Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) December 16, 2005

Commission
Registrant; State of Incorporation;
I.R.S. Employer
File Number
Address; and Telephone Number
Identification No.
     
333-21011
FIRSTENERGY CORP.
34-1843785
 
(An Ohio Corporation)
 
 
76 South Main Street
 
 
Akron, OH 44308
 
 
Telephone (800)736-3402
 
     
1-2578
OHIO EDISON COMPANY
34-0437786
 
(An Ohio Corporation)
 
 
c/o FirstEnergy Corp.
 
 
76 South Main Street
 
 
Akron, OH 44308
 
 
Telephone (800)736-3402
 
     
1-2323
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
34-0150020
 
(An Ohio Corporation)
 
 
c/o FirstEnergy Corp.
 
 
76 South Main Street
 
 
Akron, OH 44308
 
 
Telephone (800)736-3402
 
     
1-3583
THE TOLEDO EDISON COMPANY
34-4375005
 
(An Ohio Corporation)
 
 
c/o FirstEnergy Corp.
 
 
76 South Main Street
 
 
Akron, OH 44308
 
 
Telephone (800)736-3402
 
     
1-3491
PENNSYLVANIA POWER COMPANY
25-0718810
 
(A Pennsylvania Corporation)
 
 
c/o FirstEnergy Corp.
 
 
76 South Main Street
 
 
Akron, OH 44308
 
 
Telephone (800)736-3402
 
 




Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 1.01 Entry into a Material Definitive Agreement.

See Item 2.01 below with respect to certain new power supply agreements among subsidiaries of FirstEnergy Corp. and Item 2.03 below with respect to certain Guaranties of FirstEnergy referred to therein.

Item 2.01 Completion of Acquisition or Disposition of Assets.
 
On December 16, 2005, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE) and Pennsylvania Power Company (Penn, and together with OE, CEI and TE, the Utility Subsidiaries), certain operating utility subsidiaries of FirstEnergy, completed an intra-system transfer of nuclear generation assets to FirstEnergy Nuclear Generation Corp. (NGC). Penn's asset transfer was consummated pursuant to the Subscription and Capital Contribution Agreement (Penn Contribution Agreement) entered into with NGC on May 13, 2005. OE's asset transfer was consummated pursuant to the Capital Contribution Agreement (OE Contribution Agreement) entered into with NGC on May 18, 2005. CEI's and TE's asset transfers were consummated pursuant to the separate Nuclear Purchase and Sale Agreements (Nuclear PSAs) entered into with NGC on May 18, 2005. These agreements were previously disclosed on Form 8-K filed with the Securities and Exchange Commission (SEC) on May 19, 2005.
 
NGC was organized under the laws of the State of Ohio for the purpose of owning the nuclear generation assets transferred from the Utility Subsidiaries. The nuclear generating plant interests transferred do not include leasehold interests of OE and TE in certain of the nuclear plants that are currently subject to sale and leaseback arrangements with non-affiliates. FirstEnergy Nuclear Operating Company, a wholly owned subsidiary of FirstEnergy, will continue to operate and maintain the nuclear generation assets. In connection with the asset transfers, OE and TE have entered into a power supply agreement with NGC pursuant to which OE and TE will sell capacity, energy and ancillary services relating to their leasehold interests. The new agreement, which replaced in part a prior similar agreement among those companies and FirstEnergy Solutions Corp. (FES), is effective through December 31, 2010 with automatic one-year renewals thereafter unless terminated by the parties thereto. Under the new agreement, OE and TE will be compensated on a cost-of-service basis. NGC will sell all capacity, energy and ancillary services available from the nuclear assets transferred as well as under this new agreement to FES pursuant to a power sale agreement for subsequent resale to wholesale and retail customers.
 
Pursuant to the Penn Contribution Agreement, Penn previously acquired the common stock of NGC. Upon closing, Penn made a capital contribution to NGC of its undivided ownership interests in certain nuclear generation assets, together with associated decommissioning trust funds and other related assets. In connection with the contribution, NGC assumed Penn's obligations with respect to approximately $63 million aggregate principal amount of outstanding pollution control debt and certain other liabilities associated with the transferred assets. In addition, Penn received a promissory note from NGC in the principal amount of approximately $166 million, representing the net book value of the contributed assets as of September 30, 2005, less other liabilities assumed. The note bears interest at a rate per annum based on Penn's weighted average cost of long-term debt (5.39%), matures twenty years from the date of issuance, and is subject to prepayment at any time, in whole or in part, by NGC. Following the capital contribution, Penn distributed the common stock of NGC as a dividend to its parent, OE, such that NGC became a wholly owned subsidiary of OE, as further described below.

