Discontinued Operations and Held for sale businesses (Notes)

9 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

DISCONTINUED OPERATIONS

Sul — In June 2016, the Company executed an agreement for the sale of its wholly-owned subsidiary AES Sul, a distribution business in Brazil. Upon meeting the held-for-sale criteria, the Company recognized an after tax loss of $382 million comprised of a pretax impairment charge of $783 million, offset by a tax benefit of $266 million related to the impairment of the Sul long lived assets and a tax benefit of $135 million for deferred taxes related to the investment in AES Sul. Prior to the impairment charge in the second quarter, the carrying value of the AES Sul asset group of $1.6 billion was greater than its approximate fair value less costs to sell of $470 million. However, the impairment charge was limited to the carrying value of the long lived assets of the AES Sul disposal group. The sale of AES Sul closed October 31, 2016. See Note 20—Subsequent Events.

Upon disposal of AES Sul, we expect to incur an additional after tax loss on sale of approximately $700 million subject to factors such as adjustments to sales proceeds and potential future movements in exchange rates. The cumulative impact to earnings of the impairment and loss on sale is expected to be approximately $1.1 billion. This includes the reclassification of approximately $1 billion of cumulative translation losses, resulting in an expected net reduction to the Company’s stockholders’ equity of approximately $100 million.

Due to a recent portfolio evaluation, we determined that AES Sul is no longer aligned with our strategic goals and its disposal is part of a strategic shift of the Company in the Brazil distribution sector. Therefore, we have reported the results of operations and financial position of Sul as discontinued operations in the consolidated financial statements for all periods presented. Sul’s pretax loss attributable to AES was $1 million and $794 million, for the three and nine months ended September 30, 2016, respectively. Sul’s pretax gain attributable to AES for the three months ended September 30, 2015 was $6 million and pretax loss attributable to AES for the nine months ended September 30, 2015 was $18 million. Prior to its classification as discontinued operations, Sul was reported in the Brazil SBU reportable segment.

The following table summarizes the carrying amounts of the major classes of assets and liabilities of discontinued operations and held-for-sale businesses at September 30, 2016 and December 31, 2015:

(in millions)	September 30, 2016			December 31, 2015
Assets of discontinued operations and held-for-sale businesses:
Cash and cash equivalents	$	4		$	5
Accounts receivable, net of allowance for doubtful accounts of $19 and $8 respectively	184			171
Property, plant and equipment and intangibles, net	860			668
Deferred income taxes	589			133
Other classes of assets that are not major	206			233
Loss recognized on classification as held-for-sale (1)	(837		)	—
Total assets of discontinued operations	$	1,006		$	1,210
Other assets of businesses classified as held-for-sale (2)	—			96
Total assets of discontinued operations and held-for-sale businesses(3)	$	1,006		$	1,306
Liabilities of discontinued operations and held-for-sale businesses:
Accounts payable	$	141		$	150
Accrued and other liabilities	156			150
Non-recourse debt	337			346
Other classes of liabilities that are not major	168			125
Total liabilities of discontinued operations	$	802		$	771
Other liabilities of businesses classified as held-for-sale(2)	—			13
Total liabilities of discontinued operations and held-for-sale businesses (3)	$	802		$	784

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⁽¹⁾  Pre-tax impairment expense of $783 million is net of the impact from cumulative translation adjustments.

⁽²⁾  DPLER and Kelanitissa were classified as held-for-sale as of December 31, 2015. See Note 17—Dispositions for further information.

⁽³⁾  Amounts were classified as both current and long-term on the Condensed Consolidated Balance Sheet as of December 31, 2015.

The following table summarizes the the major line items constituting gains (losses) from discontinued operations for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2016			2015			2016			2015
Loss from discontinued operations, net of tax:
Revenue — regulated	$	213		$	199		$	632		$	627
Cost of sales	(200		)	(192		)	(608		)	(620		)
Asset impairment expense	—			—			(783		)	—
Other income and expense items that are not major	(14		)	(1		)	(35		)	(25		)
Pretax gain (loss) from discontinued operations	$	(1	)	$	6		$	(794	)	$	(18	)
Income tax benefit (expense)	—			(1		)	405			6
(Loss) income from discontinued operations, net of tax	$	(1	)	$	5		$	(389	)	$	(12	)

The following table summarizes the operating and investing cash flows from discontinued operations for the nine months ended September 30, 2016 and 2015:

	Nine Months Ended September 30,
(in millions)	2016			2015
Cash flows from operating activities of discontinued operations	$	68		$	(23	)
Cash flows from investing activities of discontinued operations	(63		)	(16		)

DISPOSITIONS

UK Wind— During the second quarter of 2016, the Company deconsolidated UK Wind and recorded a loss on deconsolidation of $20 million to Gain on disposal and sale of businesses in the Condensed Consolidated Statement of Operations. Prior to deconsolidation, UK Wind was reported in the Europe SBU reportable segment. See Note 11—Equity for additional information.

DPLER— On January 1, 2016, the Company completed the sale of its interest in DPLER, a competitive retail marketer selling electricity to customers in Ohio. Upon completion, proceeds of $76 million were received and a gain on sale of $49 million was recognized. The sale of DPLER did not meet the criteria to be reported as a discontinued operation. Prior to its sale, DPLER was reported in the US SBU reportable segment.

Kelanitissa— On January 27, 2016, the Company completed the sale of its interest in Kelanitissa, a diesel-fired generation station in Sri Lanka. Upon completion, proceeds of $18 million were received and a loss on sale of $5 million was recognized. The sale of Kelanitissa did not meet the criteria to be reported as a discontinued operation. Prior to its sale, Kelanitissa was reported in the Asia SBU reportable segment.

Armenia Mountain— OnJuly 1, 2015, the Company completed the sale of Armenia Mountain, a wind project in Pennsylvania. Net proceeds from the sale transaction were $64 million and the Company recognized a pretax gain on sale of $22 million. The sale did not meet the criteria to be reported as a discontinued operation. Prior to its sale, Armenia Mountain was reported in the US SBU reportable segment.