Q1 2014 Form 10-Q



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________________________________________________
FORM 10-Q
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2014
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12291
THE AES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
54 1163725
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
4300 Wilson Boulevard Arlington, Virginia
 
22203
(Address of principal executive offices)
 
(Zip Code)
(703) 522-1315
Registrant’s telephone number, including area code:
______________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Smaller reporting company ¨
 
 
 
 
 
 
 
 
 
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No  x
______________________________________________________________________________________________
The number of shares outstanding of Registrant’s Common Stock, par value $0.01 per share, on May 1, 2014 was 725,334,337
 




THE AES CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014
TABLE OF CONTENTS
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
ITEM 5.
 
 
 
ITEM 6.
 
 




PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
THE AES CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
March 31,
2014
 
December 31,
2013
 
 
(in millions, except share
and per share data)
ASSETS
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
1,413

 
$
1,642

Restricted cash
 
589

 
597

Short-term investments
 
621

 
668

Accounts receivable, net of allowance for doubtful accounts of $124 and $134, respectively
 
2,586

 
2,363

Inventory
 
687

 
684

Deferred income taxes
 
181

 
166

Prepaid expenses
 
199

 
179

Other current assets
 
1,252

 
976

Current assets of discontinued operations and held-for-sale assets
 
461

 
464

Total current assets
 
7,989

 
7,739

NONCURRENT ASSETS
 
 
 
 
Property, Plant and Equipment:
 
 
 
 
Land
 
942

 
922

Electric generation, distribution assets and other
 
31,151

 
30,596

Accumulated depreciation
 
(9,943
)
 
(9,604
)
Construction in progress
 
3,203

 
3,198

Property, plant and equipment, net
 
25,353

 
25,112

Other Assets:
 
 
 
 
Investments in and advances to affiliates
 
1,030

 
1,010

Debt service reserves and other deposits
 
586

 
541

Goodwill
 
1,468

 
1,622

Other intangible assets, net of accumulated amortization of $149 and $153, respectively
 
293

 
297

Deferred income taxes
 
680

 
666

Other noncurrent assets
 
2,445

 
2,170

Noncurrent assets of discontinued operations and held-for-sale assets
 
1,129

 
1,254

Total other assets
 
7,631

 
7,560

TOTAL ASSETS
 
$
40,973

 
$
40,411

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
2,632

 
$
2,259

Accrued interest
 
395

 
263

Accrued and other liabilities
 
1,926

 
2,114

Non-recourse debt, including $259 and $267, respectively, related to variable interest entities
 
2,067

 
2,062

Recourse debt
 
8

 
118

Current liabilities of discontinued operations and held-for-sale businesses
 
812

 
837

Total current liabilities
 
7,840

 
7,653

NONCURRENT LIABILITIES
 
 
 
 
Non-recourse debt, including $1,022 and $979, respectively, related to variable interest entities
 
13,735

 
13,318

Recourse debt
 
5,675

 
5,551

Deferred income taxes
 
1,145

 
1,119

Pension and other post-retirement liabilities
 
1,290

 
1,310

Other noncurrent liabilities
 
3,191

 
3,299

Noncurrent liabilities of discontinued operations and held-for-sale businesses
 
378

 
432

Total noncurrent liabilities
 
25,414

 
25,029

Contingencies and Commitments (see Note 8)
 

 

Cumulative preferred stock of subsidiaries
 
78

 
78

EQUITY
 
 
 
 
THE AES CORPORATION STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 814,143,636 issued and 725,308,630 outstanding at March 31, 2014 and 813,316,510 issued and 722,508,342 outstanding at December 31, 2013)
 
8

 
8

Additional paid-in capital
 
8,424

 
8,443

Accumulated deficit
 
(208
)
 
(150
)
Accumulated other comprehensive loss
 
(2,967
)
 
(2,882
)
Treasury stock, at cost (88,835,006 shares at March 31, 2014 and 90,808,168 shares at December 31, 2013)
 
(1,064
)
 
(1,089
)
Total AES Corporation stockholders’ equity
 
4,193

 
4,330

NONCONTROLLING INTERESTS
 
3,448

 
3,321

Total equity
 
7,641

 
7,651

TOTAL LIABILITIES AND EQUITY
 
$
40,973

 
$
40,411

See Notes to Condensed Consolidated Financial Statements.

1



THE AES CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended 
 March 31,
 
 
2014
 
2013
 
 
(in millions, except per share amounts)
Revenue:
 
 
 
 
Regulated
 
$
2,142

 
$
2,139

Non-Regulated
 
2,120

 
2,011

Total revenue
 
4,262

 
4,150

Cost of Sales:
 
 
 
 
Regulated
 
(1,932
)
 
(1,787
)
Non-Regulated
 
(1,536
)
 
(1,614
)
Total cost of sales
 
(3,468
)
 
(3,401
)
Operating margin
 
794

 
749

General and administrative expenses
 
(51
)
 
(54
)
Interest expense
 
(373
)
 
(370
)
Interest income
 
63

 
65

Loss on extinguishment of debt
 
(134
)
 
(47
)
Other expense
 
(8
)
 
(26
)
Other income
 
11

 
68

Gain on sale of investments
 
1

 
3

Goodwill impairment expense
 
(154
)
 
—

Asset impairment expense
 
(12
)
 
(48
)
Foreign currency transaction losses
 
(19
)
 
(30
)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES
 
118

 
310

Income tax expense
 
(54
)
 