Pursuant to the OE Contribution Agreement, OE made a capital contribution to NGC of its undivided ownership interests in certain nuclear generation assets, the common stock of OES Nuclear Incorporated (OES Nuclear), a wholly owned subsidiary of OE that held an undivided ownership interest in the Perry Nuclear Power Plant, together with associated decommissioning trust funds and other related assets. In connection with the contribution, NGC assumed OE's obligations with respect to approximately $115 million aggregate principal amount of outstanding pollution control debt and certain other liabilities associated with the transferred assets. In addition, OE received a promissory note from NGC in the principal amount of approximately $232 million, representing the net book value of the contributed assets as of September 30, 2005, less other liabilities assumed. The note bears interest at a rate per annum based on OE's weighted average cost of long-term debt (3.98%), matures twenty years from the date of issuance, and is subject to prepayment at any time, in whole or in part, by NGC. Following the capital contribution, OES Nuclear was merged with and into NGC, and OE distributed the common stock of NGC as a dividend to its parent, FirstEnergy, such that NGC is currently a direct wholly owned subsidiary of FirstEnergy.

Pursuant to the Nuclear PSAs, NGC purchased CEI's and TE's respective undivided ownership interests in certain nuclear generation assets for a purchase price equal to their net book values as of September 30, 2005 (CEI - $993 million, TE - $706 million), together with CEI's and TE's respective interests in associated decommissioning trust funds and other related assets, less the amount of obligations under outstanding pollution control debt (CEI - $367 million, TE - $284 million) and the agreed upon value of certain other liabilities associated with the transferred assets. As consideration, NGC delivered to each of CEI and TE a promissory note that is secured by a lien on the transferred assets, which bears interest at a rate per annum based on CEI's and TE's weighted average cost of long-term debt (5.99% and 4.38%, respectively), and matures twenty years from the date of issuance. NGC may pre-pay each note at any time, in whole or in part, at its option without penalty.

In conjunction with the asset transfers, FirstEnergy made a cash capital contribution to NGC of approximately $750 million. NGC expects to use the proceeds from the capital contribution to pre-pay a portion of the promissory notes described above (CEI - $465 million; TE - $265 million; Penn - $20 million).
 

 
2


Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
 
On December 16, 2005, FirstEnergy entered into five separate guaranties (Guaranties) in connection with the issuance of five new series of pollution control revenue refunding bonds (Bonds) by the Ohio Water Development Authority (OWDA), Ohio Air Quality Development Authority (OAQDA) and Beaver County Industrial Development Authority (BCIDA, and together with the OWDA and OAQDA, the Authorities) on behalf of NGC as follows:

 
Authority
 
Series
Principal
Amount
 
Maturity
OWDA
 
Series 2005-A
 
$ 99,100,000
 
August 1, 2033
 
OWDA
 
Series 2005-B
 
82,800,000
 
January 1, 2034
 
OAQDA
 
Series 2005-A
 
8,000,000
 
August 1, 2033
 
OAQDA
 
Series 2005-B
 
7,200,000
 
January 1, 2034
 
BCIDA
 
Series 2005-A
 
72,650,000
 
January 1, 2035
 
 
Total
 
 
$269,750,000
 
 
 
 
     Principal or redemption price of and interest on, and purchase price of, each series of the Bonds is payable from a pledge of revenues derived by the respective Authority pursuant to a separate Loan Agreement between the respective Authority and NGC, and NGC’s related unsecured promissory note. Payment of the principal or redemption price of and interest on, and purchase price of, the Bonds of each series will be fully secured by a separate irrevocable, direct-pay letter of credit (each a Letter of Credit) delivered to J.P. Morgan Trust Company, National Association, as Trustee for each series of Bonds, by Barclays Bank PLC (Barclays). Each Letter of Credit will permit the Trustee to draw up to (a) an amount sufficient to pay the principal of the applicable Bonds or the portion of the purchase price corresponding to principal of such Bonds, plus (b) an amount equal to 36 days’ interest accrued on applicable Bonds, computed at a maximum rate of 10% per annum, to pay accrued and unpaid interest on such Bonds or the portion of the purchase price corresponding to accrued and unpaid interest on such Bonds. Each Letter of Credit will expire December 16, 2010 unless terminated earlier or extended in accordance with its terms. If a Letter of Credit is not extended, is cancelled or is replaced as described herein, the Bonds entitled to the benefit of that Letter of Credit will be subject to mandatory purchase prior to the cancellation, expiration or replacement of such Letter of Credit.
 
