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 September 30, 2015
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 November 2, 2015 was 672,862,161
 




THE AES CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015
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.
 
 




GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
Adjusted EPS
Adjusted Earnings Per Share, a non-GAAP measure
Adjusted PTC
Adjusted Pretax Contribution, a non-GAAP measure of operating performance
AES
The Parent Company and its subsidiaries and affiliates
AFS
Available For Sale
AFUDC
Allowance for Funds Used During Construction
ANEEL
Brazilian National Electric Energy Agency
AOCL
Accumulated Other Comprehensive Loss
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
BNDES
Brazilian Development Bank
BoD
Board of Directors
CA
Commercial Availability
CAA
United States Clean Air Act
CAMMESA
Wholesale Electric Market Administrator in Argentina
CCR
Coal Combustion Residuals
CDPQ
La Caisse de depot et placement du Quebec
CEEE
Companhia Estadual de Energia
CESCO
Central Electricity Supply Company of Orissa Ltd.
CFE
Federal Commission of Electricity
CO2
Carbon Dioxide
CTA
Cumulative Translation Adjustment
DP&L
The Dayton Power & Light Company
DPL
DPL Inc.
DPLER
DPL Energy Resources, Inc.
EPA
United States Environmental Protection Agency
EPC
Engineering, Procurement and Construction
EURIBOR
Euro Interbank Offered Rate
FASB
Financial Accounting Standards Board
FCA
Federal Court of Appeals
FX
Foreign Exchange
GAAP
Generally Accepted Accounting Principles in the United States
GHG
Greenhouse Gas
GSA
Gas Supply Agreement
GWh
Gigawatt Hours
HTA
Heads of Terms Agreement
ICC
International Chamber of Commerce
IPALCO
IPALCO Enterprises, Inc.
IPL
Indianapolis Power & Light Company
KPI
Key Performance Indicator
kWh
Kilowatt Hours
LIBOR
London Interbank Offered Rate
LNG
Liquefied Natural Gas
MATS
Mercury and Air Toxics Standards
MRE
Energy Reallocation Mechanism
MW
Megawatts
MWh
Megawatt Hours
NEK
Natsionalna Elektricheska Kompania (state-owned electricity public supplier in Bulgaria)
NOV
Notice of Violation
NOX
Nitrogen Dioxide
OCI
Other Comprehensive Income
O&M
Operations and Maintenance
OPGC
Odisha Power Generation Corporation
Parent Company
The AES Corporation
PIS
Partially Integrated System
PJM
PJM Interconnection, LLC
PPA
Power Purchase Agreement
PREPA
Puerto Rico Electric Power Authority
RSU
Restricted Stock Unit
SIC
Central Interconnected Electricity System
SING
Northern Interconnected Electricity System
SAIDI
System Average Interruption Duration Index
SAIFI
System Average Interruption Frequency Index
SBU
Strategic Business Unit
SEC
United States Securities and Exchange Commission
SO2
Sulfur Dioxide
TA
Transportation Agreement
VAT
Value-added tax
VIE
Variable Interest Entity

1



PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE AES CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(in millions, except share and per share data)
ASSETS
 
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
1,437

 
$
1,539

Restricted cash
341

 
283

Short-term investments
453

 
709

Accounts receivable, net of allowance for doubtful accounts of $85 and $96, respectively
2,477

 
2,709

Inventory
670

 
702

Deferred income taxes
155

 
275

Prepaid expenses
121

 
175

Other current assets
1,514

 
1,434

Current assets of held-for-sale businesses
52

 
—

Total current assets
7,220

 
7,826

NONCURRENT ASSETS
 
 
 
Property, Plant and Equipment:
 
 
 
Land
704

 
870

Electric generation, distribution assets and other
28,307

 
30,459

Accumulated depreciation
(9,264
)
 
(9,962
)
Construction in progress
2,716

 
3,784

Property, plant and equipment, net
22,463

 
25,151

Other Assets:
 
 
 
Investments in and advances to affiliates
601

 
537

Debt service reserves and other deposits
339

 
411

Goodwill
1,473

 
1,458

Other intangible assets, net of accumulated amortization of $131 and $158, respectively
251

 
281

Deferred income taxes
503

 
662

Service concession assets
1,554

 
—

Other noncurrent assets
2,596

 
2,640

Total other assets
7,317

 
5,989

TOTAL ASSETS
$
37,000

 
$
38,966

LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES
 
 
 
Accounts payable
$
1,729

 
$
2,278

Accrued interest
341

 
260

Accrued and other liabilities
2,134

 
2,326

Recourse debt
—

 
151

Non-recourse debt, including $217 and $240, respectively, related to variable interest entities
2,300

 
1,982

Current liabilities of held-for-sale businesses
30

 
—

Total current liabilities
6,534

 
6,997

NONCURRENT LIABILITIES
 
 
 
