The fair value of current financial assets and liabilities, debt service reserves, and other deposits approximate their reported carrying amounts. The estimated fair values of the Company's assets and liabilities have been determined using available market information. Because these amounts are 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.

Valuation Techniques — The fair value measurement accounting guidance describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach, (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on current market expectations of the return on those future amounts. The cost approach is based on the amount that would currently be required to replace an asset. The Company measures its investments and derivatives at fair value on a recurring basis. Additionally, in connection with annual or event-driven impairment evaluations, certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis. These include long-lived tangible assets (i.e., property, plant and equipment), goodwill, and intangible assets (e.g., sales concessions, land use rights and water rights, etc.). In general, the Company determines the fair value of investments and derivatives using the market approach and the income approach, respectively. In the nonrecurring measurements of nonfinancial assets and liabilities, all three approaches are considered; however, the value estimated under the income approach is often the most representative of fair value.

Investments — The Company's investments measured at fair value generally consist of marketable debt and equity securities. Equity securities are either measured at fair value using quoted market prices or based on comparisons to market data obtained for similar assets. Debt securities primarily consist of unsecured debentures and certificates of deposit held by our Brazilian subsidiaries. Returns and pricing on these instruments are generally indexed to the market interest rates in Brazil. Debt securities are measured at fair value based on comparisons to market data obtained for similar assets.

Derivatives — Derivatives are measured at fair value using quoted market prices or the income approach utilizing volatilities, spot and forward benchmark interest rates (such as LIBOR and EURIBOR), foreign exchange rates, credit data, and commodity prices, as applicable. When significant inputs are not observable, the Company uses relevant techniques to determine the inputs, such as regression analysis or prices for similarly traded instruments available in the market.

The Company's methodology to fair value its derivatives is to start with any observable inputs; however, in certain instances the published forward rates or prices may not extend through the remaining term of the contract, and management must make assumptions to extrapolate the curve, which necessitates the use of unobservable inputs, such as proxy commodity prices or historical settlements to forecast forward prices. Specifically, where there is limited forward curve data with respect to foreign exchange contracts beyond the traded points, the Company utilizes the interest rate differential approach to construct the remaining portion of the forward curve. Similarly, in certain instances, the spread that reflects the credit or nonperformance risk is unobservable, requiring the use of proxy yield curves of similar credit quality.

To determine the fair value of a derivative, cash flows are discounted using the relevant spot benchmark interest rate. The Company then makes a credit valuation adjustment ("CVA"), as applicable, by further discounting the cash flows for nonperformance or credit risk based on the observable or estimated debt spread of the Company's subsidiary or its counterparty and the tenor of the respective derivative instrument. The CVA for potential future scenarios in which the derivative is in an asset position is based on the counterparty's credit ratings, credit default swap spreads, and debt spreads, as available. The CVA for potential future scenarios in which the derivative is in a liability position is based on the Parent Company's or the subsidiary's current debt spread. In the absence of readily obtainable credit information, the Parent Company's or the subsidiary's estimated credit rating (based on applying a standard industry model to historical financial information and then considering other relevant information) and spreads of comparably rated entities or the respective country's debt spreads are used as a proxy. All derivative instruments are analyzed individually and are subject to unique risk exposures.

The fair value hierarchy of an asset or a liability is based on the level of significance of the input assumptions. An input assumption is considered significant if it affects the fair value by at least 10%. Assets and liabilities are classified as Level 3 when the use of unobservable inputs is significant. When the use of unobservable inputs is insignificant, assets and liabilities are classified as Level 2. Transfers between Level 3 and Level 2 result from changes in significance of unobservable inputs used to calculate the CVA.

Debt — Recourse and non-recourse debt are carried at amortized cost. The fair value of recourse debt is estimated based on quoted market prices. The fair value of non-recourse debt is estimated based upon interest rates and other features of the loan. In general, the carrying amount of variable rate debt is a close approximation of its fair value. For fixed rate loans, the fair value is estimated using quoted market prices or discounted cash flow ("DCF") analyses. The fair value of recourse and non-recourse debt excludes accrued interest at the valuation date. The fair value was determined using available market information as of December 31, 2021. The Company is not aware of any factors that would significantly affect the fair value amounts subsequent to December 31, 2021.

Nonrecurring measurements — For nonrecurring measurements derived using the income approach, fair value is generally determined using valuation models based on the principles of DCF. The income approach is most often used in the impairment evaluation of long-lived tangible assets, equity method investments, goodwill, and intangible assets. Where the use of market observable data is limited or not available for certain input assumptions, the Company develops its own estimates using a variety of techniques such as regression analysis and extrapolations. Depending on the complexity of a valuation, an independent valuation firm may be engaged to assist management in the valuation process.

