Merger (Tables)

9 Months Ended

Sep. 30, 2011

The total consideration in the merger was based on the closing price of a share of FirstEnergy common stock on February 24, 2011, the day prior to the date the merger was completed, and was calculated as follows (in millions, except per share data):



Shares of AE common stock outstanding on February 24, 2011	170
Exchange ratio	0.667
Number of shares of FirstEnergy common stock issued	113
Closing price of FirstEnergy common stock on February 24, 2011	$	38.16
Fair value of shares issued by FirstEnergy	$	4,327
Fair value of replacement share-based compensation awards relating to pre-merger service	27
Total consideration transferred	$	4,354

The preliminary allocation of the total consideration transferred to the assets acquired and liabilities assumed

The preliminary allocation of the purchase price is as follows:



(In millions)

Current assets	$	1,493
Property, plant and equipment	9,656
Investments	138
Goodwill	873
Other noncurrent assets	1,352
Current liabilities	(718		)
Noncurrent liabilities	(3,446		)
Long-term debt and other long-term obligations	(4,994		)
	$	4,354

Goodwill recognized by segment

Total goodwill recognized by segment in FirstEnergy’s Consolidated Balance Sheet is as follows:



(In millions)	Regulated Distribution		Competitive Energy Services		Regulated Independent Transmission		Other/ Corporate		Consolidated

Balance as of December 31, 2010	$	5,551	$	24	$	—	$	—	$	5,575
Merger with Allegheny	—		873		—		—		873
Balance as of September 30, 2011	$	5,551	$	897	$	—	$	—	$	6,448

The preliminary valuation of the additional intangible assets and liabilities recorded as result of the merger

The preliminary valuation of the additional intangible assets and liabilities recorded as result of the merger is as follows:



(In millions)	Preliminary Valuation		Weighted Average Amortization Period
Above market contracts:
Energy contracts	$	189	10 years
NUG contracts	124		25 years
Coal supply contracts	516		8 years
	829
Below market contracts:
NUG contracts	143		13 years
Coal supply contracts	83		7 years
Transportation contract	35		8 years
	261

Net intangible assets	$	568

Total intangible assets recorded

As of September 30, 2011, intangible assets on FirstEnergy’s Consolidated Balance Sheet, including those recorded in connection with the merger, include the following:



(In millions)	Intangible Assets
Purchase contract assets:
NUG	$	181
OVEC	53
	234

Other intangible assets:
Coal contracts	465
FES customer intangible assets	126
Energy contracts	85
	676
Total intangible assets	$	910

Revenue and earnings of Allegheny

Revenues and earnings of Allegheny included in FirstEnergy’s Consolidated Statement of Income for the periods subsequent to the February 25, 2011 merger date are as follows:



	July 1 -		February 25 -
(In millions, except per share amounts)	September 30, 2011		September 30, 2011
Total revenues	$	1,273	$	2,891
Earnings Available to FirstEnergy Corp.⁽¹⁾	$	130	$	147

Basic Earnings Per Share	$	0.31	$	0.37
Diluted Earnings Per Share	$	0.31	$	0.37


⁽¹⁾	Includes Allegheny’s after-tax merger costs of $1 million and $57 million, respectively.

Summary of consolidated results of operations

The unaudited pro forma financial information has been presented below for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the merger been completed on January 1, 2010, or the future consolidated results of operations of the combined company.



	Three Months Ended				Nine Months Ended
(Pro forma amounts in millions, except	September 30				September 30
per share amounts)	2011		2010		2011		2010
Revenues	$	4,708	$	5,072	$	13,556	$	14,158
Earnings available to FirstEnergy	$	512	$	300	$	835	$	944

Basic Earnings Per Share	$	1.22	$	0.72	$	2.00	$	2.26
Diluted Earnings Per Share	$	1.22	$	0.71	$	1.99	$	2.25