Business Combination

9 Months Ended

Sep. 30, 2012

Business Combination

2.  Business Combination

On November 28, 2011, AES completed its acquisition of DPL.  AES paid cash consideration of approximately $3,483.6 million. The allocation of the purchase price was based on the estimated fair value of assets acquired and liabilities assumed.  In addition, Dolphin Subsidiary II, Inc. (a wholly owned subsidiary of AES) issued $1,250.0 million of debt, which, as a result of the merger of DPL and Dolphin Subsidiary II, Inc. was assumed by DPL.  The assets acquired and liabilities assumed in the acquisition were recorded at estimated amounts based on the purchase price allocation.  We finalized the allocation of the purchase price in the third quarter of 2012.

From November 28, 2011 through September 30, 2012, we recognized the following changes to our preliminary purchase price allocation:
		Decrease / (increase) to preliminary goodwill
$ in millions		Change before deferred income tax effect		Deferred income tax effect
Property, plant and equipment (1)	$	(70.7)	$	25.5
DPLER intangibles (2)		(19.1)		6.7
Out of market coal contract (3)		(34.2)		12.0
Deferred tax liabilities (4)		-		(20.7)
Regulatory assets (5)		15.4		-
Taxes payable (6)		13.1		(16.0)
Other		1.0		-
	$	(94.5)	$	7.5
Net (increase) in goodwill			$	(87.0)
(1) related to refined information associated with certain contractual arrangements, growth and ancillary revenue assumptions.
(2) related to refined market and contractual information.
(3) related to a change in certain assumptions related to an out of market coal contract.
(4) related to an assessment of our overall deferred tax liabilities on regulated property, plant and equipment.
(5) related to the increase in deferred taxes discussed in (4) above.
(6) related to the final DPL Inc. standalone federal tax return.

These purchase price adjustments increased the provisionally recognized goodwill by $87.0 million and have been reflected retrospectively as of December 31, 2011 in the accompanying Condensed Consolidated Balance Sheets.  The effect on net income for the nine months ended September 30, 2012 of $8.7 million was recorded in the second and third quarters.  The effect on net income for the period November 28, 2011 through December 31, 2011 was not material.

Estimated preliminary and final fair value of assets acquired and liabilities assumed as of the Merger date are as follows:

$ in millions		Final purchase price allocation			Preliminary purchase price allocation
Cash	$	116.4	$		116.4
Restricted cash		18.5			18.5
Accounts receivable		277.6			277.6
Inventory		123.7			123.7
Other current assets		37.3			37.3
Property, plant and equipment		2,477.8			2,548.5
Intangible assets subject to amortization		147.2			166.3
Intangible assets - indefinite-lived		5.0			5.0
Regulatory assets		217.1			201.1
Other non-current assets		58.3			58.3
Current liabilities		(413.1)			(408.2)
Debt		(1,255.1)			(1,255.1)
Deferred taxes		(551.2)			(558.2)
Regulatory liabilities		(117.0)			(117.0)
Other non-current liabilities		(216.8)			(201.5)
Redeemable preferred stock		(18.4)			(18.4)
Net identifiable assets acquired		907.3			994.3
Goodwill		2,576.3			2,489.3
Net assets acquired	$	3,483.6		$	3,483.6

DP&L [Member]

Business Combination

2.  Business Combination

On November 28, 2011, all of the outstanding common stock of DP&L’s parent company, DPL, was acquired by AES.  In accordance with FASC 805, the assets and liabilities of DPL were valued at their fair value at the Merger date.  These adjustments were “pushed down” to DPL’s records.  These adjustments were not pushed down to DP&L which will continue to use its historic costs for its assets and liabilities.