Ownership of Coal-fired Facilities

9 Months Ended

Sep. 30, 2012

5. Ownership of Coal-fired Facilities

DP&L has undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities with certain other Ohio utilities. Certain expenses, primarily fuel costs for the generating stations, 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 September 30, 2012, DP&L had $31.0 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 station.

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


				DP&L Investment
	DP&L Share			(adjusted to fair value at Merger date)
Jointly-owned production stations:	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)

Beckjord Unit 6	50.0	207	$	1	$	1	$	-	No
Conesville Unit 4	16.5	129		42		4		8	Yes
East Bend Station	31.0	186		11		6		1	Yes
Killen Station	67.0	402		316		15		4	Yes
Miami Fort Units 7 and 8	36.0	368		217		9		3	Yes
Stuart Station	35.0	808		206		16		12	Yes
Zimmer Station	28.1	365		182		27		3	Yes
Transmission (at varying percentages)		n/a		35		2		-
Total		2,465	$	1,010	$	80	$	31

Wholly-owned production station:

Hutchings Station	100.0	365	$	-	$	-	$	-	No

Currently, our coal-fired generation units at Hutchings and Beckjord do not have 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 not indeterminately. 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, which was renamed MATS (Mercury Air Toxics Standard) when the rule was issued final on December 16, 2011, and the cost of compliance with the MATS 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 has undivided ownership interests in seven coal-fired electric generating facilities and numerous transmission facilities with certain other Ohio utilities. Certain expenses, primarily fuel costs for the generating stations, 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 September 30, 2012, DP&L had $31.0 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 station.

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


	DP&L Share			DP&L Investment
Jointly-owned production stations:	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)

Beckjord Unit 6	50.0	207	$	76	$	62	$	-	No
Conesville Unit 4	16.5	129		25		-		-	Yes
East Bend Station	31.0	186		208		135		1	Yes
Killen Station	67.0	402		628		308		4	Yes
Miami Fort Units 7 and 8	36.0	368		364		146		3	Yes
Stuart Station	35.0	808		740		290		12	Yes
Zimmer Station	28.1	365		1,097		639		3	Yes
Transmission (at varying percentages)				92		59		-
Total		2,465	$	3,230	$	1,639	$	23

Wholly-owned production station:

Hutchings Station	100.0	365	$	-	$	-	$	-	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.

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 not indeterminately. In addition, DP&L has notified PJM that Hutchings Units 1 and 2 will be deactivated by June 1, 2015. We do not believe that any accruals are needed related to the Hutchings station. 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, which was renamed MATS (Mercury Air Toxics Standard) when the rule was issued final on December 16, 2011, and the cost of compliance with the MATS 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.