From the date of issuance of the Bonds, the Bonds of each series will accrue interest at Weekly Rates determined by the applicable remarketing agent as set forth in the related Trust Indenture. The method of determining the interest rate on the Bonds may be converted from time to time in accordance with the Trust Indenture to a Daily Rate, a Weekly Rate, a Commercial Paper Rate, a Semi-Annual Rate, an Annual Rate, a Two-Year Rate, a Three-Year Rate, a Five-Year Rate, a Long Term Rate or a Dutch Auction Rate. The Bonds of each series will be subject to optional, extraordinary optional and special mandatory redemption prior to maturity, and to optional and mandatory tender for purchase and remarketing in certain circumstances described in the Trust Indentures.

FirstEnergy delivered a separate Guaranty to Barclays, as Administrative Agent and Fronting Bank under each Letter of Credit and Reimbursement Agreement, dated as of December 16, 2005, with NGC and the banks parties thereto pursuant to which Barclays issued each Letter of Credit. In certain circumstances relating to the attainment of investment grade credit ratings and specified levels of financial performance by FES or NGC in the future, FirstEnergy’ may elect to have its obligations under each Guaranty reduced to zero.
 
The proceeds of the Bonds were used, together with additional funds provided by NGC in respect of applicable accrued interest and premium, if any, to refund an equal principal amount of bonds (the Prior Bonds) previously issued by the Authorities on behalf of OE ($115 million), Penn ($63 million) and TE ($91 million). The Prior Bonds were issued to finance or refinance certain air quality and water pollution control facilities and sewage or solid waste disposal facilities at the Beaver Valley Power Station and the Perry Nuclear Power Plant.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the complete text of each Guaranty, Reimbursement Agreement, Trust Indenture and Loan Agreement.

 
 
3

 
Item 9.01 Financial Statements and Exhibits.

(b) Pro forma financial information.
 
The following unaudited financial statements reflect the pro forma impact on each Utility Subsidiary of the nuclear generation asset transfers discussed above in Item 2.01 and the fossil and hydro-electric (non-nuclear) generation asset transfers to FirstEnergy Generation Corp. (FGCO) completed on October 24, 2005, as disclosed on Form 8-K filed with the SEC on October 24, 2005. The unaudited Pro Forma Consolidated Balance Sheets as of September 30, 2005 depict the impact of the asset transfers as if the transactions had occurred on September 30, 2005. The unaudited Pro Forma Consolidated Statements of Income for the nine month period ended September 30, 2005 depict the pro forma impact of the asset transfers as if the transactions had occurred on January 1, 2005. The pro forma financial statements have been prepared for comparative purposes only and do not purport to be indicative of future results of operations or financial condition.


Combined Explanatory Notes for the Pro Forma Consolidated Statements of Income

a.
The elimination of operating revenues from the lease rental of non-nuclear generation assets to FGCO.
b.
The elimination of depreciation expense on non-nuclear generation assets.
c.
The elimination of property tax expense on non-nuclear generation assets.
d.
The addition of interest income on the new associated company note receivable from FGCO for the transfer of non-nuclear generation net assets.
e.
The elimination of wholesale revenues from the sale of nuclear generation to FES.
f.
The elimination of fuel expense related to nuclear generation assets.
g.
The elimination of operating costs related to nuclear generation assets.
h.
The elimination of depreciation expense and asset retirement obligation accretion related to nuclear generation assets.
i.
The elimination of property tax expense on nuclear generation assets.
j.
The elimination of earnings on nuclear decommissioning trusts.
k.
The addition of interest income on the new associated company note receivable from NGC for the transfer of nuclear generation assets.
l.
The elimination of interest expense on pollution control revenue bonds to be transferred with the disposition of nuclear generation assets.
m.
The elimination of the allowance for borrowed funds used during construction on nuclear capital expenditures.
n.
The reduction of interest expense on associated company money pool debt resulting from the utilization of NGC's initial payment on the new associated company note receivable.
o.
To reclassify the reversal of the lease market valuation liability from nuclear operating costs to purchased power.
p.
The income tax effect of the pro forma adjustments at a composite tax rate of approximately 41%.






 
4



OHIO EDISON COMPANY
 
                               
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
 
for the nine month period ended September 30, 2005
 
(Unaudited)
 
       
Non-Nuclear
         
Nuclear
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Pro Forma
 
   
(In thousands)
 
                               
OPERATING REVENUES
 
$
2,268,760
 
$
(132,999
a
 
 
 
$
2,135,761
 
$
(219,942
) e
   
$
1,915,819
 
                                             
OPERATING EXPENSES AND TAXES:
                                           
Fuel
   
39,080
               
39,080
   
(32,188
) f
     
6,892
 
Purchased power
   
703,658
               
703,658
               
703,658
 
Nuclear operating costs
   
264,514
               
264,514
   
(122,527
) g
     
141,987
 
Other operating costs
   
293,530
               
293,530
               
293,530
 
Provision for depreciation
   
87,875
   
(30,124
) b
 
 
   
