SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-3A-2
Statement by Holding Company Claiming Exemption
Under Rule U-3A-2 from the Provisions of the
Public Utility Holding Company Act of 1935
To Be Filed Annually Prior to March 1
FIRSTENERGY CORP.
hereby files with the Securities and Exchange Commission
(Commission), pursuant to Rule 2, its statement claiming
exemption as a holding company from the provisions of the Public
Utility Holding Company Act of 1935, and submits the following
information:
1. Name, State of organization, location and nature of
business of claimant and every subsidiary thereof, other than any
exempt wholesale generator (EWG) or foreign utility company in
which claimant directly or indirectly holds an interest.
FirstEnergy Corp. (FirstEnergy) was organized under the laws
of the State of Ohio in 1996. The principal executive offices of
FirstEnergy are located in Akron, Ohio. FirstEnergy is a holding
company within the meaning of Section 2(a)(7) of the Public
Utility Holding Company Act of 1935 (1935 Act).
FirstEnergy's principal business is the holding of all of
the outstanding common stock of the following eight direct
subsidiaries: (i) Ohio Edison Company (Ohio Edison), (ii) The
Cleveland Electric Illuminating Company (Cleveland Electric),
(iii) The Toledo Edison Company (Toledo Edison); (iv) Centerior
Service Company; (v) Centerior Properties Company; (vi) Centerior
Enterprises Corporation; (vii) Market Responsive Energy, Inc.;
and (viii) FirstEnergy Securities Transfer Company.
OHIO EDISON
- -----------
Ohio Edison was organized under the laws of the State of
Ohio in 1930 and is both a public utility and a public utility
holding company which is exempt from regulation by the Commission
under the 1935 Act (except for Section 9(a)(2) thereof) because
it is predominantly a public utility company whose operations as
such do not extend beyond the State of Ohio and contiguous
states. See Ohio Edison Company, Holding Co. Act Release No.
21019 (April 26, 1979). Ohio Edison furnishes electric service to
communities in a 7,500 square mile area of central and
northeastern Ohio. Ohio Edison also provides transmission
services and electric energy for resale to certain municipalities
in its service area and transmission services to certain rural
cooperatives. Ohio Edison also has ownership interests in certain
generating facilities located in the Commonwealth of
Pennsylvania. Ohio Edison also engages in the sale, purchase and
interchange of electric energy with other electric companies. The
area it serves has a population of approximately 2,537,000.
During the twelve months ended December 31, 1996, the principal
source of Ohio Edison's operating revenues was derived from the
sale of electricity
OHIO EDISON SUBSIDIARIES - PENNSYLVANIA POWER COMPANY
-----------------------------------------------------
Ohio Edison owns all of the Common Stock of Pennsylvania
Power Company (Penn Power). Penn Power was organized under the
laws of the Commonwealth of Pennsylvania in 1930 and owns
property and does business as an electric public utility in that
state. Penn Power is also authorized to do business and owns
property in the State of Ohio. Penn Power furnishes electric
service to communities in a 1,500 square mile area of western
Pennsylvania. Penn Power also provides transmission services and
electric energy for resale to certain municipalities in
Pennsylvania. The area served by Penn Power has a population of
approximately 343,000. Ohio Edison and Penn Power operate and
dispatch electrical service as a single utility system known as
the Ohio Edison System (OES). During the twelve months ended
December 31, 1996, the principal source of Penn Power's operating
revenues was derived from the sale of electricity.
OVEC and IKEC
-------------
Ohio Edison owns directly 16.5% of the Common Stock of Ohio
Valley Electric Corporation, an Ohio corporation (OVEC).
Similarly, Toledo Edison owns directly 4% of the Common Stock of
OVEC, resulting in an indirect ownership of 20.5% of OVEC by
FirstEnergy. OVEC, in turn, owns all of the Common Stock of
Indiana-Kentucky Electric Corporation (IKEC). OVEC is a public
utility company organized under the laws of Ohio in 1952. On the
same date, IKEC was organized under the laws of Indiana. The two
companies were formed by 15 independent investor-owned public
utilities (including Ohio Edison, Penn Power, and Toledo Edison),
furnishing electric service in the Ohio River Valley for the
purpose of providing the large electric power requirements
projected for the major uranium enrichment complex near
Portsmouth, Ohio, then being built by the Atomic Energy
Commission, the predecessor to the Department of Energy (DOE).
