Discontinued Operations, Assets Held for Sale and Asset Impairments

12 Months Ended

Dec. 31, 2015

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations, Assets Held for Sale and Asset Impairments

19. Discontinued Operations, Assets Held for Sale and Asset Impairments

TECO Coal

In 2013, TECO Coal temporarily idled some of its mines due to the softened coal market. As a result, the company performed impairment analyses in the fourth quarter of 2013 on the mining complexes with closed mines and the coal reserves. The company used an undiscounted cash flows approach in determining the recoverability amount of the assets in accordance with applicable accounting guidance. All assets were determined to have carrying values that were recoverable; therefore, no impairment charge was deemed necessary in 2013. Additionally, the company performed sensitivity analyses for the effects of inflation and noted that if inflation affected costs more than revenues by one percent each year, all assets would still be recoverable.

In September 2014, the Board of Directors of TECO Energy authorized management to actively pursue the sale of TECO Coal. As a result of this and other factors, the TECO Coal segment was accounted for as an asset held for sale and reported as a discontinued operation beginning in the third quarter of 2014. All periods have been adjusted to reflect the reclassification of results from operations to discontinued operations for TECO Coal and certain charges at Parent that directly relate to the sale of TECO Coal.

In 2014, the company recorded impairment charges totaling $115.9 million pretax to write down the held-for-sale TECO Coal assets to their implied fair value based on the price specified in an agreement of sale entered into in October 2014, which agreement had conditions to closing that were not satisfied, less estimated costs of the transaction. In the second quarter of 2015, based on management’s assessment of current market conditions and discussions with interested parties, an additional impairment charge of $78.6 million pretax was recorded, which included the estimated selling costs associated with the transaction completed in September 2015. The fair value measurements were considered Level 2 measurements since the market is not active as defined by accounting standards (i.e. transactions for these assets are too infrequent to provide pricing information on an ongoing basis). None of these impairments had cash flow impacts. The asset impairment charges are recorded in the “Income (loss) from discontinued operations” line item in the Consolidated Statements of Income and the “Asset impairment” line item in the Consolidated Statements of Cash Flows for the years ended Dec. 31, 2014 and 2015.  

On Sept. 21, 2015, TECO Energy’s subsidiary, TECO Diversified, entered into the SPA and completed the sale of all of its ownership interest in TECO Coal to Cambrian.  The SPA did not provide for an up-front purchase payment, but provides for future contingent consideration of up to $60 million that may be paid yearly through 2019 if certain coal benchmark prices reach certain levels. The 2015 benchmark price was not reached and no contingent consideration payment was triggered. TECO Energy retains certain deferred tax assets and personnel-related liabilities, but all other TECO Coal assets and liabilities, including working capital, asset retirement obligations and workers compensation reserves, were transferred in the transaction.  The retained liabilities included pension liability, which was fully funded at Sept. 30, 2015, and severance agreements, which were accrued at June 30, 2015 and paid in the third quarter of 2015. Letters of indemnity related to TECO Coal reclamation bonds will remain in effect until the bonds are replaced by Cambrian, which is expected to be completed in 2016 (see description of guarantees in Note 12).  The company recorded a loss on sale of $10.0 million pretax, which is reflected in discontinued operations in the company’s Consolidated Condensed Statement of Income, primarily to write off an after-tax settlement charge of $7.7 million related to the unfunded black lung obligations previously recorded in AOCI. Transaction-related costs of $12.3 million pretax, comprised of $2.5 million of legal and other consultant costs and $9.8 million of severance and other employee costs, were accrued at June 30, 2015 and reflected in discontinued operations in the company’s Consolidated Condensed Statement of Income. The transaction-related costs were paid in 2015, with the exception of a minor amount of severance payments.

Since the closing of the sale, TECO Energy has not and will not have influence over operations of TECO Coal, therefore the contingent payments are not considered to meet the definition of direct cash flows under the applicable discontinued operations FASB guidance.

The following table provides a summary of the carrying amounts of the significant assets and liabilities reported in the combined current and non-current “Assets held for sale” and “Liabilities associated with assets held for sale” line items:

Assets held for sale
(millions)	Dec. 31, 2014
Current assets	$	109.6
Property, plant and equipment, net and other long-term assets		59.8
Total assets held for sale	$	169.4
Liabilities associated with assets held for sale
(millions)
Current liabilities	$	39.4
Long-term liabilities		65.4
Total liabilities associated with assets held for sale	$	104.8

TECO Guatemala

In 2012, TECO Guatemala completed the sale of its interests in the Alborada and San José power stations, and related solid fuel handling and port facilities in Guatemala. All periods presented reflect the classification of results from operations for TECO Guatemala and certain charges at Parent that directly relate to TECO Guatemala as discontinued operations. While TECO Energy and its subsidiaries no longer have assets or operations in Guatemala, its subsidiary, TECO Guatemala Holdings, LLC, has retained its rights under its arbitration claim filed against the Republic of Guatemala (see Note 12). The 2015 charges shown in the table below are legal costs associated with that claim.  Additionally, in March 2014, an indemnification provision for an uncertain tax position at TCAE that was provided for in the 2012 purchase agreement was reversed due to a favorable final decision by the highest court in Guatemala, resulting in the income from operations amount shown in the table below.

Combined components of income from discontinued operations

The following table provides selected components of discontinued operations related to TECO Coal and TECO Guatemala:

Components of income from discontinued operations
(millions)	2015			2014			2013
Revenues—TECO Coal	$	200.4		$	443.6		$	496.2
Income (loss) from operations—TECO Coal		(16.9	)		(13.9	)		5.4
Income (loss) from operations—TECO Guatemala		(0.8	)		4.4			(0.2	)
Loss on impairment—TECO Coal		(78.6	)		(115.9	)		0.0
Loss on sale—TECO Coal		(10.0	)		0.0			0.0
Income (loss) from discontinued operations—TECO Coal		(105.5	)		(129.8	)		5.4
Income (loss) from discontinued operations—TECO Guatemala		(0.8	)		4.4			(0.2	)
Income (loss) from discontinued operations		(106.3	)		(125.4	)		5.2
Provision (benefit) for income taxes		(38.6	)		(49.4	)		(3.8	)
Income (loss) from discontinued operations, net	$	(67.7	)	$	(76.0	)	$	9.0