Summary
American Electric Power Company, Inc. (AEP) has filed an 8-K report to disclose a material impairment of certain generation assets held by its subsidiary, Ohio Power Company. This impairment stems from AEP's intention to terminate the Interconnection Agreement and proceed with the corporate separation of Ohio Power Company's generation assets, a move for which they have filed applications with the Federal Energy Regulatory Commission (FERC). Management's evaluation, based on unit-specific estimated future cash flows, indicates a pre-tax charge in the range of $235 million to $290 million is expected in the fourth quarter of 2012. Importantly, this impairment is a non-cash charge and is not expected to impact the company's cash flows.
Key Highlights
- 1AEP is recognizing a material impairment on certain generation assets of its subsidiary, Ohio Power Company.
- 2The impairment is a direct result of AEP's plan to terminate the Interconnection Agreement and separate Ohio Power Company's generation assets.
- 3A FERC filing was made on October 31, 2012, to seek approval for the termination of the Interconnection Agreement.
- 4The estimated pre-tax impairment charge for the fourth quarter of 2012 is between $235 million and $290 million.
- 5This impairment charge is a non-cash accounting event.
- 6The impairment is not expected to have any impact on AEP's cash flows.