Ownership of Coal-fired Facilities

3 Months Ended

Mar. 31, 2012

5. Ownership of Coal-fired Facilities

DP&L and certain other Ohio utilities have undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on their energy usage. 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 June 30, 2012, DP&L had $71.0 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 plant.

DP&L's undivided ownership interest in such facilities as well as our wholly owned coal-fired Hutchings station at June 30, 2012 is as follows:


	DP&L Share		DP&L Investment (adjusted to fair value at Merger date)
	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)
Production Units:
Beckjord Unit 6	50.0	207	$	1	$	1	$	-	No
Conesville Unit 4	16.5	129		1		1		7	Yes
East Bend Station	31.0	186		5		4		7	Yes
Killen Station	67.0	402		313		10		6	Yes
Miami Fort Units 7 and 8	36.0	368		219		7		2	Yes
Stuart Station	35.0	808		203		10		11	Yes
Zimmer Station	28.1	365		141		19		38	Yes
Transmission (at varying percentages)				35		2		-
Total		2,465	$	918	$	54	$	71

Wholly-owned production unit:
Hutchings Station	100.0	365	$	1	$	-	$	1	No

Currently, our coal-fired generation units at Hutchings and Beckjord do not have the 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 Duke Energy to PJM, dated February 1, 2012, of a planned April 1, 2015 deactivation of this unit. DP&L does not object to Duke's decision. Beckjord Unit 6 was valued at zero at the Merger date.

We are considering options for the Hutchings station, but have not yet made a final decision. DP&L has informed PJM that Hutchings Unit 4 has incurred damage to a rotor and will be deactivated and unavailable for service until at least June 1, 2014, if ever. In addition, DP&L has notified PJM that Hutchings Units 1 and 2 will be deactivated by June 1, 2015. The decision to deactivate Units 1 and 2 has been made because these two units are not equipped with the advanced environmental control technologies needed to comply with the MACT standard and teh cost of compliance with the MACT standard or conversion to natural gas for these units would likely exceed the expected return. DP&L is still studying the option of converting two or more of Hutchings Units 3-6 to natural gas in order to comply with environmental requirements.

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

5. Ownership of Coal-fired Facilities

DP&L and certain other Ohio utilities have undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on their energy usage. 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 June 30, 2012, DP&L had $71.0 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 plant.

DP&L's undivided ownership interest in such facilities as well as our wholly owned coal-fired Hutchings station at June 30, 2012, is as follows:


	DP&L Share		DP&L Investment
	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)
Production Units:
Beckjord Unit 6	50.0	207	$	75	$	61	$	-	No
Conesville Unit 4	16.5	129		121		34		7	Yes
East Bend Station	31.0	186		202		134		7	Yes
Killen Station	67.0	402		624		305		6	Yes
Miami Fort Units 7 and 8	36.0	368		366		144		2	Yes
Stuart Station	35.0	808		737		286		11	Yes
Zimmer Station	28.1	365		1,059		634		38	Yes
Transmission (at varying percentages)				92		58		-
Total		2,465	$	3,276	$	1,656	$	71

Wholly-owned production unit:
Hutchings Station	100.0	365	$	123	$	115	$	1	No

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 Duke Energy to PJM, dated February 1, 2012, of a planned April 1, 2015 deactivation of this unit. DP&L does not object to Duke's decision. We are depreciating Unit 6 through December 2014 and do not believe that any additional accruals or impairment charges are needed as a result of this decision.

Due to changes in the provisional DPL purchase price allocation that were recognized in the second quarter of 2012, 18 generating facilities had a combined decline in estimated fair market value of approximately $114.1 million as of June 30, 2012. Because DP&L did not apply push down accounting to its respective assets and liabilities at the time of purchase, this change in purchase price allocation also did not affect the respective carrying values for DP&L's generating facilities as of June 30, 2012. However, DP&L did consider whether the reduction in allocated purchase price for certain generating facilities would constitute a potential impairment indicator as of June 30, 2012. Because the Company routinely assesses the recoverability of carrying values for various generating facilities using an estimated undiscounted future cash flows analysis, and because there were no significant changes to estimated future undiscounted cash flows by facility as a result of the purchase price allocation adjustments referenced above, no impairment indicators were identified and no impairment charges were recognized as of June 30, 2012 by DP&L. Significant changes in expected future revenues or costs for any of these facilities could result in a future impairment indicator.