Generation Separation (Notes)

12 Months Ended

Dec. 31, 2017

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Discontinued Operations

Discontinued Operations

On January 1, 2016, DPL closed on the sale of DPLER, its competitive retail business. The sale agreement was signed on December 28, 2015, and DPL recorded a gain on this transaction of $49.2 million in the first quarter of 2016. The gain included the impact of DPLER’s liability to DP&L that transferred with the sale on January 1, 2016.

Operating activities related to DPLER have been reclassified to "Discontinued operations" in the Consolidated Statements of Operations for the years ended December 31, 2016 and 2015.

The following table summarizes the revenues, cost of revenues, operating expenses and income tax of discontinued operations for the periods indicated:

	Years ended December 31,
$ in millions	2016			2015
Revenues	$	—		$	340.9
Cost of revenues	—			(307.0		)
Operating expenses	(0.7		)	(22.5		)
Income / (loss) from discontinued operations before income tax	(0.7		)	11.4
Gain from disposal of discontinued operations	49.2			—
Income tax expense / (benefit) from discontinued operations	19.2			(1.0		)
Income from discontinued operations	$	29.3		$	12.4

Cash flows related to discontinued operations are included in our Consolidated Statements of Cash Flows. Cash flows from operating activities for discontinued operations were $(0.7) million and $35.8 million for the years ended December 31, 2016 and 2015, respectively. Cash flows from investing activities for discontinued operations were $75.5 million and $0.5 million for the years ended December 31, 2016 and 2015, respectively. All cash generated from discontinued operations was paid to DPL through dividends for all years presented.

Assets and Liabilities Held-For-Sale and Dispositions

Assets and liabilities held-for-sale

On December 15, 2017, DPL and AES Ohio Generation entered into an asset purchase agreement with Kimura Power, LLC, as Buyer (“Kimura Power”), and, for certain limited purposes provided therein, Rockland Power Partners III, LP, as Guarantor, pursuant to which AES Ohio Generation will, subject to the terms and conditions in the asset purchase agreement, sell to Kimura Power the Peaker assets. The Peaker assets are being sold for $241.0 million in cash. The cash purchase price is subject to adjustments at closing based on working capital, capacity commitments and timing of the closing of the transaction. The sale transaction is subject to regulatory approvals and other closing conditions. The FERC approved this transaction on February 9, 2018.

As a result of entering into the asset purchase agreement, DPL recognized aggregate impairment charges with respect to the Peaker assets of $109.4 million. For more information on these impairment charges, see Note 15 – Fixed-asset Impairments of Notes to DPL's Consolidated Financial Statements.

The assets and liabilities related to the Peaker assets were classified as held-for-sale as of December 31, 2017, but the Peaker assets did not meet the criteria to be reported as discontinued operations. The following table summarizes the major classes of assets and liabilities classified as held-for-sale as of December 31, 2017:

$ in millions	December 31, 2017
Assets
Accounts receivable, net	$	3.8
Inventories	7.6
Taxes applicable to subsequent years	4.9
Property, plant & equipment, net	233.7
Other assets	0.3
Total assets of the disposal group classified as held-for-sale in the balance sheet	$	250.3
Liabilities
Accounts payable	$	3.9
Accrued taxes	3.6
Taxes payable	4.9
Asset retirement obligations	0.6
Other liabilities	0.2
Total liabilities of the disposal group classified as held-for-sale in the balance sheet	$	13.2

The Peaker assets' results of operations are reflected within continuing operations in the Consolidated Statements of Operations. The income from continuing operations before income tax for the Peaker assets was $16.9 million, $20.0 million and $23.9 million (excluding impairment charges of $109.4 million, $1.3 million and $0.0 million, respectively) for the years ended December 31, 2017, 2016, and 2015, respectively. The Peaker assets are included in the Generation segment.

Dispositions

On December 8, 2017, DPL and AES Ohio Generation completed the sale transaction of their entire undivided interest in the Miami Fort station and the Zimmer station to Dynegy Zimmer and Dynegy Miami Fort, indirect wholly-owned subsidiaries of Dynegy. On that date, AES Ohio Generation received $50.0 million in cash, plus an amount in cash equal to $20.1 million as an estimated purchase price adjustment based on estimated amounts of certain pre-closing inventories, pre-paid and other amounts, employment benefits, insurance premiums, property taxes and other payables, which will be subject to a customary post-closing reconciliation. This transaction resulted in a gain on sale of $14.0 million for the year ended December 31, 2017. Prior to the sale, the Miami Fort and Zimmer stations were included in the Generation segment.

