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Fair Value | 3 Months Ended
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Jun. 30, 2012
FAIR VALUE | 3. FAIR VALUE The fair value of current financial assets and liabilities, debt service reserves and other deposits approximate their reported carrying amounts. The fair value of non-recourse debt is estimated differently based upon the type of loan. In general, the carrying amount of variable rate debt is a close approximation of its fair value. For fixed rate loans, the fair value is estimated using quoted market prices or discounted cash flow analyses. The fair value of interest rate swap, cap and floor agreements, foreign currency forwards, swaps and options, and energy derivatives is the estimated net amount that the Company would receive or pay to sell or transfer the agreements as of the balance sheet date. The estimated fair values 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. Valuation Techniques The fair value measurement accounting guidance describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on current market expectations of the return on those future amounts. The cost approach is based on the amount that would currently be required to replace an asset. The Company measures its investments and derivatives at fair value on a recurring basis. Additionally, in connection with annual or event-driven impairment evaluations, certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis. These include long-lived tangible assets (i.e., property, plant and equipment), goodwill and intangible assets (e.g., sales concessions, land use rights and emissions allowances, etc.). In general, the Company determines the fair value of investments and derivatives using the market approach and the income approach, respectively. In the nonrecurring measurements of nonfinancial assets and liabilities, all three approaches are considered; however, fair value estimated under the income approach is often selected. A ssets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of the fair value of the assets and liabilities and their placement within the fair value hierarchy levels. Investments The Company's investments measured at fair value generally consist of marketable debt and equity securities. Equity securities are measured at fair value using quoted market prices. Debt securities primarily consist of unsecured debentures, certificates of deposit and government debt securities held by our Brazilian subsidiaries. Returns and pricing on these instruments are generally indexed to the CDI (Brazilian equivalent to London Inter-Bank Offered Rate, or LIBOR, a benchmark interest rate widely used by banks in the interbank lending market) or Selic (overnight borrowing rate) rates in Brazil. Fair value is determined from comparisons to market data obtained for similar assets and are considered Level 2 in the fair value hierarchy. For more detail regarding the fair value of investments see Note 4—Investments in Marketable Securities. Derivatives When deemed appropriate, the Company manages its risk from interest and foreign currency exchange rate and commodity price fluctuations through the use of over-the-counter or exchange traded financial and physical derivative instruments. The derivatives are primarily interest rate swaps to hedge non-recourse debt to establish a fixed rate on variable rate debt, foreign exchange instruments to hedge against currency fluctuations, commodity derivatives to hedge against commodity price fluctuations and embedded derivatives associated with commodity contracts. The Company's subsidiaries are counterparties to various over-the-counter or exchange traded derivatives, which include interest rate swaps and options, foreign currency options and forwards and commodity swaps. In addition, the Company's subsidiaries are counterparties to certain PPAs and fuel supply agreements that are derivatives or include embedded derivatives. For derivatives for which there is a standard industry valuation model, the Company uses a third-party treasury and risk management software product that uses a standard model and observable inputs to estimate the fair value. F or these derivatives, the Company performs analytical procedures and makes comparisons to other third-party information in order to assess the reasonableness of the fair value. For derivatives (such as PPAs and fuel supply agreements that are derivatives or include embedded de rivatives) for which there is not a standard industry valuation model, the Company has created internal valuation models to estimate the fair value, using observab le data to the extent available. A t each quarter-end, the models for the commodity and foreign currency-based derivatives are generally prepared by employees who globally manage the respective commodity and