(83
)
Net equity in earnings of affiliates
 
25

 
4

INCOME FROM CONTINUING OPERATIONS
 
89

 
231

Income from operations of discontinued businesses, net of income tax expense (benefit) of $14 and $(2), respectively
 
20

 
4

Net loss from disposal and impairments of discontinued businesses, net of income tax benefit of $(1) and $(1), respectively
 
(43
)
 
(36
)
NET INCOME
 
66

 
199

Noncontrolling interests:
 
 
 
 
Less: Income from continuing operations attributable to noncontrolling interests
 
(136
)
 
(119
)
Less: Loss from discontinued operations attributable to noncontrolling interests
 
12

 
2

Total net income attributable to noncontrolling interests
 
(124
)
 
(117
)
NET (LOSS) INCOME ATTRIBUTABLE TO THE AES CORPORATION
 
$
(58
)
 
$
82

AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
 
 
 
 
(Loss) income from continuing operations, net of tax
 
$
(47
)
 
$
112

Loss from discontinued operations, net of tax
 
(11
)
 
(30
)
Net (loss) income
 
$
(58
)
 
$
82

BASIC EARNINGS PER SHARE:
 
 
 
 
(Loss) Income from continuing operations attributable to The AES Corporation common stockholders, net of tax
 
$
(0.07
)
 
$
0.15

Loss from discontinued operations attributable to The AES Corporation common stockholders, net of tax
 
(0.01
)
 
(0.04
)
NET (LOSS) INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS
 
$
(0.08
)
 
$
0.11

DILUTED EARNINGS PER SHARE:
 
 
 
 
(Loss) Income from continuing operations attributable to The AES Corporation common stockholders, net of tax
 
$
(0.07
)
 
$
0.15

Loss from discontinued operations attributable to The AES Corporation common stockholders, net of tax
 
(0.01
)
 
(0.04
)
NET (LOSS) INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS
 
$
(0.08
)
 
$
0.11

DILUTED SHARES OUTSTANDING
 
724

 
749

DIVIDENDS DECLARED PER COMMON SHARE
 
$
—

 
$
—


See Notes to Condensed Consolidated Financial Statements.

2



THE AES CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

 
 
Three Months Ended 
 March 31,
 
 
2014
 
2013
 
 
(in millions)
NET INCOME
 
$
66

 
$
199

Foreign currency translation activity:
 
 
 
 
Foreign currency translation adjustments, net of income tax (expense) benefit of $(1) and $0, respectively
 
5

 
(32
)
Reclassification to earnings, net of income tax (expense) benefit of $0 and $0, respectively
 
6

 
(3
)
Total foreign currency translation adjustments
 
11

 
(35
)
Derivative activity:
 
 
 
 
Change in derivative fair value, net of income tax (expense) benefit of $24 and $0, respectively
 
(120
)
 
(16
)
Reclassification to earnings, net of income tax (expense) of $(3) and $(7), respectively
 
19

 
24

Total change in fair value of derivatives
 
(101
)
 
8

Pension activity:
 
 
 
 
Reclassification to earnings due to amortization of net actuarial loss, net of income tax (expense) of $(3) and $(7), respectively
 
6

 
14

Total pension adjustments
 
6

 
14

OTHER COMPREHENSIVE (LOSS)
 
(84
)
 
(13
)
COMPREHENSIVE INCOME (LOSS)
 
(18
)
 
186

Less: Comprehensive (income) attributable to noncontrolling interests
 
(125
)
 
(136
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION
 
$
(143
)
 
$
50



See Notes to Condensed Consolidated Financial Statements.

3



THE AES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended 
 March 31,
 
 
2014
 
2013
 
 
(in millions)
OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
66

 
$
199

Adjustments to net income:
 
 
 
 
Depreciation and amortization
 
306

 
329

Loss (gain) on sale of assets and investments
 
4

 
11

Impairment expenses
 
166

 
48

Deferred income taxes
 
56

 
13

Provisions for contingencies
 
12

 
26

Loss on the extinguishment of debt
 
134

 
47

Loss on disposals and impairments - discontinued operations
 
44

 
38

Other
 
35

 
56

Changes in operating assets and liabilities
 
 
 
 
(Increase) decrease in accounts receivable
 
(219
)
 
42

(Increase) decrease in inventory
 
(12
)
 
(4
)
(Increase) decrease in prepaid expenses and other current assets
 
(74
)
 
(192
)
(Increase) decrease in other assets
 
(444
)
 
(45
)
Increase (decrease) in accounts payable and other current liabilities
 
415

 
174

Increase (decrease) in income tax payables, net and other tax payables
 
(206
)
 
(123
)
Increase (decrease) in other liabilities
 
(62
)
 
(1
)
Net cash provided by operating activities
 
221

 
618

INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(399
)
 
(401
)
Proceeds from the sale of businesses, net of cash sold
 
29

 
1

Proceeds from the sale of assets
 
4

 
6

Sale of short-term investments
 
1,049

 
1,335

Purchase of short-term investments
 
(993
)
 
(1,492
)
Increase in restricted cash, debt service reserves and other assets
 
(19
)
 
(45
)
Other investing
 
3

 
15

Net cash used in investing activities
 
(326
)
 
(581
)
FINANCING ACTIVITIES:
 
 
 
 
Borrowings under the revolving credit facilities, net
 
65

 
15

Issuance of recourse debt
 
750

 
—

Issuance of non-recourse debt
 
554

 
1,491

Repayments of recourse debt
 
(866
)
 
(2
)
Repayments of non-recourse debt
 
(349
)
 