57,751
   
(10,520
) h
 
 
   
47,231
 
Amortization of regulatory assets
   
347,880
               
347,880
               
347,880
 
Deferral of new regulatory assets
   
(107,750
)
             
(107,750
)
             
(107,750
)
General taxes
   
146,066
   
(4,247
) c
     
141,819
   
(4,415
) i
     
137,404
 
Income taxes
   
245,942
   
(40,801
) p
 
 
   
205,141
   
(21,691
) p
     
183,450
 
Total operating expenses and taxes 
   
2,020,795
   
(75,172
)
       
1,945,623
   
(191,341
)
       
1,754,282
 
                                             
OPERATING INCOME
   
247,965
   
(57,827
)
       
190,138
   
(28,601
)
       
161,537
 
                                             
                             
(6,590
) j
         
                             
7,504
 
 k
         
OTHER INCOME (net of income taxes)
   
37,352
   
20,832
 
  d
     
58,184
   
914
         
59,098
 
                                             
NET INTEREST CHARGES:
                                           
Interest on long-term debt
   
44,330
               
44,330
   
(4,109
) l
     
40,221
 
Allowance for borrowed funds used during construction
   
(8,255
)
             
(8,255
)
 
6,615
 m  
 
   
(1,640
)
Other interest expense
   
12,457
               
12,457
   
(455
) n
 
 
   
12,002
 
Subsidiary's preferred stock dividend requirements
   
1,534
               
1,534
               
1,534
 
Net interest charges 
   
50,066
   
-
         
50,066
   
2,051
         
52,117
 
                                             
NET INCOME
   
235,251
   
(36,995
)
       
198,256
   
(29,738
)
       
168,518
 
                                             
PREFERRED STOCK DIVIDEND REQUIREMENTS
   
1,976
               
1,976
               
1,976
 
                                             
EARNINGS ON COMMON STOCK
 
$
233,275
 
$
(36,995
)
     
$
196,280
 
$
(29,738
)
     
$
166,542
 
                                             





 
5



THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
 
                               
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
 
for the nine month period ended September 30, 2005
 
(Unaudited)
 
       
Non-Nuclear
         
Nuclear
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Pro Forma
 
   
(In thousands)
 
                               
OPERATING REVENUES
 
$
1,408,341
 
$
(43,922
) a
 
 
 
$
1,364,419
 
$
(165,683
) e
 
 
 
$
1,198,736
 
                                             
OPERATING EXPENSES AND TAXES:
                                           
Fuel
   
64,138
               
64,138
   
(24,614
) f
     
39,524
 
Purchased power
   
411,366
               
411,366
   
(23,400
) o
 
 
   
387,966
 
Nuclear operating costs
   
121,765
               
121,765
   
(121,765
) g,o
 
 
   
-
 
Other operating costs
   
227,759
               
227,759
               
227,759
 
Provision for depreciation
   
100,602
   
(15,064
) b
     
85,538
   
(30,036
) h
 
 
   
55,502
 
Amortization of regulatory assets
   
177,497
               
177,497
               
177,497
 
Deferral of new regulatory assets
   
(126,508
)
             
(126,508
)
             
(126,508
)
General taxes
   
115,546
   
(5,276
) c
     
110,270
   
(6,719
) i
 
 
   
103,551
 
Income taxes
   
94,897
   
(9,731
) p
 
 
   
85,166
   
20,605
 p  
 
   
105,771
 
Total operating expenses and taxes 
   
1,187,062
   
(30,071
)
       
1,156,991
   
(185,929
)
       
971,062
 
                                             
OPERATING INCOME
   
221,279
   
(13,851
)
       
207,428
   
20,246
         
227,674
 
                                             
                             
(16,118
) j
         
                             
13,934
 k          
OTHER INCOME (net of income taxes)
   
37,691
   
10,276
 d      
47,967
   
(2,184
)
       
45,783
 
                                             
NET INTEREST CHARGES:
                                           
Interest on long-term debt
   
83,452
               
83,452
               
83,452
 
Allowance for borrowed funds used during construction
   
(2,012
)
             
(2,012
)
 
1,489
 m  
 
   
(523
)
Other interest expense
   
12,952
               
12,952
   
(10,567
) n
 
 
   
2,385
 
Net interest charges 
   
94,392
   
-
         
94,392
   
(9,078
)
       
85,314
 
                                             
NET INCOME
   
164,578
   
(3,575
)
       
161,003
   
27,140
         
188,143
 
                                             
PREFERRED STOCK DIVIDEND REQUIREMENTS
   
2,918
               
2,918
               
2,918
 
                                             
EARNINGS ON COMMON STOCK
 
$
161,660
 
$
(3,575
)
     
