GUARANTEES AND OTHER ASSURANCES FirstEnergy has various financial and performance guarantees and indemnifications which are issued in the normal course of business. These contracts include performance guarantees, stand-by LOCs, debt guarantees, surety bonds and indemnifications. FirstEnergy enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. The maximum potential amount of future payments FirstEnergy and its subsidiaries could be required to make under these guarantees as of December 31, 2022, was approximately $1.0 billion, as summarized below: Guarantees and Other Assurances Maximum Exposure (In millions) FE's Guarantees on Behalf of its Consolidated Subsidiaries Deferred compensation arrangements $ 445 Vehicle leases 75 Other 8 528 FE's Guarantees on Other Assurances Surety Bonds 326 Deferred compensation arrangements 119 LOCs 4 449 Total Guarantees and Other Assurances $ 977 Collateral and Contingent-Related Features In the normal course of business, FE and its subsidiaries may enter into physical or financially settled contracts for the sale and purchase of electric capacity, energy, fuel and emission allowances. Certain agreements contain provisions that require FE or its subsidiaries to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon FE's or its subsidiaries' credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. As of December 31, 2022, $50 million of net cash collateral has been posted by FE or its subsidiaries and is included in "Prepaid taxes and other current assets" on FirstEnergy's Consolidated Balance Sheets. FE or its subsidiaries are holding $206 million of net cash collateral as of December 31, 2022, from certain generation suppliers, primarily due to the rise in power prices, and such amount is included in "Other current liabilities" on FirstEnergy's Consolidated Balance Sheets. These credit-risk-related contingent features stipulate that if the subsidiary were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it would be required to provide additional collateral. The following table discloses the potential additional credit rating contingent contractual collateral obligations as of December 31, 2022: Potential Collateral Obligations Utilities and Transmission Companies FE Total (In millions) Contractual Obligations for Additional Collateral Upon Further Downgrade $ 70 $ — $ 70 Surety Bonds (collateralized amount)(1) 61 249 310 Total Exposure from Contractual Obligations $ 131 $ 249 $ 380 (1) Surety Bonds are not tied to a credit rating. Surety Bonds' impact assumes maximum contractual obligations, which is ordinarily 100% of the face amount of the surety bond except with respect to $39 million of surety obligations for which the collateral obligation is capped at 60% of the face amount, and typical obligations require 30 days to cure. MARKET RISK INFORMATION FirstEnergy uses various market risk sensitive instruments, including derivative contracts, primarily to manage the risk of price and interest rate fluctuations. FirstEnergy’s Enterprise Risk Management Committee, comprised of members of senior management, provides general oversight for risk management activities throughout FirstEnergy. 51
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