(1,007
)
Payments for financing fees
 
(78
)
 
(33
)
Distributions to noncontrolling interests
 
(26
)
 
(31
)
Contributions from noncontrolling interests
 
32

 
55

Dividends paid on AES common stock
 
(36
)
 
(30
)
Payments for financed capital expenditures
 
(178
)
 
(152
)
Other financing
 
—

 
4

Net cash (used in) provided by financing activities
 
(132
)
 
310

Effect of exchange rate changes on cash
 
(22
)
 
(8
)
Decrease in cash of discontinued and held-for-sale businesses
 
30

 
17

Total (decrease) increase in cash and cash equivalents
 
(229
)
 
356

Cash and cash equivalents, beginning
 
1,642

 
1,900

Cash and cash equivalents, ending
 
$
1,413

 
$
2,256

SUPPLEMENTAL DISCLOSURES:
 
 
 
 
Cash payments for interest, net of amounts capitalized
 
$
226

 
$
234

Cash payments for income taxes, net of refunds
 
$
237

 
$
295


See Notes to Condensed Consolidated Financial Statements.

4



THE AES CORPORATION
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2014 and 2013
1. FINANCIAL STATEMENT PRESENTATION
The prior-period condensed consolidated financial statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) have been reclassified to reflect the businesses held-for-sale and discontinued operations as discussed in Note 16 — Discontinued Operations and Held-for-Sale Businesses.
Consolidation
In this Quarterly Report the terms “AES,” “the Company,” “us” or “we” refer to the consolidated entity including its subsidiaries and affiliates. The terms “The AES Corporation,” “the Parent” or “the Parent Company” refer only to the publicly held holding company, The AES Corporation, excluding its subsidiaries and affiliates. Furthermore, variable interest entities (“VIEs”) in which the Company has a variable interest have been consolidated where the Company is the primary beneficiary. Investments in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation.
Correction of an error
Certain amounts related to the payment of costs for the construction of our Mong Duong facility in Vietnam were misclassified as an investing activity on the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2013. The error was related to costs that were paid under extended payment terms as allowed by the construction contract, and therefore should have been reflected as financing activities in accordance with the accounting guidance for cash flows. As a result, cash flows used in investing activities were overstated by $145 million and cash flows used in financing activities were understated by $145 million for the three months ended March 31, 2013. Cash flows used in investing activities were previously reported as $726 million and have now been restated to $581 million. Cash flows provided by financing activities were previously reported as $455 million and have now been restated to $310 million. There was no impact on amounts presented on the Condensed Consolidated Statement of Operations for the three months ended March 31, 2013.
Interim Financial Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, for interim financial information and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, comprehensive income and cash flows. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2013 audited consolidated financial statements and notes thereto, which are included in the 2013 Form 10-K filed with the SEC on February 25, 2014 (the “2013 Form 10-K”).
New Accounting Pronouncements Adopted
ASU No. 2013-11, Income Taxes (Topic 740), "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)."
Effective January 1, 2014, the Company prospectively adopted ASU No. 2013-11, which requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of uncertain tax positions. Under ASU No. 2013-11, UTBs are netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The impact to the Company’s Condensed Consolidated Balance Sheet as of March 31, 2014 was a reduction of $66 million to “Other noncurrent liabilities” and an offsetting increase to “Deferred income taxes” under “Noncurrent Liabilities.” There were no impacts on the results of operations and cash flows.


5



Accounting Pronouncements Issued But Not Yet Effective
The following accounting standards have been issued, but are not yet effective for, and have not been adopted by AES.
ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued ASU No. 2014-08, which significantly changes the existing accounting guidance on discontinued operations. Under ASU No. 2014-08, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations. Amongst other changes: equity method investments that were previously scoped-out of the discontinued operations accounting guidance are now included in the scope; a business can meet the criteria to be classified as held for sale upon acquisition and can be reported in discontinued operations; and components where an entity retains significant continuing involvement or where operations and cash flows will not be eliminated from ongoing operations as a result of a disposal transaction can meet the definition of discontinued operations. Additionally, where summarized amounts are presented on the face of financial statements, reconciliations of those amounts to major classes of line items are also required. ASU No. 2014-08 requires additional disclosures for individually material components that do not meet the definition of discontinued operations. ASU No. 2014-08 is effective for annual reporting periods beginning after December 15, 2014 and interim periods therein. ASU No. 2014-08 should be applied to components classified as held for sale after its effective date. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The Company is currently evaluating the impact of adopting ASU No. 2014-08 on its financial position and results of operations. The adoption is expected to reduce the number of disposals that meet the definition of a discontinued operations.
2. INVENTORY
The following table summarizes the Company’s inventory balances as of the periods indicated:
 
 
March 31, 2014
 
December 31, 2013
 
 
(in millions)
Coal, fuel oil and other raw materials
 
$
324

 
$
334

Spare parts and supplies
 
363

 
350

Total
 
$
687

 
$
684

3. 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 value of the Company’s assets and liabilities have been determined using available market information. By virtue of these amounts being 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. There were no changes in fair valuation techniques during the period and the Company continues to follow the valuation techniques described in Note 4. — Fair Value in Item 8. — Financial Statements and Supplementary Data of its 2013 Form 10-K.

