APS 2011 Annual Report Download - page 174

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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APS is exposed to losses relating to these VIEs upon the occurrence of certain events that
APS does not consider to be reasonably likely to occur. Under certain circumstances (for example,
the NRC issuing specified violation orders with respect to Palo Verde or the occurrence of specified
nuclear events), APS would be required to make specified payments to the VIEs’ noncontrolling
equity participants, assume the VIEs’ debt, and take title to the leased Unit 2 interests, which, if
appropriate, may be required to be written down in value. If such an event had occurred as of
December 31, 2011, APS would have been required to pay the noncontrolling equity participants
approximately $141 million and assume $97 million of debt. Since APS consolidates these VIEs, the
debt APS would be required to assume is already reflected in our Consolidated Balance Sheets.
For regulatory ratemaking purposes the leases continue to be treated as operating leases and,
as a result, we have recorded a regulatory asset relating to the arrangements.
21. Discontinued Operations
SunCor – In 2009, our real estate subsidiary, SunCor, began disposing of its homebuilding
operations, master-planned communities, land parcels, commercial assets and golf courses in order to
eliminate its outstanding debt. All activity for the income statement and prior comparative period
income statement amounts are included in discontinued operations. In 2010 and 2009, SunCor
recorded real estate impairment charges (see Note 22). SunCor’s asset sales resulted in no gain for
2010 and 2009 due to the impairment charges discussed above. At December 31, 2011, SunCor had
approximately $9 million of assets on its balance sheet, including $7 million of intercompany
receivables and $2 million of other assets. In February 2012, SunCor filed for protection under the
United States Bankruptcy Code to complete an orderly liquidation of its business. We do not expect
SunCor’s bankruptcy to have a material impact on Pinnacle West’s financial position, results of
operations, or cash flows.
APSES – On August 19, 2011, Pinnacle West sold its investment in APSES. The sale
resulted in an after-tax gain from discontinued operations of approximately $10 million. In June
2010, APSES sold its district cooling business. As a result of that sale, we recorded an after-tax gain
from discontinued operations of approximately $25 million. Prior period income statement amounts
related to these sales and the associated revenues and costs are reflected in discontinued operations.
The following table provides revenue, income (loss) before income taxes and income (loss)
after taxes classified as discontinued operations in Pinnacle West’s Consolidated Statements of
Income for the years ended December 31, 2011, 2010 and 2009 (dollars in millions):