$
158,085
 
$
27,140
       
$
185,225
 
                                             





 
6



THE TOLEDO EDISON COMPANY
 
                               
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
 
for the nine month period ended September 30, 2005
(Unaudited)
 
       
Non-Nuclear
         
Nuclear
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Pro Forma
 
   
(In thousands)
 
                               
OPERATING REVENUES
 
$
787,824
 
$
(10,887
) a
 
 
 
$
776,937
 
$
(97,584
) e
 
 
 
$
679,353
 
                                             
OPERATING EXPENSES AND TAXES:
                                           
Fuel
   
43,474
               
43,474
   
(15,112
) f
 
 
   
28,362
 
Purchased power
   
225,600
               
225,600
               
225,600
 
Nuclear operating costs
   
145,059
               
145,059
   
(82,810
) g
 
 
   
62,249
 
Other operating costs
   
123,823
               
123,823
               
123,823
 
Provision for depreciation
   
48,724
   
(2,505
) b
 
 
   
46,219
   
(19,867
) h
 
 
   
26,352
 
Amortization of regulatory assets
   
107,672
               
107,672
               
107,672
 
Deferral of new regulatory assets
   
(41,473
)
             
(41,473
)
             
(41,473
)
General taxes
   
41,960
   
(1,901
) c
 
 
   
40,059
   
(2,678
) i
 
 
   
37,381
 
Income taxes
   
44,160
   
(2,675
) p
 
 
   
41,485
   
11,725
 p  
 
   
53,210
 
Total operating expenses and taxes 
   
738,999
   
(7,081
)
       
731,918
   
(108,742
)
       
623,176
 
                                             
OPERATING INCOME
   
48,825
   
(3,806
)
       
45,019
   
11,158
         
56,177
 
                                             
                             
(11,446
) j
 
 
       
                             
8,504
 k  
 
       
OTHER INCOME (net of income taxes)
   
18,173
   
1,915
 d  
 
   
20,088
   
(2,942
)
       
17,146
 
                                             
NET INTEREST CHARGES:
                                           
Interest on long-term debt
   
12,655
               
12,655
               
12,655
 
Allowance for borrowed funds used during construction
   
(117
)
             
(117
)
 
495
 m  
 
   
378
 
Other interest expense
   
4,192
               
4,192
   
(6,022
) n
 
 
   
(1,830
)
Net interest charges 
   
16,730
   
-
         
16,730
   
(5,527
)
       
11,203
 
                                             
NET INCOME
   
50,268
   
(1,891
)
       
48,377
   
13,743
         
62,120
 
                                             
PREFERRED STOCK DIVIDEND REQUIREMENTS
   
6,109
               
6,109
               
6,109
 
                                             
EARNINGS ON COMMON STOCK
 
$
44,159
 
$
(1,891
)
     
$
42,268
 
$
13,743
       
$
56,011
 
                                             





 
7




PENNSYLVANIA POWER COMPANY
 
                               
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
 
for the nine month period ended September 30, 2005
 
(Unaudited)
 
       
Non-Nuclear
         
Nuclear
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Pro Forma
 
   
(In thousands)
 
                               
OPERATING REVENUES
 
$
414,306
 
$
(15,102
) a
 
 
 
$
399,204
 
$
(117,776
) e
 
 
 
$
281,428
 
                                             
OPERATING EXPENSES AND TAXES:
                                           
Fuel
   
17,351
               
17,351
   
(17,330
) f
 
 
   
21
 
Purchased power
   
131,948
               
131,948
               
131,948
 
Nuclear operating costs
   
56,710
               
56,710
   
(56,710
) g
 
 
   
-
 
Other operating costs
   
48,541
               
48,541
               
48,541
 
Provision for depreciation
   
11,351
   
(2,726
) b
 
 
   
8,625
   
(1,618
) h
 
 
   
7,007
 
Amortization of regulatory assets
   
29,499
               
29,499
               
29,499
 
General taxes
   
19,752
   
(253
) c
 
 
   
19,499
   
(769
) i
 
 
   
18,730
 
Income taxes
   
43,055
   
(5,026
) p
 
 
   
38,029
   
(17,780
) p
 
 
   
20,249
 
Total operating expenses and taxes 
   
358,207
   
(8,005
)
       
350,202
   
(94,207
)
       
255,995
 
                                             
OPERATING INCOME
   
56,099
   
(7,097
)
       
49,002
   
(23,569
)
       
25,433
 
                                             
OTHER INCOME (net of income taxes)
   
