APS 2012 Annual Report Download - page 175

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
150
December 31,
2012
Aggregate Fair Value of Derivative Instruments in a Net
Liability Position
$ 206
Cash Collateral Posted
49
Additional Cash Collateral in the Event Credit-Risk
Related Contingent Features were Fully Triggered (a)
120
(a) This amount is after counterparty netting and includes those contracts which qualify
for scope exceptions, which are excluded from the derivative details above.
We also have energy related non-derivative instrument contracts with investment grade
credit-related contingent features which could also require us to post additional collateral of
approximately $183 million if our debt credit ratings were to fall below investment grade.
19. Other Income and Other Expense
The following table provides detail of other income and other expense for 2012, 2011 and
2010 (dollars in thousands):
2012
2011
2010
Other income:
Interest income
$ 1,239
$ 1,850
$ 3,255
Investment gains – net
--
1,165
2,797
Miscellaneous
367
96
335
Total other income
$ 1,606
$ 3,111
$ 6,387
Other expense:
Non-operating costs
$ (7,777)
$ (7,037)
$ (6,831)
Investment loss – net
(2,453)
--
--
Miscellaneous
(9,612)
(3,414)
(3,090)
Total other expense
$ (19,842)
$ (10,451)
$ (9,921)
20. Palo Verde Sale Leaseback Variable Interest Entities
In 1986, APS entered into agreements with three separate VIE lessor trusts in order to sell
and lease back interests in Palo Verde Unit 2 and related common facilities. APS will pay
approximately $49 million per year for the years 2013 to 2015 related to these leases. The lease
agreements include fixed rate renewal periods which give APS the ability to utilize the asset for a
significant portion of the asset’s economic life, and therefore provide APS with the power to direct
activities of the VIEs that most significantly impact the VIEs’ economic performance.
Predominately due to the fixed rate renewal periods, APS has been deemed the primary beneficiary
of these VIEs and therefore consolidates the VIEs.
On December 31, 2012, APS notified the lessor trust entities that APS will retain the assets
beyond 2015 by either exercising the fixed rate lease renewals or by purchasing the assets. If APS
elects to purchase the assets, the purchase price will be based on the fair market value of the assets at