foreign currency risk s. For all derivatives, with the exception of those classified as Level 1, the income approach is used, which consists of forecasting future cash flows based on contractual notional amounts and applicable and available market data as of the val uation date. A mong the most common market data inp uts used in the income approach include volatilities, spot and forward benchmark interest rates (such as LIBOR and Euro Inter Bank Offered Rate (“EURIBOR”)), foreign exchange rates and commodity prices. Forward rates with the same tenor as the derivative instrument being valued are generally obtained from published sources, with these forward rates being assessed quarterly at a portfolio-level for reasonableness versus comparable published information provided from another source. In situations where significant inputs are not observable, the Company uses relevant techniques to best estimate the inputs, such as regression analysis, Monte Carlo simulation or prices for similarly traded instruments available in the market. For each derivative, with the exception of those classified as Level 1, the income approach is used to estimate the cash flows over the remaining term of the contract. Those cash flows are then discounted using the relevant spot benchmark interest rate (such as LIBOR or EURIBOR) plus a spread that reflects the credit or nonperformance risk. This risk is estimated by the Company using credit spreads and risk premiums that are observable in the market, whenever possible, or estimated borrowing costs based on bank quotes, industry publications and/or information on financing closed on similar projects. To the extent that management can estimate the fair value of these assets or liabilities without the use of significant unobservable inputs, the fair value of these derivatives are classified as Level 2. The Company's methodology to fair value its derivatives is to start with any observable inputs; however, in certain instances the published forward rates or prices may not extend through the remaining term of the contract and management must make assumptions to extrapolate the curve, which necessitates the use of unobservable inputs, such as proxy commodity prices or historical settlements to forecast forward prices. In addition, in certain instances, there may not be third party data readily available, requir ing the use of unobservable inputs. Similarly, in certain instances, the spread that reflects the credit or nonperformance risk is unobservable. The fair value hierarchy of an asset or a liability is based on the level of significance of the input assumptions. An input assumption is considered significant if it affects the fair value by at least 10%. Assets and liabilities are transferred to Level 3 when the use of unobservable inputs becomes significant. Similarly, when the use of unobservable input s becomes insignificant for Level 3 assets and liabilities, they are transferred to Level 2. Transfers between Level 3 and Level 2 are determined as of the end of the reporting period. The following table summarize s the significant unobservable inputs used for the Level 3 derivative assets (liabilities) at June 30, 2012:
|  |  |  |  |  |  | Amount or Range
| Fair Value |  | Unobservable Input |  | (Weighted Average)
|  | (in millions) |  |  |  |  |
Interest rate | $ | (281) |  | Subsidiaries' credit risk |  | 3% - 4.1% (3.5%)
Foreign currency: |  |  |  |  |  |  |
| Embedded derivative - Argentine Peso |  | 48 |  | Argentine Peso to U.S. Dollar |  |
|  |  |  |  |  | currency exchange rate after 2 years |  | 7.53
| Other |  | (1) |  |  |  |  |
Commodity & other: |  |  |  |  |  |  |
| Embedded derivative - Aluminum |  | (66) |  | Market price of power for |  |
|  |  |  |  |  | customer in Cameroon (per KWh) |  | $0.05 - $0.17 ($0.12)
| Embedded derivative - Philippine inflation |  | 8 |  | U.S. Producer Price Index after 5 years |  |
|  |  |  |  |  | (where base year of 2005 = 100) |  | 143 - 174 (154)
| Other |  | 6 |  |  |  |  |
Total | $ | (286) |  |  |  |  |
Changes in the above significant unobservable inputs that lead to a significant and unusual impact to current period earnings are disclosed to the Financial Audit Committee. For interest rate derivatives, increases (decreases) in the estimates of our own credit risk would decrease (increase) the value of the derivatives i n a liability position. For foreign currency derivatives, increa ses (decreases) in the estimate of the above exchange rate would increase (decrease) the v alue of the derivative. For commodity and other derivatives in the above table, increases (decreases) in the estimated inflation would increase (decrease) the value of those embedded derivatives, while increases (decreases) in the estimated market price for power would increase (de crease) the value of that embedded