8-KMaterial AgreementsFinancial EventsRegulation FD+1

FIRSTENERGY CORP 8-K Report, Material Agreement (Jul 22, 2021)

Filed July 22, 2021For Securities:FE

Summary

FirstEnergy Corp. (FE) has entered into a Deferred Prosecution Agreement (DPA) with the U.S. Attorney's Office for the Southern District of Ohio, resolving an investigation into the company's lobbying and governmental affairs activities related to Ohio House Bill 6 (HB 6). Under the DPA, FirstEnergy will pay a criminal monetary penalty of $230 million within sixty days. This penalty comprises $115 million to the U.S. Treasury and $115 million to the Ohio Development Service Agency to fund assistance programs for low-income Ohio electric utility customers. The company expects to recognize this penalty as an expense in the second quarter of 2021. The DPA also requires FirstEnergy to continue cooperating with the U.S. Attorney's Office, publish details of certain payments made in 2021, issue a public statement regarding its use of 501(c)(4) entities, and maintain its compliance and ethics programs. Upon full compliance with the DPA's obligations over a three-year term, the criminal charge of conspiracy to commit honest services wire fraud will be dismissed.

Key Highlights

  • 1FirstEnergy Corp. entered into a three-year Deferred Prosecution Agreement (DPA) with the U.S. Attorney's Office for the Southern District of Ohio to resolve an investigation into HB 6-related lobbying activities.
  • 2The company will pay a $230 million criminal monetary penalty, split evenly between the U.S. Treasury and the Ohio Development Service Agency for low-income customer assistance programs.
  • 3The $230 million penalty is expected to be recognized as an expense in the second quarter of 2021 and will not be recovered in customer rates or sought as a tax deduction.
  • 4The DPA requires FirstEnergy to continue its cooperation with the U.S. Attorney's Office, enhance transparency around certain payments, and strengthen its compliance and ethics programs.
  • 5The criminal charge of conspiracy to commit honest services wire fraud will be dismissed upon successful completion of the DPA's terms.
  • 6Amendments to the company's revolving credit facilities have been made to waive or modify certain covenants and defaults arising from the DPA, ensuring continued access to liquidity.

Frequently Asked Questions

FirstEnergy will pay a $230 million criminal monetary penalty. This amount is expected to be recognized as an expense in the second quarter of 2021. Importantly, the company stated that this penalty will not be recovered in customer rates nor will the company seek any tax deduction for it.

The $230 million will be divided equally: $115 million will be paid to the United States Treasury, and $115 million will be paid to the Ohio Development Service Agency to fund assistance programs for low-income Ohio electric utility customers.

FirstEnergy must continue to cooperate with the U.S. Attorney's Office, publish a list of payments made in 2021 to specific entities and update it quarterly, issue a public statement regarding its use of 501(c)(4) entities, and continue to implement and review its compliance and ethics programs.

The company has amended its revolving credit facilities to address certain representations, warranties, covenants, and potential events of default that arose from entering into the DPA. These amendments are designed to ensure FirstEnergy remains in compliance with its credit facilities and maintains access to its liquidity.