Financing Activities
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Dec. 31, 2013
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Financing Activities | 14. FINANCING ACTIVITIES
AEP Common Stock
Listed below is a reconciliation of common stock share activity for the years ended December 31, 2013, 2012 and 2011:
Preferred Stock
In December 2011, AEP subsidiaries redeemed all of their outstanding preferred stock with a par value of $60 million at a premium, resulting in a $2.8 million loss, which is included in Preferred Stock Dividend Requirements of Subsidiaries Including Capital Stock Expense on the statement of income. Long-term Debt
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo and KPCo in the amounts of $300 million and $200 million, respectively, upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year on the balance sheets. (d) Notes payable represent outstanding promissory notes issued under term loan agreements and credit agreements with a number of banks and other financial institutions. At expiration, all notes then issued and outstanding are due and payable. Interest rates are both fixed and variable. Variable rates generally relate to specified short-term interest rates. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 16). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see "SNF Disposal" section of Note 6). (g) In 2013, PSO, TCC and TNC issued $50 million, $100 million and $75 million three-year credit facilities, respectively, to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
In January 2014 and February 2014, I&M retired $5 million and $19 million, respectively, of Notes Payable related to DCC Fuel.
In January 2014, TCC retired $112 million of its outstanding Securitization Bonds.
In January 2014, OPCo retired $225 million of 4.85% Senior Unsecured Notes due in 2014.
As of December 31, 2013, trustees held, on our behalf, $500 million of our reacquired Pollution Control Bonds. Dividend Restrictions
Parent Restrictions
The holders of our common stock are entitled to receive the dividends declared by our Board of Directors provided funds are legally available for such dividends. Our income derives from our common stock equity in the earnings of our utility subsidiaries.
Pursuant to the leverage restrictions in our credit agreements, we must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements. None of AEP's retained earnings were restricted for the purpose of the payment of dividends.
Utility Subsidiaries' Restrictions
Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of our utility subsidiaries to transfer funds to us in the form of dividends. Specifically, several of our public utility subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. As of December 31, 2013, the amount of restricted net assets of AEP's subsidiaries that may not be distributed to Parent in the form of a loan, advance or dividend was approximately $6 billion.
The Federal Power Act prohibits the utility subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock. This restriction does not limit the ability of the utility subsidiaries to pay dividends out of retained earnings. Lines of Credit and Short-term Debt
We use our commercial paper program to meet the short-term borrowing needs of our subsidiaries. The program is used to fund both a Utility Money Pool, which funds the utility subsidiaries, and a Nonutility Money Pool, which funds the majority of the nonutility subsidiaries. In addition, the program also funds, as direct borrowers, the short-term debt requirements of other subsidiaries that are not participants in either money pool for regulatory or operational reasons. As of December 31, 2013, we had credit facilities totaling $3.5 billion to support our commercial paper program. The maximum amount of commercial paper outstanding during 2013 was $904 million and the weighted average interest rate of commercial paper outstanding during 2013 was 0.32%. Our outstanding short-term debt was as follows:
(a) Weighted average rate. (b) Amount of securitized debt for receivables as accounted for under the "Transfers and Servicing" accounting guidance. (c) This line of credit does not reduce available liquidity under AEP's credit facilities. Credit Facilities
For a discussion of credit facilities, see “Letters of Credit” section of Note 6. Securitized Accounts Receivable – AEP Credit
AEP Credit has a receivables securitization agreement with bank conduits. Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries. AEP Credit continues to service the receivables. These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase our operating companies' receivables and accelerate AEP Credit's cash collections.
In June 2013, we amended our receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. We amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. We intend to extend or replace the agreement expiring in June 2014 on or before its maturity.
Accounts receivable information for AEP Credit is as follows:
Customer accounts receivable retained and securitized for our operating companies are managed by AEP Credit. AEP Credit's delinquent customer accounts receivable represents accounts greater than 30 days past due.
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Appalachian Power Co [Member]
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Financing Activities | 13. FINANCING ACTIVITIES
Preferred Stock
In December 2011, the Registrant Subsidiaries redeemed all of their outstanding preferred stock, resulting in a loss, which is included in Preferred Stock Dividend Requirements Including Capital Stock Expense on the statements of income. The par value of preferred stock redeemed and the loss recorded by the Registrant Subsidiaries was as follows:
Long-term Debt
There are certain limitations on establishing liens against the Registrant Subsidiaries' assets under their respective indentures. None of the long-term debt obligations of the Registrant Subsidiaries have been guaranteed or secured by AEP or any of its affiliates.
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo in the amount of $300 million upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets. (d) In 2013, APCo issued $86 million in Long Term Debt - Affiliated to AGR. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 15). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see “SNF Disposal” section of Note 5). (g) In 2013, PSO issued a $50 million three-year credit facility to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
Dividend Restrictions
The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.
Federal Power Act
The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.
Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.
None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.