Recourse debt
5,107

 
5,107

Non-recourse debt, including $1,050 and $1,030, respectively, related to variable interest entities
13,291

 
13,618

Deferred income taxes
1,185

 
1,277

Pension and other post-retirement liabilities
978

 
1,342

Other noncurrent liabilities
2,906

 
3,222

Total noncurrent liabilities
23,467

 
24,566

Contingencies and Commitments (see Note 9)

 

Redeemable stock of subsidiaries
538

 
78

EQUITY
 
 
 
THE AES CORPORATION STOCKHOLDERS’ EQUITY
 
 
 
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 815,846,624 issued and 674,461,074 outstanding at September 30, 2015 and 814,539,146 issued and 703,851,297 outstanding at December 31, 2014)
8

 
8

Additional paid-in capital
8,710

 
8,409

Retained earnings
370

 
512

Accumulated other comprehensive loss
(3,758
)
 
(3,286
)
Treasury stock, at cost (141,385,550 shares at September 30, 2015 and 110,687,849 shares at December 31, 2014)
(1,763
)
 
(1,371
)
Total AES Corporation stockholders’ equity
3,567

 
4,272

NONCONTROLLING INTERESTS
2,894

 
3,053

Total equity
6,461

 
7,325

TOTAL LIABILITIES AND EQUITY
$
37,000

 
$
38,966


See Notes to Condensed Consolidated Financial Statements.

2



THE AES CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(in millions, except per share amounts)
Revenue:
 
 
 
 
 
 
 
Regulated
$
1,903

 
$
2,378

 
$
5,991

 
$
6,636

Non-Regulated
1,818

 
2,063

 
5,572

 
6,378

Total revenue
3,721

 
4,441

 
11,563

 
13,014

Cost of Sales:
 
 
 
 
 
 
 
Regulated
(1,660
)
 
(1,956
)
 
(5,101
)
 
(5,732
)
Non-Regulated
(1,388
)
 
(1,718
)
 
(4,314
)
 
(4,902
)
Total cost of sales
(3,048
)
 
(3,674
)
 
(9,415
)
 
(10,634
)
Operating margin
673

 
767

 
2,148

 
2,380

General and administrative expenses
(45
)
 
(45
)
 
(150
)
 
(148
)
Interest expense
(388
)
 
(390
)
 
(1,061
)
 
(1,086
)
Interest income
150

 
69

 
373

 
205

Loss on extinguishment of debt
(20
)
 
(47
)
 
(165
)
 
(196
)
Other expense
(18
)
 
(12
)
 
(52
)
 
(37
)
Other income
13

 
12

 
43

 
56

Gain on disposals and sale of investments
23

 
362

 
24

 
363

Goodwill impairment expense
—

 
—

 
—

 
(154
)
Asset impairment expense
(231
)
 
(15
)
 
(276
)
 
(90
)
Foreign currency transaction gains (losses)
9

 
(79
)
 
1

 
(91
)
Other non-operating expense
—

 
(16
)
 
—

 
(60
)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES
166

 
606

 
885

 
1,142

Income tax expense
(45
)
 
(92
)
 
(261
)
 
(303
)
Net equity in earnings (losses) of affiliates
82

 
(6
)
 
97

 
39

INCOME FROM CONTINUING OPERATIONS
203

 
508

 
721

 
878

Income from operations of discontinued businesses, net of income tax expense of $0, $0, $0 and $22, respectively
—

 
—

 
—

 
27

Net loss from disposal and impairments of discontinued businesses, net of income tax expense of $0, $0, $0 and $4, respectively
—

 
—

 
—

 
(56
)
NET INCOME
203

 
508

 
721

 
849

Noncontrolling interests:
 
 
 
 
 
 
 
Less: (Income) from continuing operations attributable to noncontrolling interests
(23
)
 
(20
)
 
(330
)
 
(295
)
Less: Loss from discontinued operations attributable to noncontrolling interests
—

 
—

 
—

 
9

Total net income attributable to noncontrolling interests
(23
)
 
(20
)
 
(330
)
 
(286
)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION
$
180

 
$
488

 
$
391

 
$
563

AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
180

 
$
488

 
$
391

 
$
583

Loss from discontinued operations, net of tax
—

 
—

 
—

 
(20
)
Net income
$
180

 
$
488

 
$
391

 
$
563

BASIC EARNINGS PER SHARE:
 
 
 
 
 
 
 
Income from continuing operations attributable to The AES Corporation common stockholders, net of tax
$
0.27

 
$
0.68

 
$
0.57

 
$
0.81

Loss from discontinued operations attributable to The AES Corporation common stockholders, net of tax
—

 
—

 
—

 
(0.03
)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS
$
0.27

 
$
0.68

 
$
0.57

 
$
0.78

DILUTED EARNINGS PER SHARE:
 
 
 
 
 
 
 
Income from continuing operations attributable to The AES Corporation common stockholders, net of tax
$
0.26

 
$
0.67

 
$
0.56

 
$
0.81

Loss from discontinued operations attributable to The AES Corporation common stockholders, net of tax
—

 
—

 
—

 
(0.03
)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS
$
0.26

 
$
0.67

 
$
0.56

 
$
0.78

DILUTED SHARES OUTSTANDING
682

 
740

 
694

 
727

DIVIDENDS DECLARED PER COMMON SHARE
$
0.10

 
$
0.05

 
$
0.20

 
$
0.10

See Notes to Condensed Consolidated Financial Statements.