OHIO EDISON SUBSIDIARIES - OTHER
--------------------------------
In addition to Penn Power, Ohio Edison has eight other
wholly-owned subsidiaries: (i) OES Capital, Incorporated,
organized under the laws of the State of Ohio; (ii) OES Fuel,
Incorporated, organized under the laws of the State of Ohio;
(iii) OES Finance, Incorporated, organized under the laws of the
State of Ohio; (iv) Ohio Edison Financing Trust, organized under
the laws of the State of Delaware; (v) Ohio Edison Financing
Trust II, organized under the laws of the State of Delaware; (vi)
OES Nuclear, Incorporated, organized under the laws of the State
of Ohio; (vii) OES Ventures, Incorporated, organized under the
laws of the State of Ohio; and (viii) FirstEnergy Services
Corp., organized under the laws of the State of Ohio. These
subsidiaries manage and finance nuclear fuel for OES, finance
certain electric accounts receivable, provide structures for
investment in energy-related projects and the raising of capital
by Ohio Edison, finance and manage business opportunities not
directly related to the provision of electric service, or provide
other energy-related products and services. OES Ventures,
Incorporated is part owner of three limited liability companies
which own or apply technologies for the production of gypsum
products and one limited liability company that owns facilities
for the transloading of bulk materials on the Ohio River. These
companies, all of which are organized under the laws of the State
of Ohio, are Eastroc LLC; Eastroc Technologies LLC; Engineered
Processes, Ltd. and Warrenton River Terminal, Ltd. OES Ventures
also has two other subsidiaries, both of which are organized in
Ohio; COMSE Energy Managers Inc. (provides energy efficiency
planning) and Millennium Fuel Services, Ltd. (provides fuel
management services). In addition, OES Ventures has a 49%
beneficial interest in the PNBV Capital Trust, a business trust
organized under the laws of the State of Delaware to facilitate
the acquisition of lease obligation bonds relating to Ohio
Edison's sale and leaseback of individual interests in Beaver
Valley Unit No. 2 and Perry Nuclear Power Plant Unit No. 1 (Perry
Unit 1) and the resultant reduction in effective cost to Ohio
Edison under those leases. Finally, Ohio Edison has a 49%
interest in OES Engineering Incorporated, an Ohio corporation
that provides engineering services at cost as a subcontractor on
construction projects undertaken by Ohio Edison for third
parties. Other than Penn Power, these subsidiaries do not,
individually or in the aggregate, have a material effect on the
consolidated financial statements of Ohio Edison.
CLEVELAND ELECTRIC
- ------------------
Cleveland Electric was organized under the laws of the State
of Ohio in 1892 and is a public utility engaged primarily in the
generation, transmission, distribution and sale of electric
energy to an area of approximately 1,700 square miles in
northeastern Ohio, including the City of Cleveland. It has one
subsidiary, Centerior Funding Corporation. During the twelve
months ended December 31, 1996, nearly all of Cleveland
Electric's operating revenues were derived from the sale of
electricity.
TOLEDO EDISON
- -------------
Toledo Edison was organized under the laws of the State of
Ohio in 1901 and is a public utility engaged primarily in the
generation, transmission, distribution and sale of electric
energy to an area of approximately 2,500 square miles in
northwestern Ohio, including the City of Toledo. During the
twelve months ended December 31, 1996, nearly all of Toledo
Edison's operating revenues were derived from the sale of
electricity.
CENTERIOR SERVICE COMPANY
- -------------------------
Centerior Service Company was organized under the laws of
the State of Ohio in 1986 and is a service company that has
entered into service agreements in the State of Ohio concerning
management, engineering, legal, finance, nuclear operations,
construction, systems dispatch and certain other matters with
Cleveland Electric and Toledo Edison at cost.
CENTERIOR PROPERTIES COMPANY
- ----------------------------
Centerior Properties Company is an Ohio corporation
organized in 1929 that primarily manages non-residential real
estate. It has one subsidiary, BSG Properties, Inc., organized
under the laws of the State of Ohio in 1996 that pursues real
estate development.
