Disposition, Assets and Liabilities Held for Sale and Discontinued Operations

9 Months Ended

Sep. 30, 2015

Disposition, Assets and Liabilities Held for Sale and Discontinued Operations

DISPOSITION, ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS

DISPOSITION

2015

Muskingum River Plant (Generation & Marketing Segment)

In August 2015, AGR sold its retired Muskingum River Plant site including its associated asset retirement obligations to a nonaffiliated party.  AGR paid $48 million and the nonaffiliated party took ownership of the Muskingum River Plant site assets and assumed responsibility for environmental liabilities and AROs, including ash pond closure, asbestos abatement and decommissioning and demolition.  As a result of the sale, a net gain of $32 million was recognized and recorded in Other Operation on the condensed consolidated statements of income.  The cash paid was recorded in Operating Activities on the condensed consolidated statements of cash flows.  

ASSETS AND LIABILITIES HELD FOR SALE

AEPRO (AEP River Operations Segment)

During the third quarter of 2015, we evaluated bids from prospective buyers, selected a buyer and received approval from AEP's Board of Directors to proceed with the sale to the nonaffiliated party.  In October 2015, we signed an agreement to sell our commercial barge transportation subsidiary, AEPRO, to a nonaffiliated party.  The sale of AEPRO is subject to regulatory approval including federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.  Upon close of the sale, the nonaffiliated party will acquire AEPRO by purchasing all of the common stock of AEP Resources, Inc., the parent company of AEPRO.  The nonaffiliated party will assume certain assets and liabilities of AEPRO, excluding the equity method investment in IMT, pension and benefit assets and liabilities and debt obligations.  We will retain ownership of our captive barge fleet that delivers coal to the company's regulated coal-fueled power plant units owned or leased by AEGCo, APCo, I&M, KPCo and WPCo.  We signed a contract with the nonaffiliated party to dispatch and schedule our captive barge fleet for the company's regulated coal-fueled power plant units.  We also contracted with the nonaffiliated party to barge coal for AGR. These agreements with the nonaffiliated party extend through the end of 2016.  The sale is expected to close in the fourth quarter of 2015.

Upon evaluation, management concluded that the AEPRO business met the classification as held for sale in the third quarter of 2015.  Accordingly, AEPRO's assets and liabilities have been recorded as Assets Held for Sale and Liabilities Held for Sale, respectively, on our condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 and as shown in the following table:

	September 30, 2015		December 31, 2014
Assets:	(in millions)
Accounts Receivable	$	55	$	91
Property, Plant and Equipment – Net	506		482
Other Classes of Assets That Are Not Major	47		52
Total Assets Classified as Held for Sale on the Condensed Consolidated Balance Sheets	$	608	$	625
Liabilities:
Long-term Debt	$	81	$	83
Obligations Under Capital Leases	228		189
Other Classes of Liabilities That Are Not Major	165		163
Total Liabilities Classified as Held for Sale on the Condensed Consolidated Balance Sheets	$	474	$	435

DISCONTINUED OPERATIONS

Management periodically assesses the overall AEP business model and makes decisions regarding our continued support and funding of our various businesses and operations.  When it is determined that we will seek to exit a particular business or activity and we have met the accounting requirements for reclassification, we will reclassify the operations of those businesses or operations as discontinued operations.  The assets and liabilities of these discontinued operations are classified as Assets Held for Sale and Liabilities Held for Sale until the time they are sold.  In the third quarter of 2015, AEPRO was determined to be discontinued operations and has been classified as such for third quarter 2015 reporting.  Results of operations of AEPRO have been classified as discontinued operations in our condensed consolidated statements of income for the three and nine months ended September 30, 2015 and 2014 as shown in the following table:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2015		2014		2015		2014
	(in millions)
Other Revenues	$	129	$	141	$	372	$	435
Other Operation Expense	96		102		273		342
Maintenance Expense	4		8		20		24
Depreciation and Amortization Expense	9		8		27		23
Other Expense	8		7		24		22
Total Expenses	117		125		344		411
Pretax Income of Discontinued Operations	12		16		28		24
Income Tax Expense	4		5		10		8
Total Income on Discontinued Operations as Presented on the Condensed Consolidated Statements of Income	$	8	$	11	$	18	$	16