For nonrecurring measurements derived using the cost approach, fair value is typically based upon a replacement cost approach. This approach involves a considerable amount of judgment, which is why its use is limited to the measurement of long-lived tangible assets. Like the market approach, this approach is also used to corroborate the fair value determined under the income approach.

Fair Value Considerations — In determining fair value, the Company considers the source of observable market data inputs, liquidity of the instrument, the credit risk of the counterparty, and the risk of the Company's or its counterparty's nonperformance. The conditions and criteria used to assess these factors are:

Sources of market assumptions — The Company derives most of its market assumptions from market efficient data sources (e.g., Bloomberg and Reuters). To determine fair value where market data is not readily available, management uses comparable market sources and empirical evidence to develop its own estimates of market assumptions.

Market liquidity — The Company evaluates market liquidity based on whether the financial or physical instrument, or the underlying asset, is traded in an active or inactive market. An active market exists if the prices are fully transparent to market participants, can be measured by market bid and ask quotes, the market has a relatively large proportion of trading volume as compared to the Company's current trading volume, and the market has a significant number of market participants that will allow the market to rapidly absorb the quantity of assets traded without significantly affecting the market price. Another factor the Company considers when determining whether a market is active or inactive is the presence of government or regulatory controls over pricing that could make it difficult to establish a market-based price when entering into a transaction.

Nonperformance risk — Nonperformance risk refers to the risk that an obligation will not be fulfilled and affects the value at which a liability is transferred or an asset is sold. Nonperformance risk includes, but may not be limited to, the Company's or its counterparty's credit and settlement risk. Nonperformance risk adjustments are dependent on credit spreads, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. The Company is party to various interest rate swaps and options, foreign currency options and forwards, and derivatives and embedded derivatives, which subject the Company to nonperformance risk. The financial and physical instruments held at the subsidiary level are generally non-recourse to the Parent Company.

Recurring Measurements — The following table presents, by level within the fair value hierarchy as described in Note 1—General and Summary of Significant Accounting Policies, the Company's financial assets and liabilities that were measured at fair value on a recurring basis as of the dates indicated (in millions). For the Company's investments in marketable debt securities, the security classes presented were determined based on the nature and risk of the security and are consistent with how the Company manages, monitors, and measures its marketable securities:


	December 31, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
DEBT SECURITIES:
Available-for-sale:
Unsecured debentures	$	—	$	—	$	—	$	—	$	—	$	21	$	—	$	21
Certificates of deposit	—		199		—		199		—		238		—		238

Total debt securities	—		199		—		199		—		259		—		259
EQUITY SECURITIES:
Mutual funds	31		13		—		44		28		51		—		79

Total equity securities	31		13		—		44		28		51		—		79
DERIVATIVES:
Interest rate derivatives	—		51		2		53		—		13		—		13
Cross-currency derivatives	—		5		—		5		—		5		—		5
Foreign currency derivatives	—		29		108		137		—		15		146		161
Commodity derivatives	—		32		6		38		—		8		2		10
Total derivatives — assets	—		117		116		233		—		41		148		189
TOTAL ASSETS	$	31	$	329	$	116	$	476	$	28	$	351	$	148	$	527
Liabilities
DERIVATIVES:
Interest rate derivatives	$	—	$	286	$	8	$	294	$	—	$	374	$	236	$	610
Cross-currency derivatives	—		11		—		11		—		2		2		4
Foreign currency derivatives	—		35		—		35		—		43		—		43
Commodity derivatives	—		37		7		44		—		22		—		22
Total derivatives — liabilities	—		369		15		384		—		441		238		679
TOTAL LIABILITIES	$	—	$	369	$	15	$	384	$	—	$	441	$	238	$	679

As of December 31, 2021, all available-for-sale debt securities had stated maturities within one year. For the years ended December 31, 2021 and 2020, no impairments of marketable securities were recognized in earnings or Other Comprehensive Income (Loss). Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from sale of available-for-sale securities for the periods indicated (in millions):

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 years ended December 31, 2021 and 2020 (presented net by type of derivative in millions). Transfers between Level 3 and Level 2 principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.


Year Ended December 31, 2021	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at January 1	$	(236)	$	(2)	$	146	$	2	$	(90)
Total realized and unrealized gains (losses):
Included in earnings	13		(10)		(7)		(1)		(5)
Included in other comprehensive income — derivative activity	4		—		(3)		(5)		(4)

Included in regulatory (assets) liabilities	—		—		—		1		1
Settlements	216		3		(28)		(1)		190
Transfers of assets/(liabilities), net into Level 3	(3)		—		—		3		—
Transfers of (assets)/liabilities, net out of Level 3	—		9		—		—		9
Balance at December 31	$	(6)	$	—	$	108	$	(1)	$	101
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	$	2	$	4	$	(35)	$	—	$	(29)