6




Recurring Measurements
The following table sets forth, 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 periods indicated:
 
 
March 31, 2014
 
December 31, 2013
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVAILABLE-FOR-SALE:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured debentures
 
$
—

 
$
427

 
$
—

 
$
427

 
$
—

 
$
435

 
$
—

 
$
435

Certificates of deposit
 
—

 
109

 
—

 
109

 
—

 
151

 
—

 
151

Government debt securities
 
—

 
26

 
—

 
26

 
—

 
25

 
—

 
25

Subtotal
 
—

 
562

 
—

 
562

 
—

 
611

 
—

 
611

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
 
—

 
45

 
—

 
45

 
—

 
44

 
—

 
44

Subtotal
 
—

 
45

 
—

 
45

 
—

 
44

 
—

 
44

Total available-for-sale
 
—

 
607

 
—

 
607

 
—

 
655

 
—

 
655

TRADING:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
 
13

 
—

 
—

 
13

 
13

 
—

 
—

 
13

Total trading
 
13

 
—

 
—

 
13

 
13

 
—

 
—

 
13

DERIVATIVES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
—

 
46

 
—

 
46

 
—

 
98

 
—

 
98

Cross currency derivatives
 
—

 
4

 
—

 
4

 
—

 
5

 
—

 
5

Foreign currency derivatives
 
—

 
18

 
105

 
123

 
—

 
15

 
98

 
113

Commodity derivatives
 
—

 
46

 
3

 
49

 
—

 
18

 
6

 
24

Total derivatives
 
—

 
114

 
108

 
222

 
—

 
136

 
104

 
240

TOTAL ASSETS
 
$
13

 
$
721

 
$
108

 
$
842

 
$
13

 
$
791

 
$
104

 
$
908

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DERIVATIVES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
$
—

 
$
289

 
$
87

 
$
376

 
$
—

 
$
221

 
$
101

 
$
322

Cross currency derivatives
 
—

 
11

 
—

 
11

 
—

 
11

 
—

 
11

Foreign currency derivatives
 
—

 
40

 
4

 
44

 
—

 
16

 
5

 
21

Commodity derivatives
 
—

 
41

 
3

 
44

 
—

 
15

 
2

 
17

Total derivatives
 
—

 
381

 
94

 
475

 
—

 
263

 
108

 
371

TOTAL LIABILITIES
 
$
—

 
$
381

 
$
94

 
$
475

 
$
—

 
$
263

 
$
108

 
$
371

 _____________________________
(1) 
Amortized cost approximated fair value at March 31, 2014 and December 31, 2013.

7



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 months ended March 31, 2014 and 2013 (presented net by type of derivative). Transfers between Level 3 and Level 2 are determined as of the end of the reporting period and principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.
 
 
Three Months Ended March 31, 2014
 
 
Interest
Rate
 
Foreign
Currency
 
Commodity
 
Total
 
 
(in millions)
Balance at the beginning of the period
 
$
(101
)
 
$
93

 
$
4

 
$
(4
)
Total gains (losses) (realized and unrealized):
 
 
 
 
 
 
 
 
Included in earnings
 
—

 
26

 
(1
)
 
25

Included in other comprehensive income - derivative activity
 
(64
)
 
(1
)
 
—

 
(65
)
Included in other comprehensive income - foreign currency translation activity
 
—

 
(18
)
 
—

 
(18
)
Included in regulatory (assets) liabilities
 
—

 
—

 
(3
)
 
(3
)
Settlements
 
8

 
—

 
—

 
8

Transfers of (assets) liabilities out of Level 3
 
70

 
1

 
—

 
71

Balance at the end of the period
 
$
(87
)
 
$
101

 
$
—

 
$
14

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
 
$
—

 
$
26

 
$
(1
)
 
$
25

 
 
Three Months Ended March 31, 2013
 
 
Interest
Rate
 
Foreign
Currency
 
Commodity
 
Total
 
 
(in millions)
Balance at the beginning of the period
 
$
(412
)
 
$
72

 
$
(1
)
 
$
(341
)
Total gains (losses) (realized and unrealized):
 
 
 
 
 
 
 
 
Included in earnings
 
—

 
3

 
—

 
3

Included in other comprehensive income - derivative activity
 
(21
)
 
—

 
—

 
(21
)
Included in other comprehensive income - foreign currency translation activity
 
4

 
(3
)
 
—

 
1

Included in regulatory (assets) liabilities
 
—

 
—

 
(2
)
 
(2
)
Settlements
 
23

 
(1
)
 
—

 
22

Transfers of (assets) liabilities out of Level 3
 
334

 
—

 
—

 
334

Balance at the end of the period
 
$
(72
)
 
$
71

 
$
(3
)
 
$
(4
)
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

 
$
—

 
$
2


The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of March 31, 2014:
Type of Derivative
 
Fair Value
 
Unobservable Input
 
Amount or Range
(Weighted Average)
 
 
(in millions)
 
 
 
 
Interest rate
 
$
(87
)
 
Subsidiaries’ credit spreads
 
3.72% - 4.48% (3.9%)

Foreign currency:
 
 
 
 
 
 
Embedded derivative — Argentine Peso
 
105

 
Argentine Peso to U.S. Dollar currency exchange rate after 1 year
 
8.13 - 30.46 (19.96)

Embedded derivative — Euro
 
(4
)
 
Subsidiaries’ credit spreads
 
3.72
%
Total
 
$
14

 
 
 
 

8



Nonrecurring Measurements
When evaluating impairment of goodwill, long-lived assets, discontinued operations and held-for-sale businesses, and equity method investments, 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 their then-latest available carrying amount. The following table summarizes major categories of assets and liabilities measured at fair value on a nonrecurring basis during the period and their level within the fair value hierarchy:
 