derivative. The only Level 1 derivative instruments as of June 30, 2012 are exchange-traded commodity futures for which the pricing is observable in active markets, and as such, these are not expected to transfer to other levels. There have been no transfers between Level 1 and Level 2. Debt Recourse and non-recourse debt are carried at amortized cost. The fair value of recourse debt is estimated based on quoted market prices. The fair value of non-recourse debt is estimated based upon the type of borrowing. The fair value of fixed rate borrowings is estimated using quoted market prices, if available, or a discounted cash flow analysis. In the discounted cash flow analysis, the discount rate is based on the credit rating of the individual debt instruments, if available, or the credit rating of the subsidiary. If the subsidiary's credit rating is not available, a synthetic credit rating is determined using certain key metrics, including cash flow ratios and interest coverage, as well as other industry specific factors. For subsidiaries located outside the U.S., in the event that the country rating is lower than the credit rating previously determined, the country rating is used for the purposes of the discounted cash flow analysis. The fair value of recourse and non-recourse debt excludes accrued interest at the valuation date. The fair value was determined using available market information as of June 30, 2012. The Company is [not] aware of any factors that would significantly affect the fair value amounts subsequent to June 30, 2012. Nonfinancial Assets and Liabilities For nonrecurring measurements derived using the income approach, fair value is determined using valuation models based on the principles of discounted cash flows (“DCF”). The income approach is most often used in the impairment evaluation of long-lived tangible assets, goodwill and intangible assets. The Company has developed internal valuation models for such valuations; however, an independent valuation firm may be engaged in certain situations. In such situations, the independent valuation firm largely uses DCF valuation models as the primary measure of fair value though other valuation approaches are also considered. A few examples of input assumptions to such valuations include macroeconomic factors such as growth rates, industry demand, inflation, exchange rates and power and commodity prices. Whenever possible, the Company attempts to obtain market observable data to develop input assumptions. Where the use of market observable data is limited or not available for certain input assumptions, the Company develops its own estimates using a variety of techniques such as regression analysis and extrapolations. For nonrecurring measurements derived using the market approach, recent market transactions involving the sale of identical or similar assets are considered. The use of this approach is limited because it is often difficult to identify sale transactions of identical or similar asset s. This approach is used in impairment evaluations of certain intangible assets. Otherwise, it is used to corroborate the fair value determined under the income approach. For nonrecurring measurements derived using the cost approach, fair value is typically determined using the replacement cost approach. Under this approach, the depreciated replacement cost of assets is determined by first determining the current replacement cost of assets and then applying the remaining useful life percentages to such cost s. Further adjustments for economic and functional obsolescence are made to the depreciated replacement cost. This approach involves a considerable amount of judgment, which is why its use is limited to the measurement of a few long-lived tangible assets. Like the market approach, this approach is also used to corroborate the fair value determined under the income approach Fair Value Considerations In determining fair value, the Company considers the source of observable market data inputs, liquidity of the instrument, the credit risk of the counterparty and the risk of the Company's or its counterparty's nonperformance. The conditions and criteria used to assess these factors are: Sources of market assumptions The Company derives most of its market assumptions from market efficient data so urces (e.g., Bloomberg, Reuters and Platt's). To determine fair value, where market data is not readily available, management uses comparable market sources and empirical evidence to develop its own estimates of market assumptions. Market liquidity The Company evaluates market liquidity based on whether the financial or physical instrument, or the underlying asset, is traded in an active or inactive market. An active market exists if the prices are fully transparent to market participants, can be measured by market bid and ask