ASSET IMPAIRMENT EXPENSE



Years ended December 31, (in millions)	2016		2015		2014
DPL	$	859	$	—	$	—
Buffalo Gap II	159		—		—
Buffalo Gap I	77		—		—
Kilroot	—		121		—
Buffalo Gap III	—		116		—
U.K. Wind	—		37		12
Ebute	—		—		67
East Bend (DP&L)	—		—		12
Other	1		11		—
Total asset impairment expense	$	1,096	$	285	$	91

Buffalo Gap I — During 2016, the Company tested the recoverability of its long-lived assets at Buffalo Gap I. Low wind production during 2016 resulted in management lowering future expectations of production and therefore future forecasted revenues. As such this was determined to be an impairment indicator. The Company determined that the carrying amount of the asset group was not recoverable. The Buffalo Gap I asset group was determined to have a fair value of $36 million using the income approach. As a result, the Company recognized an asset impairment expense of $77 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 regarding ESP 2, 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.

During the fourth quarter of 2016, the Company tested the recoverability of its long-lived coal-fired generation assets and one gas-fired peaking plant at DPL. Additional uncertainty around the useful life of Stuart and Killen related to the Company’s ESP proceedings, along with lower expected forward dark spreads and capacity prices, were collectively determined to be an impairment indicator for these assets. Market information indicating that there was a significant decrease in the fair value of Zimmer and Miami Fort was determined to be an indicator of impairment for these assets. The lower forward dark spreads and capacity prices, along with the indicators at the other coal-fired facilities, collectively, resulted in an indicator of impairment for the Conesville asset group. For the gas-fired peaking plant, significant incremental capital expenditures relative to its fair value, and an impairment charge taken at this facility in Q2 2016, were collectively determined to be impairment indicators for this asset. The Company performed a long-lived asset impairment analysis for each of these asset groups and determined that their carrying amounts were not recoverable. The Stuart, Killen, Miami Fort, Zimmer, Conesville and the gas-fired peaking plant asset groups were determined to have a fair value of $57 million, $43 million, $36 million, $24 million, $1 million and $2 million, respectively, using the market approach for Miami Fort and Zimmer and the income approach for the remaining asset groups. As a result, the Company recognized a total pre-tax asset impairment expense of $624 million. DPL is reported in the US SBU reportable segment.

Buffalo Gap II — During 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 2015, the Company tested the recoverability of long-lived assets at Kilroot, a coal- and oil-fired plant in the U.K., 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 $70 million using the income approach. As a result, the Company recognized asset impairment expense of $121 million. Kilroot is reported in the Europe SBU reportable segment.

Buffalo Gap III — During 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 $118 million using the income approach. As a result, the Company recognized asset impairment expense of $116 million. Buffalo Gap III is reported in the US SBU reportable segment.

U.K. Wind — During 2015, the Company decided to no longer pursue two wind projects in the U.K. 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 current 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 asset impairment expense of $37 million. The U.K. Wind Projects are reported in the Europe SBU reportable segment.

Ebute — During 2014, the Company identified impairment indicators at Ebute in Nigeria, resulting from the continued lack of gas supply, the increased likelihood of selling the asset group before the end of its useful life, and indications about the potential proceeds that could be received from a future sale. The Company determined that the carrying amount of the asset group was not recoverable. The Company recognized asset impairment of $67 million, which represents the difference between the carrying amount of $103 million and fair value less cost to sell of $36 million. In November 2014, the Company completed the sale of its interest in Ebute. See Note 23—Dispositions for additional details. Prior to its sale, Ebute was reported in the Europe SBU reportable segment.

U.K. Wind (Newfield) — During 2014, the Company tested the recoverability of long-lived assets at its Newfield wind development project in the U.K. after their government refused to grant a permit necessary for the project to continue. The Company determined that the carrying amount of the asset group was not recoverable. The Newfield asset group was determined to have no fair value using the income approach. As a result, the Company recognized asset impairment expense of $12 million. U.K. Wind (Newfield) is reported in the Europe SBU reportable segment.

East Bend (DP&L) — During 2014, the Company identified impairment indicators at East Bend, a coal-fired plant in Ohio jointly owned by DP&L, resulting from the increased likelihood that the asset group would be disposed prior to the end of its useful life. The Company determined that the carrying amount of the asset group was not recoverable. The East Bend asset group was determined to have a fair value of $2 million using the market approach, and the Company recognized asset impairment expense of $12 million. The Company's interest in East Bend was sold in December 2014. Prior to its sale, East Bend was reported in the US SBU reportable segment.