ASSET IMPAIRMENT EXPENSE



	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2016		2015		2016		2015
Buffalo Gap I	$	78	$	—	$	78	$	—
Buffalo Gap II	—		—		159		—
DPL	—		—		235		—
Kilroot	—		113		—		113
UK Wind	—		—		—		37
Buffalo Gap III	—		118		—		118
Other	1		—		1		8
Total asset impairment expense	$	79	$	231	$	473	$	276

Buffalo Gap I — During the third quarter of 2016, the Company tested the recoverability of its long-lived assets at Buffalo Gap I. As a result of decreases in wind production, management underwent a process to enhance the methodology for forecasting wind dispatch. The change in management’s estimate of dispatch resulted in lower forecasted revenues from September 2016 through the end of the asset group’s useful life. The Company determined that the carrying amount of the Buffalo Gap I asset group was not recoverable. The Buffalo Gap I asset group was determined to have a fair value of $35 million using the income approach. As a result, the Company recognized an asset impairment expense of $78 million ($23 million attributable to AES). Buffalo Gap I is reported in the US SBU reportable segment.

DPL — During the second quarter of 2016, the Company tested the recoverability of its long-lived generation assets at DPL. Uncertainty created by the Supreme Court of Ohio’s June 20, 2016 opinion, lower expectations of future revenue resulting from the most recent PJM capacity auction, and higher anticipated environmental compliance costs resulting from third party studies were collectively determined to be an impairment indicator for these assets. The Company performed a long-lived asset impairment analysis and determined that the carrying amount of Killen, a coal-fired generation facility, and certain DPL peaking generation facilities were not recoverable. The Killen and DPL peaking generation asset groups were determined to have a fair value of $84 million and $5 million, respectively, using the income approach. As a result, the Company recognized a total asset impairment expense of $235 million. DPL is reported in the US SBU reportable segment.

Buffalo Gap II — During the first quarter of 2016, the Company tested the recoverability of its long-lived assets at Buffalo Gap II. Impairment indicators were identified based on a decline in forward power curves. The Company determined that the carrying amount was not recoverable. The Buffalo Gap II asset group was determined to have a fair value of $92 million using the income approach. As a result, the Company recognized an asset impairment expense of $159 million ($49 million attributable to AES). Buffalo Gap II is reported in the US SBU reportable segment.

Kilroot — During the third quarter of 2015, the Company tested the recoverability of long-lived assets at Kilroot, a coal and oil-fired plant in the United Kingdom, when the regulator established lower capacity prices for the Irish Single Electricity Market. The Company determined that the carrying amount of the asset group was not recoverable. The Kilroot asset group was determined to have a fair value of $78 million using the income approach. As a result, the Company recognized asset impairment expense of $113 million. Kilroot is reported in the Europe SBU reportable segment.

Buffalo Gap III — During the third quarter of 2015, the Company tested the recoverability of its long-lived assets at Buffalo Gap III, a wind farm in Texas. Impairment indicators were identified based on a decline in forward power curves coupled with the near term expiration of favorable contracted cash flows. The Company determined that the carrying amount was not recoverable. The Buffalo Gap III asset group was determined to have a fair value of $116 million using the income approach. As a result, the Company recognized asset impairment expense of $118 million. Buffalo Gap III is reported in the US SBU reportable segment.

UK Wind — During the second quarter of 2015, the Company decided to no longer pursue two wind projects in the United Kingdom based on recent regulatory clarifications specific to these projects, resulting in a full impairment. Impairment indicators were also identified at four other wind projects based on their development status and a reassessment of the likelihood that each project would be pursued given aviation concerns, regulatory changes, economic considerations and other factors. The Company determined that the carrying amounts of each of these asset groups, which totaled $38 million, were not recoverable. In aggregate, the asset groups were determined to have a fair value of $1 million using the market approach and, as a result, the Company recognized an asset impairment expense of $37 million. The UK Wind projects were reported in the Europe SBU reportable segment.