3



THE AES CORPORATION
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(in millions)
NET INCOME
$
203

 
$
508

 
$
721

 
$
849

Available-for-sale securities activity:
 
 
 
 
 
 
 
Change in fair value of available-for-sale securities, net of $0 income tax for all periods
—

 
(1
)
 
—

 
(1
)
Reclassification to earnings, net of $0 income tax for all periods
—

 
—

 
—

 
—

Total change in fair value of available-for-sale securities
—

 
(1
)
 
—

 
(1
)
Foreign currency translation activity:
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of income tax benefit (expense) of $1, $1, $1 and $(7), respectively
(513
)
 
(329
)
 
(857
)
 
(300
)
Reclassification to earnings, net of $0 income tax for all periods
—

 
(4
)
 
—

 
(51
)
Total foreign currency translation adjustments
(513
)
 
(333
)
 
(857
)
 
(351
)
Derivative activity:
 
 
 
 
 
 
 
Change in derivative fair value, net of income tax benefit of $22, $6, $22 and $52, respectively
(70
)
 
(36
)
 
(73
)
 
(261
)
Reclassification to earnings, net of income tax benefit (expense) of $0, $(10), $(6) and $(23), respectively
14

 
44

 
46

 
76

Total change in fair value of derivatives
(56
)
 
8

 
(27
)
 
(185
)
Pension activity:
 
 
 
 
 
 
 
Change in pension adjustments due to prior service cost, net of income tax benefit (expense) of $0, $0, $0, and $(1), respectively
—

 
—

 
—

 
1

Change in pension adjustments due to disposal of discontinued operations for the period, net of income tax benefit (expense) of $0, $0, $0 and $(9), respectively
—

 
—

 
—

 
14

Reclassification to earnings due to amortization of net actuarial loss, net of income tax expense of $(3), $(3), $(8) and $(4), respectively
4

 
5

 
13

 
21

Total pension adjustments
4

 
5

 
13

 
36

OTHER COMPREHENSIVE LOSS
(565
)
 
(321
)
 
(871
)
 
(501
)
COMPREHENSIVE INCOME (LOSS)
(362
)
 
187

 
(150
)
 
348

Less: Comprehensive (income) loss attributable to noncontrolling interests
229

 
108

 
56

 
(119
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION
$
(133
)
 
$
295

 
$
(94
)
 
$
229

See Notes to Condensed Consolidated Financial Statements.

4



THE AES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(in millions)
OPERATING ACTIVITIES:
 
 
 
Net income
$
721

 
$
849

Adjustments to net income:
 
 
 
Depreciation and amortization
880

 
937

Gain on sale of businesses
(24
)
 
(363
)
Impairment expenses
276

 
304

Deferred income taxes
(8
)
 
83

Releases of contingencies
(91
)
 
(41
)
Loss on the extinguishment of debt
165

 
196

Loss on sale of assets
23

 
19

Loss on disposals and impairments — discontinued operations
—

 
51

Other
50

 
135

Changes in operating assets and liabilities
 
 
 
(Increase) decrease in accounts receivable
(314
)
 
(494
)
(Increase) decrease in inventory
(11
)
 
(75
)
(Increase) decrease in prepaid expenses and other current assets
377

 
(12
)
(Increase) decrease in other assets
(1,103
)
 
(439
)
Increase (decrease) in accounts payable and other current liabilities
238

 
(14
)
Increase (decrease) in income tax payables, net and other tax payables
(126
)
 
(239
)
Increase (decrease) in other liabilities
452

 
319

Net cash provided by operating activities
1,505

 
1,216

INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(1,687
)
 
(1,389
)
Acquisitions, net of cash acquired
(17
)
 
(728
)
Proceeds from the sale of businesses, net of cash sold
96

 
1,668

Proceeds from the sale of assets
1

 
29

Sale of short-term investments
3,683

 
3,335

Purchase of short-term investments
(3,605
)
 
(3,386
)
(Increase) decrease in restricted cash, debt service reserves and other assets
(60
)
 
162

Other investing
(50
)
 
(55
)
Net cash used in investing activities
(1,639
)
 
(364
)
FINANCING ACTIVITIES:
 
 
 
Borrowings under the revolving credit facilities
677

 
758

Repayments under the revolving credit facilities
(644
)
 
(744
)
Issuance of recourse debt
575

 
1,525

Repayments of recourse debt
(915
)
 
