APS 2013 Annual Report Download - page 154

Table of Contents
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our Consolidated Balance Sheets at December 31, 2013 and December 31, 2012 include the following amounts relating to the VIEs (in millions):
December 31,
2013
December 31,
2012
Palo Verde sale leaseback property plant and equipment, net of accumulated
depreciation $125 $129
Current maturities of long-term debt 26 27
Long-term debt excluding current maturities 13 39
Equity-Noncontrolling interests 146 129
Assets of the VIEs are restricted and may only be used to settle the VIEs’ debt obligations and for payment to the noncontrolling interest holders.
Other than the VIEs’ assets reported on our consolidated financial statements, the creditors of the VIEs have no other recourse to the assets of APS or Pinnacle
West, except in certain circumstances, such as a default by APS under the lease.
APS is exposed to losses relating to these VIEs upon the occurrence of certain events that APS does not consider 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 Palo Verde
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, 2013, APS would have
been required to pay the noncontrolling equity participants approximately $133 million and assume $39 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.
20. Nuclear Decommissioning Trusts
To fund the costs APS expects to incur to decommission Palo Verde, APS established external decommissioning trusts in accordance with NRC
regulations. Third-party investment managers are authorized to buy and sell securities per stated investment guidelines. The trust funds are invested in fixed
income securities and equity securities. APS classifies investments in decommissioning trust funds as available for sale. As a result, we record the
decommissioning trust funds at their fair value on our Consolidated Balance Sheets. See Note 14 for a discussion of how fair value is determined and the
classification of the nuclear decommissioning trust investments within the fair value hierarchy. Because of the ability of APS to recover decommissioning
costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, we have deferred realized and unrealized gains and losses
(including other-than-temporary impairments on investment securities) in other regulatory liabilities . The following table includes the unrealized gains and
losses based on the original cost of the investment and summarizes the fair value of APS’s nuclear decommissioning trust fund assets at December 31, 2013
and December 31, 2012 (dollars in millions):
150