CENTERIOR ENTERPRISES COMPANY
- -----------------------------
Centerior Enterprises Company is an Ohio corporation
organized in 1971 whose principal business involves the ownership
of stock investments in certain non-utility ventures. It has six
subsidiaries: (i) Centerior Power Enterprises Incorporated which,
together with CPICOR Management LLC (a non-affiliate), is
responsible for implementing a DOE clean coal project; (ii)
Centerior Energy Services Inc., which provides various energy
services; (iii) Fertile-Earth Inc., which composts certain wastes
and wood products into salable mulch and soil amendments; (iv)
Centerior Telecom Company, which provides telecommunications
services; (v) Centerior Communications Holdings Inc., which holds
equity investments for certain telecommunications ventures and
(vi) Bay Shore Power Company, which provides steam to a Toledo
Edison generating unit and a nonaffiliated refinery.
MARKET RESPONSIVE ENERGY, INC.
- -----------------------------
Market Responsive Energy, Inc. is a Delaware corporation
organized in 1995 that is a power marketer in the wholesale power
markets.
CENTERIOR FUNDING CORPORATION
- -----------------------------
Centerior Funding Corporation is a Delaware corporation organized
in 1996 that finances accounts receivable.
THE TOLEDO EDISON CAPITAL CORPORATION
- -------------------------------------
The Toledo Edison Capital Corporation is a Delaware
corporation organized in 1997 which makes equity investments in
Delaware business trusts which hold lessor debt instruments
issued in connection with Cleveland Electric's and Toledo
Edison's sale and leaseback of interests in the Bruce Mansfield
Plant.
FIRST ENERGY SECURITIES TRANSFER COMPANY
- ----------------------------------------
FirstEnergy Securities Transfer Company is an Ohio
corporation organized in 1997 to act as transfer agent and
registrar for the securities of FirstEnergy and its direct and
indirect subsidiaries.
2. A brief description of the properties of claimant and each
of its subsidiary public utility companies used for the
generation, transmission, and distribution of electric energy for
sale, or for the production, transmission, and distribution of
natural or manufactured gas, indicating the location of principal
generating plants, transmission lines, producing fields, gas
manufacturing plants, and electric and gas distribution
facilities, including all such properties which are outside the
State in which claimant and its subsidiaries are organized and
all transmission or pipelines which deliver or receive electric
energy or gas at the borders of such State.
FirstEnergy owns no such property.
Centerior Service Company, Centerior Properties Company,
Centerior Enterprises Corporation, Market Responsive Energy,
Inc., Centerior Funding Corporation, The Toledo Edison Capital
Corporation and FirstEnergy Securities Transfer Company are not
public utilities.
OES, OHIO EDISON and PENN POWER
- -------------------------------
Ohio Edison and Penn Power operate and dispatch electrical
service as a single utility system known as the OES. OES owns or
leases all or a portion of 39 electric generating units,
consisting of 18 coal fired units, three nuclear units, seven oil
fired units, one gas/oil fired unit and 10 diesel generators
(located at three sites), which have total net generating
capacity of 5,757 megawatts (MW). All of the electric properties
owned by OES are located within the State of Ohio and the
Commonwealth of Pennsylvania.
Eleven of the 18 coal fired units are 100% owned by Ohio
Edison, and all such units are located in Ohio. Four of the 18
coal fired units are a held in a combined OES ownership, and the
remaining three coal fired units are 100% owned by Penn Power.
The three nuclear units consist of (i) Beaver Valley 1,
located in Pennsylvania and representing a 425 MW share from a
combined OES ownership of 52.50%, (ii) Beaver Valley 2, also
located in Pennsylvania and representing a 343 MW share from an
Ohio Edison ownership and leasehold interest of 41.88%, and (iii)
Perry Unit 1, located in Ohio and representing a 421 MW share
from a combined OES ownership and leasehold interest of 35.24%.
One of the seven oil fired units is located in Ohio and 100%
owned by Ohio Edison. The remaining six oil fired units are also
located in Ohio but are held in a combined OES ownership.