(2,019
)
Issuance of non-recourse debt
3,281

 
2,253

Repayments of non-recourse debt
(2,468
)
 
(1,639
)
Payments for financing fees
(65
)
 
(111
)
Distributions to noncontrolling interests
(182
)
 
(377
)
Contributions from noncontrolling interests
117

 
114

Proceeds from the sale of redeemable stock of subsidiaries
461

 
—

Dividends paid on AES common stock
(209
)
 
(108
)
Payments for financed capital expenditures
(110
)
 
(360
)
Purchase of treasury stock
(408
)
 
(140
)
Other financing
(24
)
 
4

Net cash provided by (used in) financing activities
86

 
(844
)
Effect of exchange rate changes on cash
(40
)
 
(55
)
Decrease in cash of discontinued businesses
—

 
75

Cash at held-for-sale businesses
(14
)
 
—

Total (decrease) increase in cash and cash equivalents
(102
)
 
28

Cash and cash equivalents, beginning
1,539

 
1,642

Cash and cash equivalents, ending
$
1,437

 
$
1,670

SUPPLEMENTAL DISCLOSURES:
 
 
 
Cash payments for interest, net of amounts capitalized
$
875

 
$
902

Cash payments for income taxes, net of refunds
$
319

 
$
401

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
Assets received upon sale of subsidiaries
$
—

 
$
44

Assets acquired through capital lease
$
12

 
$
13

See Notes to Condensed Consolidated Financial Statements.

5



THE AES CORPORATION
Notes to Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2015 and 2014
1. FINANCIAL STATEMENT PRESENTATION
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 (“VIE”) 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.
Interim Financial Presentation
The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with GAAP, as contained in the FASB ASC, for interim financial information and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all the information and footnotes required by 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 and nine months ended September 30, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2014 audited consolidated financial statements and notes thereto, which are included in the 2014 Form 10-K filed with the SEC on February 25, 2015 (the “2014 Form 10-K”).
New Accounting Pronouncements Adopted
ASU No. 2015-13, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets
In August 2015, the FASB issued ASU No. 2015-13, which resolves the diversity in practice resulting from determining whether certain contracts qualify for the normal purchases and normal sales scope exception under ASC Topic 815, Derivatives and Hedging. This standard clarifies that entities would not be precluded from applying the normal purchases and normal sales exception to certain forward contracts that necessitate the transmission of electricity through, or delivery to a location within, a nodal energy market. The standard is effective upon issuance and should be applied prospectively. As the Company had designated qualifying contracts as normal purchase or normal sales, there was no impact on the Company’s consolidated financial statements upon adoption of this standard.
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
Effective July 1, 2014, the Company prospectively adopted ASU No. 2014-08, which significantly changed the previous 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. Other changes were as follows: 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 the 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. Under the previous accounting guidance, the UK Wind (Operating Projects) and Ebute disposals in the third and fourth quarters of 2014, respectively, would have met the discontinued operations criteria and would have been reclassified accordingly. Additionally, Armenia Mountain and Kelanitissa, which met the held-for-sale criteria in the first and third quarter of 2015, respectively, would have met the discontinued operations criteria under the previous accounting guidance and would have been reclassified accordingly.
ASU No. 2014-05, Service Concession Arrangements (Topic 853)
Effective January 1, 2015, the Company adopted ASU No. 2014-05, which states that certain service concession arrangements with public-sector entity grantors are not in scope of ASC 840 - Leases, and that entities should not recognize the related infrastructure as property, plant and equipment, but should apply other Generally Accepted Accounting Principles