623
   
2,951
 d  
 
   
3,574
   
3,445
 k  
 
   
7,019
 
                                             
NET INTEREST CHARGES:
                                           
Interest expense
   
7,477
               
7,477
   
(2,821
) l,n
 
 
   
4,656
 
Allowance for borrowed funds used during construction
   
(4,508
)
             
(4,508
)
 
4,357
 m  
 
   
(151
)
Net interest charges 
   
2,969
   
-
         
2,969
   
1,536
         
4,505
 
                                             
NET INCOME
   
53,753
   
(4,146
)
       
49,607
   
(21,660
)
       
27,947
 
                                             
PREFERRED STOCK DIVIDEND REQUIREMENTS
   
1,534
               
1,534
               
1,534
 
                                             
EARNINGS ON COMMON STOCK
 
$
52,219
 
$
(4,146
)
     
$
48,073
 
$
(21,660
)
     
$
26,413
 
                                             



 
8



Combined Explanatory Notes for the Pro Forma Consolidated Balance Sheets

a.
The transfer of non-nuclear generation plant in service to FGCO.
b.
The transfer of the accumulated provision for depreciation on non-nuclear plant in service to FGCO.
c.
The establishment of an associated company note receivable as consideration for pollution control debt to be assumed by FGCO or NGC at a future date.
d.
The establishment of an associated company note receivable as consideration for the purchased assets and assumption of liabilities.
e.
The transfer of other property and investments related to non-nuclear plant assets to FGCO.
f.
The transfer of the current portion of pollution control revenue bonds related to nuclear generation plant to NGC.
g.
The transfer of materials and supplies for non-nuclear generation plant to FGCO.
h.
The transfer of accrued interest for debt related to nuclear generation plant to NGC.
i.
The distribution of the nuclear net assets spin as a dividend to the respective parent company.
j.
To record in other paid-in capital the difference between the net book value and the purchase price, pursuant to the purchase option in the Master Lease, for the non-nuclear generation assets.
k.
The transfer of unrealized gains and losses on decommissioning trust investments recorded as other comprehensive income to NGC.
l.
The use of proceeds from the nuclear asset transfer to reduce associated company money pool debt.
m.
The transfer of accumulated deferred income taxes for non-nuclear generation plant to FGCO.
n.
The transfer of accumulated deferred investment tax credits for non-nuclear generation plant to FGCO.
o.
The transfer of asset retirement obligations related to the non-nuclear generation plants to FGCO.
p.
The transfer of other property and investments related to nuclear plant assets to NGC.
q.
The transfer of nuclear plant in service and nuclear fuel in service to NGC.
r.
The transfer of the accumulated provision for depreciation and amortization for nuclear plant in service and nuclear fuel in service to NGC.
s.
The transfer of nuclear plant construction work in progress to NGC.
t.
The transfer of nuclear fuel construction work in progress to NGC.
u.
The transfer of nuclear plant decommissioning trusts to NGC.
v.
The establishment of a parent company investment in NGC.
w.
The transfer of materials and supplies for nuclear plant to NGC.
x.
The reversal of regulatory liabilities to reflect the discontinued application of SFAS No. 71 accounting for decommissioning trust activity.
y.
The transfer of other current liabilities related to nuclear generation plant to NGC.
z.
The transfer of accumulated deferred income taxes for nuclear generation plant to NGC.
aa.
The transfer of other deferred charges for nuclear plant to NGC.
bb.
The transfer of asset retirement obligations related to the nuclear generation plants to NGC.
cc.
The transfer of the long-term portion of pollution control revenue bonds related to nuclear generation plant to NGC.
dd.
The transfer of accumulated deferred investment tax credits for nuclear generation plant to NGC.
ee.
The transfer of OES Nuclear common stock to NGC.





 
9



OHIO EDISON COMPANY
 
PRO FORMA CONSOLIDATED BALANCE SHEET
 
As of September 30, 2005
 
(Unaudited)
 
                           
Transfer
         
       
Non-nuclear
         
Nuclear
     
Investment in
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Subsidiary
     
Pro Forma
 
                                       
   
(In thousands)
 
ASSETS
                                     
UTILITY PLANT:
                                     
In service
 
$
5,573,996
 
$
(2,248,017
) a
 
 
 
$
3,325,979
 
$
(1,056,145
) q
 
 
 
$
-
       
$
2,269,834
 
Less-Accumulated provision for depreciation
   
2,793,343
   
(1,317,719
) b
 
 
   
1,475,624
   
(631,569
) r
 
 
               
844,055
 
     
2,780,653
   
(930,298
)
       
1,850,355
   
(424,576
)
       
-
         
1,425,779
 
Construction work in progress-
                                                   
-
 
Electric plant
   
246,325
               
246,325
   
(225,116
) s
 
 
               
