FAIR VALUE

The fair value of current financial assets and liabilities, debt service reserves and other deposits approximate their reported carrying amounts. The estimated fair value of the Company’s assets and liabilities has been determined using available market information. By virtue of these amounts being estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The Company made no changes during the period to the fair valuation techniques described in Note 4.—Fair Value in Item 8.—Financial Statements and Supplementary Data of its 2015 Form 10-K.

Recurring Measurements — The following table presents, 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 (in millions). For the Company’s investments in marketable debt and equity securities, the security classes presented are determined based on the nature and risk of the security and are consistent with how the Company manages, monitors and measures its marketable securities:



	September 30, 2016								December 31, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
AVAILABLE FOR SALE:
Debt securities:
Unsecured debentures	$	—	$	372	$	—	$	372	$	—	$	318	$	—	$	318
Certificates of deposit	—		168		—		168		—		129		—		129
Government debt securities	—		9		—		9		—		28		—		28
Subtotal	—		549		—		549		—		475		—		475
Equity securities:
Mutual funds	—		40		—		40		—		15		—		15
Subtotal	—		40		—		40		—		15		—		15
Total available for sale	—		589		—		589		—		490		—		490
TRADING:
Equity securities:
Mutual funds	16		—		—		16		15		—		—		15
Total trading	16		—		—		16		15		—		—		15
DERIVATIVES:
Cross-currency derivatives	—		3		—		3		—		—		—		—
Foreign currency derivatives	—		42		274		316		—		35		292		327
Commodity derivatives	—		52		10		62		—		41		7		48
Total derivatives — assets	—		97		284		381		—		76		299		375
TOTAL ASSETS	$	16	$	686	$	284	$	986	$	15	$	566	$	299	$	880
Liabilities
DERIVATIVES:
Interest rate derivatives	$	—	$	194	$	307	$	501	$	—	$	54	$	304	$	358
Cross-currency derivatives	—		26		—		26		—		43		—		43
Foreign currency derivatives	—		82		—		82		—		41		15		56
Commodity derivatives	—		37		1		38		—		29		4		33
Total derivatives — liabilities	—		339		308		647		—		167		323		490
TOTAL LIABILITIES	$	—	$	339	$	308	$	647	$	—	$	167	$	323	$	490

As of September 30, 2016, all AFS debt securities had stated maturities within one year. Gains and losses on the sale of investments are determined using the specific-identification method. For the three and nine months ended September 30, 2016 and 2015 no other-than-temporary impairments of marketable securities were recognized in earnings or OCI. The table below presents gross proceeds from the sale of available for sale securities during the periods indicated (in millions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Gross proceeds from sale of AFS securities	$	812	$	1,105	$	3,216	$	3,285

The following tables present a reconciliation of net derivative assets and liabilities by type measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2016 and 2015 (in millions). 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 September 30, 2016	Interest Rate			Foreign Currency			Commodity			Total
Balance at the beginning of the period	$	(421	)	$	271		$	11		$	(139	)
Total realized and unrealized gains (losses):
Included in earnings	(1		)	12			1			12
Included in other comprehensive income — derivative activity	6			—			—			6
Included in other comprehensive income — foreign currency translation activity	—			(5		)	—			(5		)
Settlements	17			(4		)	(3		)	10
Transfers of liabilities into Level 3	(2		)	—			—			(2		)
Transfers of liabilities out of Level 3	94			—			—			94
Balance at the end of the period	$	(307	)	$	274		$	9		$	(24	)
Total gains 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	$	—		$	8		$	1		$	9



Three Months Ended September 30, 2015	Interest Rate			Foreign Currency			Commodity			Total
Balance at the beginning of the period	$	(191	)	$	222		$	17		$	48
Total realized and unrealized gains (losses):
Included in earnings	(1		)	19			—			18
Included in other comprehensive income — derivative activity	(33		)	—			—			(33		)
Included in other comprehensive income — foreign currency translation activity	—			(8		)	—			(8		)
Included in regulatory (assets) liabilities	—			—			(20		)	(20		)
Settlements	7			(2		)	12			17
Transfers of liabilities into Level 3	(65		)	—			—			(65		)
Balance at the end of the period	$	(283	)	$	231		$	9		$	(43	)
Total gains 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	$	—		$	18		$	—		$	18



Nine Months Ended September 30, 2016	Interest Rate			Foreign Currency			Commodity			Total
Balance at the beginning of the period	$	(304	)	$	277		$	3		$	(24	)
Total realized and unrealized gains (losses):
Included in earnings	—			30			3			33
Included in other comprehensive income — derivative activity	(172		)	6			—			(166		)
Included in other comprehensive income — foreign currency translation activity	(3		)	(43		)	—			(46		)
Included in regulatory (assets) liabilities	—			—			11			11
Settlements	56			(8		)	(8		)	40
Transfers of liabilities into Level 3	(2		)	—			—			(2		)
Transfers of liabilities out of Level 3	118			12			—			130
Balance at the end of the period	$	(307	)	$	274		$	9		$	(24	)
Total gains 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	$	5		$	25		$	3		$	33



