FirstEnergy Solutions – Court approves Comprehensive Settlement Agreement

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September 26, 2018 – The Court hearing the FirstEnergy Solutions case approved [Docket No. 1465] the settlement agreement (the “Settlement Agreement”), dated August 26, 2018, by and between (i) FirstEnergy Corp. (“FirstEnergy” or the “Company”), (ii) the FES Creditor Groups (consisting of key creditors of the Company’s wholly-owned subsidiary FirstEnergy Solutions Corp. and its subsidiaries, collectively “FES”), (iii) the FES Debtors (consisting of FES and a further wholly-owned subsidiary of the Company, FirstEnergy Nuclear Operating Company, or “FENOC”) and (iv) the FES Debtors’ Unsecured Creditors Committee. 
 
In a press release announcing the Settlement Agreement, the Company noted, “The definitive agreement defines and quantifies all of FirstEnergy’s obligations with respect to the FES and FENOC bankruptcies and allows FirstEnergy to turn its full focus toward the continued successful implementation of its regulated growth strategies.” In a further release issued to mark the Court’s approval of the Settlement Agreement, the Company’s President and Chief Executive Officer Charles E. Jones added, “This is an exciting development for FirstEnergy. Less than two years ago, we committed to exiting competitive markets, so that our company could focus on growing our regulated businesses.  With the court’s approval of this fair and equitable settlement agreement, we are looking forward to focusing on our distribution and transmission businesses and providing shareholders with stable, predictable growth.  We believe this is an important milestone for our company, and our customers.”
 
Key terms of the Settlement Agreement include:

Separation: Pursuant to terms of the Settlement Agreement, the Company, along with all affiliates other than the FES Debtors will enter into a separation agreement with the FES Debtors to implement the separation of the FES Debtors and their businesses from the FE Non-Debtor Parties. Additionally, a business separation committee is to be established between the Company and the FES Debtors to review and determine issues that arise in the context of the separation of the FES Debtors’ businesses from those of the Company.
 
Cash Payments and New Senior Notes: Under the terms of the Settlement Agreement, upon effectiveness of the Debtors’ Plan, the Company will pay the FES Debtors $225 million and issue $628 million aggregate principal amount of senior notes (the “New FE Notes”) due on December 31, 2022 to the FES Debtors. The Company will also pay the FES Debtors a cash amount equal to the difference, if any, between the principal amount of New FE Notes and the market price of such New FE Notes at issuance, as determined pursuant to a formula set forth in the Settlement Agreement (the “Upfront Payment”). The New FE Notes will bear a fixed interest rate equal to the interpolated yield on U.S. Treasury securities with a term based on the Plan Effective Date and a maturity date of December 31, 2022 and be redeemable at par, plus accrued but unpaid interest, at any time after October 31, 2022 without premium or penalty. The New FE Notes will include other terms that are consistent with the Company’s 2.85% senior notes Series A, due 2022. 
 
Pleasants Power Plant and Retail Book Sale Process: Allegheny Energy Supply Company LLC (“AE Supply”), a wholly-owned subsidiary of the Company, will transfer all of its right, title and interest in the 1,300 megawatt Pleasants power plant located in Willow Island, West Virginia and related assets (the “Pleasants PS”), other than the McElroy’s Run impoundment, to the FES Debtors or another entity, such as a newly formed subsidiary of an FES Debtor, or third party, as the case may be, as directed by the FES Debtors (the “Pleasants Purchaser”) while retaining certain specified liabilities (including all liabilities related to the McElroy’s Run impoundment), subject to the terms and conditions of an asset transfer agreement to be negotiated by the parties prior to December 31, 2018. 

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