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Asset Impairment Expense
3 Months Ended
Sep. 30, 2012
IMPAIRMENTS

14. ASSET IMPAIRMENT EXPENSE

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2012 2011 2012 2011
             
  (in millions)
Wind turbines and projects $ 36 $ 116 $ 40 $ 116
Kelanitissa   5   4   17   37
St. Patrick   -   -   11   -
Other   2   10   4   10
Total asset impairment expense $ 43 $ 130 $ 72 $ 163

Wind Turbines and Projects During the third quarter of 2012, the Company determined that all turbines held in storage met the held-for-sale criteria due to the ongoing receipt of offers from potential buyers and less viable internal deployment scenarios. Accordingly, the Company measured the turbines at fair value less cost to sell under the market approach. The turbines with a carrying amount of $45 million were written down to their fair value less cost to sell of $25 million, which resulted in an impairment expense of $20 million. The turbines were previously evaluated for impairment in the third quarter of 2011 due to a reduction in wind turbine market pricing and advances in turbine technology. At that time, the Company had also concluded that it was more likely than not that certain non-refundable deposits it had made in prior years to a turbine manufacturer for the purchase of wind turbines were not recoverable due to the availability of more advanced and lower cost turbines in the market. As a result, the Company had recognized asset impairment expense of $116 million related to these turbines and deposits in the third quarter of 2011.

Additionally, during the third quarter of 2012, the Company determined that two early-stage wind development projects that were capitalizing certain project costs were no longer probable because of the Company's shift in capital allocation for developing these projects. The Company considered the likelihood of cash flows for these projects under current market conditions with no likely extension of the production tax credit in the U.S. Additionally, the Company assessed the value of the projects using the market approach and, after consultation with third party valuation firms and internal development staff, the fair value was determined to be zero. A full impairment of $16 million was recognized in the current quarter. These wind turbines and projects are reported in Corporate and Other.

Kelanitissa—We continue to evaluate the recoverability of our long-lived assets at Kelanitissa, our diesel-fired generation plant in Sri Lanka, as a result of both the requirement to transfer the plant to the government at the end of our PPA and the expectation of lower future operating cash flows. During the nine months ended September 30, 2012, the Company recognized asset impairment expense of $17 million for the long-lived assets of Kelanitissa. Our evaluations during this period indicated that the long-lived assets were no longer recoverable and, accordingly, were written down to their estimated fair value of $10 million based on a discounted cash flow analysis. The long-lived assets had a carrying amount of $22 million prior to the recognition of asset impairment expense. Kelanitissa was previously evaluated for impairment in the second and third quarter of 2011 due to the reasons described above. These evaluations resulted in asset impairment expense of $37 million during the nine months ended September 30, 2011. Kelanitissa is reported in the Asia Generation reportable segment.

St. PatrickDuring the second quarter of 2012, the Company received approval from its Board of Directors for the sale of its wholly-owned subsidiary Ferme Eolienne Saint Patrick SAS (“St. Patrick”). Upon meeting the held for sale criteria including the Board's approval, long-lived assets with a carrying amount of $33 million were written down to their fair value of $22 million (i.e., the sale price attributed to St. Patrick) and an impairment expense of $11 million was recorded. The sale transaction subsequently closed on June 28, 2012. St. Patrick is reported in “Corporate and Other”.