Leverage Restrictions
Pursuant to the credit agreement leverage restrictions, APCo, I&M and PSO must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. As of December 31, 2013, $12 million of I&M's retained earnings and none of APCo's or PSO's retained earnings have restrictions related to the payment of dividends to Parent. Utility Money Pool – AEP System
The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2013 and 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the years ended December 31, 2013 and 2012 are described in the following tables:
Year Ended December 31, 2013:
Year Ended December 31, 2012:
The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the years ended December 31, 2013, 2012 and 2011 are summarized for all Registrant Subsidiaries in the following table:
Interest expense related to short-term borrowing activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Expense on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:
Interest income related to short-term lending activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Income on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:
Credit Facilities
For a discussion of credit facilities, see “Letters of Credit” section of Note 5. Sale of Receivables – AEP Credit
Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.
In June 2013, AEP Credit amended its receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.
The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of December 31, 2013 and 2012 was as follows:
The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:
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Indiana Michigan Power Co [Member]
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Financing Activities | 13. FINANCING ACTIVITIES
Preferred Stock
In December 2011, the Registrant Subsidiaries redeemed all of their outstanding preferred stock, resulting in a loss, which is included in Preferred Stock Dividend Requirements Including Capital Stock Expense on the statements of income. The par value of preferred stock redeemed and the loss recorded by the Registrant Subsidiaries was as follows:
Long-term Debt
There are certain limitations on establishing liens against the Registrant Subsidiaries' assets under their respective indentures. None of the long-term debt obligations of the Registrant Subsidiaries have been guaranteed or secured by AEP or any of its affiliates.
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo in the amount of $300 million upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets. (d) In 2013, APCo issued $86 million in Long Term Debt - Affiliated to AGR. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 15). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see “SNF Disposal” section of Note 5). (g) In 2013, PSO issued a $50 million three-year credit facility to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
In January 2014 and February 2014, I&M retired $5 million and $19 million, respectively, of Notes Payable related to DCC Fuel. As of December 31, 2013, trustees held, on behalf of I&M and OPCo, $40 million and $460 million, respectively, of their reacquired Pollution Control Bonds. Dividend Restrictions
The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.
Federal Power Act
The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.
Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.
None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.
Leverage Restrictions
Pursuant to the credit agreement leverage restrictions, APCo, I&M and PSO must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. As of December 31, 2013, $12 million of I&M's retained earnings and none of APCo's or PSO's retained earnings have restrictions related to the payment of dividends to Parent. Utility Money Pool – AEP System
The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2013 and 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the years ended December 31, 2013 and 2012 are described in the following tables:
Year Ended December 31, 2013:
Year Ended December 31, 2012:
The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the years ended December 31, 2013, 2012 and 2011 are summarized for all Registrant Subsidiaries in the following table:
Interest expense related to short-term borrowing activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Expense on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:
Interest income related to short-term lending activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Income on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:
Credit Facilities
For a discussion of credit facilities, see “Letters of Credit” section of Note 5. Sale of Receivables – AEP Credit
Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.
In June 2013, AEP Credit amended its receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.
The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of December 31, 2013 and 2012 was as follows:
The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:
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Ohio Power Co [Member]
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Financing Activities | 13. FINANCING ACTIVITIES
Preferred Stock
In December 2011, the Registrant Subsidiaries redeemed all of their outstanding preferred stock, resulting in a loss, which is included in Preferred Stock Dividend Requirements Including Capital Stock Expense on the statements of income. The par value of preferred stock redeemed and the loss recorded by the Registrant Subsidiaries was as follows:
Long-term Debt
There are certain limitations on establishing liens against the Registrant Subsidiaries' assets under their respective indentures. None of the long-term debt obligations of the Registrant Subsidiaries have been guaranteed or secured by AEP or any of its affiliates.
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo in the amount of $300 million upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets. (d) In 2013, APCo issued $86 million in Long Term Debt - Affiliated to AGR. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 15). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see “SNF Disposal” section of Note 5). (g) In 2013, PSO issued a $50 million three-year credit facility to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
In January 2014, OPCo retired $225 million of 4.85% Senior Unsecured Notes due in 2014.
As of December 31, 2013, trustees held, on behalf of I&M and OPCo, $40 million and $460 million, respectively, of their reacquired Pollution Control Bonds. Dividend Restrictions
The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.
Federal Power Act
The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.
Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.
None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.
Utility Money Pool – AEP System
The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2013 and 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the years ended December 31, 2013 and 2012 are described in the following tables:
Year Ended December 31, 2013:
Year Ended December 31, 2012:
The activity in the above table does not include short-term lending activity of OPCo's former wholly-owned subsidiary, AGR. In January 2013, AGR became a participant in the Nonutility Money Pool. In November 2013, AGR's participation in the Nonutility Money Pool ended as AGR became a direct borrower from Parent. On December 31, 2013, OPCo contributed the assets and liabilities of AGR to Parent as part of corporate separation. For the year ended December 31, 2013, AGR had the following activity in the Nonutility Money Pool or from Parent:
(a) The borrowings of AGR from Parent as of December 31, 2013 are no longer associated with OPCo.
The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the years ended December 31, 2013, 2012 and 2011 are summarized for all Registrant Subsidiaries in the following table:
AGR's maximum, minimum and average interest rates for funds either borrowed from or loaned to the Nonutility Money Pool or Parent for the year ended December 31, 2013 are summarized in the following table:
Interest expense related to short-term borrowing activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Expense on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:
Interest income related to short-term lending activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Income on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:
Credit Facilities
For a discussion of credit facilities, see “Letters of Credit” section of Note 5. Sale of Receivables – AEP Credit
Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.