6



(“GAAP”). The Company has a small number of entities that fall within the scope of this guidance, with the Company’s Mong Duong generation facility in Vietnam being the most significant.
Mong Duong is based on a build, operate and transfer agreement with the Vietnam government. Management concluded there were two deliverables included within the arrangement, as well as a financing element. Due to the contingent nature of the revenue stream, no amounts of revenue could be recognized during the build phase of the contract. All amounts billed during the operate phase are recognized as revenue when billed, with amounts allocated between the financing element and build and operate deliverables. The financing element is recognized as interest income using the effective interest method as payments for construction of the plant are received over the life of the contract. Costs are expensed as incurred. As the related infrastructure is no longer considered property, plant and equipment, there are no longer any capitalizable expenses beyond those related to the initial build, and accordingly these will be expensed as incurred. All cash flows, excluding those related to the debt incurred by AES for these arrangements will be reflected in cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows prospectively.
The guidance was applied on a modified retrospective basis to service concession arrangements in existence at January 1, 2015. Upon adoption of this standard, the impact to the Company’s Condensed Consolidated Balance Sheet as of January 1, 2015 resulted in a reclassification of $1.5 billion from property, plant and equipment to service concession assets, as well as a cumulative adjustment to retained earnings and cumulative translation adjustment of $(18) million, net of tax, and $13 million, respectively.
Accounting Pronouncements Issued But Not Yet Effective
The following accounting standards have been issued but are not yet effective for, or have not yet been adopted by AES:
ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments
In September 2015, the FASB issued ASU 2015-16, which simplifies the measurement-period adjustments in business combinations. It eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. An acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. The standard is effective for public entities for annual reporting periods beginning after December 15, 2015, and interim periods therein. Early adoption is permitted for financial statements that have not been issued. The new guidance should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this standard. The Company is currently evaluating the early adoption of this standard, but there is no expected impact on the Company’s consolidated financial statements upon adoption of this standard.
ASU No. 2015-15, Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
In August 2015, the FASB issued ASU No. 2015-15, which clarifies that the SEC Staff would not object to an entity presenting debt issuance costs related to line-of-credit arrangements as an asset that is subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This standard should be adopted concurrent with adoption of ASU 2015-03. The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory
In July 2015, the FASB issued ASU No. 2015-11, which simplifies the subsequent measurement of inventory. It replaces the current lower of cost or market test with a lower of cost or net realizable value test. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted. The new guidance must be applied prospectively. The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
ASU No. 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
In April 2015, the FASB issued ASU No. 2015-05, which clarifies how customers in cloud computing arrangements should determine whether the arrangement includes a software license and eliminates the existing requirement for customers to account for software licenses they acquired by analogizing to the accounting guidance on leases. The standard is effective for annual reporting periods beginning after December 15, 2015 and interim periods therein. Early adoption is permitted. The standard permits the use of a prospective or retrospective approach. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the standard on its consolidated financial statements.
ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30)
In April 2015, the FASB issued ASU No. 2015-03, which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the

7



carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The standard is effective for annual reporting periods beginning after December 15, 2015 and interim periods therein, and requires the use of the full retrospective approach. Early adoption is permitted for financial statements that have not been previously issued. As of September 30, 2015, the Company had approximately $382 million in deferred financing costs classified in other noncurrent assets that would be reclassified to reduce the related debt liabilities upon adoption of ASU No. 2015-03.
ASU No. 2015-02, Consolidation — Amendments to the Consolidation Analysis (Topic 810)
In February 2015, the FASB issued ASU 2015-02, which makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. The standard amends the evaluation of whether (1) fees paid to a decision-maker or service providers represent a variable interest, (2) a limited partnership or similar entity has the characteristics of a VIE and (3) a reporting entity is the primary beneficiary of a VIE. The standard is effective for annual periods beginning after December 15, 2015 and interim periods therein. Early adoption is permitted. The Company is currently assessing the impact of the standard on its consolidated financial statements.
ASU No. 2014-12, Compensation — Stock Compensation (Topic 718)
In June 2014, the FASB issued ASU No. 2014-12, which is intended to resolve the diverse accounting treatment in practice with compensation awards. The objective of the new standard is to clarify the treatment of accounting for performance targets that affect award vesting. The standard is effective for annual reporting periods beginning after December 15, 2015 and interim periods therein. Early adoption is permitted. The standard permits the use of either a prospective or modified retrospective approach. The Company has not yet selected a transition method and is currently evaluating the impact of the standard on its financial position and results of operations.
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606)
In May 2014, the FASB issued ASU No. 2014-09, which clarifies principles for recognizing revenue and will result in a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The objective of the new standard is to provide a single and comprehensive revenue recognition model for all contracts with customers to improve comparability. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The standard requires an entity to recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year, resulting in the new revenue standard being effective for annual reporting periods beginning after December 15, 2017 and interim periods therein. Early adoption is now permitted only as of the original effective date for public entities (that is, no earlier than 2017 for calendar year-end entities). The standard permits the use of either a full retrospective or modified retrospective approach. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2. INVENTORY
The following table summarizes the Company’s inventory balances as of the periods indicated (in millions):
 
September 30, 2015
 
December 31, 2014
Fuel and other raw materials
$
336

 
$
357

Spare parts and supplies
334

 
345

Total
$
670

 
$
702

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 has 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. The Company made no changes during the period to the fair valuation techniques described in Note 4.—Fair Value in Item 8.—Financial Statements and Supplementary Data of its 2014 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 periods indicated (in millions):

8



 
September 30, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVAILABLE FOR SALE:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured debentures
$
—

 
$
321

 
$
—

 
$
321

 
$
—

 
$
501

 
$
—

 
$
501

Certificates of deposit
—

 
109

 
—

 
109

 
—

 
151

 
—

 
151

Government debt securities
—

 
33

 
—

 
33

 
—

 
57

 
—

 
57

Subtotal
—

 
463

 
—

 
463

 
—

 
709

 
—

 
709

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
—

 
16

 
—

 
16

 
—

 
25

 
—

 
25

Subtotal
—

 
16

 
—

 
16

 
—

 
25

 
—

 
25

Total available for sale
—

 
479

 
—

 
479

 
—

 
734

 
—

 
734

TRADING:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
14

 
—

 
—

 
14

 
15

 
—

 
—

 
15

Total trading
14

 
—

 
—

 
14

 
15

 
—

 
—

 
15

DERIVATIVES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency derivatives
—

