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 FGCO, who assumed all of CEI’s and TE’s obligations arising under those leases. However, CEI and TE remain primarily liable on the 1987 leases and related agreements. FGCO 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, FGCO 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 FGCO’s obligations under each of the leases.

During 2008, NGC 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, NGC 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.

Rentals for capital and operating leases for 2011, 2010 and 2009, are summarized as follows:



	FirstEnergy		FES		OE		CEI		TE		JCP&L		Met-Ed		Penelec
	(In millions)
2011
Operating leases	$	226	$	197	$	147	$	4	$	64	$	8	$	4	$	4
Capital leases
Interest element	6		1		—		1		—		—		—		—
Other⁽¹⁾	46		34		—		—		—		—		—		—
Total rentals	$	278	$	232	$	147	$	5	$	64	$	8	$	4	$	4

2010
Operating leases	$	228	$	202	$	147	$	4	$	64	$	9	$	7	$	4
Capital leases
Interest element	2		1		—		1		—		—		—		—
Other⁽¹⁾	35		34		—		—		—		—		1		—
Total rentals	$	265	$	237	$	147	$	5	$	64	$	9	$	8	$	4

2009
Operating leases	$	236	$	202	$	146	$	4	$	64	$	9	$	7	$	4
Capital leases
Interest element	1		2		1		1		—		—		—		—
Other⁽¹⁾	16		18		—		—		—		—		—		—
Total rentals	$	253	$	222	$	147	$	5	$	64	$	9	$	7	$	4


⁽¹⁾	FirstEnergy and FES include $29 million, $30 million and $16 million, in 2011, 2010 and 2009, respectively, for wind purchased power agreements classified as capital leases.

The future minimum capital lease payments as of December 31, 2011 are as follows (TE and JCP&L have no material capital leases):



Capital leases	FirstEnergy			FES			OE			CEI			Met-Ed		Penelec
	(In millions)
2012	$	25		$	6		$	2		$	2		$	1	$	1
2013	24			6			2			2			1		1
2014	22			6			2			2			1		1
2015	20			6			2			2			1		1
2016	17			6			2			2			—		—
Years thereafter	27			5			3			2			—		—
Total minimum lease payments	135			35			13			12			4		4
Executory costs	—			—			—			—			—		—
Net minimum lease payments	135			35			13			12			4		4
Interest portion	(27		)	(4		)	(2		)	(4		)	—		—
Present value of net minimum lease payments	108			31			11			8			4		4
Less current portion	23			5			1			1			—		—
Noncurrent portion	$	85		$	26		$	10		$	7		$	4	$	4

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 8, Variable Interest Entities).

FirstEnergy's future minimum consolidated operating lease payments as of December 31, 2011, are as follows:



	FirstEnergy
Operating Leases	Lease Payments		Capital Trust⁽¹⁾		Net
	(In millions)
2012	$	383	$	125	$	258
2013	382		130		252
2014	371		131		240
2015	373		90		283
2016	344		29		315
Years thereafter	1,803		4		1,799
Total minimum lease payments	$	3,656	$	509	$	3,147


⁽¹⁾	PNBV and Shippingport purchased a portion of the lease obligation bonds associated with certain sale and leaseback transactions. These arrangements effectively reduce lease costs related to those transactions.



Operating Leases	FES		OE⁽¹⁾		CEI		TE⁽¹⁾		JCP&L		Met-Ed		Penelec
	(In millions)
2012	$	237	$	147	$	4	$	64	$	7	$	4	$	3
2013	241		146		3		64		7		4		3
2014	236		145		3		64		6		3		2
2015	239		145		2		64		5		4		2
2016	230		117		3		64		5		3		2
Years thereafter	1,662		49		4		14		48		37		12
Total minimum lease payments	$	2,845	$	749	$	19	$	334	$	78	$	55	$	24


⁽¹⁾	Includes certain minimum lease payments associated with NGC'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. The unamortized above-market lease liability for Beaver Valley Unit 2 of $199 million as of December 31, 2011, of which $37 million is classified as current, is being amortized by TE on a straight-line basis through the end of the lease term in 2017. The unamortized above-market lease liability for the Bruce Mansfield Plant of $217 million as of December 31, 2011, of which $46 million is classified as current, is being amortized by FGCO on a straight-line basis through the end of the lease term in 2016.