The oil/natural gas unit is located in Ohio and is 100%
owned by Ohio Edison.
Two of the three diesel generated sites are located in Ohio.
The remaining diesel generator site is located in Pennsylvania.
OES has a transmission system of 5,647 circuit line miles
covering an area of approximately 9,000 square miles. The
transmission system has 629 circuit miles of 345 kilovolt (kV)
lines, 2,350 circuit miles of 138 kV lines, 1,894 circuit miles
of 69 kV lines, 180 circuit miles of 34.5 kV lines and 594
circuit miles of 23 kV lines. Additionally, OES's electric
distribution systems include 26,463 miles of overhead pole line
and underground conduit carrying primary, secondary and street
lighting circuits. OES owns, individually or together with one or
more of the other Central Area Power Coordination Group (CAPCO)
companies (Cleveland Electric, Toledo Edison and Duquesne Light
Company (Duquesne)) as tenants in common, 448 substations with a
total installed transformer capacity of 24,849,513 kV-amperes, of
which 70 are transmission substations, including nine located at
generating plants.
Ohio Edison and Penn Power are extensively interconnected,
with 12 points of interconnection at voltage levels ranging from
23 kV to 345 kV. Ohio Edison and Cleveland Electric have five
345 kV and four 138 kV interconnections, and Ohio Edison and
Toledo Edison have one 345 kV and one 138 kV interconnection.
Ohio Edison and Toledo Edison also have one 69 kV
interconnection, which is normally operated open.
Ohio Edison has one 345 kV interconnection with Allegheny
Power System, Inc. (Allegheny Power), seven 345 kV
interconnections with American Electric Power Company, Inc.
(AEP) and five 345 kV interconnections with Duquesne. Ohio
Edison has the following 138 kV interconnections: one with
Allegheny Power, eight with AEP and three with Dayton Power and
Light Company (Dayton). Ohio Edison also has one 23 kV
interconnection with AEP. The 69 kV interconnections with Dayton
and AEP, and the 23 kV interconnection with AEP, normally are
operated open. One of the 138 kV interconnections with AEP is
also normally operated open.
.
OES also has the following 69 kV interconnections: one with
Dayton, one with AEP, one with Allegheny Power, and one with
Duquesne.
Ohio Edison does not own or have any financial interest in
any natural gas pipeline company. However, at Ohio Edison's
Edgewater plant, OES Fuel owns a four mile gas pipeline that
connects the Edgewater plant to the Columbia Gas Transmission
system.
OVEC and IKEC
- -------------
OVEC owns the Kyger Creek Plant at Cheshire, Ohio, which is
a coal-fired facility with a capacity of 1,075 MW. IKEC owns the
Clifty Creek Plant at Madison, Indiana, which is a coal-fired
facility with a capacity of 1,290 MW. These plants are connected
by a 780-mile 345 kV transmission network and are interconnected
with the major transmission systems of OVEC's sponsor companies,
although OVEC's transmission facilities do not interconnect
directly with the OES or Toledo Edison systems.
CLEVELAND ELECTRIC
- ------------------
Cleveland Electric's generating properties consist of all or
a portion of: (i)15 units at four fossil fuel plants including
the Avon Lake Plant, located in Avon Lake, Ohio, the Lake Shore
Plant, located in Cleveland, Ohio, the Eastlake Plant, located in
Eastlake, Ohio, and the Ashtabula Plant, located in Ashtabula,
Ohio; (ii) a 454 MW share of Davis-Besse Nuclear Power Station
located in Oak Harbor, Ohio; and a (iii) 351 MW share of a pumped
storage hydroelectric plant (Seneca Plant) located in Warren,
Pennsylvania. These six Cleveland Electric-owned plants, at
December 31, 1996, have a net demonstrated capability of 3,279 MW
during the winter.
On September 30, 1987, Cleveland Electric sold essentially
all of its 470 MW undivided tenant-in-common interests in Units
1, 2 and 3 of the Bruce Mansfield Plant located in Shippingport,
Pennsylvania. As a result of separate sale and leaseback
transactions completed on that date, Cleveland Electric and
Toledo Edison are co-lessees of 6.5% (51 MW), 45.9% (358 MW) and
44.38% (355 MW) of Units 1, 2 and 3, respectively, of the coal-
fired Bruce Mansfield Plant for terms of about 29-1/2 years.