quotes, the market has a relatively large proportion of trading volume as compared to the Company's current trading volume and the market has a significant number of market participants that will allow the market to ra pidly absorb the quantity of assets traded without significantly affecting the market price. Another factor the Company considers when determining whether a market is active or inactive is the presence of government or regulatory controls over pricing that could make it difficult to establish a market based price when entering into a transaction. Nonperformance risk Nonperformance risk refers to the risk that an obligation will not be fulfilled and affects the value at which a liability is transferred or an asset is sold. Nonperformance risk includes, but may not be limited to, the Company or its counterparty's credit and settlement risk. Nonperformance risk adjustments are dependent on credit spreads, letters of credit, collateral, other arrangements available and the nature of master netting arrangements. The Company and its subsidiaries are parties to various interest rate swaps and options; foreign currency options and forwards; and derivatives and embedded derivatives, which subject the Company to nonperformance risk. The financial and physical instruments held at the subsidiary level are generally non-recourse to the Parent Company. Nonperformance risk on the investments held by the Company is incorporated in the fair value derived from quoted market data to mark the investments to fair value. The Company adjusts for nonperformance or credit risk on its derivative instruments by deducting a credit valuation adjustment (“CVA”). The CVA is based on the margin or debt spread of the Company's subsidiary or its counterparty and the tenor of the respective derivative instrument. The counterparty for a derivative asset position is considered to be the bank or government sponsored banking entity or counterparty to the PPA or commodity contract. The CVA for asset positions is based on the counterparty's credit ratings and debt spreads or, in the absence of readily obtainable credit information, the respective country's debt spreads are used as a proxy. The CVA for liability positions is based on the Parent Company's or the subsidiary's current debt spread, the margin on indicative financing arrangements, or in the absence of readily obtainable credit information, the respective country's debt spreads are used as a proxy. All derivative instruments are analyzed individually and are subject to unique risk exposures. 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 June 30, 2012 and December 31, 2011:
|  |  | Fair Value
|  |  |  | Total |  | Level 1 |  | Level 2 |  | Level 3
| (in millions)
June 30, 2012 |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
| Available-for-sale securities | $ | 864 |  | $ | 1 |  | $ | 863 |  | $ | -
| Trading securities |  | 12 |  |  | 12 |  |  | - |  |  | -
| Derivatives |  | 116 |  |  | - |  |  | 45 |  |  | 71
|  | Total assets | $ | 992 |  | $ | 13 |  | $ | 908 |  | $ | 71
Liabilities |  |  |  |  |  |  |  |  |  |  |
| Derivatives | $ | 805 |  | $ | - |  | $ | 448 |  | $ | 357
|  | Total liabilities | $ | 805 |  | $ | - |  | $ | 448 |  | $ | 357
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
| Available-for-sale securities | $ | 1,340 |  | $ | 1 |  | $ | 1,339 |  | $ | -
| Trading securities |  | 12 |  |  | 12 |  |  | - |  |  | -
| Derivatives |  | 120 |  |  | 2 |  |  | 52 |  |  | 66
|  | Total assets | $ | 1,472 |  | $ | 15 |  | $ | 1,391 |  | $ | 66
Liabilities |  |  |  |  |  |  |  |  |  |  |
| Derivatives | $ | 690 |  | $ | - |  | $ | 476 |  | $ | 214
|  | Total liabilities | $ | 690 |  | $ | - |  | $ | 476 |  | $ | 214
The following table s present a reconciliation of net derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2012 and 2011 (presented net by type of derivative where any foreign currency impacts are presented as part of gains (losses) in earnings or other comprehensive income as appropriate):
|  |  |  | Three Months Ended June 30, 2012
|  |  |  | Interest |  | Cross |  | Foreign |  | Commodity |  |
|  |  |  | Rate |  | Currency |  | Currency |  | and Other |  | Total
|  |  | (in millions)
Balance at April 1 |  | $ | (124) |  | $ | - |  | $ | 48 |  | $ | (46) |  | $ | (122)
| Total gains (losses) (realized and unrealized): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Included in earnings (1) |  |  | - |  |  | - |  |  | - |  |  | (13) |  |  | (13)
|  | Included in other comprehensive income |  |  | (58) |  |  | - |  |  | - |  |  | - |  |  | (58)
|  | Included in regulatory (assets) liabilities |  |  | - |  |  | - |  |  | - |  |  | 7 |  |  | 7
| Settlements |  |  | 6 |  |  | - |  |  | (1) |  |  | - |  |  | 5
| Transfers of assets (liabilities) into Level 3 (2) |  |  | (105) |  |  | - |  |  | - |  |  | - |  |  | (105)
