2.2.0.25falsefalse00202 - Disclosure - Mergertruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
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<!-- Begin Block Tagged Note 2 - us-gaap:BusinessCombinationDisclosureTextBlock-->
<div style="font-family: Helvetica,Arial,sans-serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. MERGER</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Merger</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">On February 25, 2011, the merger between FirstEnergy and Allegheny closed. Pursuant to the terms of
the Agreement and Plan of Merger among FirstEnergy, Element Merger Sub, Inc., a Maryland
corporation and a wholly-owned subsidiary of FirstEnergy (Merger Sub), and AE, Merger Sub merged
with and into AE, with AE continuing as the surviving corporation and becoming a wholly-owned
subsidiary of FirstEnergy. As part of the merger, AE shareholders received 0.667 of a share of
FirstEnergy common stock for each share of AE common stock outstanding as of the date the merger
was completed, and all outstanding AE equity-based employee compensation awards were converted into
FirstEnergy equity-based awards on the same basis.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">
The merger created a combined company with increased scale and scope and greater diversification
in energy delivery, generation and transmission. The combined company is the largest
U.S. diversified electric utility by customers and operates one of the largest unregulated power
generation fleets in the United States with FirstEnergy’s total current capacity of approximately
23,000 MW, which includes approximately 3,000 MW of regulated generation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The total consideration in the merger was based on the closing price of a share of FirstEnergy
common stock on February 24, 2011, the day prior to the date the merger was completed, and was
calculated as follows (in millions, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares of Allegheny common stock outstanding on February 24, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">170</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exchange ratio
</div></td>
<td> </td>
<td> </td>
<td align="right">0.667</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Number of shares of FirstEnergy common stock issued
</div></td>
<td> </td>
<td> </td>
<td align="right">113</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Closing price of FirstEnergy common stock on February 24, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">38.16</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of shares issued by FirstEnergy
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,327</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value of replacement share-based compensation awards relating to pre-merger service
</div></td>
<td> </td>
<td> </td>
<td align="right">27</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total consideration transferred
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,354</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The preliminary allocation of the total consideration transferred to the assets acquired and
liabilities assumed includes adjustments for the fair value of coal contracts, energy supply
contracts, emission allowances, unregulated property, plant and equipment, derivative instruments,
goodwill, intangible assets, long-term debt and deferred income taxes. The preliminary allocation
of the purchase price is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Preliminary</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Purchase Price</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(In millions)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Allocation</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,509</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">9,656</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments
</div></td>
<td> </td>
<td> </td>
<td align="right">138</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Goodwill
</div></td>
<td> </td>
<td> </td>
<td align="right">952</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other noncurrent assets
</div></td>
<td> </td>
<td> </td>
<td align="right">1,262</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(714</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noncurrent liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,453</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term debt and other long-term obligations
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,996</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,354</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Assumptions and estimates underlying the fair value adjustments are subject to change pending
further review of the assets acquired and liabilities assumed.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The excess of the purchase price over the estimated fair values of the assets acquired and
liabilities assumed was recognized as goodwill. The Allegheny delivery, transmission and generation
businesses have been assigned to the Regulated Distribution, Regulated Independent Transmission and
Competitive Energy Services segments, respectively. The preliminary estimate of goodwill from the
merger of $952 million was assigned entirely to the Competitive Energy Services segment based on
expected synergies from the merger. The goodwill is not deductible for tax purposes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Total goodwill recognized by segment in FirstEnergy’s Consolidated Balance Sheet is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Competitive</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Regulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Regulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Energy</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Independent</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Other/</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(In millions)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Distribution</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Services</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Transmission</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Corporate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,551</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,575</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Merger with Allegheny
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">952</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">952</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,551</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">976</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,527</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The preliminary valuation of the additional intangible assets and liabilities recorded as
result of the merger is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Preliminary</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(In millions)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Valuation</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization Period</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Above market contracts:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Energy supply contracts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">189</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">10 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">NUG contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">124</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">25 years</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Coal supply contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">525</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">8 years</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">838</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Below market contracts:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">NUG contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">143</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">13 years</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Coal supply contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">86</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">7 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Transportation contract
</div></td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">8 years</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">264</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right">574</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value measurements of intangible assets and liabilities were primarily based on
