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Investments
12 Months Ended
Dec. 31, 2013
Equity Method Investments And Joint Ventures [Abstract]  
Investments
12. Investments

The following is a summary of our investments and the related funding commitments (in millions):

 

     December 31, 2013      December 31,  
            Funding      2012  
     Assets      Commitments      Assets  

Chem-Mod LLC

   $ 4.0       $ —         $ 4.0   

Chem-Mod International LLC

     2.0         —           2.0   

C-Quest Technology LLC

     2.0         —           —     

Clean-coal investments:

        

Non-controlling interest in three limited liability companies that own seven 2009 Era Clean Coal Plants

     4.5         0.6         2.8   

Controlling interest in three limited liability companies that own seven 2009 Era Clean Coal Plants

     13.8         2.7         6.3   

Non-controlling interest in six limited liability companies that own five 2011 Era Clean Coal Plants

     12.1         —           13.2   

Controlling interest in six limited liability companies that own eleven 2011 Era Clean Coal Plants

     46.0         2.7         9.2   

Controlling interest in a limited liability company that owns four 2011 Era Clean Coal Plants

     2.3         —           5.1   

Notes receivable and interest from co-investorrelated to the sales of three 2009 Era Plants

     —           —           8.5   

Other investments

     3.7         5.4         3.0   
  

 

 

    

 

 

    

 

 

 

Total investments

   $ 90.4       $ 11.4       $ 54.1   
  

 

 

    

 

 

    

 

 

 

Chem-Mod LLC - At December 31, 2013, we had a 46.54% controlling interest in Chem-Mod. Chem-Mod possesses the exclusive marketing rights in the U.S. and Canada, for technologies used to reduce emissions created during the combustion of coal. The refined coal production plants discussed below, as well as those owned by other unrelated parties, license and use Chem-Mod’s proprietary technologies, The Chem-Mod™ Solution, in the production of refined coal. The Chem-Mod™ Solution uses a dual injection sorbent system to reduce mercury, sulfur dioxide and other emissions at coal-fired power plants.

We believe that the application of The Chem-Mod™ Solution qualifies for refined coal tax credits under IRC Section 45 when used with refined coal production plants placed in service by December 31, 2011 or 2009. Chem-Mod has been marketing its technologies principally to coal-fired power plants owned by utility companies, including those utilities that are operating with the IRC Section 45 refined coal production plants in which we hold an investment.

Chem-Mod is determined to be a VIE. We are the controlling manager of Chem-Mod and therefore consolidate its operations into our consolidated financial statements. At December 31, 2013, total assets and total liabilities of this VIE included in our consolidated balance sheet were $8.0 million and $0.8 million, respectively. For 2013, total revenues and expenses were $37.9 million and $21.2 million (including non-controlling interest of $19.2 million), respectively. We are under no obligation to fund Chem-Mod’s operations in the future.

Chem-Mod International LLC - At December 31, 2013, we held a 31.52% non-controlling ownership interest in Chem-Mod International. Chem-Mod International has the rights to market The Chem-Mod™ Solution in countries other than the U.S. and Canada. Such marketing activity has been limited to date.

C-Quest Technology LLC - At December 31, 2013, we held a non-controlling 8% interest in C-Quest’s global operation. C-Quest possesses rights, information and technology for the reduction of carbon dioxide emissions created by burning fossil fuels. Thus far, C-Quest’s operations have been limited to laboratory testing. C-Quest is determined to be a VIE, but due to our lack of control over the operation of C-Quest, we do not consolidate this investment into our consolidated financial statements. We also have options to acquire an additional 19% interest in C-Quest’s global operations for $9.5 million at any time on or prior to August 15, 2016. On August 1, 2013, we loaned the majority owner $2.0 million at a 2% interest rate, which matures on May 15, 2014. The loan can be paid in cash or by delivery of an additional 4% ownership interest in C-Quest’s global operations. If the loan is paid by delivery of the additional 4% ownership interest, our option would be reduced to 15% and the remaining purchase price would be reduced to $7.5 million.

 

Clean Coal Investments -

   

We have investments in limited liability companies that own 34 refined coal production plants which produce refined coal using proprietary technologies owned by Chem-Mod. We believe the production and sale of refined coal at these plants is qualified to receive refined coal tax credits under IRC Section 45. The fourteen plants placed in service prior to December 31, 2009 (which we refer to as the 2009 Era Plants) can receive tax credits through 2019 and the twenty plants placed in service prior to December 31, 2011 (which we refer to as the 2011 Era Plants) can receive tax credits through 2021.

 

   

On March 1, 2013, we purchased an additional ownership interest in twelve of the 2009 Era Plants from one of the co-investors. For nine of the plants, our ownership increased from 24.5% to 49.5%. Our investment in these plants had been accounted for under the equity method of accounting and will continue to be accounted for under the equity method. For three of the plants, our ownership went from 25.0% to 60.0%. Our investment in these plants had been accounted for under the equity method of accounting. As of March 1, 2013, we consolidated the operations of the limited liability company that owns these three plants. For 2013, total revenues and expenses recorded in our consolidated statement of earnings related to this acquisition were $128.3 million and $133.5 million, respectively.

