Summary
This 8-K filing from American Electric Power Company, Inc. (AEP) and its subsidiary Ohio Power Company (OPCo) announces a material impairment charge related to the Muskingum River Unit 5 (MR5) coal generation plant. A modification to a 2007 consent decree, approved in May 2013, presented OPCo with two options for MR5: either retire the coal-fired unit in 2015 or convert it to natural gas by June 2017. AEP has determined that the likelihood of undertaking the costly natural gas refueling project is remote. Consequently, AEP expects to record a pre-tax impairment charge in the range of $150 million to $170 million for the second quarter of 2013. This charge reflects the reduced carrying value of the MR5 asset and will not involve any future cash outlays. Investors should note that this impairment is a non-cash accounting event, and the decision impacts the future operational strategy for this specific generating unit.
Key Highlights
- 1AEP and OPCo are reporting a material impairment charge related to the Muskingum River Unit 5 (MR5) coal generation plant.
- 2The impairment stems from a modification to a consent decree requiring pollution control equipment or conversion to natural gas for MR5.
- 3OPCo has the option to retire MR5 in 2015 or convert it to natural gas by June 2017.
- 4AEP has decided the likelihood of investing in the natural gas refueling project for MR5 is remote.
- 5A pre-tax impairment charge of $150 million to $170 million is expected to be recorded in Q2 2013.
- 6This impairment charge is a non-cash accounting event and will not result in future cash expenditures.
- 7The decision impacts the future operational plans for the MR5 plant.