans; and (ii) for working capital needs and other general business purposes.

Also during the third quarter, FG and NG remarketed approximately $140.1 million and $101 million, respectively, of PCRBs. Of the total, approximately $45 million of PCRBs were remarketed by NG with a fixed interest rate of 3.63%, of which $15.5 million has a mandatory put date of June 1, 2020 and $29.5 million has a mandatory put date of April 1, 2020. NG also remarketed $56 million of PCRBs with a fixed interest rate of 3.95% and a mandatory put date of May 1, 2020; FG remarketed $50 million of PCRBs with a fixed interest rate of 3.10% and a mandatory put date of March 1, 2019; and $90.1 million of PCRBs with a fixed interest rate of 3.00% and a maturity date of May 15, 2019.

On November 25, 2014, PE issued $200 million of 4.44% FMBs due November 15, 2044. Proceeds received from the issuance of the FMBs were used: (i) to refinance PE's outstanding $175 million of 5.35% FMBs due November 15, 2014; (ii) to repay PE's borrowings under the FirstEnergy regulated companies' money pool; and (iii) for other general business purposes.

On December 1, 2014, NG repurchased approximately $26 million PCRBs, which were subject to a mandatory put on such date. NG is currently holding these PCRBs for remarketing subject to future market and other conditions.

On December 11, 2014, TrAIL issued $550 million of 3.85% senior notes due June 1, 2025. Proceeds received from the issuance of the senior notes were used: (i) to repay TrAIL's outstanding $450 million of 4.00% senior notes due January 15, 2015; (ii) to fund capital expenditures; and (iii) for working capital needs and other general business purposes.

On December 19, 2014, the maturity date for a $200 million term loan agreement for which FE is the borrower was extended an additional year to December 31, 2016.

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, 2014 and 2013, $450 million and $472 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, 2014 and 2013, $168 million and $207 million of the transition bonds were outstanding, respectively.

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 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. As of December 31, 2014 and 2013, $386 million and $445 million of the phase-in recovery bonds were outstanding, respectively.

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, 2014, the sinking fund requirement for all FMBs issued under the various mortgage indentures amounted to payments of $8 million in 2014, all of which relate to Penn. Penn expects to meet its 2014 annual sinking fund requirement with a replacement credit under its mortgage indenture.

As of December 31, 2014, FirstEnergy’s currently payable long-term debt included approximately $92 million of FES 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, 2014. PCRBs that can be tendered for mandatory purchase prior to maturity are reflected in 2015.



Year	FirstEnergy		FES
	(In millions)
2015	$	769	$	501
2016	1,241		416
2017	1,641		163
2018	1,687		501
2019	2,266		322

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)
2015	$	405	$	405
2016	391		391
2017	130		130
2018	359		359
2019	232		232

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 is entitled to a credit against its obligation to repay those bonds. FG pays annual fees based on the amounts of the LOCs to the issuing bank and is obligated to reimburse the bank for any drawings thereunder.

The amounts and annual fees for PCRB-related LOCs for FirstEnergy and FES as of December 31, 2014, are as follows:



	Aggregate LOC Amount ⁽¹⁾		Annual Fees
	(In millions)
FirstEnergy	$	93	1.65%
FES	93		1.65%


(1)	Includes approximately $1 million of applicable interest

coverage.

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, 2014, 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 FE 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 FE. Also, defaults by FE would generally not cross-default applicable financing arrangements of any of FE’s subsidiaries. Cross-default provisions are not typically found in any of the senior notes or FMBs of FE, FG, NG or the Utilities.