 
24

 
245

 
269

 
—

 
18

 
218

 
236

Commodity derivatives
—

 
47

 
10

 
57

 
—

 
37

 
7

 
44

Total derivatives
—

 
71

 
255

 
326

 
—

 
55

 
225

 
280

TOTAL ASSETS
$
14

 
$
550

 
$
255

 
$
819

 
$
15

 
$
789

 
$
225

 
$
1,029

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DERIVATIVES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
$
—

 
$
131

 
$
283

 
$
414

 
$
—

 
$
206

 
$
210

 
$
416

Cross-currency derivatives
—

 
40

 
—

 
40

 
—

 
29

 
—

 
29

Foreign currency derivatives
—

 
47

 
14

 
61

 
—

 
43

 
9

 
52

Commodity derivatives
—

 
29

 
1

 
30

 
—

 
16

 
1

 
17

Total derivatives
—

 
247

 
298

 
545

 
—

 
294

 
220

 
514

TOTAL LIABILITIES
$
—

 
$
247

 
$
298

 
$
545

 
$
—

 
$
294

 
$
220

 
$
514

 _____________________________
(1) 
Amortized cost approximated fair value at September 30, 2015 and December 31, 2014.
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 nine months ended September 30, 2015 and 2014 (presented in millions and 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 September 30, 2015
Interest Rate
 
Foreign Currency
 
Commodity
 
Total
Balance at the beginning of the period
$
(191
)
 
$
222

 
$
17

 
$
48

Total gains (losses) (realized and unrealized):
 
 
 
 
 
 
 
Included in earnings
(1
)
 
19

 
—

 
18

Included in other comprehensive income — derivative activity
(33
)
 
—

 
—

 
(33
)
Included in other comprehensive income — foreign currency translation activity
—

 
(8
)
 
—

 
(8
)
Included in regulatory (assets) liabilities
—

 
—

 
(20
)
 
(20
)
Settlements
7

 
(2
)
 
12

 
17

Transfers of assets (liabilities) into Level 3
(65
)
 
—

 
—

 
(65
)
Balance at the end of the period
$
(283
)
 
$
231

 
$
9

 
$
(43
)
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
$
—

 
$
18

 
$
—

 
$
18

Three Months Ended September 30, 2014
Interest Rate
 
Foreign Currency
 
Commodity
 
Total
Balance at the beginning of the period
$
(183
)
 
$
107

 
$
16

 
$
(60
)
Total gains (losses) (realized and unrealized):
 
 
 
 
 
 
 
Included in earnings
—

 
(7
)
 
—

 
(7
)
Included in other comprehensive income — derivative activity
(13
)
 
—

 
—

 
(13
)
Included in other comprehensive income — foreign currency translation activity
9

 
(4
)
 
—

 
5

Included in regulatory (assets) liabilities
—

 
—

 
(4
)
 
(4
)
Settlements
7

 
(1
)
 
—

 
6

Balance at the end of the period
$
(180
)
 
$
95

 
$
12

 
$
(73
)
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
$
—

 
$
(8
)
 
$
—

 
$
(8
)

9



Nine Months Ended September 30, 2015
Interest Rate
 
Foreign Currency
 
Commodity
 
Total
Balance at the beginning of the period
$
(210
)
 
$
209

 
$
6

 
$
5

Total gains (losses) (realized and unrealized):
 
 
 
 
 
 

Included in earnings
(1
)
 
49

 
2

 
50

Included in other comprehensive income — derivative activity
(30
)
 
—

 
—

 
(30
)
Included in other comprehensive income — foreign currency translation activity
7

 
(21
)
 
—

 
(14
)
Included in regulatory (assets) liabilities
—

 
—

 
(12
)
 
(12
)
Settlements
16

 
(6
)
 
13

 
23

Transfers of assets (liabilities) into Level 3
(65
)
 
—

 
—

 
(65
)
Balance at the end of the period
$
(283
)
 
$
231

 
$
9

 
$
(43
)
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
$
—

 
$
44

 
$
2

 
$
46

Nine Months Ended September 30, 2014
Interest Rate
 
Foreign Currency
 
Commodity
 
Total
Balance at the beginning of the period
$
(101
)
 
$
93

 
$
4

 
$
(4
)
Total gains (losses) (realized and unrealized):
 
 
 
 
 
 
 
Included in earnings
1

 
29

 
2

 
32

Included in other comprehensive income — derivative activity
(112
)
 
(2
)
 
—

 
(114
)
Included in other comprehensive income — foreign currency translation activity
9

 
(24
)
 
—

 
(15
)
Included in regulatory (assets) liabilities
—

 
—

 
7

 
7

Settlements
23

 
(4
)
 
