Ownership of Coal-fired Facilities

3 Months Ended

Mar. 31, 2013

4. Ownership of Coal-fired Facilities

DP&L has undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities with certain other Ohio utilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on the energy taken. The remaining expenses, investments in fuel inventory, plant materials and operating supplies, and capital additions are allocated to the owners in accordance with their respective ownership interests. As of March 31, 2013, DP&L had $39.0 million of construction work in process at such jointly owned facilities. DP&L’s share of the operating cost of such facilities is included within the corresponding line in the Condensed Consolidated Statements of Results of Operations and DP&L’s share of the investment in the facilities is included within Total net property, plant and equipment in the Condensed Consolidated Balance Sheets. Each joint owner provides their own financing for their share of the operations and capital expenditures of the jointly owned units and stations.

DP&L’s undivided ownership interest in such facilities as well as our wholly owned coal-fired Hutchings Station at March 31, 2013 is as follows:



	DP&L Share			DP&L Investment
Jointly owned production units and stations:	Ownership (%)	Summer Production Capacity (MW)	Gross Plant in Service ($ in millions)		Accumulated Depreciation ($ in millions)		Construction Work in Process ($ in millions)		SCR and FGD Equipment Installed and in Service (Yes/No)

Beckjord Unit 6	50.0	207	$	1	$	1	$	-	No
Conesville Unit 4	16.5	129		42		4		12	Yes
East Bend Station	31.0	186		8		3		3	Yes
Killen Station	67.0	402		301		4		9	Yes
Miami Fort Units 7 and 8	36.0	368		212		9		3	Yes
Stuart Station	35.0	808		202		7		10	Yes
Zimmer Station	28.1	365		169		15		2	Yes
Transmission (at varying percentages)		n/a		40		2		-
Total		2,465	$	975	$	45	$	39

Wholly owned production station:

Hutchings Station	100.0	365	$	-	$	-	$	-	No

Currently, our coal-fired generation units at Hutchings and Beckjord do not have SCR and FGD emission-control equipment installed. DP&L owns 100% of the Hutchings Station and has a 50% interest in Beckjord Unit 6. On July 15, 2011, Duke Energy, a co-owner at Beckjord Unit 6, filed their Long-term Forecast Report with the PUCO. The plan indicated that Duke Energy plans to cease production at the Beckjord Station, including our jointly owned Unit 6, in December 2014. This was followed by a notification by the joint owners to PJM of a planned June 1, 2015 deactivation of this station. Beckjord Unit 6 was valued at zero at the Merger date.

DP&L has informed PJM that Hutchings Unit 4 has incurred damage to a rotor and will be deactivated on June 1, 2013. In addition, DP&L has notified PJM that the remaining coal-fired units at Hutchings Station will be deactivated on June 1, 2015. The decision to deactivate these remaining coal-fired units has been made because these units are not equipped with the advanced environmental control technologies needed to comply with the MATS, and the expected cost of compliance with MATS for these units would exceed the expected return. Additionally, conversion of the coal-fired units to natural gas was investigated, but the cost of investment exceeded the expected return.

DPL revalued DP&L’s investment in the above plants at the estimated fair value for each plant at the Merger date.

DP&L [Member]

Ownership of Coal-fired Facilities

4. Ownership of Coal-fired Facilities

DP&L has undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities with certain other Ohio utilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on the energy taken. The remaining expenses, investments in fuel inventory, plant materials and operating supplies, and capital additions are allocated to the owners in accordance with their respective ownership interests. As of March 31, 2013, DP&L had $31.0 million of construction work in process at such jointly owned facilities. DP&L’s share of the operating cost of such facilities is included within the corresponding line in the Condensed Statements of Results of Operations and DP&L’s share of the investment in the facilities is included within Total net property, plant and equipment in the Condensed Balance Sheets. Each joint owner provides their own financing for their share of the operations and capital expenditures of the jointly owned unit or station.

DP&L’s undivided ownership interest in such facilities as well as our wholly owned coal-fired Hutchings Station at March 31, 2013, is as follows:



	DP&L Share			DP&L Investment
Jointly owned production units and stations:	Ownership (%)	Summer Production Capacity (MW)	Gross Plant in Service ($ in millions)		Accumulated Depreciation ($ in millions)		Construction Work in Process ($ in millions)		SCR and FGD Equipment Installed and in Service (Yes/No)

Beckjord Unit 6	50.0	207	$	76	$	64	$	-	No
Conesville Unit 4	16.5	129		28		2		4	Yes
East Bend Station	31.0	186		209		137		3	Yes
Killen Station	67.0	402		617		302		9	Yes
Miami Fort Units 7 and 8	36.0	368		361		148		3	Yes
Stuart Station	35.0	808		744		297		10	Yes
Zimmer Station	28.1	365		1,097		644		2	Yes
Transmission (at varying percentages)				97		59		-
Total		2,465	$	3,229	$	1,653	$	31

Wholly owned production station:

Hutchings Station	100.0	365	$	-	$	-	$	-	No

Currently, our coal-fired generation units at Hutchings and Beckjord do not have SCR and FGD emission-control equipment installed. DP&L owns 100% of the Hutchings Station and has a 50% interest in Beckjord Unit 6. On July 15, 2011, Duke Energy, a co-owner at the Beckjord Unit 6 facility, filed their Long-term Forecast Report with the PUCO. The plan indicated that Duke Energy plans to cease production at the Beckjord Station, including our jointly owned Unit 6, in December 2014. This was followed by a notification by the joint owners to PJM of a planned June 1, 2015 deactivation of this unit.

As part of the provisional DPL purchase accounting adjustments related to the Merger, four stations (Beckjord, Conesville, East Bend and Hutchings) had future expected cash flows that, when discounted, produced a zero fair market value. Since DP&L did not apply push down accounting, this valuation did not affect the book value of these stations’ or units’ valuation at DP&L.