Allegheny Power 2010 Annual Report Download - page 147

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132
FIRSTENERGY SOLUTIONS CORP.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2008 FES FGCO NGC Eliminations Consolidated
(In thousands)
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 40,791 $ 350,986 $ 478,047 $ (16,896) $ 852,928
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt - 353,325 265,050 - 618,375
Equity contributions from parent 280,000 675,000 175,000 (850,000) 280,000
Short-term borrowings, net 701,119 18,571 - (18,931) 700,759
Redemptions and Repayments-
Long-term debt (2,955) (293,349) (183,132) 16,896 (462,540)
Short-term borrowings, net - - (18,931) 18,931 -
Common stock dividend payment (43,000) - - - (43,000)
Other - (3,107) (2,040) - (5,147)
Net cash provided from financing activities 935,164 750,440 235,947 (833,104) 1,088,447
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (43,244) (1,047,917) (744,468) - (1,835,629)
Proceeds from asset sales - 23,077 - - 23,077
Sales of investment securities held in trusts - - 950,688 - 950,688
Purchases of investment securities held in trusts - - (987,304) - (987,304)
Loans to associated companies, net (83,457) (21,946) 69,012 - (36,391)
Investment in subsidiary (850,000) - - 850,000 -
Other 744 (54,601) (1,922) - (55,779)
Net cash used for investing activities (975,957) (1,101,387) (713,994) 850,000 (1,941,338)
Net change in cash and cash equivalents (2) 39 - - 37
Cash and cash equivalents at beginning of period 2 - - - 2
Cash and cash equivalents at end of period $ - $ 39 $ - $ - $ 39
19. IMPAIRMENT OF LONG-LIVED ASSETS
FirstEnergy reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. The recoverability of a long-lived asset is measured by comparing
its carrying value to the sum of undiscounted future cash flows expected to result from the use and eventual disposition
of the asset. If the carrying value is greater than the undiscounted cash flows, impairment exists and a loss is recognized
for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.
Coal-Fired FGCO Units
On August 12, 2010, FirstEnergy announced its intention to make operational changes at certain coal-fired FGCO units.
The announcement of the operational change indicated a need to evaluate the future recoverability of the carrying value
of the assets associated with the affected FGCO units. As a result of the recoverability evaluation, FirstEnergy recorded
an impairment of $303 million to continuing operations of its competitive energy services segment during the year ended
December 31, 2010. This impairment represents a $296 million write down of the carrying value of the assets associated
with the affected FGCO units to their estimated fair value and a charge of $7 million for excessive or obsolete inventory
identified as a result of the operational changes.
FirstEnergy used various assumptions in evaluating whether the FGCO units’ carrying value was recoverable. The
estimated undiscounted cash flows were based on assumptions about budgeted net operating income; the impact of
current market conditions on future revenues including a long-term view of future market prices; the impact of reduced
customer demand; and the estimated cost of remedial retro-fitting of the FGCO units to comply with proposed changes in
federal environmental laws. The result of this evaluation indicated that the carrying costs of the FGCO units were not
fully recoverable.
FirstEnergy further evaluated the extent to which the carrying value of the FGCO units exceeded their estimated fair
value. FirstEnergy applied the income approach to estimating fair value under a discounted cash flow valuation technique
to convert future cash flows expected over the remaining life of the asset group to a single present value. The
assumptions used to estimate the non-recurring fair value measurement of the FGCO units applied significant
unobservable inputs considered Level 3 under the fair value hierarchy. The estimated cash flows used during the
recoverability test were discounted using the weighted average cost of capital for a market participant.