XML 35 R21.htm IDEA: XBRL DOCUMENT v3.24.0.1
CAPITALIZATION
 12 Months Ended
Dec. 31, 2023
Capitalization, Long-Term Debt and Equity [Abstract]  
CAPITALIZATION CAPITALIZATION
COMMON STOCK

Retained Earnings and Dividends

As of December 31, 2023, FirstEnergy had an accumulated deficit of $97 million. Dividends declared in 2023 totaled $1.60 per share and dividends declared in 2022 totaled $1.56 per share. Dividends of $0.39 per share were declared in the first, second, third and fourth quarters in 2022 and the first and second quarters in 2023. In September 2023, the FE Board declared a $0.02 per share increase to the quarterly common dividend payable December 1, 2023, to $0.41 per share, which represents a 5% increase compared to the quarterly payments of $0.39 per share paid by FE since March 2020. The dividend declared in the fourth quarter of 2023, payable on March 1, 2024, was also $0.41 per share.
The amount and timing of all dividend declarations are subject to the discretion of the FE Board and its consideration of business conditions, results of operations, financial condition, risks and uncertainties of the government investigations, and other factors.

When FE makes distributions to shareholders, it is required to subsequently determine and report the tax characterization of those distributions for purposes of shareholders’ income taxes. Whether a distribution is characterized as a dividend or a return of capital (and possible capital gain) depends upon an internal tax calculation to determine earnings and profits for income tax purposes. Earnings and profits should not be confused with earnings or net income under GAAP. Further, after FE reports the expected tax characterization of distributions it has paid, the actual characterization could vary from its expectation with the result that holders of FE's common stock could incur different income tax liabilities than expected.

In general, distributions are characterized as dividends to the extent the amount of such distributions do not exceed FE's calculation of current or accumulated earnings and profits. Distributions in excess of current and accumulated earnings and profits may be treated as a non-taxable return of capital. Generally, a non-taxable return of capital will reduce an investor’s basis in FirstEnergy's stock for federal tax purposes, which will impact the calculation of gain or loss when the stock is sold.

Provided the FET Minority Equity Interest Sale closes as anticipated, FE expects to realize an over $7 billion tax gain in 2024. This tax gain is estimated to create sufficient earnings and profits to cause distributions made during 2024 to be characterized as ordinary dividends for federal income tax purposes. Upon such characterization, shareholders are urged to consult their own tax advisors regarding the income tax treatment of FE's distributions to them.

In addition to paying dividends from retained earnings, the Ohio Companies and JCP&L have authorization from 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 35%. In addition, AGC has authorization from FERC to pay cash dividends to its parent, MP, from paid-in capital accounts, as long as its FERC-defined equity-to-total-capitalization ratio remains above 45%. The articles of incorporation, indentures, regulatory limitations, FET P&SA I and FET P&SA II, and various other agreements, including those 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 subsidiaries’ abilities to pay cash dividends to FE as of December 31, 2023.

Common Stock Issuance

FE issued approximately 2 million shares of common stock in 2023, 2 million shares of common stock in 2022 and 1 million shares of common stock in 2021 to registered shareholders and its directors and the employees of its subsidiaries under its Stock Investment Plan and certain share-based benefit plans.

On November 6, 2021, FE entered into a Common Stock Purchase Agreement with BIP Securities II-B L.P., an affiliate of Blackstone Infrastructure Partners L.P., for the private placement of 25,588,535 shares of FE common stock, par value $0.10 per share, at a price of $39.08 per share, representing an investment of $1.0 billion. The transaction settled on December 13, 2021. Issuance costs associated with the transaction were approximately $26 million as of December 31, 2021.
PREFERRED AND PREFERENCE STOCK

