Sale of Operating Assets and Discontinued Operations

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

SALE OF OPERATING ASSETS AND DISCONTINUED OPERATIONS

Sale of Operating Assets

Partial Sale of Electric Utilities Assets

On Sept. 18, 2012, Colorado Electric completed the sale of an undivided 50 percent ownership interest in the Busch Ranch Wind project for $25 million. Colorado Electric retains the remaining undivided interest and is the operator of this jointly owned facility. Commercial operation of the newly constructed wind farm commenced on Oct. 16, 2012. Colorado Electric will purchase our partner’s interest in the energy produced by the wind farm through a REPA. See Note 18 for further information.

Partial Sale of Oil and Gas Assets

On Sept. 27, 2012, our Oil and Gas segment sold a majority of its Bakken and Three Forks shale assets in the Williston Basin in North Dakota. An effective date of July 1, 2012, was used to determine the sales price.

Our Oil and Gas segment follows the full-cost method of accounting for oil and gas activities. Typically, this methodology does not allow for gain or loss on sale and proceeds from sale are credited against the full cost pool. Gain or loss recognition is allowed when such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. The Williston Basin asset sale significantly altered the relationship and accordingly we recorded a gain of $29 million with the remainder of the proceeds recorded as a reduction in the full cost pool. As a result of the reduction in the full cost pool from the sale of these assets, the depreciation, depletion, and amortization rate declined during 2013.

Net cash proceeds, subsequent to the true-up of all post-closing adjustments, were as follows (in thousands):

Cash proceeds received on date of sale	$	243,314
Less:
Post close adjustments	2,793
Transaction adviser fees	(1,400		)
Estimated payment for contractual obligation related to “back-in” fee *	(16,847		)
Net cash proceeds	$	227,860

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* Required payment, triggered by the sale of the property, arising from a contractual obligation contained in the original participation agreement with the property operator.

Discontinued Operations

Results of operations for discontinued operations have been classified as Income from discontinued operations, net of income taxes in the accompanying Consolidated Statements of Income. Assets and liabilities of the discontinued operations have been classified and reflected on the accompanying Consolidated Balance Sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations.” For comparative purposes, all prior periods presented have been restated to reflect the reclassification on a consistent basis.

Energy Marketing Segment

On Feb. 29, 2012, we sold the outstanding stock of our Energy Marketing segment, Enserco Energy Inc. The transaction was completed through a stock purchase agreement and certain other ancillary agreements. Net cash proceeds at date of sale were approximately $165 million, subject to final post-closing adjustments. Those proceeds represented $108 million received from the buyer and $58 million cash retained from Enserco before closing.

The buyer asserted certain purchase price adjustments, some that we accepted, and several that we disputed. The disputed claims were substantially resolved in our favor through a binding arbitration decision dated Jan. 17, 2014. We expensed $1.4 million in 2012, relative to purchase price adjustments we accepted through a partial settlement agreement with the buyer, and an additional $1.1 million in 2013 relative to the claims assigned to arbitration. Loss from discontinued operations was $0.9 million and $7.0 million for the twelve months ended Dec. 31, 2013 and 2012, respectively. Results for 2013 include the settlement of unresolved purchase price adjustments.

Operating results of the Energy Marketing segment included in Income (loss) from discontinued operations, net of tax on the accompanying Consolidated Statements of Income were as follows (in thousands):

For the Years Ended Dec. 31,	2013			2012			2011
Revenue	$	—		$	(604	)	$	41,101
Pre-tax income (loss) from discontinued operations	—			(6,061		)	14,838
Pre-tax gain (loss) on sale	(1,391		)	(4,184		)	—
Income tax (expense) benefit	507			3,268			(5,473		)
Income (loss) from discontinued operations, net of tax (a)	$	(884	)	$	(6,977	)	$	9,365

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(a) 2012 includes transaction related costs, net of tax, of $2.5 million for the year ended Dec. 31, 2012.

Total indirect corporate costs and inter-segment interest expenses previously allocated to Enserco were not reclassified to discontinued operations in accordance with GAAP and instead have been reclassified to our Corporate segment.