In June 2013, AEP Credit amended its receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.
The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of December 31, 2013 and 2012 was as follows:
The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:
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Public Service Co of Oklahoma [Member]
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Financing Activities | 13. FINANCING ACTIVITIES
Preferred Stock
In December 2011, the Registrant Subsidiaries redeemed all of their outstanding preferred stock, resulting in a loss, which is included in Preferred Stock Dividend Requirements Including Capital Stock Expense on the statements of income. The par value of preferred stock redeemed and the loss recorded by the Registrant Subsidiaries was as follows:
Long-term Debt
There are certain limitations on establishing liens against the Registrant Subsidiaries' assets under their respective indentures. None of the long-term debt obligations of the Registrant Subsidiaries have been guaranteed or secured by AEP or any of its affiliates.
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo in the amount of $300 million upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets. (d) In 2013, APCo issued $86 million in Long Term Debt - Affiliated to AGR. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 15). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see “SNF Disposal” section of Note 5). (g) In 2013, PSO issued a $50 million three-year credit facility to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
Dividend Restrictions
The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.
Federal Power Act
The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.
Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.
None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.
Leverage Restrictions
Pursuant to the credit agreement leverage restrictions, APCo, I&M and PSO must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. As of December 31, 2013, $12 million of I&M's retained earnings and none of APCo's or PSO's retained earnings have restrictions related to the payment of dividends to Parent. Utility Money Pool – AEP System
The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2013 and 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the years ended December 31, 2013 and 2012 are described in the following tables:
Year Ended December 31, 2013:
Year Ended December 31, 2012:
The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the years ended December 31, 2013, 2012 and 2011 are summarized for all Registrant Subsidiaries in the following table:
Interest expense related to short-term borrowing activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Expense on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:
Interest income related to short-term lending activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Income on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:
Sale of Receivables – AEP Credit
Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.
In June 2013, AEP Credit amended its receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.
The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of December 31, 2013 and 2012 was as follows:
The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:
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Southwestern Electric Power Co [Member]
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Financing Activities | 13. FINANCING ACTIVITIES
Preferred Stock
In December 2011, the Registrant Subsidiaries redeemed all of their outstanding preferred stock, resulting in a loss, which is included in Preferred Stock Dividend Requirements Including Capital Stock Expense on the statements of income. The par value of preferred stock redeemed and the loss recorded by the Registrant Subsidiaries was as follows:
Long-term Debt
There are certain limitations on establishing liens against the Registrant Subsidiaries' assets under their respective indentures. None of the long-term debt obligations of the Registrant Subsidiaries have been guaranteed or secured by AEP or any of its affiliates.
The following details long-term debt outstanding as of December 31, 2013 and 2012:
(a) In July 2013, AGR, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. In 2013, OPCo borrowed $1 billion under the credit facility and retired other certain debt. On December 31, 2013, OPCo assigned the $1 billion in credit facility borrowings to AGR upon the transfer of OPCo's generation assets to AGR. Also on December 31, 2013, AGR subsequently assigned a portion of the borrowings to APCo in the amount of $300 million upon AGR's transfer of certain of those generation assets. (b) For certain series of pollution control bonds, interest rates are subject to periodic adjustment. Certain series may be purchased on demand at periodic interest adjustment dates. Letters of credit from banks and insurance policies support certain series. (c) Certain pollution control bonds are subject to redemption earlier than the maturity date. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets. (d) In 2013, APCo issued $86 million in Long Term Debt - Affiliated to AGR. (e) In 2013, APCo and OPCo issued $380 million and $267 million, respectively, of Securitization Bonds (see Note 15). (f) Spent nuclear fuel obligation consists of a liability along with accrued interest for disposal of spent nuclear fuel (see “SNF Disposal” section of Note 5). (g) In 2013, PSO issued a $50 million three-year credit facility to be used for general corporate purposes. Long-term debt outstanding as of December 31, 2013 is payable as follows:
Dividend Restrictions
The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.
Federal Power Act
The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.
Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.
None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.
Utility Money Pool – AEP System
The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2013 and 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the years ended December 31, 2013 and 2012 are described in the following tables:
Year Ended December 31, 2013:
Year Ended December 31, 2012:
The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the years ended December 31, 2013, 2012 and 2011 are summarized for all Registrant Subsidiaries in the following table:
Interest expense related to short-term borrowing activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Expense on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:
Interest income related to short-term lending activities with the Utility Money Pool, the Nonutility Money Pool and Parent is included in Interest Income on each of the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:
Short-term Debt
The Registrant Subsidiaries' outstanding short-term debt was as follows:
Credit Facilities
For a discussion of credit facilities, see “Letters of Credit” section of Note 5. Sale of Receivables – AEP Credit
Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.
In June 2013, AEP Credit amended its receivables securitization agreement to extend through June 2014. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.
The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of December 31, 2013 and 2012 was as follows:
The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:
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