FirstEnergy and the Utilities were authorized to issue preferred stock and preference stock as of December 31, 2023, as follows:
Preferred StockPreference Stock
Shares AuthorizedPar ValueShares AuthorizedPar Value
FE5,000,000 $100   
OE6,000,000 $100 8,000,000 no par
OE8,000,000 $25   
Penn(1)
1,200,000 $100   
CEI4,000,000 no par3,000,000 no par
TE3,000,000 $100 5,000,000 $25 
TE12,000,000 $25 
JCP&L15,600,000 no par
ME(1)
10,000,000 no par
PN(1)
11,435,000 no par
MP940,000 $100 
PE10,000,000 $0.01 
WP(1)
32,000,000 no par
(1) On January 1, 2024, FirstEnergy consolidated the Pennsylvania Companies into FE PA, making it a new, single operating entity. FE PA has not been authorized to issue preferred stock or preference stock.

As of December 31, 2023 and 2022, there were no preferred stock or preference stock outstanding.

LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

The following tables present outstanding long-term debt and finance lease obligations for FirstEnergy as of December 31, 2023 and 2022:

As of December 31, 2023As of December 31,
Maturity DateInterest Rate20232022
(In millions)
FMBs and secured notes - fixed rate2024-2059
2.650% - 8.250%
$5,709 $5,153 
Unsecured notes - fixed rate2024-2050
1.600% - 7.375%
18,545 16,488 
Finance lease obligations14 23 
Unamortized debt discounts(9)(5)
Unamortized debt issuance costs(127)(110)
Unamortized fair value adjustments3 5 
Currently payable long-term debt(1,250)(351)
Total long-term debt and other long-term obligations$22,885 $21,203 

See Note 8, "Leases," for additional information related to finance leases.
FirstEnergy had the following redemptions and issuances during the twelve months ended December 31, 2023:

CompanyTypeRedemption/Issuance DateInterest RateMaturityAmount
(In millions)		Description
Redemptions(1)
MEUnsecured NotesMarch, 20233.50%2023$300ME redeemed unsecured notes that became due.
FEUnsecured NotesMay, 20237.38%2031$194
FE repurchased approximately $194 million of the principal amount of its 2031 Notes through the open market for $228 million including a premium of approximately $34 million ($27 million after-tax). In addition, FE recognized approximately $2 million ($1 million after-tax) of deferred cash flow hedge losses associated with the FE debt redemptions.
Issuances
WPFMBsJanuary, 20235.29%2033$50Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
MAITUnsecured NotesFebruary, 20235.39%2033$175Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
MEUnsecured NotesMarch, 20235.20%2028$425
Proceeds were used to repay short-term borrowings, including borrowings incurred to repay, at maturity, the $300 million aggregate principal amount of ME's 3.50% unsecured notes due March 15, 2023, to finance capital expenditures and for other general corporate purposes.
PNUnsecured NotesMarch, 20235.15%2026$300Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
ATSIUnsecured NotesMay, 20235.13%2033$150Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
FEUnsecured Convertible NotesMay, 20234.00%2026$1,500
Proceeds were used to repay short-term borrowings, to repurchase a portion of its 2031 Notes, to fund the qualified pension plan and for other general corporate purposes.
PEFMBsSeptember, 20235.64%2028$100Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
PEFMBsSeptember, 20235.73%2030$50Proceeds were used to repay short-term borrowings, to finance capital expenditures and for other general corporate purposes.
MPFMBsSeptember, 20235.85%2034$400
Proceeds are to be used for repaying short-term and long-term debt, including MP’s $400 million 4.10% FMBs due April 15, 2024, to finance capital expenditures and for other general corporate purposes.
(1) Excludes principal payments on securitized bonds.

Convertible Notes

As discussed above, on May 4, 2023, FE issued $1.5 billion aggregate principal amount of 2026 Convertible Notes, with a fixed interest rate of 4.00% per year, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2023. The 2026 Convertible Notes are unsecured and unsubordinated obligations of FE, and will mature on May 1, 2026, unless required to be converted or repurchased in accordance with their terms. However, FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date. The 2026 Convertible Notes are included within “Long-term debt and other long-term obligations” on the FirstEnergy Consolidated Balance Sheets. Proceeds from the issuance were approximately $1.48 billion, net of issuance costs.

