main8_k.htm
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) October 8, 2008
Commission
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Registrant;
State of Incorporation;
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I.R.S.
Employer
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Address; and Telephone
Number
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333-21011
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FIRSTENERGY
CORP.
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34-1843785
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(An
Ohio Corporation)
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76
South Main Street
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Akron,
OH 44308
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Telephone (800)736-3402
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333-145140-01
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FIRSTENERGY
SOLUTIONS CORP.
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31-1560186
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(An
Ohio Corporation)
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c/o
FirstEnergy Corp.
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76
South Main Street
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Akron,
OH 44308
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Telephone
(800)736-3402
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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
Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
On October 8, 2008,
to enhance their liquidity position in the face of the turbulent credit and bond
markets, FirstEnergy Corp. (FirstEnergy) and its subsidiaries,
FirstEnergy Solutions Corp. (FES) and FirstEnergy Generation Corp. (FGCO),
entered into a $300 million secured term loan facility (Facility), with Credit
Suisse (CS), as administrative agent and lender, and such other lenders as may
become parties to the Facility from time to time. Under the Facility,
FGCO is the borrower and FES and FirstEnergy are guarantors.
Generally, the
Facility is available to FGCO until October 7, 2009, with a minimum borrowing
amount of $100 million. Each borrowing will mature 30 days from the
date of borrowing (or, if earlier, on October 7, 2009), excluding any “blackout
periods” agreed upon by FirstEnergy and CS for the purpose of issuing registered
or Rule 144A securities. Blackout periods will commence on the first
day following the end of a fiscal quarter of FirstEnergy and shall end not later
than two days following the date on which earnings for FirstEnergy for such
fiscal quarter are publicly released. Once repaid, a loan may not be
reborrowed. The proceeds of the loans may be used for general corporate purposes
of FirstEnergy and its subsidiaries, other than, with certain exceptions, the
payment of indebtedness under other revolving credit or term loan credit
facilities of FirstEnergy and its subsidiaries.
Borrowings under the
Facility may take the form of alternate base rate loans or Eurodollar rate
loans. Outstanding alternate base rate loans will bear interest on
each day at a fluctuating rate per annum equal to the sum of the higher of CS’s
prime rate in effect on such day and the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1.00%, plus the applicable margin, which is the higher
of 2.00% and a rate determined on the basis of FirstEnergy’s and CS’s applicable
credit default swap spread. The interest on alternate base rate loans will be
payable quarterly in arrears on the last business day of each quarter, on the
maturity date of the loan, on the date such alternate base rate loan would be
converted to a Eurodollar rate loan and on the date such loan is paid in full.
Outstanding Eurodollar rate loans will bear interest for interest periods of one
month at a rate per annum equal to the sum of the applicable London Interbank
Offered Rate (LIBOR) two days prior to the commencement of the interest period
for such Eurodollar rate loan, plus the applicable margin, which is the higher
of 3.00% and a rate determined on the basis of FirstEnergy’s and CS’s applicable
credit default swap spread. The interest on Eurodollar rate loans
will be payable on the last day of each interest period for such Eurodollar rate
loan, on the maturity date for the loan, on the date such Eurodollar rate loan
would be converted to an alternate base rate loan and on the date such loan is
paid in full.
In addition, under
the terms of the Facility, FGCO has agreed to pay each lender, through CS, an
unused commitment fee equal to 0.75% per annum of the daily unused amount of the
commitment of such lender during the preceding quarter or other period starting
with the date of the Facility or at the completion of the 364 day availability
period or the date on which the commitment of such lender would expire or be
terminated.
The loans under the
Facility are subject to mandatory prepayment if FirstEnergy or any subsidiary
incurs or issues debt for borrowed money owed to, or issues equity to, a person
other than FirstEnergy or any of its subsidiaries. However, any debt
incurred or issued under certain credit facilities in existence as of the date
of the new Facility will not result in a mandatory prepayment.
In addition to
customary conditions precedent to borrowing under the Facility, FGCO must issue
to the administrative agent for its benefit and the benefit of the lenders, a
first mortgage bond pursuant to its General Mortgage Indenture and Deed of Trust
dated as of June 19, 2008, to The Bank of New York Trust Company, N.A. (FGCO
Mortgage). It is a further condition that the aggregate outstanding
amount of bonds issued under the FGCO Mortgage must not exceed 60% (or such
higher percentage as may be agreed to by CS) of the lesser of the cost or fair
value of all property additions (as determined in accordance with the FGCO
Mortgage). Also, certain existing credit facilities of FirstEnergy
and its subsidiaries must be drawn in full, and FirstEnergy must engage an
investment bank satisfactory to CS to publicly sell or privately place debt or
equity securities of FirstEnergy or any of its subsidiaries, the proceeds of
which would be used to provide funds for the prepayment in full of the loans and
termination of the Facility.
The Facility
contains customary events of default, including, without limitation,
defaults relating to or arising from non-payment, breach of covenants,
inaccuracy of representations and warranties, cross-defaults to other
indebtedness (including the occurrence of an event of default under the FGCO
Mortgage), bankruptcy and insolvency events, judgments, ERISA defaults,
invalidity of loan and collateral documents, and change of
control. If an event of default under the Facility occurs and is
continuing, CS may declare the commitment of each lender to make loans to be
terminated and declare the unpaid principal amount of all outstanding loans and
interests accrued under the Facility immediately due and payable, and the
lenders may exercise their other rights and remedies under the Facility and the
FGCO Mortgage.
