CAPITALIZATION

COMMON STOCK

Retained Earnings and Dividends

As of December 31, 2017, FirstEnergy had an accumulated deficit of $(6.3) billion. Dividends declared in 2017 and 2016 were $1.44 per share, which included dividends of $0.36 per share paid in the first, second, third and fourth quarters. The amount and timing of all dividend declarations are subject to the discretion of the Board of Directors and its consideration of business conditions, results of operations, financial condition and other factors. On January 16, 2018, the Board of Directors declared a quarterly dividend of $0.36 per share to be paid from other paid-in-capital in the first quarter of 2018.

In addition to paying dividends from retained earnings, OE, CEI, TE, Penn, JCP&L, ME and PN have authorization from the FERC to pay cash dividends to FirstEnergy from paid-in capital accounts, as long as their FERC-defined equity-to-total-capitalization ratio remains above 35%. In addition, TrAIL and AGC have authorization from FERC to pay cash dividends to their respective parents from paid-in capital accounts, as long as their FERC-defined equity-to-total-capitalization ratio remains above 45%. The articles of incorporation, indentures, regulatory limitations and various other agreements 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’s subsidiaries’ abilities to pay cash dividends to FirstEnergy as of December 31, 2017.

Stock Issuance

On January 22, 2018, FirstEnergy entered into agreements for the private placement of its equity securities representing an approximately $2.5 billion investment in the Company. See Note 21, "Subsequent Events," for additional information related to the equity issuances.

FE issued approximately 3.0 million shares of common stock in 2017, 2.7 million shares of common stock in 2016 and 2.5 million shares of common stock in 2015 to registered shareholders and its directors and the employees of its subsidiaries under its Stock Investment Plan and certain share-based benefit plans.

On December 13, 2016, FE contributed 16,097,875 newly issued shares of its common stock to its qualified pension plan in a private placement transaction. These shares were valued at approximately $500 million in the aggregate, and were issued to satisfy a portion of FirstEnergy’s future pension funding obligations. The independent fiduciary representing the pension plan with respect to the equity contribution fully liquidated the FE common stock by January 31, 2017.

PREFERRED AND PREFERENCE STOCK

FirstEnergy and the Utilities were authorized to issue preferred stock and preference stock as of December 31, 2017, as follows:



	Preferred Stock			Preference Stock
	Shares Authorized	Par Value		Shares Authorized	Par Value
FirstEnergy	5,000,000	$	100
OE	6,000,000	$	100	8,000,000	no par
OE	8,000,000	$	25
Penn	1,200,000	$	100
CEI	4,000,000	no par		3,000,000	no par
TE	3,000,000	$	100	5,000,000	$	25
TE	12,000,000	$	25
JCP&L	15,600,000	no par
ME	10,000,000	no par
PN	11,435,000	no par
MP	940,000	$	100
PE	10,000,000	$	0.01
WP	32,000,000	no par

As of December 31, 2017 and 2016, there were no preferred or preference shares outstanding. See Note 21, "Subsequent Events," for additional information related to preferred stock outstanding.

LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

The following tables present outstanding long-term debt and capital lease obligations for FirstEnergy and FES as of December 31, 2017 and 2016:



	As of December 31, 2017		As of December 31
(Dollar amounts in millions)	Maturity Date	Interest Rate	2017			2016
FirstEnergy:
FMBs and secured notes - fixed rate	2018 - 2056	1.726% - 9.740%	$	5,446		$	5,623
Secured notes - variable rate	2019	4.500%	9			10
Total FMBs and secured notes			5,455			5,633
Unsecured notes - fixed rate	2018 - 2047	2.550% - 7.700%	15,370			13,058
Unsecured notes - variable rate	2020 - 2021	3.227%	1,450			1,200
Total unsecured notes			16,820			14,258
Capital lease obligations			91			104
Unamortized debt discounts			(42		)	(25		)
Unamortized debt issuance costs			(113		)	(87		)
Unamortized fair value adjustments			(14		)	(6		)
Currently payable long-term debt			(1,082		)	(1,685		)
Total long-term debt and other long-term obligations			$	21,115		$	18,192

FES:
Secured notes - fixed rate	2018 - 2047	4.250% - 5.625%	$	612		$	617
Secured notes - variable rate	2019	4.500%	9			10
Total secured notes			621			627
Unsecured notes - fixed rate	2019 - 2041	2.550% - 6.800%	2,215			2,373
Capital lease obligations			2			8
Unamortized debt discounts			(1		)	(1		)
Unamortized debt issuance costs			(14		)	(15		)
Currently payable long-term debt			(524		)	(179		)
Total long-term debt and other long-term obligations			$	2,299		$	2,813

On March 1, 2017, FG retired $28 million of PCRBs at maturity.

On March 15, 2017, MP retired $150 million of FMBs at maturity.

On April 3, 2017, CEI retired $130 million of 5.70% senior notes at maturity.

