Monongahela Power Takes on New Debt to Pay for Harrison

FirstEnergy announced on Nov. 20 that its shell subsidiary Monongahela Power is issuing $1 billion in first mortgage bonds.  Proceeds from these bonds will be used as follows:

(i) repay at maturity $300 million of its First Mortgage Bonds, 7.95% Series due December 15, 2013,

(ii) redeem $120 million of its First Mortgage Bonds, 6.70% Series due June 15, 2014 (2014 Bonds),

(iii) repay a $572.7 million short-term promissory note originally issued on October 9, 2013 to its affiliate, Allegheny Energy Supply Company, LLC in connection with MP’s acquisition of the remaining ownership of the Harrison Power Station, and

(iv) for working capital needs and other general corporate purposes. [emphasis mine]

Here’s what FirstEnergy told the Securities and Exchange Commission about how it financed the Harrison Power Station deal:

The transaction resulted in AE Supply receiving net consideration of $1.1 billion and MP’s assumption of a $73.5 million pollution control note. Currently, the $1.1 billion net consideration was financed by MP through an equity infusion from FE of approximately $527 million and a note payable to AE Supply of approximately $573 million.

It is the note to AE Supply described in the SEC filing that Mon Power will pay off with the newly issued bonds.  We also find out that Mon Power will be assuming $73.5 million of the debt for Harrison’s scrubbers.  That’s even more interest that will show up on our electric bills.

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