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FirstEnergy Solutions Corp. Announces Restructuring Support Agreement Under Which It Would Retain Retail Supply Business Beyond Chapter 11, As Privately Held Company

Will Terminate Agreement To Sell Retail Business To Constellation

January 23, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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FirstEnergy Solutions Corp. ("FES" or the "Company") today announced that the Company, the official committee of unsecured creditors (the "Committee"), two creditor groups representing a majority in aggregate amount of the Debtors' funded indebtedness and sale-leaseback certificates (the "Ad Hoc Groups"), and a group of creditors holding claims against FES and FirstEnergy Nuclear Operating Co. (the "FES Creditor Group") have reached agreement on the terms of a Restructuring Support Agreement ("RSA") that contemplates the Company's emergence from Chapter 11 protection in 2019 with continued ownership and operation of its retail and wholesale load-serving business.

FirstEnergy Solutions said that, "The RSA will enable the Company to emerge as a fully integrated Independent Power Producer focused on maximizing the operating and financial synergies of its retail, nuclear and fossil generating assets. The Company will continue operating its nuclear and fossil generation until their previously announced deactivation dates, with a possibility of running the units for an extended period if the Company obtains sufficient legislative support and meaningful market reforms. The Company continues to have constructive dialogue with important stakeholders at the state and federal levels for necessary financial support for its baseload assets that are a critical source of reliable and clean power in Ohio and Pennsylvania. The RSA will form the basis of a Plan of Reorganization which will ultimately be filed with the U.S. Bankruptcy Court for the Northern District of Ohio (the 'Bankruptcy Court')."

Specifically, the RSA contemplates that unsecured creditors will receive a distribution of newly-issued equity and/or cash based on value allocable to each Debtor and preserves the option for FES (with the consent of the bondholders party to the RSA and in consultation with the Committee) to make cash distributions to unsecured creditors receiving equity in order to optimize the capital structure of FES at emergence from bankruptcy (without increasing the value of recoveries to those creditors). The RSA also contemplates the reinstatement or payment in full of secured pollution control note claims against FirstEnergy Nuclear Generation, LLC and FirstEnergy Generation, LLC. Finally, the RSA incorporates the implementation of a global plan settlement, including settlements regarding the allowance and treatment of intercompany claims and the allocation of consideration received pursuant to the Settlement Agreement with FirstEnergy Corp. dated as of August 26, 2018 and approved by the Bankruptcy Court on September 26, 2018.

"This is an important step in ensuring the value of the FES estate is maximized for the benefit of all of our stakeholders," said Donald Schneider, President of FirstEnergy Solutions. "It is important to note that nothing in this agreement provides for the Company to continue operating its fossil or nuclear generation assets beyond their currently contemplated deactivation dates. Without legislative support and market reforms operating beyond those dates will be a significant challenge. We remain optimistic that such support may be forthcoming, will solidify the tax base and tremendous economic value these plants provide to the surrounding communities in Ohio and Pennsylvania."

The RSA sets out certain milestones for completing the FES restructuring including filing the Plan of Reorganization and the Disclosure Statement by February 8, 2019. The agreement calls for a Bankruptcy Court order approving the Disclosure Statement by March 21, 2019 and a Confirmation order by May 10, 2019. The initial milestone for the effective date of the Plan of Reorganization that allows the Company to emerge from Chapter 11 is September 15, 2019 which date shall automatically extend to October 31, 2019 in the event that the only remaining conditions precedent to the Plan Effective Date are regulatory approvals.

"The Company and its supporting parties are committed to investing in a best-in-class retail supply business that will have the financial resources to provide a compelling suite of solutions for its retail and wholesale customers. This will provide the opportunity for job creation in Ohio and for existing employees to leverage their strong customer relationships and commercial experience to regenerate the business back to its industry leading position. As a result, the Company has determined to terminate the agreement with respect to the proposed sale of its retail and wholesale load-serving business to Constellation, and will retain ownership of this business going forward. The termination of the retail sale will not affect service to existing FES customers. The Company expects that the transactions contemplated in the Plan will not impact the collateral it has posted to support its business operations," FirstEnergy Solutions said

The RSA also provides that January 23, 2019 will serve as a record date for holders of General Unsecured Claims (as defined in the RSA and attached plan term sheet) having an election to receive their distributions in equity rather than cash. Holders of General Unsecured Claims that exercise such election will be required to certify that they were the beneficial holder of their claims as of the record date and have not sold, transferred, or provided a participation in, or directly or implicitly agreed to do so following the record date. Any holder of a General Unsecured Claim who is not a party to the RSA who sells their claim following the record date, will not be permitted to make an election for equity under the plan, and any buyer of a General Unsecured Claim, which claim is not subject to the RSA as of the record date will only be permitted to receive cash on account of such claim. Notwithstanding the foregoing, no Holder of a General Unsecured Claim shall be prohibited from selling their General Unsecured Claim at any time after the record date, provided that the transferee of any such General Unsecured Claim will not be eligible to receive an equity distribution (unless such claim is subject to the RSA).

Parties to the RSA include each of the Debtors, including the Company, members of the Ad Hoc Groups, members of the FES Creditor Group, and the Committee.

The transactions contemplated by the Restructuring Support Agreement are subject to a variety of conditions, including the negotiation and execution of definitive documents evidencing and related to the proposed restructuring, approval of a disclosure statement in respect of the Plan pursuant to section 1125 of the Bankruptcy Code, entry of an order of the Bankruptcy Court confirming the Plan and the satisfaction of other conditions to the effectiveness of the Plan, including all regulatory approvals.

"FES looks forward to completing its restructuring in the next year to become a privately held company headquartered in Akron, Ohio focused on job creation, asset and customer growth opportunities for the future," FirstEnergy Solutions said

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