Prior to the close of business on the business day immediately preceding February 1, 2026, the 2026 Convertible Notes will be convertible at the option of the holders only under the following conditions:

•During any calendar quarter, if the last reported sale price of FE’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•During the five consecutive business day period immediately after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Convertible Notes for each trading day of such 10 trading day period was less than 98% of the product of the last reported sale price of FE’s common stock and the conversion rate on each such trading day; or
•Upon the occurrence of certain corporate events specified in the indenture governing the 2026 Convertible Notes.

On and after February 1, 2026, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes at their option at any time at the conversion rate then in effect, irrespective of these conditions. FE will settle conversions of the 2026 Convertible Notes, if any, by paying cash up to the aggregate principal amount of the 2026 Convertible Notes being converted and by paying cash or delivering shares of FE’s common stock (or a combination of each), at its election, of its conversion obligation in excess of the aggregate principal amount of the 2026 Convertible Notes being converted.

The conversion rate for the 2026 Convertible Notes will initially be 21.3620 shares of FE’s common stock per $1,000 principal amount of the 2026 Convertible Notes (equivalent to an initial conversion price of approximately $46.81 per share of FE’s
common stock). The initial conversion price of the 2026 Convertible Notes represents a premium of approximately 20% over the last reported sale price of FE’s common stock on the New York Stock Exchange on May 1, 2023. The conversion rate and the corresponding conversion price will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. FE may not elect to redeem the 2026 Convertible Notes prior to the maturity date.

If FE undergoes a fundamental change (as defined in the relevant indenture), subject to certain conditions, holders of the 2026 Convertible Notes may require FE to repurchase for cash all or any portion of their 2026 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the relevant indenture). In addition, if certain fundamental changes occur, FE may be required, in certain circumstances, to increase the conversion rate for any 2026 Convertible Notes converted in connection with such fundamental changes by a specified number of shares of its common stock.

The following table presents scheduled debt repayments or debt that has been noticed for redemption for outstanding long-term debt, excluding finance leases, fair value purchase accounting adjustments and unamortized debt discounts and premiums, for the next five years as of December 31, 2023.

(In millions)20242025202620272028
Scheduled debt repayments $1,246$2,023$2,876$2,003$2,453

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. Principal and interest owed on the environmental control bonds is secured by, and payable solely from, the proceeds of the environmental control charges. Creditors of FirstEnergy, other than the limited liability company SPEs, have no recourse to any assets or revenues of the special purpose limited liability companies. As of December 31, 2023 and 2022, $218 million and $247 million of environmental control 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 are payable only from, and secured by, phase in recovery property owned by the SPEs. The bondholder has no recourse to the general credit of FirstEnergy or any of the Ohio Companies. Each of the Ohio Companies, as servicer of its respective SPE, manages and administers the phase in recovery property including the billing, collection and remittance of usage-based charges payable by retail electric customers. The SPEs are considered VIEs and each one is consolidated into its applicable utility. As of December 31, 2023 and 2022, $191 million and $206 million of the phase-in recovery bonds were outstanding, respectively.

FMBs

The Ohio Companies, Penn, MP, PE, and WP 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. The outstanding debt under the FMBs of specific FE PA predecessors (WP and Penn) were assumed by FE PA.

Debt Covenant Default Provisions

FirstEnergy has various debt covenants under certain financing arrangements, including its revolving credit facilities and term loans. 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, 2023, FirstEnergy remains 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. Such defaults by any of the Utilities or Transmission Companies would cross-default certain FE financing arrangements containing these provisions, and a certain FET Financing arrangement, with respect to the Transmission Companies only. Such defaults by AE Supply would 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 or its subsidiaries.