 
Three Months Ended March 31, 2014
 
 
Carrying
Amount
 
Fair Value
 
Gross
Loss
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
Long-lived assets held and used:(1)
 
 
 
 
 
 
 
 
 
 
DPL (East Bend)
 
$
14

 
$
—

 
$
2

 
$
—

 
$
12

Discontinued operations and held-for-sale businesses:(2)
 
 
 
 
 
 
 
 
 
 
Cameroon
 
372

 
—

 
340

 
—

 
38

Goodwill(3)
 
 
 
 
 
 
 
 
 
 
DPLER
 
136

 
—

 
—

 
—

 
136

Buffalo Gap
 
28

 
—

 
—

 
10

 
18

 
 
Three Months Ended March 31, 2013
 
 
Carrying
Amount
 
Fair Value
 
Gross
Loss
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
Long-lived assets held and used:(1)
 
 
 
 
 
 
 
 
 
 
Beaver Valley
 
$
61

 
$
—

 
$
—

 
$
15

 
$
46

Long-lived assets held for sale:(1)
 
 
 
 
 
 
 
 
 
 
Wind turbines
 
25

 
—

 
—

 
25

 
—

Discontinued operations and held for sale businesses:
 
 
 
 
 
 
 
 
 


Ukraine utilities
 
143

 
—

 
109

 
—

 
38

_____________________________
(1) 
See Note 15 — Asset Impairment Expense for further information.
(2) 
See Note 16 — Discontinued Operations and Held-For-Sale Businesses for further information. Also, the gross loss equals the carrying amount of the disposal group less its fair value less costs to sell.
(3) 
See Note 14 - Goodwill Impairments for further information.
Financial Instruments not Measured at Fair Value in the Condensed Consolidated Balance Sheets
The following table sets forth 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 March 31, 2014 and December 31, 2013, but for which fair value is disclosed.
 
 
Carrying
Amount
 
Fair Value
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
(in millions)
March 31, 2014
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Accounts receivable — noncurrent(1)
 
$
220

 
$
194

 
$
—

 
$
—

 
$
194

Liabilities
 
 
 
 
 
 
 
 
 
 
Non-recourse debt
 
15,802

 
16,191

 
—

 
14,026

 
2,165

Recourse debt
 
5,683

 
6,103

 
—

 
6,103

 
—

December 31, 2013
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Accounts receivable — noncurrent(1)
 
$
260

 
$
194

 
$
—

 
$
—

 
$
194

Liabilities
 
 
 
 
 
 
 
 
 
 
Non-recourse debt
 
15,380

 
15,620

 
—

 
13,397

 
2,223

Recourse debt
 
5,669

 
6,164

 
—

 
6,164

 
—

_____________________________
(1) 
These accounts receivable principally relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and are included in “Noncurrent assets — Other” in the accompanying condensed consolidated balance sheets. The fair value of these accounts receivable excludes value-added tax of $38 million and $46 million at March 31, 2014 and December 31, 2013, respectively.

9



4. INVESTMENTS IN MARKETABLE SECURITIES
The Company’s investments in marketable debt and equity securities as of March 31, 2014 and December 31, 2013 by security class and by level within the fair value hierarchy have been disclosed in Note 3 — Fair Value. The security classes are determined based on the nature and risk of a security and are consistent with how the Company manages, monitors and measures its marketable securities. As of March 31, 2014, all available-for-sale debt securities had stated maturities within one year. Gains and losses on the sale of investments are determined using the specific-identification method. Pretax gains and losses related to available-for-sale and trading securities are generally immaterial for disclosure purposes. For the three months ended March 31, 2014 and 2013, there were no realized losses on the sale of available-for-sale securities and no other-than-temporary impairment of marketable securities recognized in earnings or other comprehensive income. The following table summarizes the gross proceeds from sale of available-for-sale securities for the periods indicated:
 
 
Three Months Ended March 31,
 
 
2014
 
2013
 
 
(in millions)
Gross proceeds from sales of available-for-sale securities
 
$
1,060

 
$
1,340

5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
There have been no changes to the information disclosed under Derivatives and Hedging Activities in Note 1 — General and Summary of Significant Accounting Policies included in Item 8. — Financial Statements and Supplementary Data in the 2013 Form 10-K.
Volume of Activity
The following tables set forth, by type of derivative, the Company’s outstanding notional under its derivatives and the weighted-average remaining term as of March 31, 2014 regardless of whether the derivative instruments are in qualifying cash flow hedging relationships:
 
 
Current
 
Maximum
 
 
 
 
Interest Rate and Cross Currency
 
Derivative
Notional
 
Derivative Notional Translated to USD
 
Derivative
Notional
 
Derivative Notional Translated to USD
 
Weighted-Average Remaining Term
 
% of Debt Currently Hedged by Index(2)
 
 
(in millions)
 
(in years)
 
 
Interest Rate Derivatives:(1)
 
 
 
 
 
 
 
 
 
 
 
 
LIBOR (U.S. Dollar)
 
3,621

 
$
3,621

 
5,515

 
$
5,515

 
10
 
73
%
EURIBOR (Euro)
 
570

 
785

 
570

 
785

 
8
 
86
%
LIBOR (British Pound)
 
67

 
112

 
67

 
112

 
12
 
84
%
Cross Currency Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
Chilean Unidad de Fomento
 
6

 
241

 
6

 
241

 
8
 
85
%
_____________________________
(1) 
The Company’s interest rate derivative instruments primarily include accreting and amortizing notionals. The maximum derivative notional represents the largest notional at any point between March 31, 2014 and the maturity of the derivative instrument, which includes forward-starting derivative instruments. The interest rate and cross currency derivatives range in maturity through 2033 and 2028, respectively.
(2) 
The percentage of variable-rate debt currently hedged is based on the related index and excludes forecasted issuances of debt and variable-rate debt tied to other indices where the Company has no interest rate derivatives.

