Plant acquisitions:

12 Months Ended

Dec. 31, 2011

Plant acquisitions:

Plant acquisitions:

12. Plant acquisitions:

a. Murray Energy Facility

    On April 8, 2011, we acquired 100% of KGen Murray I and II LLC, a wholly owned subsidiary of KGen Power Corporation. KGen Murray I and II LLC, subsequently renamed Murray I and II, LLC, owns the Murray Energy Facility, located near Dalton, Georgia. This facility consists of two natural gas-fired combined cycle units that have an aggregate summer planning reserve generation capacity of approximately 1,250 megawatts. In connection with this acquisition, we cancelled our previously announced plans to construct our own combined cycle plant.

    As part of the acquisition, we assumed an existing power purchase and sale agreement with Georgia Power for the entire output of Murray Unit No. 1 through May 31, 2012. Our members generally plan to take the output of Murray beginning in 2016 in connection with their forecasted power requirements. Prior to our members' use of Murray, energy may be sold into the wholesale market in order to reduce the net cost of this facility to our members.

    We accounted for the transaction as a purchase business combination. In connection with the acquisition, which included acquisition related costs of approximately $1,962,000 (consisting primarily of legal and professional services which are recorded in the accompanying statement of revenues and expenses for the year ended December 31, 2011), we funded the entire $532,255,000 cash outlay by closing a $260,000,000 three-year term loan and by financing the remaining $272,255,000 through the issuance of commercial paper and draws under existing credit facilities.

    The following amounts represent the identifiable assets acquired and liabilities assumed in the Murray acquisition:

		(in millions)
Recognized fair value amounts of identifiable assets acquired and liabilities assumed:
Property, plant and equipment	$	456.7
Inventory		34.0
Other current assets		4.6
Power purchase and sale agreement		40.4
Emission credits		0.2
Current liabilities		(5.6	)
Total identifiable net assets	$	530.3

    There was no goodwill associated with this acquisition.

    We have consolidated the financial position and results of operations of Murray as of April 8, 2011. Our revenues for the year ended December 31, 2011 include $165,389,000 of non-member sales from Murray. Prior to our members taking the output from Murray, the net results of operations from Murray, including related interest costs, are being deferred as a regulatory asset as such amounts represent an additional cost incurred to acquire Murray. The regulatory asset will be amortized over the remaining life of the plant (estimated to be 30 years) beginning in 2016. For the year ended December 31, 2011, we deferred $3,536,000 in excess costs from Murray.

b. Hawk Road Energy Facility

    On May 1, 2009, we acquired 100% of Heard County Power L.L.C. (Heard LLC). Heard LLC owned the Hawk Road Energy Facility, a 500 megawatt natural gas-fired peaking facility, located in Heard County. We assumed as part of the acquisition of Heard LLC an existing power purchase and sale agreement to sell 500 megawatts of capacity and associated energy to seven of our members through December 31, 2015. After 2015, the output of the Hawk Road Energy Facility will be available to all of our subscribing members.

    In connection with the acquisition, we funded the entire $105,900,000 cash outlay, which included acquisition related costs and payments of approximately $900,000 (consisting primarily of legal and professional services), by issuing commercial paper. In 2011, we obtained permanent financing for the entire acquisition cost through a Rural Utilities Service-guaranteed loan from the Federal Financing Bank. The acquisition related costs of $900,000 were expensed in the second quarter of 2009.

    The following amounts represent the identifiable assets acquired and liabilities assumed in the Heard LLC acquisition:

		(in millions)
Recognized fair value amounts of identifiable assets acquired and liabilities assumed:
Property, plant and equipment	$	202.7
Inventory		0.5
Current liabilities		(0.1	)
Liability for power purchase and sale agreement		(98.1	)
Total identifiable net assets	$	105.0

    There was no goodwill or gain on bargain purchase associated with this acquisition.

    We consolidated the financial condition and results of operations of Heard LLC as of May 1, 2009. The impact on our revenues from the Heard LLC acquisition for the period May 1, 2009 through December 31, 2009 was $4,208,000. In May of 2010, Heard LLC was dissolved. The effects on net margin are being deferred until the end of the power purchase and sale agreement in 2015 and then they will be amortized over the remaining life of the plant.

c. Hartwell Energy Facility

    On October 13, 2009, we acquired 100% of the Hartwell Energy Limited Partnership (HELP). HELP owned the Hartwell Energy Facility, a 300 megawatt oil and natural gas-fired peaking facility with two 150 megawatt combustion turbine generating units, located in Hart County. We acquired as part of the acquisition of HELP an existing power purchase and sale agreement that we had with HELP.

    In connection with the acquisition, which included acquisition related costs and payments of approximately $939,000 (consisting primarily of legal and professional services), we funded the entire $109,740,000 cash outlay by issuing commercial paper. In 2011, we obtained permanent financing for the entire acquisition cost through a Rural Utilities Service-guaranteed loan from the Federal Financing Bank.

    The following amounts represent the identifiable assets acquired and liabilities assumed in the HELP acquisition:

		(in millions)
Recognized fair value amounts of identifiable assets acquired and liabilities assumed:
Property, plant and equipment	$	154.7
Inventory (including fuel oil)		4.3
Other current assets		10.1
Power purchase and sale agreement		1.8
Current liabilities		(0.6	)
Project level debt		(61.5	)
Total identifiable net assets	$	108.8

    There was no goodwill or gain on bargain purchase associated with this acquisition.

    We consolidated the financial position and results of operations of HELP as of October 13, 2009. The impact on our revenues from the acquisition for the period October 13, 2009 through December 31, 2009 was immaterial. In May of 2010, HELP was dissolved.