Cleveland Electric also owns a 371 MW share of Perry Unit 1
located in Perry, Ohio, which was placed in commercial operation
on November 18, 1987 and a 201 MW share of Beaver Valley Nuclear
Power Station Unit No. 2 (Beaver Valley Unit 2) located in
Shippingport, Pennsylvania, which was placed in commercial
operation on November 17, 1987 and leases, as co-lessee with
Toledo Edison, another 18.26% (150 MW) of Beaver Valley Unit 2
for a term of about 29-1/2 years.
Cleveland Electric owns the transmission facilities located
in the area it serves in northeastern Ohio for transmitting
electric energy to all of its customers, except for one 5.5 mile
138kV transmission line that Cleveland Electric leases from the
City of Cleveland. The portions of the transmission lines
located in Pennsylvania to the Seneca Plant, Bruce Mansfield
Plant and the Beaver Valley Power Station are not owned by
Cleveland Electric. Cleveland Electric has a transmission
interconnection with Pennsylvania Electric Company, which
provides for transmission of electric energy from the Seneca
Plant.
Cleveland Electric also has interconnections with Ohio
Edison which provide for the transmission of electric energy from
the Bruce Mansfield Plant and the Beaver Valley Nuclear Power
Station, and also interconnects with AEP.
Cleveland Electric's transmission facilities consist of
transmission lines and transmission substations operating at
various voltages between 11,000 volts and 345,000 volts.
Cleveland Electric owns the distribution facilities located
in the area it serves in northeastern Ohio for distributing
electric energy to all of its customers. These distribution
facilities consist primarily of distribution lines and
distribution substations and related service facilities and are
used to serve electric energy to customers pursuant to franchises
granted by the State of Ohio and, in some instances, by
municipalities.
TOLEDO EDISON
- -------------
Toledo Edison's generating properties consist of : (i) two
wholly-owned fossil fuel electric generating stations, Acme and
Bay Shore, located in Lucas County, Ohio; (ii) a 429 MW share of
Davis-Besse Nuclear Power Station located in Oak Harbor, Ohio;
and (iii) five internal combustion turbine generator units with
an aggregate capability of 77 MW located in northwestern Ohio.
These Toledo Edison-owned plants have, at December 31, 1996, a
net demonstrated capability of 1,137 MW during the winter.
On September 30, 1987, Toledo Edison sold essentially all of
its 294 MW undivided tenant-in-common interests in Units 2 and 3
of the Bruce Mansfield Plant located in Shippingport,
Pennsylvania. As a result of separate sale and leaseback
transactions completed on that date, Toledo Edison and Cleveland
Electric are co-lessees of 6.5% (51 MW), 45.9% (358 MW) and
44.38% (355 MW) of Units 1, 2 and 3, respectively, of the coal-
fired Bruce Mansfield Plant for terms of about 29-1/2 years.
Toledo Edison also owns a 238 MW share of Perry Unit 1. On
September 30, 1987, Toledo Edison sold about 18.26% (150 MW) of
its undivided tenant-in-common interests in Beaver Valley Unit 2
located in Shippingport, Pennsylvania (Toledo Edison had owned
19.91% (163 MW) and has retained about a 1.65% interest in that
Unit). On the same day, the purchasers leased those interests to
Toledo Edison (with Cleveland Electric as co-lessee) for a term
of about 29-1/2 years. Toledo Edison is selling 150 MW of its
Beaver Valley Unit 2 leased capacity entitlement of Cleveland
Electric. This sale commenced in November 1988 and it is
anticipated that it will continue at least until 1998.
Toledo Edison's transmission facilities consist of
transmission lines and transmission substations operating at
various voltages between 23,000 volts and 345,000 volts. Toledo
Edison owns the transmission facilities located in the area it
serves in northwestern Ohio for transmitting electric energy to
all of its customers. The portions of the transmission lines
located in Pennsylvania to the Bruce Mansfield Plant and the
Beaver Valley Power Station are not owned by Toledo Edison.