The results of operations of the Miami Fort and Zimmer stations are presented within continuing operations in the Consolidated Statements of Operations. The combined income / (loss) from continuing operations before income tax for the Miami Fort and Zimmer stations was $25.7 million (excluding gain on sale of $14.0 million), $(13.5) million (excluding impairment charges of $294.1 million) and $5.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Discontinued Operations

Generation Separation

On October 1, 2017, DP&L completed the transfer of its generating plants, the real property on which the generation plants and generation-related assets are sited, step-up transformers and other transmission plant assets used to interconnect with the electric transmission grid, fuel inventory, equipment inventory and spare parts, working capital, and other miscellaneous generation-related assets and liabilities ("Generation assets") to AES Ohio Generation. The transfer was completed as a contribution through an asset contribution agreement to a wholly-owned subsidiary of DP&L after which DP&L then distributed all of the outstanding equity in the subsidiary to DPL and then the subsidiary was merged into AES Ohio Generation.

The following table summarizes the carrying amounts of DP&L's Generation assets that were transferred to AES Ohio Generation on October 1, 2017:

$ in millions	October 1, 2017
ASSETS
Restricted cash	$	2.0
Accounts receivable, net	31.3
Inventories	42.0
Taxes applicable to subsequent years	1.8
Property, plant & equipment, net	87.0
Intangible assets, net	0.7
Other assets	15.5
Total assets	$	180.3
LIABILITIES
Accounts payable	$	12.4
Accrued taxes (b)	(3.9		)
Long-term debt(a)	0.3
Deferred taxes (b)	(91.9		)
Pension, retiree and other benefits	9.6
Unamortized investment tax credit	15.1
Asset retirement obligations	126.3
Other liabilities	24.1
Total liabilities	$	92.0
Total accumulated other comprehensive income	2.1
Net assets transferred to AES Ohio Generation	$	86.2

(a) Long-term debt that transferred to AES Ohio Generation relates to capital leases.

(b) Accrued taxes and deferred taxes transferred to AES Ohio Generation represent the tax asset position netted with liabilities on DP&L prior to Generation Separation.

DP&L's generation business met the criteria to be classified as a discontinued operation, and, accordingly, the historical activity has been reclassified to "Discontinued operations" in the Statements of Operations for the years ended December 31, 2017, 2016 and 2015. Similarly, the assets and liabilities related to the generation business were classified as held-for-sale as of December 31, 2016.

The following table summarizes the major categories of assets and liabilities at December 31, 2016, and the revenues, cost of revenues, operating and other expenses and income tax of discontinued operations for the periods indicated:

				December 31,
$ in millions				2016
Restricted cash				$	29.0
Accounts receivable, net				34.9
Inventories				66.5
Taxes applicable to subsequent years				11.3
Property, plant & equipment, net				156.7
Intangible assets, net				0.9
Other assets				25.3
Total assets of the disposal group classified as held-for-sale in the balance sheets				$	324.6
Accounts payable				$	54.8
Accrued taxes				3.5
Long-term debt				13.4
Taxes payable				11.3
Deferred taxes (a)				(120.7		)
Pension, retiree and other benefits				8.2
Unamortized investment tax credit				16.6
Asset retirement obligations				127.0
Other liabilities				43.6
Total liabilities of the disposal group classified as held-for-sale in the balance sheets				$	157.7
	Years ended December 31,
	2017			2016			2015
Revenues	$	358.4		$	557.9		$	901.6
Cost of revenues	(191.6		)	(341.1		)	(698.3		)
Operating and other expenses	(156.8		)	(202.0		)	(250.8		)
Fixed-asset impairment	(66.3		)	(1,353.5		)	—
Loss from discontinued operations	(56.3		)	(1,338.7		)	(47.5		)
Income tax benefit from discontinued operations	(15.9		)	(468.4		)	(23.9		)
Net loss from discontinued operations	$	(40.4	)	$	(870.3	)	$	(23.6	)

(a) Deferred taxes represent the tax asset position netted with liabilities on DP&L prior to Generation Separation.

Cash flows related to discontinued operations are included in the Statements of Cash Flows. Cash flows from operating activities for discontinued operations were $(10.4) million, $50.9 million and $138.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. Cash flows from investing activities for discontinued operations were $23.4 million, $(50.9) million and $(24.3) million for the years ended December 31, 2017, 2016 and 2015, respectively. Cash flows from financing activities for discontinued operations were $(13.0) million, $0.0 million and $(114.4) million for the years ended December 31, 2017, 2016 and 2015, respectively.

The PUCO authorized DP&L to maintain long-term debt of $750 million or 75% of its rate base, whichever is greater, until January 1, 2018, or to file an application to explain why it would not achieve those metrics. Accordingly, $750.0 million of debt and the pro rata interest expense associated with that debt were allocated to continuing operations. All remaining debt and interest expense were included in discontinued operations above. The interest expense included in discontinued operations was $0.2 million, $0.5 million and $2.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.