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Goodwill | 9 Months Ended
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Sep. 30, 2013
Goodwill |
Goodwill | 4. Goodwill Our goodwill balance was $296.3 million and $334.7 million as of September 30, 2013 and December 31, 2012, respectively. We recorded $331.1 million of goodwill in connection with the acquisition of Capital Power Income L.P. (the "Partnership") in 2011 and $3.5 million associated with the step-up acquisition of Rollcast in March 2010. We apply an accounting standard under which goodwill has an indefinite life and is not amortized. Goodwill is tested for impairments at least annually, or more frequently whenever an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We test goodwill for impairment at the reporting unit level, which is at the project level and, the lowest level below the operating segments for which discrete financial information is available. Based on a prolonged decline in our market capitalization, we determined that it was appropriate to initiate a test of goodwill to determine if the fair value of each of our reporting units' goodwill does not exceed their carrying amounts. The impairment analysis was performed as of August 31, 2013. For reporting units that failed step 1 of the goodwill impairment test, we performed a step 2 test to quantify the amount, if any, of non-cash impairment to record. Based on the results of our impairment analysis, it was determined that goodwill was impaired at the Kenilworth reporting unit (Northeast segment) and the Naval Station, Naval Training Center and North Island reporting units ("The Naval reporting units") (Southwest segment). The total impairment recorded in the three months ended September 30, 2013 was $34.9 million. The $30.8 million impairment at Kenilworth was due to lower forecasted capacity and energy prices compared to the assumptions at the time of the acquisition in November 2011. When performing our step 2 quantitative analysis, the increase in the intangible value associated with the new Energy Service Agreement ("ESA") entered into in July 2013 resulted in a lower implied goodwill value. At the time of its acquisition in November 2011, the fair value of the assets acquired and liabilities assumed for the Kenilworth project were valued assuming a merchant basis for the period subsequent to the expiration of the project's original PPA in July 2012. As discussed above, these forecasted energy revenues on a merchant basis were higher than the current forecasted energy prices subsequent to the expiration of the new ESA. The $4.1 million impairment at the Naval reporting units was primarily due to increased uncertainty, not assumed at the time of the reporting units acquisition in 2011, in our ability to extend two of the projects lease and steam agreements upon their expiration. In addition, lower currently forecasted capacity and energy prices in California after the expiration of the PPAs compared to the forecast at the time of the acquisition in 2011 result in a lower business enterprise value which resulted in a lower implied goodwill value. During the three months ended June 30, 2013, we recorded a $3.5 million impairment of goodwill at Rollcast which is a component of our Un-allocated corporate segment. We determined, based on the results of the two-step process, that the carrying amount of goodwill exceeded the implied fair value of goodwill. We also wrote-off $1.4 million of capitalized development costs at Rollcast related to the Greenway development project. The determination to impair goodwill and write-off the capitalized development costs was based on the reduced expectation of the Greenway project being further developed. The following table is a roll-forward of goodwill for the nine months ended September 30, 2013:
(in millions) |  | Northeast |  | Northwest |  | Southwest |  | Un-allocated corporate |  | Total |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Balance at December 31, 2012 |  | $ | 135.3 |  | $ | 138.3 |  | $ | 57.6 |  | $ | 3.5 |  | $ | 334.7 |
Impairment of goodwill |  |  | (30.8 | ) |  | — |  |  | (4.1 | ) |  | (3.5 | ) |  | (38.4 | )
Balance at September 30, 2013 |  | $ | 104.5 |  | $ | 138.3 |  | $ | 53.5 |  | $ | — |  | $ | 296.3 |

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