 

   

Our purchase price for the additional ownership interests in these twelve plants was the assumption of the promissory note that we received as consideration for the co-investor’s purchase of ownership interests in three of the 2009 Era Plants on March 1, 2010, which had a carrying value, including accrued interest, of $8.0 million at March 1, 2013, plus the payment of cash and other consideration of $5.0 million. We recognized a gain of $9.6 million, which included the increase in fair value of our prior 25% equity interest in the limited liability company upon the acquisition of the additional 35% equity interest, and recorded $26.3 million of fixed and other amortizable intangible assets and $5.0 million of other assets in connection with this transaction. The carrying value of our prior non-controlling interest in the limited liability company was $4.8 million as of the acquisition date. The fair value of our prior non-controlling interest in the limited liability company was determined by allocating, on a pro rata basis, the fair value of the limited liability company as adjusted for our lack of control in our prior ownership position. We determined the fair value of the limited liability company based on provisional estimates of fair value using similar valuation techniques to those discussed in Note 3 to these consolidated financial statements.

 

   

On September 1, 2013, we purchased a 99% interest in a limited liability company that has ownership interests in four limited liability companies that own five 2011 Era Plants. The purchase price was $4.0 million in cash plus a $10.0 million note with 3% interest due in installments through December 19, 2021. Total revenues and expenses recorded in our consolidated statement of earnings, for 2013 related to the acquisition, were $33.7 million and $36.9 million, respectively.

 

   

On December 13, 2013, we purchased a co-investor’s 50.5% interest in one refined fuel plant for $2.5 million in cash. After this transaction, we own 100% of this plant and consolidate its results. Total revenues and expenses recorded in our consolidated statement of earnings, for 2013 related to the acquisition, were zero and $0.1 million, respectively.

 

   

As of December 31, 2013:

 

   

Twenty-eight of the plants have long-term production contracts.

 

   

The remaining six plants are in various stages of seeking and negotiating long-term production contracts.

 

   

We have a non-controlling, minority interest in twelve plants. We also have agreements in principle with co-investors for the sale of majority ownership interests in six additional plants. We may sell ownership interests in some or all of the remaining plants to co-investors.

 

   

Seven of the 2009 Era Plants and five of the 2011 Era Plants that are owned by limited liability companies have been determined to be VIEs, for which we are not the primary beneficiary. At December 31, 2013, total assets and total liabilities of these VIEs were $76.3 million and $41.3 million, respectively. For 2013, total revenues and expenses of these VIEs were $342.2 million and $390.1 million, respectively.

 

   

In all limited liability companies where we are a non-controlling, minority investor, the membership agreements for the operations of each of these entities contain provisions that preclude an individual member from being able to make major decisions that would denote control. As of the date we became a non-controlling, minority investor, we deconsolidated these entities and subsequently accounted for the investments using equity method accounting.

 

   

For all plants that are not under long-term production contracts, we estimate that we will invest, on average, an additional $5.0 million per plant to connect and house each of them. For those plants that will have majority ownership co-investors, the average additional investment will be $2.5 million. We plan to sell majority ownership interests in such plants to co-investors and relinquish control of the plants, thereby becoming a non-controlling, minority investor. We are currently committed to fund an additional $6.0 million under engineering and construction contracts related to moving, connecting and housing the refined coal plants that we plan to redeploy during 2014. We further estimate that we will invest an additional $30.0 million to $35.0 million to redeploy the remainder of the refined coal plants later in 2014 and into 2015, before co-investor contributions.

 

   

Each investor funds its portion of the on-going operations of the limited liability companies in proportion to its investment ownership percentage. Other than our portion of the on-going operational funding, there are no additional amounts that we are committed to related to funding these investments.

 

   

We are aware that some of the coal-fired power plants that purchase the refined coal are considering changing to burning natural gas or shutting down completely for economic reasons. We and our partners are prepared to move the refined coal productions plants to other, generally higher volume, coal-fired power plants. If these potential developments were to occur, we estimate those plants will not operate for 12 to 18 months during their movement and redeployment, which could have a material impact on the amount of tax credits that are generated by these plants.

 

   

Until March 1, 2013, we had a promissory note from a co-investor that was received as part of the consideration for the March 1, 2010 sale of ownership interests in three of the 2009 Era Plants. The note assumed by us as part of our purchase of additional ownership interests in twelve of the 2009 Era Plants as described above.

Other Investments - At December 31, 2013, we owned a non-controlling, minority interest in five venture capital funds totaling $3.2 million, a 20% non-controlling interest in an investment management company totaling $0.5 million, twelve certified low-income housing developments with zero carrying value and two real estate entities with zero carrying value. The low-income housing developments and real estate entities have been determined to be VIEs, but are not required to be consolidated due to our lack of control over their respective operations. At December 31, 2013, total assets and total liabilities of these VIEs were approximately $60.0 million and $20.0 million, respectively.