(1
)
 
18

Transfers of (assets) liabilities out of Level 3
—

 
3

 
—

 
3

Balance at the end of the period
$
(180
)
 
$
95

 
$
12

 
$
(73
)
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

 
$
26

 
$
1

 
$
28

The table below summarizes the significant unobservable inputs used for Level 3 derivative assets (liabilities) as of September 30, 2015 ($ in millions):
Type of Derivative
 
Fair Value
 
Unobservable Input
 
Amount or Range (Weighted Avg)
Interest rate
 
$
(283
)
 
Subsidiaries’ credit spreads
 
4.44% — 8.47% (5.77%)
Foreign currency:
 
 
 
 
 
 
Argentine Peso
 
230

 
Argentine Peso to USD currency exchange rate after one year
 
15.03 — 38.25 (25.85)
Euro
 
15

 
Counterparty's credit spread
 
5.66%
Euro
 
(14
)
 
Subsidiary’s credit spread
 
8.47%
Commodity:
 
 
 
 
 
 
Other
 
9

 
 
 
 
Total
 
$
(43
)
 
 
 
 
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 its then-latest available carrying amount. The following table summarizes major categories of assets and liabilities measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):
Nine Months Ended September 30, 2015
Measurement Date
 
Carrying Amount (1)
 
Fair Value
 
Pretax Loss
 
 
Level 1
 
Level 2
 
Level 3
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Long-lived assets held and used: (2)
 
 
 
 
 
 
 
 
 
 
 
UK Wind (Development Projects)
06/30/2015
 
$
38

 
$
—

 
$
1

 
$
—

 
$
37

Kilroot
08/28/2015
 
191

 
—

 
—

 
78

 
113

Buffalo Gap III
09/30/2015
 
234

 
—

 
—

 
116

 
118

Other
03/31/2015
 
29

 
—

 
21

 
—

 
8

Equity method investment:
 
 
 
 
 
 
 
 
 
 
 
Solar Spain
02/09/2015
 
29

 
—

 
—

 
29

 
—

Nine Months Ended September 30, 2014
Measurement Date
 
Carrying Amount (1) 
 
Fair Value
 
Pretax Loss
Assets
 
Level 1
 
Level 2
 
Level 3
 
Long-lived assets held and used: (2)
 
 
 
 
 
 
 
 
 
 
 
DPL (East Bend)
03/31/2014
 
$
14

 
$
—

 
$
2

 
$
—

 
$
12

Ebute
06/30/2014
 
99

 
—

 
—

 
47

 
52

Ebute
09/30/2014
 
51

 
—

 
—

 
36

 
15

UK Wind (Newfield)
06/06/2014
 
11

 
—

 
—

 
—

 
11

Discontinued operations and held-for-sale businesses: (3)
 
 
 
 
 
 
 
 
 
 


Cameroon
03/31/2014
 
372

 
—

 
334

 
—

 
38

Equity method investments
 
 
 
 
 
 
 
 
 
 
 
Silver Ridge Power
06/30/2014
 
315

 
—

 
—

 
273

 
42

Entek
09/25/2014
 
143

 
—

 
125

 
—

 
18

Goodwill: (4)
 
 
 
 
 
 
 
 
 
 
 
DPLER
02/28/2014
 
136

 
—

 
—

 
—

 
136

Buffalo Gap
03/31/2014
 
28

 
—

 
—

 
10

 
18


10



_____________________________
(1) 
Represents the carrying values at the dates of measurement, before fair value adjustment.
(2) 
See Note 15—Asset Impairment Expense for further information.
(3) 
See Note 18—Discontinued Operations for further information. Fair value of long-lived assets held-for-sale excludes costs to sell.
(4) 
See Note 14—Goodwill Impairment for further information.
The following table summarizes the significant unobservable inputs used in the Level 3 measurement on a nonrecurring basis during the nine months ended September 30, 2015 ($ in millions):
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range (Weighted Average)
Long-lived assets held and used:
 
 
 
 
 
 
 
Kilroot
$
78

 
Discounted cash flow
 
Annual revenue growth
 
-88% to 6% (-7%)

 
 
 
 
 
Annual pretax operating margin
 
-74% to 10% (0%)

 
 
 
 
 
Weighted-average cost of capital
 
6
%
Buffalo Gap III
116

 
Discounted cash flow
 
Annual revenue growth
 
-2% to 19% (3%)

 
 
 
 
 
Annual pretax operating margin
 
-282% to 58% (24%)

 
 
 
 
 
Weighted-average cost of capital
 
9
%
Equity method investment:
 
 
 
 
 
 
 
Solar Spain
29

 
Discounted cash flow
 
Annual revenue growth
 
-3% to 0% (0%)

 
 
 
 
 
Annual pretax operating margin
 
-13% to 56% (24%)

 
 
 
 