10



 
 
March 31, 2014
Foreign Currency Derivatives
 
Notional(1)
 
Notional Translated to USD
 
Weighted-Average Remaining Term (2)
 
 
(in millions)
 
(in years)
Foreign Currency Options and Forwards:
 
 
 
 
 
 
Chilean Unidad de Fomento
 
13

 
$
548

 
1
Chilean Peso
 
102,538

 
186

 
<1
Brazilian Real
 
241

 
106

 
<1
Euro
 
126

 
174

 
<1
Colombian Peso
 
205,606

 
105

 
<1
British Pound
 
30

 
51

 
<1
Philippine Peso
 
1,376

 
31

 
<1
Embedded Foreign Currency Derivatives:
 
 
 
 
 
 
Argentine Peso
 
796

 
99

 
10
Kazakhstani Tenge
 
2,449

 
13

 
2
Brazilian Real
 
192

 
83

 
<1
_____________________________
(1) 
Represents contractual notionals. The notionals for options have not been probability adjusted, which generally would decrease them.
(2) 
Represents the remaining tenor of our foreign currency derivatives weighted by the corresponding notional. These options and forwards and these embedded derivatives range in maturity through 2017 and 2025, respectively.
 
 
March 31, 2014
 
 
 
 
Weighted-Average
Commodity Derivatives
 
Notional
 
Remaining Term(1)
 
 
(in millions)
 
(in years)
Power (MWh)
 
6

 
3
_____________________________
(1) Represents the remaining tenor of our commodity derivatives weighted by the corresponding volume. These derivatives range in maturity through 2016.

Accounting and Reporting
Assets and Liabilities
The following tables set forth the Company’s derivative instruments as of March 31, 2014 and December 31, 2013, first by whether or not they are designated hedging instruments, then by whether they are current or noncurrent to the extent they are subject to master netting agreements or similar agreements (where the rights to set-off relate to settlement of amounts receivable and payable under those derivatives) and by balances no longer accounted for as derivatives.
 
 
March 31, 2014
 
December 31, 2013
 
 
Designated
 
Not Designated
 
Total
 
Designated
 
Not Designated
 
Total
 
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
$
44

 
$
2

 
$
46

 
$
96

 
$
2

 
$
98

Cross currency derivatives
 
4

 
—

 
4

 
5

 
—

 
5

Foreign currency derivatives
 
7

 
116

 
123

 
4

 
109

 
113

Commodity derivatives
 
30

 
19

 
49

 
8

 
16

 
24

Total assets
 
$
85

 
$
137

 
$
222

 
$
113

 
$
127

 
$
240

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
 
$
373

 
$
3

 
$
376

 
$
318

 
$
4

 
$
322

Cross currency derivatives
 
11

 
—

 
11

 
11

 
—

 
11

Foreign currency derivatives
 
34

 
10

 
44

 
15

 
6

 
21

Commodity derivatives
 
22

 
22

 
44

 
7

 
10

 
17

Total liabilities
 
$
440

 
$
35

 
$
475

 
$
351

 
$
20

 
$
371


11



 
 
March 31, 2014
 
December 31, 2013
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(in millions)
Current
 
$
55

 
$
177

 
$
32

 
$
157

Noncurrent
 
167

 
298

 
208

 
214

Total
 
$
222

 
$
475

 
$
240

 
$
371

Derivatives subject to master netting agreement or similar agreement:
 
 
 
 
 
 
 
 
Gross amounts recognized in the balance sheet
 
$
92

 
$
438

 
$
91

 
$
314

Gross amounts of derivative instruments not offset
 
(18
)
 
(18
)
 
(9
)
 
(9
)
Gross amounts of cash collateral received/pledged not offset
 
—

 
(16
)
 
(3
)
 
(6
)
Net amount
 
$
74

 
$
404

 
$
79

 
$
299

Other balances that had been, but are no longer, accounted for as derivatives that are to be amortized to earnings over the remaining term of the associated PPA
 
$
165

 
$
187

 
$
169

 
$
190


Effective Portion of Cash Flow Hedges
The following tables set forth the pretax gains (losses) recognized in accumulated other comprehensive loss (“AOCL”) and earnings related to the effective portion of derivative instruments in qualifying cash flow hedging relationships (including amounts that were reclassified from AOCL as interest expense related to interest rate derivative instruments that previously, but no longer, qualify for cash flow hedge accounting), as defined in the accounting standards for derivatives and hedging, for the periods indicated:
 
 
Gains (Losses)
Recognized in AOCL
 
 
 
Gains (Losses) Reclassified
from AOCL into Earnings
 
 
Three Months Ended 
 March 31,
 
Classification in
Condensed Consolidated
Statements of Operations
 
Three Months Ended 
 March 31,
Type of Derivative
 
2014
 
2013
 
2014
 
2013
 
 
(in millions)
 
 
 
(in millions)
Interest rate derivatives
 
$
(150
)
 
$
(13
)
 
Interest expense
 
$
(31
)
 
$
(32
)
 
 
 
 
 
 
Non-regulated cost of sales
 
(1
)
 
(1
)
 
 
 
 
 
 
Net equity in earnings of affiliates
 
(1
)
 
(2
)
Cross currency derivatives
 
(3
)
 