significant unobservable inputs and thus represent level 3 measurements as defined in accounting
guidance for fair value measurements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of Allegheny’s energy, NUG and gas transportation contracts, both above-market and
below-market, were estimated based on the present value of the above/below market cash flows
attributable to the contracts based on the contract type, discounted by a current market interest
rate consistent with the overall credit quality of the portfolio. The above/below market cash flows
were estimated by comparing the expected cash flow based on existing contracted prices and expected
volumes with the cash flows from estimated current market contract prices for the same expected
volumes. The estimated current market contract prices were derived considering current market
prices, such as the price of energy and transmission, miscellaneous fees and a normal profit
margin. The weighted average amortization period was determined based on the expected volumes to be
delivered over the life of the contract.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of coal supply contracts was determined in a similar manner based on the present
value of the above/below market cash flows attributable to the contracts. The fair value of these
contracts will be amortized based on expected deliveries under each contract.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Total intangible assets recorded on FirstEnergy’s Consolidated Balance Sheet as of March 31, 2011
are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intangible</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(In millions)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Assets</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Purchase contract assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">NUG
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">241</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">OVEC
</div></td>
<td> </td>
<td> </td>
<td align="right">52</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">293</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Coal contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">520</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">FES customer intangible assets
</div></td>
<td> </td>
<td> </td>
<td align="right">132</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Energy contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">130</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">782</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right">1,075</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Other intangible assets acquired in the Allegheny merger include land easements and software,
having a fair value of $126 million, are included in “Property, plant and equipment” on
FirstEnergy’s Consolidated Balance Sheet as of March 31, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In connection with the merger, FirstEnergy recorded approximately $82 million ($68 million net of
tax) and $14 million ($10 million net of tax) of merger transaction costs during the first quarter
of 2011 and 2010, respectively. These costs are included in “Other operating expenses” in the
Consolidated Statement of Income. Merger transaction costs recognized in the first quarter of 2011
include $56 million ($47 net of tax) of change in control and other benefit payments to AE
executives.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">FirstEnergy also recorded approximately $75 million in merger integration costs during the first
quarter of 2011, including an inventory valuation adjustment. In connection with the
merger, FirstEnergy reviewed its inventory levels as a result of combining the inventory of both
companies. Following this review FirstEnergy management determined the combined inventory stock
contained excess and duplicative items. FirstEnergy management also adopted a consistent excess and
obsolete inventory practice for the combined entity. Application of the revised practice, in
conjunction with those items identified as excess and duplicative, resulted in an inventory
valuation adjustment of $67 million ($42 million net of tax).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The amounts of revenue and earnings of Allegheny since the merger date included in FirstEnergy’s
Consolidated Statement of Income for the quarter ended March 31, 2011 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>February 26 -</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(In millions, except per share amounts)</b><sup style="font-size: 85%; vertical-align: text-top"> </sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>March 31, 2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">437</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Income<sup style="font-size: 85%; vertical-align: text-top">(1)</sup>
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(46</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic Earnings Per Share
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.13</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted Earnings Per Share
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.13</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top">(1)</sup></td>
<td> </td>
<td>
<div style="text-align: justify">Includes Allegheny’s
after-tax merger costs of $52 million.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Pro Forma Financial Information</i>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following unaudited pro forma financial information reflects the consolidated results of
operations of FirstEnergy as if the merger with Allegheny had taken place on January 1, 2010. The
unaudited pro forma information has been calculated after applying FirstEnergy’s accounting
policies and adjusting Allegheny’s results to reflect the depreciation and amortization that would
have been charged assuming fair value adjustments to property, plant and equipment, debt and
intangible assets had been applied on January 1, 2010, together with the consequential tax effects.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">FirstEnergy and Allegheny both incurred non-recurring costs directly related to the merger that
have been included in the pro forma earnings presented below. Approximately $83 million and $27
million of combined pre-tax transaction costs were incurred in the three months ended March 31,
2011 and March 31, 2010, respectively. In addition, in the three months ended March 31, 2011, $75
million of pre-tax merger integration costs and $24 million of charges from merger settlements
approved by regulatory agencies have been recognized. Charges resulting from merger settlements are
not expected to be material in future periods.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The unaudited pro forma financial information has been presented for illustrative purposes only and
is not necessarily indicative of results of operations that would have been achieved had the pro
forma events taken place on the dates indicated, or the future consolidated results of operations
of the combined company.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>March 31</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>(Pro forma amounts in millions, except per share amounts)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,786</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,685</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to FirstEnergy
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">137</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">255</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic Earnings Per Share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.33</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.61</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted Earnings Per Share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.33</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.61</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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<!-- Begin Block Tagged Notefalsefalsefalsefalsefalse | Otherus-types:textBlockItemTypestringDescription of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable).Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141
-Paragraph 51, 52
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 88-16
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 67-73
Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph F4
-Subparagraph e
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