Debt capacity is subject to the consolidated interest coverage ratio in the 2021 Credit Facilities. As of December 31, 2022, FirstEnergy could incur approximately $780 million of incremental interest expense or incur an approximate $1.9 billion reduction to the consolidated interest coverage earnings numerator, as defined under the covenant, and FE would remain within the limitations of the financial covenant required by the 2021 Credit Facilities. Cash Requirements and Commitments FirstEnergy has certain obligations and commitments to make future payments under contracts, including contracts executed in connection with certain of the planned construction expenditures. As of December 31, 2022 (Undiscounted): Total 2023 2024-2025 2026-2027 Thereafter (In millions) Long-term debt(1) $ 21,641 $ 344 $ 3,269 $ 3,079 $ 14,949 Short-term borrowings 100 100 — — — Interest on long-term debt 10,669 925 1,690 1,458 6,596 Operating leases(2) 346 56 101 84 105 Finance leases(2) 33 9 10 9 5 Fuel and purchased power(3) 2,883 635 962 555 731 Committed investments(4) 3,767 1,393 1,246 1,128 — Pension funding(5) 2,287 — 250 675 1,362 Total $ 41,726 $ 3,462 $ 7,528 $ 6,988 $ 23,748 (1) Excludes unamortized discounts and premiums, fair value accounting adjustments and finance leases. (2) See Note 8, "Leases," of the Notes to Consolidated Financial Statements. (3) Based on estimated annual amounts under contract with fixed or minimum quantities. (4) Amounts represent committed capital expenditures and other capital-like investments that earn a return (5) As discussed below, FirstEnergy does not expect to have a required contribution to the pension plan until 2025. Excluded from the table above are estimates for the cash outlays from power purchase contracts entered into by most of the Utilities and under which they procure the power supply necessary to provide generation service to their customers who do not choose an alternative supplier. Although actual amounts will be determined by future customer behavior, consumption levels and power prices, management currently estimates these cash outlays will be approximately $4.3 billion in 2023. The table above also excludes AROs, reserves for litigation, injuries and damages and environmental remediation since the amount and timing of the cash payments are uncertain. The table also excludes accumulated deferred income taxes since cash payments for income taxes are determined based primarily on taxable income for each applicable fiscal year. FirstEnergy’s pension and OPEB funding policy is based on actuarial computations using the projected unit credit method. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which, among other things, extended shortfall amortization periods and modification of the interest rate stabilization rules for single-employer plans thereby impacting funding requirements. As a result, FirstEnergy does not currently expect to have a required contribution to the pension plan until 2025, which, based on various assumptions, including annual expected rate of return on assets of 8.0% in 2023, is expected to be approximately $250 million. However, FirstEnergy may elect to contribute to the pension plan voluntarily. Changes in Cash Position As of December 31, 2022, FirstEnergy had $160 million of cash and cash equivalents and $46 million of restricted cash compared to $1,462 million of cash and cash equivalents and $49 million of restricted cash as of December 31, 2021, on the Consolidated Balance Sheets. Cash Flows From Operating Activities FirstEnergy’s most significant sources of cash are derived from electric service provided by its distribution and transmission operating subsidiaries. The most significant use of cash from operating activities is buying electricity to serve non-shopping customers and paying fuel suppliers, employees, tax authorities, lenders and others for a wide range of materials and services. Net cash provided from operating activities was $2,683 million during 2022, $2,811 million during 2021, and $1,423 million during 2020. The decrease from 2021 to 2022 is primarily due to: • Rate refunds and rate credits provided to Ohio customers during 2022 under the PUCO-approved Ohio Stipulation, • Higher operating expenses from lower capitalization of certain vegetation management and corporate support costs, • Higher materials supplies inventory, primarily due to increased coal and fuel supply inventories to support regulated generation plant operations, 48
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