Toledo Edison has interconnections with Ohio Edison which provide
for the transmission of electric energy from the Bruce Mansfield
Plant and the Beaver Valley Nuclear Power Station. Toledo Edison
also has transmission interconnections with Consumers Power
Company, The Detroit Edison Company and AEP.
Toledo Edison owns the distribution facilities located in
the area it serves in northwestern Ohio for distributing electric
energy to all of its customers. These distribution facilities
consist primarily of distribution lines and distribution
substations and related service facilities and are used to serve
electric energy to its customers.
3. The following information for the last calendar year with
respect to claimant and each of its subsidiary public utility
companies:
(a) Number of kwh. of electric energy sold (at retail
or wholesale), and Mcf. of natural or manufactured gas
distributed at retail.
Ohio Edison 30,297,461,000 kwh
Penn Power 5,054,632,000 kwh
Cleveland Electric 21,520,456,000 kwh
Toledo Edison 11,054,347,000 kwh
(b) Number of kwh. of electric energy and Mcf. of
natural or manufactured gas distributed at retail outside the
State in which each such company is organized.
Ohio Edison None
Penn Power None
Cleveland Electric None
Toledo Edison None
(c) Number of kwh. of electric energy and Mcf. of
natural or manufactured gas sold at wholesale outside the State
in which each such company is organized, or at the State line.
Ohio Edison 6,190,242,000 kwh
Penn Power 976,441,000 kwh
Cleveland Electric 1,323,238,000 kwh
Toledo Edison 306,565,000 kwh
(d) Number of kwh. of electric energy and Mcf. of
natural or manufactured gas purchased outside the State in which
each such company is organized, or at the State line.
Ohio Edison 863,985,000 kwh
Penn Power 1,035,444,000 kwh
Cleveland Electric 110,948,000* kwh
Toledo Edison (72,221,000)* kwh
4. The following information for the reporting period with
respect to claimant and each interest it holds directly or
indirectly in an EWG or a foreign utility company, stating
monetary amounts in United States dollars:
(a) Name, location, business address and description
of the facilities used by the EWG or foreign utility company for
the generation, transmission and distribution of electric energy
for sale or for the distribution at retail of natural or
manufactured gas.
Not applicable.
(b) Name of each system company that holds an interest
in such EWG or foreign utility company and description of the
interest held.
Not applicable.
(c) Type and amount of capital invested, directly or
indirectly, by the holding company claiming exemption; any direct
or indirect guarantee of the security of the EWG or foreign
utility company by the holding company claiming exemption; and
any debt or other financial obligation for which there is
recourse, directly or indirectly, to the holding company claiming
exemption or another system company other than the EWG or foreign
utility company.
Not applicable.
(d) Capitalization and earnings of the EWG or foreign
utility company during the reporting period.
Not applicable.
- ----------------------
* Net kwh of purchases and non-monetary power exchange
transactions with wholesale customers outside the state.
(e) Identify any service, sales or construction
contract(s) between the EWG or foreign utility company and a
system company, and describe the services to be rendered or goods
sold and fees or revenues under such agreement(s).
Not applicable.
The above-named claimant has caused this statement to
be duly executed on its behalf by its authorized officer on this
8th day of November 1997.
FirstEnergy Corp.
By: /s/ Harvey L. Wagner
--------------------------
Title: Controller
CORPORATE SEAL
Attest: /s/ Nancy C. Ashcom
------------------------
Title: Corporate Secretary
Name, title, and address of officer to whom notices and
correspondence concerning this statement should be addressed:
Harvey L. Wagner Controller
- --------------------------------
(Name) (Title)
76 South Main Street, Akron, OH 44308
- -------------------------------------
(Address)
Exhibit A
FIRSTENERGY CORP.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma balance sheet of FirstEnergy at
June 30, 1997, set forth below, gives effect to the Merger as if
it had been consummated on that date. The unaudited pro forma
statements of income of FirstEnergy for the twelve month period
ended June 30, 1997 set forth below, give effect to the Merger as
if it had been consummated on July 1, 1996. These statements are
prepared based on accounting for the Merger as a purchase with
the assumptions specified in the notes thereto. Purchase
accounting adjustments are estimates and therefore subject to
change.
