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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2011

9. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill, by segment for the years ended December 31, 2011 and 2010.

			Latin		Latin		North		North
			America -		America -		America -		America -		Europe -		Asia -		Corporate
			Generation		Utilities		Generation		Utilities		Generation		Generation		and Other		Total

Balance as of December 31, 2009
	Goodwill		$	926	$	140	$	111	$	-	$	137	$	78	$	101	$	1,493
	Accumulated impairment losses			(24)		(7)		(20)		-		(137)		-		(6)		(194)
		Net balance		902		133		91		-		-		78		95		1,299

	Impairment losses			-		-		(18)		-		-		-		(3)		(21)
	Foreign currency translation
		and other		-		-		(10)		-		-		3		-		(7)

Balance as of December 31, 2010
	Goodwill			926		140		101		-		137		81		101		1,486
	Accumulated impairment losses			(24)		(7)		(38)		-		(137)		-		(9)		(215)
		Net balance		902		133		63		-		-		81		92		1,271

	Impairment losses			-		-		-		-		-		(17)		-		(17)
	Goodwill acquired during the year⁽¹⁾			-		-		-		2,489		-		-		-		2,489
	Foreign currency translation
		and other		-		-		(10)		-		-		-		-		(10)

Balance as of December 31, 2011
	Goodwill			926		140		91		2,489		137		81		101		3,965
	Accumulated impairment losses			(24)		(7)		(38)		-		(137)		(17)		(9)		(232)
		Net balance	$	902	$	133	$	53	$	2,489	$	-	$	64	$	92	$	3,733

(1) Represents goodwill resulting from the acquisition of DPL, which was allocated to the two newly established reporting units identified within DPL. See Note 23―Acquisitions and Dispositions for further information.

During the third quarter of 2011, the Company identified higher coal prices and the resulting reduced operating margins in China as an impairment indicator for the goodwill at Chigen, our wholly-owned subsidiary that holds equity interests in Chinese ventures and reported in the Asia Generation segment. A significant downward revision of cash flow forecasts indicated that the fair value of Chigen reporting unit was lower than its carrying amount. As of September 30, 2011, Chigen had goodwill of $17 million. The Company performed an interim impairment evaluation of Chigen's goodwill and determined that goodwill had no implied fair value. As a result, the entire carrying amount of $17 million was recognized as goodwill impairment in the third quarter.

During the third quarter of 2010, Deepwater, our petcoke-fired merchant generation facility in Texas, reported in the North America Generation segment, incurred a goodwill impairment of $18 million. The Company determined the adverse market conditions as an impairment indicator, performed the two-step goodwill impairment test and recognized the entire $18 million carrying amount of goodwill as goodwill impairment in the third quarter.

In 2009, Kilroot, our coal fired power plant in the United Kingdom, reported in the Europe Generation segment, incurred a goodwill impairment of $118 million. Factors contributing to the impairment included: reduced profit expectations based on latest estimates of future commodity prices and reduced expectations on the recovery of cash flows on the existing plant following the Company's decision to forgo capital expenditures to meet emission allowance requirements taking effect in 2024. Additionally, one of our subsidiaries located in the Ukraine and reported within “Corporate and Other” incurred a goodwill impairment loss of $4 million.

The following tables summarize the balances comprising other intangible assets in the accompanying Consolidated Balance Sheets as of December 31, 2011 and 2010:

		December 31, 2011						December 31, 2010
		Gross		Accumulated		Net		Gross		Accumulated		Net
		Balance		Amortization		Balance		Balance		Amortization		Balance