1

 
Interest expense
 
(1
)
 
(3
)
 
 
 
 
 
 
Foreign currency transaction gains (losses)
 
(10
)
 
5

Foreign currency derivatives
 
(15
)
 
1

 
Foreign currency transaction gains (losses)
 
7

 
2

Commodity derivatives
 
24

 
(5
)
 
Non-regulated revenue
 
13

 
—

 
 


 


 
Non-regulated cost of sales
 
2

 
—

Total
 
$
(144
)
 
$
(16
)
 
 
 
$
(22
)
 
$
(31
)
The pretax accumulated other comprehensive income (loss) expected to be recognized as an increase (decrease) to income from continuing operations before income taxes over the next twelve months as of March 31, 2014 is $(112) million for interest rate hedges, $(5) million for cross currency swaps, $2 million for foreign currency hedges, and $1 million for commodity and other hedges.
Ineffective Portion of Cash Flow Hedges
The following table sets forth the pretax gains (losses) recognized in earnings related to the ineffective portion of derivative instruments in qualifying cash flow hedging relationships, as defined in the accounting standards for derivatives and hedging, for the periods indicated:
 
 
 
 
Gains (Losses) Recognized in Earnings
 
 
Classification in Condensed Consolidated Statements of Operations
 
Three Months Ended 
 March 31,
Type of Derivative
 
2014
 
2013
 
 
 
 
(in millions)
Interest rate derivatives
 
Interest expense
 
$
—

 
$
(1
)
Total
 
 
 
$
—

 
$
(1
)


12



Not Designated for Hedge Accounting
The following table sets forth the gains (losses) recognized in earnings related to derivative instruments not designated as hedging instruments under the accounting standards for derivatives and hedging and the amortization of balances that had been, but are no longer, accounted for as derivatives, for the periods indicated:
 
 
 
 
Gains (Losses) Recognized in Earnings
 
 
Classification in Condensed Consolidated Statements of Operations
 
Three Months Ended 
 March 31,
Type of Derivative
 
2014
 
2013
 
 
 
 
(in millions)
Interest rate derivatives
 
Interest expense
 
$
—

 
$
1

 
 
Net equity in earnings of affiliates
 
—

 
(6
)
Foreign currency derivatives
 
Foreign currency transaction gains (losses)
 
23

 
6

 
 
Net equity in earnings of affiliates
 
(4
)
 
(3
)
Commodity and other derivatives
 
Non-regulated revenue
 
3

 
(8
)
 
 
Regulated revenue
 
—

 
(3
)
 
 
Non-regulated cost of sales
 
—

 
1

 
 
Regulated cost of sales
 
(8
)
 
—

 
 
Income (loss) from operations of discontinued businesses
 
(5
)
 
(13
)
Total
 
 
 
$
9

 
$
(25
)
Credit Risk-Related Contingent Features
DP&L, a utility within our United States strategic business unit, has certain over-the-counter commodity derivative contracts under master netting agreements that contain provisions that require DP&L to maintain an investment-grade issuer credit rating from credit rating agencies. Since DP&L's rating has fallen below investment grade, certain of the counterparties to the derivative contracts have requested immediate and ongoing full overnight collateralization of the mark-to-market loss (fair value excluding credit valuation adjustments), which was $33 million and $11 million as of March 31, 2014 and December 31, 2013, respectively, for all derivatives with credit risk-related contingent features. As of March 31, 2014 and December 31, 2013, DP&L had posted $16 million and $6 million, respectively, of cash collateral directly with third parties and in a broker margin account and DP&L held no cash collateral from counterparties to its derivative instruments that were in an asset position. After consideration of the netting of counterparty assets, DP&L could have been required to, but did not, provide additional collateral of $4 million and $0 million as of March 31, 2014 and December 31, 2013, respectively.
6. FINANCING RECEIVABLES
Financing receivables are defined as receivables that have contractual maturities of greater than one year. The Company has financing receivables pursuant to amended agreements or government resolutions that are due from certain Latin American governmental bodies, primarily in Argentina. The following table sets forth the breakdown of financing receivables by country as of the periods indicated:
 
 
March 31, 2014
 
December 31, 2013
 
 
(in millions)
Argentina(1)
 
$
139

 
$
164

Dominican Republic
 
2

 
2

Brazil
 
15

 
18

Total long-term financing receivables
 
$
156

 
$
184

_____________________________
(1) 
Excludes noncurrent receivables of $101 million and $122 million, respectively, as of March 31, 2014 and December 31, 2013, which have not been converted into financing receivables and do not have contractual maturities of greater than one year. Also, excludes the foreign currency-related embedded derivative assets associated with the financing receivables which had a fair value of $104 million and $97 million, respectively, as of March 31, 2014 and December 31, 2013.
Argentina—As a result of energy market reforms in 2004 and consistent with contractual arrangements, AES Argentina entered into three agreements with the Argentine government called (as translated into English) the Fund for the Investment Needed to Increase the Supply of Electricity in the Wholesale Market (“FONINVEMEM Agreements”) to contribute a portion of their accounts receivable into a fund for financing the construction of combined cycle and gas-fired plants. These receivables accrue interest and are collected in monthly installments over 10 years once the related plant begins operations. In addition, AES Argentina receives an ownership interest in these newly built plants once the receivables have been fully repaid. Collection of the principal and interest on these receivables is subject to various business risks and uncertainties including, but not limited to, the completion and operation of power plants which generate cash for payments of