Year Ended December 31, 2020	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at January 1	$	(184)	$	(11)	$	94	$	(1)	$	(102)
Total realized and unrealized gains (losses):
Included in earnings	3		(2)		67		2		70
Included in other comprehensive income — derivative activity	(84)		(10)		23		—		(71)


Settlements	34		21		(39)		1		17
Transfers of assets/(liabilities), net into Level 3	(6)		—		—		—		(6)
Transfers of (assets)/liabilities, net out of Level 3	1		—		1		—		2
Balance at December 31	$	(236)	$	(2)	$	146	$	2	$	(90)
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	$	—	$	(2)	$	35	$	2	$	35


Type of Derivative	Fair Value		Unobservable Input	Amount or Range (Weighted Average)
Interest rate	$	(6)	Subsidiaries’ credit spreads	0.9% - 3.2% (2.3%)

Foreign currency:
Argentine peso	108		Argentine peso to USD currency exchange rate after one year	105 - 478 (245)



Commodity:
Other	(1)
Total	$	101

For interest rate derivatives and foreign currency derivatives, increases (decreases) in the estimates of the Company's own credit spreads would decrease (increase) the value of the derivatives in a liability position. For foreign currency derivatives, increases (decreases) in the estimate of the above exchange rate would increase (decrease) the value of the derivative.

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 the then-latest available carrying amount. The following table summarizes our major categories of assets measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):


Year Ended December 31, 2021	Measurement Date	Carrying Amount (1)		Fair Value						Pre-tax Loss
Assets				Level 1		Level 2		Level 3
Dispositions: (2)
Estrella del Mar I	9/30/2021	$	17	$	—	$	6	$	—	$	11
Alto Maipo (3)	11/30/2021	2,339		—		—		2,043		—
Long-lived assets held and used: (4)
Puerto Rico	3/31/2021	548		—		—		73		475
Mountain View I & II	4/30/2021	78		—		—		11		67
Ventanas 3 & 4	6/30/2021	661		—		—		12		649
Angamos	6/30/2021	241		—		—		86		155
Buffalo Gap III	12/31/2021	91		—		—		—		91
Buffalo Gap II	12/31/2021	73		—		—		—		73
Buffalo Gap I	12/31/2021	29		—		—		—		29


Year Ended December 31, 2020	Measurement Date	Carrying Amount (1)		Fair Value						Pre-tax Loss
Assets				Level 1		Level 2		Level 3




Long-lived assets held and used: (4)
Angamos	8/1/2020	$	870	$	—	$	—	$	306	$	564
Ventanas 1 & 2	8/1/2020	213		—		—		—		213
Hawaii	8/31/2020	114		—		—		76		38
Estrella del Mar I	9/30/2020	44		—		—		14		30

Equity method investments:
OPGC (5)	3/31/2020	195		—		—		152		43
OPGC (5)	6/30/2020	272		—		104		—		158

(3)Fair value measurement performed for purposes of allocating $224 million of goodwill to the carrying amount of Alto Maipo in determining the loss on disposal. The goodwill allocation was determined based on the relative fair value of Alto Maipo, which was included in the AES Andes reporting unit. Note that the Pre-

December 31, 2021

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Long-lived assets held and used:

Puerto Rico

Discounted cash flow

Annual revenue growth

(80)% to 8% (—%)

Annual variable margin

37% to 97% (—%)

Weighted-average cost of capital

18% to —%

Mountain View I & II

Discounted cash flow

Annual revenue growth

(69)% to 54% (—%)

Annual variable margin

(10)% to 56% (46%)

Weighted-average cost of capital

Ventanas 3 & 4

Discounted cash flow

Annual revenue growth

(18)% to 23% (2%)

Annual variable margin

(5)% to 21% (6%)

Weighted-average cost of capital

11%

Angamos

Discounted cash flow

Annual revenue growth

(8)% to 58% (8%)

Annual variable margin

(8)% to 53% (11%)

Weighted-average cost of capital

11%

Buffalo Gap III

—

Discounted cash flow

Annual revenue growth

(12)% to 6% (—%)

Pre-tax operating margin

(18)% to 29% (2%)

Weighted-average cost of capital

11%

Buffalo Gap II

—

Discounted cash flow

Annual revenue growth

(10)% to 6% (—%)

Pre-tax operating margin

(26)% to 39% (-11%)

Weighted-average cost of capital

11%

Buffalo Gap I

—

Discounted cash flow

Annual revenue growth

(12)% to 6% (-1%)

Pre-tax operating margin

(45)% to 45% (-37%)

Weighted-average cost of capital

11%

Alto Maipo

2,043

Discounted cash flow

Annual revenue growth

(14)% to 14% (2%)

Pre-tax operating margin

(18)% to 8% (2%)

Weighted-average cost of capital

Total

2,225