Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair value hierarchy for recurring measurements table

The following table sets forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of the periods indicated:



	June 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Assets
AVAILABLE-FOR-SALE:⁽¹⁾
Debt securities:
Unsecured debentures	$	—	$	260	$	—	$	260	$	—	$	435	$	—	$	435
Certificates of deposit	—		72		—		72		—		151		—		151
Government debt securities	—		44		—		44		—		25		—		25
Subtotal	—		376		—		376		—		611		—		611
Equity securities:
Mutual funds	—		47		—		47		—		44		—		44
Subtotal	—		47		—		47		—		44		—		44
Total available-for-sale	—		423		—		423		—		655		—		655
TRADING:
Equity securities:
Mutual funds	15		—		—		15		13		—		—		13
Total trading	15		—		—		15		13		—		—		13
DERIVATIVES:
Interest rate derivatives	—		22		—		22		—		98		—		98
Cross currency derivatives	—		—		—		—		—		5		—		5
Foreign currency derivatives	—		15		111		126		—		15		98		113
Commodity derivatives	—		47		17		64		—		18		6		24
Total derivatives	—		84		128		212		—		136		104		240
TOTAL ASSETS	$	15	$	507	$	128	$	650	$	13	$	791	$	104	$	908
Liabilities
DERIVATIVES:
Interest rate derivatives	$	—	$	226	$	183	$	409	$	—	$	221	$	101	$	322
Cross currency derivatives	—		11		—		11		—		11		—		11
Foreign currency derivatives	—		35		4		39		—		16		5		21
Commodity derivatives	—		42		1		43		—		15		2		17
Total derivatives	—		314		188		502		—		263		108		371
TOTAL LIABILITIES	$	—	$	314	$	188	$	502	$	—	$	263	$	108	$	371

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⁽¹⁾	Amortized cost approximated fair value at June 30, 2014 and December 31, 2013.

Derivatives Level 3 Rollforward Table

The following tables present a reconciliation of net derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2014 and 2013 (presented net by type of derivative). Transfers between Level 3 and Level 2 are determined as of the end of the reporting period and principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.



	Three Months Ended June 30, 2014
	Interest Rate			Foreign Currency			Commodity			Total
	(in millions)
Balance at the beginning of the period	$	(87	)	$	101		$	—		$	14
Total gains (losses) (realized and unrealized):
Included in earnings	—			10			3			13
Included in other comprehensive income - derivative activity	(30		)	—			—			(30		)
Included in other comprehensive income - foreign currency translation activity	—			(2		)	—			(2		)
Included in regulatory (assets) liabilities	—			—			15			15
Settlements	3			(2		)	(2		)	(1		)
Transfers of assets (liabilities) into Level 3	(69		)	—			—			(69		)
Transfers of (assets) liabilities out of Level 3	—			—			—			—
Balance at the end of the period	$	(183	)	$	107		$	16		$	(60	)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	—		$	9		$	—		$	9



	Three Months Ended June 30, 2013
	Interest Rate			Foreign Currency			Commodity			Total
	(in millions)
Balance at the beginning of the period	$	(72	)	$	71		$	(3	)	$	(4	)
Total gains (losses) (realized and unrealized):
Included in earnings	(4		)	12			1			9
Included in other comprehensive income - derivative activity	13			—			—			13
Included in other comprehensive income - foreign currency translation activity	—			(3		)	—			(3		)
Included in regulatory (assets) liabilities	—			—			11			11
Settlements	4			(1		)	—			3
Transfers of assets (liabilities) into Level 3	(42		)	—			—			(42		)
Transfers of (assets) liabilities out of Level 3	38			(9		)	—			29
Balance at the end of the period	$	(63	)	$	70		$	9		$	16
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	—		$	14		$	—		$	14



	Six Months Ended June 30, 2014
	Interest Rate			Foreign Currency			Commodity			Total
	(in millions)
Balance at the beginning of the period	$	(101	)	$	93		$	4		$	(4	)
Total gains (losses) (realized and unrealized):
Included in earnings	1			37			1			39
Included in other comprehensive income - derivative activity	(99		)	(1		)	—			(100		)
Included in other comprehensive income - foreign currency translation activity	—			(20		)	—			(20		)
Included in regulatory (assets) liabilities	—			—			12			12
Settlements	16			(3		)	(1		)	12
Transfers of (assets) liabilities out of Level 3	—			1			—			1
Balance at the end of the period	$	(183	)	$	107		16			$	(60	)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	1		$	34		$	—		$	35