13



these receivables, regulatory changes that could impact the timing and amount of collections, and economic conditions in Argentina. The Company monitors these risks including the credit ratings of the Argentine government on a quarterly basis to assess the collectability of these receivables. The Company accrues interest on these receivables once the recognition criteria have been met. The Company’s collection estimates are based on assumptions that it believes to be reasonable but are inherently uncertain. Actual future cash flows could differ from these estimates. The receivables under the first two FONINVEMEM Agreements are being actively collected since the related plants commenced operations in 2010. In assessing the collectability of the receivables under these agreements, the Company also considers how the collections have historically been made timely in accordance with the agreements. The receivables related to the third FONINVEMEM Agreement are not currently due as commercial operation of the two related gas-fired plants has not been achieved. In assessing the collectability of the receivables under this agreement, the Company also considers the extent to which significant milestones necessary to complete the plants have been achieved or are still probable.
In March 2013, the Argentine government passed Resolution No. 95/2013 ("Resolution 95") to introduce a new energy regulatory framework. Applicable to the majority of generation companies, the new regulatory framework remunerates the fixed and variable costs plus a margin depending on the type of fuel consumed and technology used. On May 31, 2013, Resolution 95 became effective retroactively to February 1, 2013. CAMMESA, the administrator of the wholesale electricity market in Argentina, has been billing the generation companies in accordance with the Resolution 95 procedures since June 2013. In addition, Resolution 95 determines the portion of future outstanding receivables that shall be contributed into the new trusts to be set up by the Argentine government. In March 2014, AES Argentina signed a framework agreement with the Secretary of Energy that outlines a plan to make an investment in new energy capacity in which AES Argentina will maintain 100% ownership, utilizing Resolution 95 new trust receivables to be accumulated through December 31, 2015. Terms and conditions of this plan are still being negotiated.
7. INVESTMENTS IN AND ADVANCES TO AFFILIATES
Summarized Financial Information
The following tables summarize financial information of the Company’s 50%-or-less owned affiliates that are accounted for using the equity method.
 
50%-or-less Owned Affiliates
For the Three months ended March 31,
2014
 
2013
 
(in millions)
Revenue
$
277

 
$
359

Operating margin
77

 
286

Net income (loss)
49

 
(2
)

8. DEBT
Recourse Debt
In February 2014, the Company redeemed in full the $110 million balance of its 7.75% senior unsecured notes due March 2014. On March 7, 2014, the Company issued $750 million aggregate principal amount of 5.50% senior notes due 2024. Concurrent with this offering, the Company redeemed via tender offers $625 million aggregate principal of its existing 8.00% senior unsecured notes due 2017. As a result of the latter transaction, the Company recognized a loss on extinguishment of debt of $132 million that is included in the Condensed Consolidated Statement of Operations.
Non-Recourse Debt
Significant transactions
During the three months ended March 31, 2014, we had the following significant debt transactions at our subsidiaries:
•
Mong Duong drew $143 million under its construction loan facility;
•
Tietê issued new debt of $129 million partially offset by repayments of $52 million;
•
Gener issued new debt of $129 million more than offset by repayments of $149 million.

14



Debt in default
The following table summarizes the Company’s subsidiary non-recourse debt in default or accelerated as of the period indicated. The debt is classified as current non-recourse debt unless otherwise indicated:
 
 
Primary Nature
of Default
 
March 31, 2014
Subsidiary
 
Default Amount
 
Net Assets
 
 
 
 
(in millions)
Maritza
 
Covenant
 
$
820

 
$
743

Kavarna
 
Covenant
 
197

 
91

 
 
 
 
$
1,017

 
 
In addition to the defaults listed in the table above, discontinued operations at Sonel and Kribi in Cameroon had debt in default of $236 million and $251 million; and net assets of $487 million and $(5) million, respectively as of March 31, 2014. For further information please see Note 16 — Discontinued Operations and Held-for-Sale Businesses.
The above defaults are not payment defaults, but are instead defaults triggered by failure to comply with other covenants and/or other conditions such as (but not limited to) failure to meet information covenants, complete construction or other milestones in an allocated time, meet certain minimum or maximum financial ratios, or other requirements contained in the non-recourse debt documents of the borrower.
In addition, in the event that there is a default, bankruptcy or maturity acceleration at a subsidiary or group of subsidiaries that meets the applicable definition of materiality under the corporate debt agreements of The AES Corporation, there could be a cross-default to the Company’s recourse debt. As of March 31, 2014, none of the defaults listed above individually or in the aggregate results in a cross-default under the recourse debt of the Company.
9. CONTINGENCIES AND COMMITMENTS
Guarantees, Letters of Credit and Commitments
In connection with certain project financing, acquisition, power purchase and other agreements, the Parent Company has expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events. In the normal course of business, the Parent Company has entered into various agreements, mainly guarantees and letters of credit, to provide financial or performance assurance to third parties on behalf of AES businesses. These agreements are entered into primarily to support or enhance the creditworthiness otherwise achieved by a business on a stand-alone basis, thereby facilitating the availability of sufficient credit to accomplish their intended business purposes. Most of the contingent obligations relate to future performance commitments which the Company or its businesses expect to fulfill within the normal course of business. The expiration dates of these guarantees vary from less than one year to more than 20 years. The following table summarizes the Parent Company’s contingent contractual obligations as of March 31, 2014. Amounts presented in the table below represent the Parent Company’s current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees. The amounts include obligations made by the Parent Company for the direct benefit of the lenders associated with the non-recourse debt of its businesses of $24 million.
Contingent Contractual Obliga