Fair Value

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE

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 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. For further information on our valuation techniques and policies, see Note 5—Fair Value in Item 8.—Financial Statements and Supplementary Data of our 2021 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 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:

	June 30, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
DEBT SECURITIES:
Available-for-sale:
Certificates of deposit	$	—	$	566	$	—	$	566	$	—	$	199	$	—	$	199
Total debt securities	—		566		—		566		—		199		—		199
EQUITY SECURITIES:
Mutual funds	27		10		—		37		31		13		—		44
Total equity securities	27		10		—		37		31		13		—		44
DERIVATIVES:
Interest rate derivatives	—		315		2		317		—		51		2		53
Cross-currency derivatives	—		—		—		—		—		5		—		5
Foreign currency derivatives	—		28		50		78		—		29		108		137
Commodity derivatives	—		143		50		193		—		32		6		38
Total derivatives — assets	—		486		102		588		—		117		116		233
TOTAL ASSETS	$	27	$	1,062	$	102	$	1,191	$	31	$	329	$	116	$	476
Liabilities
DERIVATIVES:
Interest rate derivatives	$	—	$	15	$	1	$	16	$	—	$	286	$	8	$	294
Cross-currency derivatives	—		42		—		42		—		11		—		11
Foreign currency derivatives	—		33		—		33		—		35		—		35
Commodity derivatives	—		111		13		124		—		37		7		44
Total derivatives — liabilities	—		201		14		215		—		369		15		384
TOTAL LIABILITIES	$	—	$	201	$	14	$	215	$	—	$	369	$	15	$	384

As of June 30, 2022, all available-for-sale debt securities had stated maturities within one year. There were no other-than-temporary impairments of marketable securities during the three and six months ended June 30, 2022. Credit-related impairments are recognized in earnings under ASC 326. Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from the sale of available-for-sale securities during the periods indicated (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Gross proceeds from sale of available-for-sale securities	$	150	$	55	$	347	$	300

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 three and six months ended June 30, 2022 and 2021 (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.

Three Months Ended June 30, 2022	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at April 1	$	1	$	—	$	93	$	(13)	$	81
Total realized and unrealized gains (losses):
Included in earnings	1		—		(32)		(4)		(35)
Included in other comprehensive income — derivative activity	5		—		(11)		6		—
Included in regulatory (assets) liabilities	—		—		—		15		15
Settlements	—		—		—		2		2
Transfers of assets (liabilities), net into Level 3	—		—		—		31		31
Transfers of (assets) liabilities, net out of Level 3	(6)		—		—		—		(6)
Balance at June 30	$	1	$	—	$	50	$	37	$	88
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	$	1	$	—	$	(32)	$	—	$	(31)
Three Months Ended June 30, 2021	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at April 1	$	(166)	$	(3)	$	98	$	1	$	(70)
Total realized and unrealized gains (losses):
Included in earnings	(1)		(32)		6		—		(27)
Included in other comprehensive income — derivative activity	(16)		—		1		12		(3)
Included in regulatory (assets) liabilities	—		—		—		3		3
Settlements	11		3		(8)		—		6
Transfers of assets (liabilities), net into Level 3	(20)		—		—		—		(20)
Transfers of (assets) liabilities, net out of Level 3	—		—		—		(1)		(1)
Balance at June 30	$	(192)	$	(32)	$	97	$	15	$	(112)
Total 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	$	(1)	$	—	$	(4)	$	—	$	(5)

Six Months Ended June 30, 2022	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at January 1	$	(6)	$	—	$	108	$	(1)	$	101
Total realized and unrealized gains (losses):
Included in earnings	3		—		(44)		(4)		(45)
Included in other comprehensive income — derivative activity	10		—		(14)		(8)		(12)
Included in regulatory (assets) liabilities	—		—		—		15		15
Settlements	—		—		—		2		2
Transfers of assets (liabilities), net into Level 3	—		—		—		31		31
Transfers of (assets) liabilities, net out of Level 3	(6)		—		—		2		(4)
Balance at June 30	$	1	$	—	$	50	$	37	$	88
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	$	3	$	—	$	(44)	$	1	$	(40)
Six Months Ended June 30, 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	1		(33)		(23)		—		(55)
Included in other comprehensive income — derivative activity	19		—		(8)		12		23
Included in regulatory (assets) liabilities	—		—		—		3		3
Settlements	24		3		(18)		(1)		8
Transfers of (assets) liabilities, net out of Level 3	—		—		—		(1)		(1)
Balance at June 30	$	(192)	$	(32)	$	97	$	15	$	(112)
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	$	1	$	—	$	(44)	$	—	$	(43)

The following table summarizes the significant unobservable inputs used for Level 3 derivative assets (liabilities) as of June 30, 2022 (in millions, except range amounts):

Type of Derivative	Fair Value		Unobservable Input	Amount or Range (Weighted Average)
Interest rate	$	1	Subsidiaries’ credit spreads	0.8% - 5.7% (4.4%)
Foreign currency:
Argentine peso	50		Argentine peso to U.S. dollar currency exchange rate after one year	213 - 499 (374)
Commodity:
Other	37
Total	$	88

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.

Nonrecurring Measurements

The Company measures fair value using the applicable fair value measurement guidance. Impairment expense, shown as pre-tax loss below, is measured by comparing the fair value at the evaluation date to the then-latest available carrying amount and is included in Asset impairment expense or Other non-operating expense, as applicable, on the Condensed Consolidated Statements of Operations. 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).

	Measurement Date	Carrying Amount (1)		Fair Value						Pre-tax Loss
Six Months Ended June 30, 2022				Level 1		Level 2		Level 3
Long-lived assets held and used:
Maritza	4/30/2022	$	927	$	—	$	—	$	452	$	475
	Measurement Date	Carrying Amount (1)		Fair Value						Pre-tax Loss
Six Months Ended June 30, 2021				Level 1		Level 2		Level 3
Long-lived assets held and used:
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

_____________________________

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

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets held and used measured on a nonrecurring basis during the six months ended June 30, 2022 (in millions, except range amounts):

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Long-lived assets held and used:
Maritza	$	452	Discounted cash flow	Annual revenue growth	(66)% to 11% (-11%)
				Annual variable margin	(66)% to 23% (-1%)
				Weighted-average cost of capital	20% to 25% (21%)
Total	$	452

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

The following 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 the periods indicated, but for which fair value is disclosed:

		June 30, 2022
		Carrying Amount		Fair Value
				Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent (1)	$	44	$	81	$	—	$	—	$	81
Liabilities:	Non-recourse debt	17,020		17,654		—		15,451		2,203
	Recourse debt	4,177		3,812		—		3,812		—

		December 31, 2021
		Carrying Amount		Fair Value
				Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent (1)	$	55	$	117	$	—	$	—	$	117
Liabilities:	Non-recourse debt	14,811		16,091		—		16,065		26
	Recourse debt	3,754		3,818		—		3,818		—

_____________________________

(1)These amounts primarily relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and amounts impacted by the Stabilization Fund enacted by the Chilean government, 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 $2 million as of June 30, 2022 and December 31, 2021.