The following pro forma financial information has been
prepared from, and should be read in conjunction with, the
historical consolidated financial statements and related notes
thereto of Ohio Edison and Centerior. The following information
does not reflect any potential cost reductions or synergies
associated with the Merger and is not necessarily indicative of
the financial position or operating results that would have
occurred had the Merger been consummated on the date as of which,
or at the beginning of the periods for which, the Merger is being
given effect, nor is it necessarily indicative of future
financial position or operating results.
The unaudited pro forma financial statements reflect a
fair value adjustment of $1.25 billion to reduce the carrying
value of the nuclear generating units at FirstEnergy, as required
by Accounting Principles Board Opinion 16. This fair value
adjustment is an estimated amount; the ultimate fair value of
Cleveland Electric's and Toledo Edison's net assets to be
determined is likely to require an adjustment which may be more
or less than the amount used for purposes of these unaudited pro
forma financial statements. Any difference between the ultimate
net asset valuation and the valuation assumed in the unaudited
pro forma financial statements will be reflected as an adjustment
of the goodwill recognized in connection with the Merger.
<TABLE>
FIRSTENERGY CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
June 30, 1997
(In millions)
<CAPTION>
Pro Forma Pro Forma
Ohio Edison Centerior Adjustments Combined
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Utility plant, net of depreciation $5,256 $ 6,799 $ (1,250) (3a) $10,805
Other property and investments 1,132 1,142 2,274
Current assets 513 480 (13) (3b) 980
Regulatory assets 1,656 2,248 (750) (3a) 3,154
Goodwill 0 0 904 (3c) 904
Other deferred charges 265 270 535
------ ------- ------- -------
Total Assets $8,822 $10,939 $(1,109) $18,652
====== ======= ======= =======
Capitalization and Liabilities
Common shareholders' equity:
Common stock and other paid-in capital $2,101 $2,321 $ (755) (3d) $3,667
Retained earnings (deficit) 596 (393) 393 (3d) 596
Unallocated ESOP common shares (150) 0 0 (150)
------ ------ ------ ------
Total common shareholders' equity 2,547 1,928 (362) 4,113
Preferred stock:
Not subject to mandatory redemption 161 0 (161) (3e) 0
Subject to mandatory redemption 20 0 (20) (3e) 0
Preferred stock of consolidated subsidiaries:
Not subject to mandatory redemption 51 448 161 (3e) 660
Subject to mandatory redemption 15 174 6 (3e)(3f) 195
Ohio Edison obligated mandatorily redeemable
preferred securities of subsidiary trust hold-
ing solely Ohio Edison subordinated debentures 120 0 120
Long-term debt 2,369 4,238 16 (3f) 6,623
------ ------- ------- -------
Total capitalization 5,283 6,788 (360) 11,711
Current liabilities 1,295 1,062 (13) (3b) 2,344
Accumulated deferred income taxes 1,742 1,896 (690) (3k) 2,948
Accumulated deferred investment tax credits 192 246 (64) (3k) 374
Other liabilities 310 947 18 (3g) 1,275
------ ------- ------- -------
Total Capitalization and Liabilities $8,822 $10,939 $(1,109) $18,652
====== ======= ======= =======
</TABLE>
<TABLE>
FIRSTENERGY CORP.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Twelve Months Ended June 30, 1997
(In millions, except per share amounts))
- --------------------------------------------------------------------------------------------------
<CAPTION>
Pro Forma Pro Forma
Ohio Edison Centerior Adjustments Combined
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Operating revenues $2,457 $2,563 $(13) (3h) $5,007
------ ------ ---- ------
Fuel and purchased power 435 475 (3) (3h) 907
Other operation and maintenance expenses 679 783 (12) (3h) 1,450
------ ------ ---- ------
Total operation and maintenance expenses 1,114 1,258 (15) 2,357
Depreciation and amortization, net 399 352 (75) (3i) 676
General taxes 234 312 2 (3h) 548
Income taxes 186 125 26 (3k) 337
------ ------ ---- ------
Total operating expense and taxes 1,933 2,047 (62) 3,918
------ ------ ---- ------
Operating income 524 516 49 1,089
Other income (expense) 48 (14) (22) (3i) 12
------ ------ ---- ------
Total income 572 502 27 1,101
------ ------ ---- ------
Interest charges 240 324 564
Allowance for borrowed funds used during
construction and capitalized interest (2) (2) (4)
Subsidiaries' preferred stock dividend
requirements 16 54 12 (3j) 82
------ ------ ---- ------
Net interest and other charges 254 376 12 642
Net income 318 126 15 459
Preferred stock dividend requirements 12 - (12) (3j) -
------ ------- ---- ------
Earnings on common stock $ 306 $ 126 $ 27 $ 459
====== ======= ==== ======
Average common shares outstanding 144 148 (70) 222
====== ======= ==== ======
Earnings per share of common stock $ 2.12 $ .85 $ 2.07
====== ======= ======
</TABLE>
FIRSTENERGY CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
- ----------------------------------------------------------------
Note 1 - Reclassifications
Certain reclassifications have been made to the
Centerior unaudited historical financial statements to conform to
the presentation expected to be used by the merged companies.