21,209
 
Nuclear Fuel
   
17,972
               
17,972
   
(17,972
) t
 
 
               
-
 
     
264,297
   
-
         
264,297
   
(243,088
)
       
-
         
21,209
 
     
3,044,950
   
(930,298
)
       
2,114,652
   
(667,664
)
       
-
         
1,446,988
 
OTHER PROPERTY AND INVESTMENTS:
                                                   
-
 
Investment in lease obligation bonds
   
341,335
               
341,335
                           
341,335
 
Nuclear plant decommissioning trusts
   
462,439
               
462,439
   
(362,099
) u
 
 
               
100,340
 
Long-term notes receivable from associated companies
   
207,089
   
1,146,169
 c,d  
 
   
1,353,258
   
377,430
 c,d  
 
               
1,730,688
 
Other
   
44,623
   
(367
) e
 
 
   
44,256
   
112,709
 p,v  
 
   
(112,911
) i
 
 
   
44,054
 
     
1,055,486
   
1,145,802
         
2,201,288
   
128,040
         
(112,911
)
       
2,216,417
 
CURRENT ASSETS:
                                                   
-
 
Cash and cash equivalents
   
900
               
900
                           
900
 
Receivables-
                                                   
-
 
Customers
   
285,462
               
285,462
                           
285,462
 
Associated companies
   
121,262
               
121,262
                           
121,262
 
Other
   
20,653
               
20,653
                           
20,653
 
Notes receivable from associated companies
   
798,513
               
798,513
                           
798,513
 
Materials and supplies, at average cost
   
92,610
   
(2,644
) g
 
 
   
89,966
   
(89,966
) w
 
 
               
-
 
Prepayments and other
   
17,336
               
17,336
                           
17,336
 
     
1,336,736
   
(2,644
)
       
1,334,092
   
(89,966
)
       
-
         
1,244,126
 
DEFERRED CHARGES:
                                                   
-
 
Regulatory assets
   
844,590
               
844,590
   
63,367
 x  
 
               
907,957
 
Property taxes
   
61,419
               
61,419
                           
61,419
 
Unamortized sale and leaseback costs
   
56,477
               
56,477
                           
56,477
 
Other
   
67,093
               
67,093
   
(3,454
) aa
 
 
               
63,639
 
     
1,029,579
   
-
         
1,029,579
   
59,913
                     
1,089,492
 
   
$
6,466,751
 
$
212,860
       
$
6,679,611
 
$
(569,677
)
     
$
(112,911
)
     
$
5,997,023
 
CAPITALIZATION AND LIABILITIES
                                                       
CAPITALIZATION:
                                                       
Common stockholder's equity-
                                                       
Common stock, without par value
 
$
2,099,099
 
$
174,835
 j  
 
 
$
2,273,934
 
$
(10
) ee
 
 
 
$
-
       
$
2,273,924
 
Accumulated other comprehensive loss
   
(58,484
)
             
(58,484
)
 
(7,181
) k
 
 
               
(65,665
)
Retained earnings
   
434,473
               
434,473
   
37,147
 x  
 
   
(112,911
) i
 
 
   
358,709
 
Total common stockholder's equity 
   
2,475,088
   
174,835
         
2,649,923
   
29,956
         
(112,911
)
       
2,566,968
 
Preferred stock
   
60,965
               
60,965
                           
60,965
 
Preferred stock of consolidated subsidiary
   
14,105
               
14,105
                           
14,105
 
Long-term debt and other long-term obligations
   
1,099,147
               
1,099,147
   
(267,728
) cc
 
 
               
831,419
 
     
3,649,305
   
174,835
         
3,824,140
   
(237,772
)
       
(112,911
)
       
3,473,457
 
CURRENT LIABILITIES:
                                                       
Currently payable long-term debt
   
273,656
               
273,656
   
(15,500
) f
 
 
               
258,156
 
Short-term borrowings-
                                                       
Associated companies
   
120,971
               
120,971
   
(20,000
) l
 
 
               
100,971
 
Other
   
123,584
               
123,584
                           
123,584
 
Accounts payable-
                                                       
Associated companies
   
81,980
               
81,980
                           
81,980
 
Other
   
11,289
               
11,289
                           
11,289
 
Accrued taxes
   
213,843
               
213,843
                           
213,843
 
Other
   
117,268
               
117,268
   
(4,756
) y
 
 
               
112,512
 
     
942,591
   
-
         
942,591
   
(40,256
)
       
-
         
902,335
 
NONCURRENT LIABILITIES:
                                                       
Accumulated deferred income taxes
   
688,702
   
71,153
 m  
 
   
759,855
   
2,432
 z  
 
               
762,287
 
Accumulated deferred investment tax credits
   
52,108
   
(23,908
) n
 
 
   
