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, CEI and TE assigned their leasehold interests in the Bruce Mansfield Plant to FG, who assumed all of CEI’s and TE’s obligations arising under those leases. However, CEI and TE remain primarily liable on those 1987 leases and related agreements for which the EBO has not been completed totaling 321.2 MWs. FG remains primarily liable on the 2007 leases and related agreements, and FES remains primarily liable as a guarantor under the related 2007 guarantees, as to the lessors and other parties to the respective agreements. These assignments terminate automatically upon the termination of the underlying leases.

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 or other interests in connection with the 1987 Bruce Mansfield Plant sale and leaseback transactions for $262.2 million.

Rentals for capital and operating leases for 2012, 2011 and 2010, are summarized as follows:



	FirstEnergy		FES		OE		JCP&L
	(In millions)
2012
Operating leases	$	307	$	243	$	147	$	8
Capital leases
Interest element	5		1		—		—
Other	52		36		2		—
Total rentals	$	364	$	280	$	149	$	8

2011
Operating leases	$	226	$	197	$	147	$	8
Capital leases
Interest element	6		1		—		—
Other	46		34		—		—
Total rentals	$	278	$	232	$	147	$	8

2010
Operating leases	$	228	$	202	$	147	$	9
Capital leases
Interest element	2		1		—		—
Other	35		34		—		—
Total rentals	$	265	$	237	$	147	$	9

The future minimum capital lease payments as of December 31, 2012 are as follows (JCP&L has no material capital leases):



Capital leases	FirstEnergy			FES			OE
	(In millions)
2013	$	36		$	6		$	4
2014	35			6			4
2015	32			6			4
2016	29			5			4
2017	24			5			4
Years thereafter	55			2			13
Total minimum lease payments	211			30			33
Interest portion	(35		)	(3		)	(4		)
Present value of net minimum lease payments	176			27			29
Less current portion	32			5			3
Noncurrent portion	$	144		$	22		$	26

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. The PNBV and Shippingport arrangements effectively reduce lease costs related to those transactions (see Note 7, Variable Interest Entities).

FirstEnergy's future minimum consolidated operating lease payments as of December 31, 2012, are as follows:



	FirstEnergy
Operating Leases	Lease Payments		Capital Trust		Net
	(In millions)
2013	$	256	$	46	$	210
2014	250		48		202
2015	246		40		206
2016	214		13		201
2017	126		3		123
Years thereafter	1,678		—		1,678
Total minimum lease payments	$	2,770	$	150	$	2,620

FES', OE's and JCP&L's future minimum operating lease payments as of December 31, 2012, are as follows:



Operating Leases	FES		OE⁽¹⁾		JCP&L
	(In millions)
2013	$	144	$	146	$	9
2014	143		145		8
2015	141		145		7
2016	130		116		8
2017	81		46		7
Years thereafter	1,581		3		52
Total minimum lease payments	$	2,220	$	601	$	91


⁽¹⁾	Includes certain minimum lease payments associated with NG's lessor equity interests in Perry and Beaver Valley Unit 2 that are eliminated in consolidation.

FirstEnergy recorded above-market lease liabilities for Beaver Valley Unit 2 and the Bruce Mansfield Plant associated with the 1997 merger between OE and Centerior.