			(in millions)					(in millions)
Subject to Amortization
Project development rights⁽¹⁾		$	102	$	-	$	102	$	117	$	-	$	117
Sales concessions			156		(92)		64		162		(89)		73
Contractual payment rights⁽²⁾			69		(13)		56		65		(4)		61
Land use rights			49		(4)		45		50		(2)		48
Management rights			39		(13)		26		66		(30)		36
Emission allowances⁽³⁾			18		-		18		8		-		8
Electric security plan			88		(9)		79		-		-		-
Customer contracts			45		(3)		42		-		-		-
Customer relationships			30		-		30		-		-		-
Other⁽⁴⁾			71		(30)		41		70		(26)		44
	Subtotal		667		(164)		503		538		(151)		387
Indefinite-Lived Intangible Assets
Land use rights			52		-		52		51		-		51
Emission allowances⁽⁵⁾			4		-		4		8		-		8
Trademark/Trade name			5		-		5		-		-		-
Other			2		-		2		2		-		2
	Subtotal		63		-		63		61		-		61
Total		$	730	$	(164)	$	566	$	599	$	(151)	$	448

Represent development rights, including but not limited to, land control, various permits and right to acquire equity interests in development projects resulting from asset acquisitions by our Wind group. A portion of these development rights was recognized as a loss on disposal of discontinued operations when certain development projects were abandoned during the fourth quarter of 2011. See Note 22― Discontinued Operations and Held for Sale Businesses for further information.
Represent legal rights to receive system reliability payments from the regulator.
Acquired or purchased emission allowances are expensed when utilized and included in net income for the year.
Consists of various intangible assets including PPAs and transmission rights, none of which is individually significant.
Represent perpetual emission allowances without an expiration date.

The following table summarizes, by category, intangible assets acquired during the years ended December 31, 2011 and 2010:

December 31, 2011

Subject to

Amortization/

Weighted Average

Amortization

Amount

Indefinite-Lived

Amortization Period

Method

(in millions)

(in years)

Electric security plan⁽²⁾

Subject to amortization

Straight line

Customer relationship^{(1) (3)}

Subject to amortization

Straight line

Customer contracts^{(1) (4)}

Subject to amortization

Other

Trademark/Trade name^{(1) (5)}

Indefinite-lived

N/A

Other

Subject to amortization

Various

As utilized

Total

172

December 31, 2010

Subject to

Amortization/

Weighted Average

Amortization

Amount

Indefinite-Lived

Amortization Period

Method

(in millions)

(in years)

Project development rights

141

Subject to amortization

Various

Straight line

Contractual payment rights

Subject to amortization

Straight line

Emission allowances

Subject to amortization

Various

As utilized

Land use rights

Indefinite-lived

N/A

Total

227

Represents intangible assets arising from the acquisition of DPL. See Note 23―Acquisitions and Dispositions for further information.
Electric Security Plan is a rate plan for the supply and pricing of electric generation service applicable to Ohio's electric utilities under state law. It provides a level of price stability to consumers of electricity as compared to market-based electricity prices. The plan was recognized as an intangible asset since the prices under the plan are higher than market prices charged by competitive retailers or CRES.
Customer relationships represent the value assigned to customer information possessed by DPL in the preliminary purchase price allocation, where DPL has regular contact with the customer, and the customer has the ability to make direct contact with DPL. See Note 23―Acquisitions and Dispositions for further information.
The amortization method used reflects the pattern in which the economic benefits of the intangible asset are consumed.
Trademarks/Trade name represent the value assigned to trade name of DPLER, DPL's subsidiary engaged in competitive retail business in Ohio.

The following table summarizes the estimated amortization expense, broken down by intangible asset category, for 2012 through 2016:

	Estimated amortization expense
	2012		2013		2014		2015		2016

		(in millions)
Contractual payment rights	$	9	$	9	$	9	$	9	$	3
Sales concessions		6		6		6		6		5
Customer relationships & contracts		35		11		4		3		3
Electric security plan		79		-		-		-		-
All other		9		6		4		4		4
Total	$	138	$	32	$	23	$	22	$	15

Intangible asset amortization expense was $36 million, $14 million and $16 million for the years ended December 31, 2011, 2010 and 2009, respectively.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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