	Six Months Ended June 30, 2013
	Interest Rate			Foreign Currency			Commodity			Total
	(in millions)
Balance at the beginning of the period	$	(412	)	$	72		$	(1	)	$	(341	)
Total gains (losses) (realized and unrealized):
Included in earnings	(4		)	15			1			12
Included in other comprehensive income - derivative activity	81			—			—			81
Included in other comprehensive income - foreign currency translation activity	2			(6		)	—			(4		)
Included in regulatory (assets) liabilities	—			—			10			10
Settlements	48			(2		)	(1		)	45
Transfers of (assets) liabilities out of Level 3	222			(9		)	—			213
Balance at the end of the period	$	(63	)	$	70		$	9		$	16
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	—		$	13		$	1		$	14

Significant unobservable inputs, recurring

The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of June 30, 2014:



Type of Derivative	Fair Value			Unobservable Input	Amount or Range (Weighted Average)
	(in millions)
Interest rate	$	(183	)	Subsidiaries’ credit spreads	3.75% - 5.30% (4.67%)
Foreign currency:
Embedded derivative — Argentine Peso	111			Argentine Peso to U.S. Dollar currency exchange rate after 1 year	8.36 - 30.60 (20.06)
Embedded derivative — Euro	(4		)	Subsidiaries’ credit spreads	5.3	%
Commodity:
Other	16
Total	$	(60	)

Fair value hierarchy for nonrecurring measurements table

The following table summarizes major categories of assets and liabilities measured at fair value on a nonrecurring basis during the period and their level within the fair value hierarchy:



	Six Months Ended June 30, 2014
	Carrying Amount		Fair Value						Gross Loss
			Level 1		Level 2		Level 3
	(in millions)
Assets
Long-lived assets held and used:⁽¹⁾
DPL (East Bend)	$	14	$	—	$	2	$	—	$	12
Ebute	99		—		—		47		52
UK Wind (Newfield)	11		—		—		—		11
Discontinued operations and held-for-sale businesses:⁽²⁾
Cameroon	372		—		340		—		38
Equity method investments
Silver Ridge Power	317		—		—		273		44
Goodwill:⁽³⁾
DPLER	136		—		—		—		136
Buffalo Gap	28		—		—		10		18



	Six Months Ended June 30, 2013
	Carrying Amount		Fair Value						Gross Loss
	Carrying Amount		Level 1		Level 2		Level 3		Gross Loss
	(in millions)
Assets
Long-lived assets held and used:⁽¹⁾
Beaver Valley	$	61	$	—	$	—	$	15	$	46
Long-lived assets held for sale:⁽¹⁾
Wind turbines	25		—		25		—		—
Discontinued operations and held-for-sale businesses:⁽²⁾
Ukraine utilities	143		—		113		—		34

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⁽¹⁾	See Note 15 — Asset Impairment Expense for further information.


⁽²⁾	See Note 17 — Discontinued Operations and Held-For-Sale Businesses for further information. Also, the gross loss equals the carrying amount of the disposal group less its fair value less costs to sell.


⁽³⁾	See Note 14 — Goodwill Impairments for further information.

Fair value schedule of unobservable inputs, nonrecurring

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets during the six months ended June 30, 2014:



	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)				($ in millions)
Long-lived assets held and used:
Ebute	$	47	Discounted cash flow	Annual revenue growth	0% to 1% (1%)
				Annual pretax operating margin	0% to 47% (24%)
				Weighted-average cost of capital	10.3	%
Equity Method Investment:
Silver Ridge Power ⁽¹⁾	273		Discounted cash flow	Annual revenue growth	-57% to 1% (-4%)
				Annual pretax operating margin	-115% to 50% (6%)
				Cost of equity	13% to 16% (14%)
Total	$	320

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⁽¹⁾ The fair value for Silver Ridge Power was determined using a combination of the bid price (a level 2 input) obtained for the sale of AES’ interest in solar photovoltaic projects in operation and under development in Bulgaria, France, Greece, India and the United States, and a discounted cash flow model for the solar photovoltaic projects that were retained in Italy, Puerto Rico and Spain.

Financial instruments not measured at fair value in the condensed consolidated balance sheets

The following table sets forth the carrying amount, fair value and fair value hierarchy of the Company’s financial assets and liabilities that are not measured at fair value in the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013, but for which fair value is disclosed.



	Carrying Amount		Fair Value
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(in millions)
June 30, 2014
Assets
Accounts receivable — noncurrent⁽¹⁾	$	220	$	194	$	—	$	—	$	194
Liabilities
Non-recourse debt	15,940		16,500		—		14,143		2,357
Recourse debt	5,783		6,147		—		6,147		—
December 31, 2013
Assets
Accounts receivable — noncurrent⁽¹⁾	$	260	$	194	$	—	$	—	$	194
Liabilities
Non-recourse debt	15,380		15,620		—		13,397		2,223
Recourse debt	5,669		6,164		—		6,164		—

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⁽¹⁾

These accounts receivable principally relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and are included in “Noncurrent assets — Other” in the accompanying condensed consolidated balance sheets. The fair value and carrying amount of these accounts receivable exclude value-added tax of $38 million and $46 million at June 30, 2014 and December 31, 2013, respectively.