FGCO, FES and
FirstEnergy are subject to certain affirmative and negative covenants, including
limitations on the ability to sell, lease, transfer or dispose of assets, to
grant or permit liens upon properties to secure debt, to merge or consolidate,
to enter into any prohibited transactions as defined in the Employee Retirement
Income Security Act of 1974, to use the proceeds of any borrowing for prohibited
purposes or to make certain payments on, or reduce or terminate the lending
commitments under, certain other indebtedness. Also, FirstEnergy must
maintain a debt to capitalization ratio of no more than 0.65 to 1.00, determined
as of the last day of each fiscal quarter.
The foregoing is a
summary description of certain terms of the Facility and is qualified in its
entirety by reference to the Facility, which FirstEnergy intends to file as an
exhibit to its quarterly report on Form 10-Q for the quarter ending September
30, 2008.
For a more complete
discussion of the liquidity position of FirstEnergy and its subsidiaries, see
FirstEnergy’s letter to the investment community filed by the registrants with
the SEC on Form 8-K on October 9, 2008.
Forward-Looking Statements:
This Form 8-K includes forward-looking statements based on information currently
available to management. Such statements are subject to certain risks and
uncertainties. These statements include declarations regarding management’s
intents, beliefs and current expectations. These statements typically
contain, but are not limited to, the terms “anticipate,” “potential,” “expect,”
“believe,” “estimate” and similar words. Forward-looking statements
involve estimates, assumptions, known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Actual
results may differ materially due to the speed and nature of increased
competition in the electric utility industry and legislative and regulatory
changes affecting how generation rates will be determined following the
expiration of existing rate plans in Ohio and Pennsylvania, the impact of the
PUCO’s rulemaking process on the Ohio Companies’ Electric Security Plan and
Market Rate Offer filings, economic or weather conditions affecting future sales
and margins, changes in markets for energy services, changing energy and
commodity market prices and availability, replacement power costs being higher
than anticipated or inadequately hedged, the continued ability of FirstEnergy’s
regulated utilities to collect transition and other charges or to recover
increased transmission costs, maintenance costs being higher than anticipated,
other legislative and regulatory changes including revised environmental
requirements and possible greenhouse gas emissions regulation, the impact of the
U.S. Court of Appeals’ July 11, 2008 decision to vacate the CAIR rules and the
scope of any laws, rules or regulations that may ultimately take their place,
the uncertainty of the timing and amounts of the capital expenditures needed to,
among other things, implement the Air Quality Compliance Plan (including that
such amounts could be higher than anticipated) or levels of emission reductions
related to the Consent Decree resolving the New Source Review litigation or
other potential regulatory initiatives, adverse regulatory or legal decisions
and outcomes (including, but not limited to, the revocation of necessary
licenses or operating permits and oversight by the Nuclear Regulatory Commission
including, but not limited to, the Demand for Information issued to FENOC on May
14, 2007) as disclosed in the registrants’ SEC filings, the timing and outcome
of various proceedings before the PUCO (including, but not limited to, the
Distribution Rate Cases and the generation supply plan filing for the Ohio
Companies and the successful resolution of the issues remanded to the PUCO by
the Supreme Court of Ohio regarding the Rate Stabilization Plan and the Rate
Certainty Plan, including the recovery of deferred fuel costs) and Met-Ed’s and
Penelec’s transmission service charge filings with the PPUC (as well as the
resolution of the Petitions for Review filed with the Commonwealth Court of
Pennsylvania with respect to the transition rate plan for Met-Ed and Penelec),
the continuing availability of generating units and their ability to continue to
operate at or near full capacity, the ability to comply with applicable state
and federal reliability standards, the ability to accomplish or realize
anticipated benefits from strategic goals (including employee workforce
initiatives), the ability to improve electric commodity margins and to
experience growth in the distribution business, changing market conditions that
could affect the value of assets held in the registrants’ nuclear
decommissioning trust funds, pension funds and other trust funds, the ability to
access the public securities and other capital and credit markets in accordance
with FirstEnergy’s financing plan and the cost of such capital, changes in
general economic conditions affecting the registrants, the state of the capital
and credit markets affecting the registrants, and the risks and other factors
discussed from time to time in the registrants’ SEC filings, and other similar
factors. The foregoing review of factors should not be construed as
exhaustive. New factors emerge from time to time, and it is not
possible for management to predict all such factors, nor assess the impact of
any such factor on the registrants’ business or the extent to which any factor,
or combination of factors, may cause results to differ materially from those
contained in any forward-looking statements. Dividends declared from time to
time on FirstEnergy’s common stock during any annual period depend on
circumstances considered by FirstEnergy’s Board of Directors at the time of the
actual declarations. The registrants expressly disclaim any current
intention to update any forward-looking statements contained herein as a result
of new information, future events, or otherwise.
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, each Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
October 15,
2008
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FIRSTENERGY
CORP.
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Registrant
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FIRSTENERGY SOLUTIONS
CORP.
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Registrant
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Harvey L.
Wagner
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Vice
President, Controller
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and Chief
Accounting Officer
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