Note 2 - Exchange Ratios
Under the Merger Agreement, each outstanding share of
Ohio Edison Common Stock will be converted into one share of
FirstEnergy Common Stock, and each outstanding share of Centerior
Common Stock will be converted into 0.525 of a share of
FirstEnergy Common Stock. These conversion numbers were used in
computing share and per share amounts in the accompanying
unaudited pro forma combined condensed financial statements.
Note 3 - Pro Forma Adjustments
(a) As required by APB16, a pro forma adjustment has
been recognized by FirstEnergy to adjust the Cleveland Electric
and Toledo Edison nuclear generating units to fair value. Such
adjustment has been based upon the estimated discounted future
cash flows expected to be generated by their nuclear generating
units.
(b) A pro forma adjustment has been made to eliminate
accounts receivable and payable between Ohio Edison and Centerior
as of the balance sheet date.
(c) A pro forma adjustment has been made to recognize
goodwill in connection with the Merger. The goodwill represents
the excess of the purchase price over Centerior's net assets
after taking into account the adjustments described in (a) above.
The carrying cost for all other assets and liabilities (except as
described in (f) and (g) below) is assumed to be equal to fair
market value. If it is determined that the ultimate fair market
value of Centerior's net assets is more or less than their
estimated carrying value at the time of consummation, goodwill
would be adjusted accordingly. The purchase price was based on
the imputed value to holders of Centerior Common Stock using a
market value of Ohio Edison Common Stock of $20.125 per share.
(d) Pro forma equity adjustments recognize the
elimination of Centerior's accumulated deficit as of the
consummation of the Merger and the purchase price computed as
described in (c) above.
(e) Pro forma adjustments have been made to reclassify
Ohio Edison preferred stock outstanding to subsidiary preferred
stock outstanding on FirstEnergy's balance sheet.
(f)A pro forma adjustment has been made to recognize
Centerior's preferred stock of consolidated subsidiaries subject
to mandatory redemption and long-term debt at estimated fair
market value.
(g) A pro forma adjustment has been made to recognize
Centerior's net unamortized transition obligation related to
certain retirement benefits.
(h)Pro forma adjustments have been made to eliminate
revenue and expense transactions between Ohio Edison and
Centerior.
(i)Pro forma adjustments have been made to recognize
amortization of goodwill in connection with the Merger over a 40-
year period, offset by reductions in depreciation expense and
amortization of regulatory assets resulting from the assumed
revaluation of Centerior's assets described in (a) above.
(j)A pro forma adjustment has been made to reclassify
Ohio Edison's preferred stock dividend requirements to
subsidiaries' preferred stock dividend requirements (a reduction
to net income) on FirstEnergy's statement of income.
(k)Pro forma adjustments have been made for the
estimated tax effects of the adjustments discussed in (a), (f),
(g) and (i) above.
Exhibit B
FIRSTENERGY CORP.
Twelve Months Ended June 30, 1997
(In Millions)
Financial Data Schedule
Item No. Caption Heading
-------- ---------------
1 Total Assets $18,652
2 Total Operating Revenues $ 5,007
3 Net Income $ 459