 
Cost of equity
 
12
%
Financial Instruments not Measured at Fair Value in the Condensed Consolidated Balance Sheets
The next 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 September 30, 2015 and December 31, 2014, but for which fair value is disclosed:
 
 
Carrying
Amount
 
Fair Value
September 30, 2015
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
Accounts receivable — noncurrent (1)
 
$
294

 
$
284

 
$
—

 
$
—

 
$
284

Liabilities
 
 
 
 
 
 
 
 
 
 
Non-recourse debt
 
15,591

 
15,660

 
—

 
11,387

 
4,273

Recourse debt
 
5,107

 
4,841

 
—

 
4,841

 
—

December 31, 2014
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Accounts receivable — noncurrent (1)
 
$
301

 
$
290

 
$
—

 
$
—

 
$
290

Liabilities
 
 
 
 
 
 
 
 
 
 
Non-recourse debt
 
15,600

 
16,008

 
—

 
12,538

 
3,470

Recourse debt
 
5,258

 
5,552

 
—

 
5,552

 
—

_____________________________
(1) 
These amounts principally relate to amounts due from CAMMESA, and are included in Noncurrent assets—Other in the accompanying Condensed Consolidated Balance Sheets. The fair value and carrying amount of these receivables exclude VAT of $48 million and $36 million at September 30, 2015 and December 31, 2014, respectively.
4. INVESTMENTS IN MARKETABLE SECURITIES
The Company’s investments in marketable debt and equity securities as of September 30, 2015 and December 31, 2014 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 September 30, 2015, $430 million of AFS debt securities had stated maturities within one year and $33 million had stated maturities between 1 and 1.5 years. Gains and losses on the sale of investments are determined using the specific-identification method. For the three and nine months ended September 30, 2015 and 2014, pretax realized gains and losses related to AFS and trading securities were less than $1 million, there were no unrealized losses on AFS securities, and no other-than-temporary impairments of marketable securities were recognized in earnings or OCI. The following table summarizes the gross proceeds from sale of AFS securities for the periods indicated (in millions):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Gross proceeds from sales of AFS securities
$
1,224

 
$
1,144

 
$
3,705

 
$
3,362

5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
There are no changes to the information disclosed in Note 1—General and Summary of Significant Accounting Policies—Derivatives and Hedging Activities of Item 8.—Financial Statements and Supplementary Data in the 2014 Form 10-K.
Volume of Activity — The following three tables present, by type of derivative, the Company’s outstanding notional (in millions) under its derivatives and the weighted average remaining term (in years) as of September 30, 2015 regardless of whether the derivative instruments are in qualifying cash flow hedging relationships:

11



 
 
Current
 
Maximum
 
 
 
 
Interest Rate and Cross-Currency(1)
 
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)
Interest Rate Derivatives:
 
 
 
 
 
 
LIBOR (U.S. Dollar)
 
2,512

 
$
2,512

 
2,872

 
$
2,872

 
11
 
51
%
EURIBOR (Euro)
 
504

 
564

 
504

 
564

 
6
 
87
%
Cross-Currency Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
Chilean Unidad de Fomento
 
4

 
160

 
4

 
160

 
13
 
76
%
_____________________________
(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 September 30, 2015 and the maturity of the derivative instrument, which includes forward-starting derivative instruments. The interest rate and cross-currency derivatives mature 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.
Foreign Currency Derivatives
 
Notional (1)
 
Notional Translated to USD
 
Weighted Average Remaining Term (2)
Argentine Peso
 
2,072

 
$
220

 
10
Brazilian Real
 
52

 
13

 
<1
British Pound
 
17

 
26

 
<1
Chilean Peso
 
127,365

 
183

 
<1
Chilean Unidad de Fomento
 
9

 
346

 
1
Colombian Peso
 
205,082

 
66

 
<1
Euro
 
112

 
125

 
<1
Kazakhstani Tenge
 
2,715

 
10

 
1
Philippine Peso
 
234

 
5

 
<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 derivatives mature through 2025.
Commodity Derivatives
 
Notional
 
Weighted-Average Remaining Term (1)
Power (MWh)
 
11

 
3
_____________________________
(1) 
Represents the remaining tenor of our commodity derivatives weighted by the corresponding volume. These derivatives range in maturity through 2018.
Accounting and Reporting — Assets and Liabilities — The following tables present the fair values of the Company’s derivative instruments as of September 30, 2015 and December 31, 2014, first by whether 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 (in millions):
 
September 30, 2015
 
December 31, 2014
Assets
Designated
 
Not Designated
 
Total
 
Designated
 
Not Designated
 
Total
Foreign currency derivatives
$
13

 
$
256

 
$
269

 
$
6

 
$
230

 
$
236

Commodity derivatives
34

 
23

 
57

 
25

 
19

 
44

Total assets
$
47

 
$
279

 
$
326

 
$
31

 
$
249

 
$
280

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Interest rate derivatives
$
414

 
$
—

 
$
414

 
$
416