28,200
   
(812
) dd
 
 
               
27,388
 
Asset retirement obligation
   
364,525
   
(9,220
) o
 
 
   
355,305
   
(293,269
) bb
 
 
               
62,036
 
Retirement benefits
   
320,044
               
320,044
                           
320,044
 
Other
   
449,476
               
449,476
                           
449,476
 
     
1,874,855
   
38,025
         
1,912,880
   
(291,649
)
       
-
         
1,621,231
 
COMMITMENTS AND CONTINGENCIES
                                                       
   
$
6,466,751
 
$
212,860
       
$
6,679,611
 
$
(569,677
)
     
$
(112,911
)
     
$
5,997,023
 
                                                         

 

10

 

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
 
PRO FORMA CONSOLIDATED BALANCE SHEET
 
as of September 30, 2005
 
(Unaudited)
 
                               
       
Non-nuclear
         
Nuclear
         
   
As Reported
 
Adjustments
     
Pro Forma
 
Adjustments
     
Pro Forma
 
ASSETS
                             
   
(In thousands)
 
UTILITY PLANT:
                             
In service
 
$
4,498,876
 
$
(1,252,552
) a
 
 
 
$
3,246,324
 
$
(1,235,420
) q
 
 
 
$
2,010,904
 
Less-Accumulated provision for depreciation
   
2,020,868
   
(823,166
) b
 
 
   
1,197,702
   
(422,802
) r
 
 
   
774,900
 
     
2,478,008
   
(429,386
)
       
2,048,622
   
(812,618
)
       
1,236,004
 
Construction work in progress-
                                           
Electric plant
   
90,911
               
90,911
   
(53,982
) s
 
 
   
36,929
 
Nuclear fuel
   
8,632
               
8,632
   
(8,632
) t
 
 
   
-
 
     
99,543
   
-
         
99,543
   
(62,614
)
       
36,929
 
     
2,577,551
   
(429,386
)
       
2,148,165
   
(875,232
)
       
1,272,933
 
OTHER PROPERTY AND INVESTMENTS:
                                           
Investment in lessor notes
   
564,169
               
564,169
               
564,169
 
Nuclear plant decommissioning trusts
   
427,920
               
427,920
   
(427,920
) u
 
 
   
-
 
Long-term notes receivable from associated companies
   
8,774
   
389,462
 c,d  
 
   
398,236
   
528,102
 c,d  
 
   
926,338
 
Other
   
16,028
   
(3,889
) e
 
 
   
12,139
   
(1,518
) p
 
 
   
10,621
 
     
1,016,891
   
385,573
         
1,402,464
   
98,664
         
1,501,128
 
CURRENT ASSETS:
                                           
Cash and cash equivalents
   
207
               
207
               
207
 
Receivables-
                                           
Customers
   
255,769
               
255,769
               
255,769
 
Associated companies
   
19,883
               
19,883
               
19,883
 
Other
   
9,651
               
9,651
               
9,651
 
Materials and supplies, at average cost
   
72,506
   
(11,461
) g
 
 
   
61,045
   
(61,045
) w
 
 
   
-
 
Prepayments and other
   
2,769
               
2,769
               
2,769
 
     
360,785
   
(11,461
)
       
349,324
   
(61,045
)
       
288,279
 
DEFERRED CHARGES:
                                           
Goodwill
   
1,688,966
               
1,688,966
               
1,688,966
 
Regulatory assets
   
889,127
               
889,127
               
889,127
 
Property taxes
   
77,792
               
77,792
               
77,792
 
Other
   
29,995
               
29,995
               
29,995
 
     
2,685,880
   
-
         
2,685,880
   
-
         
2,685,880
 
   
$
6,641,107
 
$
(55,274
)
     
$
6,585,833
 
$
(837,613
)
     
$
5,748,220
 
CAPITALIZATION AND LIABILITIES
                                           
CAPITALIZATION:
                                           
Common stockholder's equity-
                                           
Common stock, without par value
 
$
1,356,998
 
$
(31,330
) j
 
 
 
$
1,325,668
 
$
-
       
$
1,325,668
 
Accumulated other comprehensive income
   
12,148
               
12,148
   
(30,231
) k
 
 
   
(18,083
)
Retained earnings
   
574,394
               
574,394
               
574,394
 
Total common stockholder's equity 
   
1,943,540
   
(31,330
)
       
1,912,210
   
(30,231
)
       
1,881,979
 
Long-term debt and other long-term obligations
   
1,939,730
               
1,939,730
               
1,939,730
 
     
3,883,270
   
(31,330
)
       
3,851,940