Nine Months Ended September 30, 2015	Interest Rate			Foreign Currency			Commodity			Total
Balance at the beginning of the period	$	(210	)	$	209		$	6		$	5
Total realized and unrealized gains (losses):
Included in earnings	(1		)	49			2			50
Included in other comprehensive income — derivative activity	(30		)	—			—			(30		)
Included in other comprehensive income — foreign currency translation activity	7			(21		)	—			(14		)
Included in regulatory (assets) liabilities	—			—			(12		)	(12		)
Settlements	16			(6		)	13			23
Transfers of liabilities into Level 3	(65		)	—			—			(65		)
Balance at the end of the period	$	(283	)	$	231		$	9		$	(43	)
Total gains 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	$	—		$	44		$	2		$	46

The table below summarizes the significant unobservable inputs used for Level 3 derivative assets (liabilities) as of September 30, 2016 (in millions, except range amounts):



Type of Derivative	Fair Value			Unobservable Input	Amount or Range (Weighted Avg)
Interest rate	$	(307	)	Subsidiaries’ credit spreads	2.4% to 31.5% (4.3%)
Foreign currency:
Argentine Peso	274			Argentine Peso to USD currency exchange rate after one year	17.5 to 32.7 (25.4)
Other	9
Total	$	(24	)

Nonrecurring Measurements

When evaluating impairment of long-lived assets and equity method investments, the Company measures fair value using the applicable fair value measurement guidance. Impairment expense is measured by comparing the fair value at the evaluation date to its then-latest available carrying amount. The following table summarizes our major categories of assets and liabilities measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):



Nine Months Ended September 30, 2016	Measurement Date	Carrying Amount (1)		Fair Value						Pretax Loss
Assets	Measurement Date	Carrying Amount (1)		Level 1		Level 2		Level 3		Pretax Loss
Long-lived assets held and used: ⁽²⁾
Buffalo Gap I	08/31/2016	$	113	$	—	$	—	$	35	$	78
DPL	06/30/2016	324		—		—		89		235
Buffalo Gap II	03/31/2016	251		—		—		92		159
Discontinued operations: ⁽³⁾
Sul	06/30/2016	1,581		—		470		—		783



Nine Months Ended September 30, 2015	Measurement Date	Carrying Amount (1)		Fair Value						Pretax Loss
Assets	Measurement Date	Carrying Amount (1)		Level 1		Level 2		Level 3		Pretax Loss
Long-lived assets held and used: ⁽²⁾
Buffalo Gap III	09/30/2015	$	234	$	—	$	—	$	116	$	118
Kilroot	08/28/2015	191		—		—		78		113
UK Wind	06/30/2015	38		—		1		—		37
Other	Various	29		—		21		—		8
Equity method investments:
Solar Spain	02/09/2015	29		—		—		29		—

_____________________________


⁽¹⁾	Represents the carrying values at the dates of measurement, before fair value adjustment.


⁽²⁾	See Note 14—Asset Impairment Expense for further information.


⁽³⁾	Per the Company’s policy, pre-tax loss is limited to the impairment of long-lived assets. Any additional loss will be recognized on completion of the sale. See Note 16—Discontinued Operations for further information.

The following table summarizes the significant unobservable inputs used in the Level 3 measurement on a nonrecurring basis during the nine months ended September 30, 2016 (in millions, except range amounts):



	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Long-lived assets held and used:
Buffalo Gap I	$	35	Discounted cash flow	Annual revenue growth	-20% to 9% (-14%)
				Annual pretax operating margin	-40% to 42% (29%)
				Weighted-average cost of capital	9	%
DPL	89		Discounted cash flow	Annual revenue growth	-11% to 13% (1%)
				Annual pretax operating margin	-50% to 60% (5%)
				Weighted-average cost of capital	7% to 12%
Buffalo Gap II	92		Discounted cash flow	Annual revenue growth	-17% to 21% (20%)
				Annual pretax operating margin	-166% to 48% (18%)
				Weighted-average cost of capital	9	%

Financial Instruments not Measured at Fair Value in the Condensed Consolidated Balance Sheets

The next table presents (in millions) 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 September 30, 2016 and December 31, 2015, but for which fair value is disclosed:



		September 30, 2016
		Carrying Amount		Fair Value
		Carrying Amount		Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent ⁽¹⁾	$	222	$	312	$	—	$	—	$	312
Liabilities:	Non-recourse debt	15,887		16,411		—		14,381		2,030
	Recourse debt	4,944		5,298		—		5,298		—



		December 31, 2015
		Carrying Amount		Fair Value
		Carrying Amount		Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent ⁽¹⁾	$	238	$	310	$	—	$	20	$	290
Liabilities:	Non-recourse debt	15,115		15,592		—		13,325		2,267
	Recourse debt	4,966		4,696		—		4,696		—

_____________________________


⁽¹⁾	These amounts principally relate to amounts due from CAMMESA, and are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The fair value and carrying amount of these receivables exclude VAT of $23 million and $27 million as of September 30, 2016 and December 31, 2015, respectively.