On May 16, 2017, MP issued $250 million of 3.55% FMBs due 2027. Proceeds received from the issuance of the FMBs were used: (i) to repay short-term borrowings, (ii) to fund capital expenditures and (iii) for working capital needs and other general business purposes.

On June 1, 2017, FG repurchased approximately $130 million of PCRBs, which were subject to a mandatory put on such date. FG is currently holding these PCRBs indefinitely.

On June 1, 2017, JCP&L retired $250 million of 5.65% senior notes at maturity.

On June 21, 2017, FE issued the aggregate principal amount of $3.0 billion of its senior notes in three series: $500 million of 2.85% notes due 2022; $1.5 billion of 3.90% notes due 2027; and $1.0 billion of 4.85% notes due 2047. Proceeds from the issuance of the notes were used: (i) to redeem $650 million of FE's 2.75% notes due in 2018 on July 25, 2017, and (ii) for general corporate purposes, including the repayment of short-term borrowings under the FE Facility.

On August 31, 2017, ATSI issued $150 million of 3.66% senior unsecured notes maturing in 2032. Proceeds from the issuance of the notes were used: (i) to repay short-term borrowings, (ii) to fund capital expenditures and (iii) for working capital needs and other general business purposes.

On September 8, 2017, PN issued $300 million of 3.25% senior notes maturing in 2028. Proceeds from the issuance of the notes were used to repay short-term borrowings that were used to repay at maturity $300 million of PN's 6.05% senior notes due September 1, 2017.

On September 15, 2017, WP issued $100 million of 4.09% FMBs due 2047. Proceeds from the issuance of the FMBs were used: (i) to repay short-term borrowings, (ii) to fund capital expenditures and (iii) for other general business purposes.

On October 5, 2017, CEI issued $350 million of 3.50% senior notes maturing in 2028. Proceeds from the issuance of the notes were used: (i) to refinance existing indebtedness, including $300 million of 7.88% FMBs due November 1, 2017, and borrowings outstanding under FirstEnergy's regulated utility money pool and the Facility, (ii) to fund capital expenditures and (iii) for working capital and other general business purposes.

On December 15, 2017, WP issued $275 million of 4.14% FMBs maturing in 2047. Proceeds from the issuance of the FMBs were used to repay at maturity $275 million of WP's 5.95% FMBs due December 15, 2017.

See Note 7, "Leases," for additional information related to capital leases.

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. As of December 31, 2017 and 2016, $383 million and $406 million of environmental control bonds were outstanding, respectively.

Transition Bonds

The consolidated financial statements of FirstEnergy and JCP&L include transition bonds issued by JCP&L Transition Funding and JCP&L Transition Funding II, wholly owned limited liability companies of JCP&L. The proceeds were used to securitize the recovery of JCP&L’s bondable stranded costs associated with the previously divested Oyster Creek Nuclear Generating Station and to securitize the recovery of deferred costs associated with JCP&L’s supply of BGS. As of December 31, 2017 and 2016, $56 million and $85 million of the transition 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. As of December 31, 2017 and 2016, $315 million and $339 million of the phase-in recovery bonds were outstanding, respectively.

See Note 9, "Variable Interest Entities," for additional information on securitized bonds.

Other Long-term Debt

The Ohio Companies, Penn, FG and NG 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.

Based on the amount of FMBs authenticated by the respective mortgage bond trustees as of December 31, 2017, the sinking fund requirement for all FMBs issued under the various mortgage indentures was zero.

The following table presents scheduled debt repayments for outstanding long-term debt, excluding capital leases, fair value purchase accounting adjustments and unamortized debt discounts and premiums, for the next five years as of December 31, 2017. PCRBs that are scheduled to be tendered for mandatory purchase prior to maturity are reflected in the applicable year in which such PCRBs are scheduled to be tendered.



Year	FirstEnergy		FES
	(In millions)
2018	$	1,051	$	515
2019	1,267		323
2020	1,281		667
2021	2,032		674
2022	1,428		284

Certain PCRBs allow bondholders to tender their PCRBs for mandatory purchase prior to maturity. The following table classifies these PCRBs by year, excluding unamortized debt discounts and premiums, for the next five years based on the next date on which the debt holders may exercise their right to tender their PCRBs.



Year	FirstEnergy		FES
	(In millions)
2018	$	375	$	375
2019	232		232
2020	490		490
2021	342		342
2022	284		284

Debt Covenant Default Provisions

FirstEnergy has various debt covenants under certain financing arrangements, including its revolving credit facilities. 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, 2017, FirstEnergy and FES remain 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, excluding FES and AES, default under another financing arrangement in excess of a certain principal amount, typically $100 million. Although such defaults by any of the Utilities, ATSI or TrAIL would generally cross-default FE financing arrangements containing these provisions, defaults by any of AE Supply, FES, FG or NG would generally 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, FG, NG or the Utilities.