| Transfers of (assets) liabilities out of Level 3 (2) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Balance at June 30 |  | $ | (281) |  | $ | - |  | $ | 47 |  | $ | (52) |  | $ | (286)
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) |  | $ | (13) |  | $ | (14)
|  |  |  | Three Months Ended June 30, 2011
|  |  |  | Interest |  | Cross |  | Foreign |  | Commodity |  |
|  |  |  | Rate |  | Currency |  | Currency |  | and Other |  | Total
|  |  | (in millions)
Balance at April 1 |  | $ | (7) |  | $ | 5 |  | $ | 23 |  | $ | 24 |  | $ | 45
| Total gains (losses) (realized and unrealized): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Included in earnings (1) |  |  | - |  |  | (2) |  |  | 18 |  |  | (16) |  |  | -
|  | Included in other comprehensive income |  |  | (12) |  |  | 8 |  |  | - |  |  | - |  |  | (4)
|  | Included in regulatory (assets) liabilities |  |  | - |  |  | - |  |  | - |  |  | 7 |  |  | 7
| Settlements |  |  | 1 |  |  | 4 |  |  | (1) |  |  | - |  |  | 4
| Transfers of assets (liabilities) into Level 3 (2) |  |  | (58) |  |  | - |  |  | - |  |  | - |  |  | (58)
| Transfers of (assets) liabilities out of Level 3 (2) |  |  | 16 |  |  | - |  |  | (2) |  |  | 2 |  |  | 16
Balance at June 30 |  | $ | (60) |  | $ | 15 |  | $ | 38 |  | $ | 17 |  | $ | 10
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) |  | $ | 15 |  | $ | (7) |  | $ | 6
|  |  |  | Six Months Ended June 30, 2012
|  |  |  | Interest |  | Cross |  | Foreign |  | Commodity |  |
|  |  |  | Rate |  | Currency |  | Currency |  | and Other |  | Total
|  |  | (in millions)
Balance at January 1 |  | $ | (128) |  | $ | (18) |  | $ | 51 |  | $ | (53) |  | $ | (148)
| Total gains (losses) (realized and unrealized): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Included in earnings (1) |  |  | (1) |  |  | - |  |  | (2) |  |  | (5) |  |  | (8)
|  | Included in other comprehensive income |  |  | (19) |  |  | 4 |  |  | - |  |  | - |  |  | (15)
|  | Included in regulatory (assets) liabilities |  |  | - |  |  | - |  |  | - |  |  | 7 |  |  | 7
| Settlements |  |  | 13 |  |  | 8 |  |  | (2) |  |  | (1) |  |  | 18
| Transfers of assets (liabilities) into Level 3 (2) |  |  | (146) |  |  | - |  |  | - |  |  | - |  |  | (146)
| Transfers of (assets) liabilities out of Level 3 (2) |  |  | - |  |  | 6 |  |  | - |  |  | - |  |  | 6
Balance at June 30 |  | $ | (281) |  | $ | - |  | $ | 47 |  | $ | (52) |  | $ | (286)
Total gains/(losses) for the period included in earnings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| attributable to the change in unrealized gains/(losses) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| relating to assets and liabilities held at the end of the |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| period |  | $ | - |  | $ | - |  | $ | (3) |  | $ | (5) |  | $ | (8)
|  |  |  | Six Months Ended June 30, 2011
|  |  |  | Interest |  | Cross |  | Foreign |  | Commodity |  |
|  |  |  | Rate |  | Currency |  | Currency |  | and Other |  | Total
|  |  | (in millions)
Balance at January 1 |  | $ | (1) |  | $ | 10 |  | $ | 22 |  | $ | 18 |  | $ | 49
| Total gains (losses) (realized and unrealized): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Included in earnings (1) |  |  | - |  |  | - |  |  | 18 |  |  | (7) |  |  | 11
|  | Included in other comprehensive income |  |  | (1) |  |  |  |  |  | - |  |  | - |  |  | (1)
|  | Included in regulatory (assets) liabilities |  |  | - |  |  | - |  |  | - |  |  | 6 |  |  | 6
| Settlements |  |  | - |  |  | 5 |  |  | (2) |  |  | - |  |  | 3
| Transfers of assets (liabilities) into Level 3 (2) |  |  | (58) |  |  | - |  |  | - |  |  | - |  |  | (58)
| Transfers of (assets) liabilities out of Level 3 (2) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Balance at June 30 |  | $ | (60) |  | $ | 15 |  | $ | 38 |  | $ | 17 |  | $ | 10
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 |  | $ | - |  | $ | - |  | $ | 15 |  | $ | (1) |  | $ | 14
(1) The gains (losses) included in earnings for these Level 3 derivatives are classified as follows: interest rate and cross currency d erivatives as interest expense; foreign currency derivatives as foreign currency transaction gains (losses); and commodity and other derivatives as either non-regulated revenue, non-regulated cost of sales, or other expense. See Note 5—Derivative Instruments and Hedging Activities for further information regarding the classification of gains and losses included in earnings in the condensed consolidated statements of operations. (2) Transfers in and out of Level 3 are determined as of the end of the reporting period and are from and to Level 2. T he assets (liabilities) transferred into and out of Level 3 are primarily the result of an increase or decrease in the significance of unobservable inputs used to calculate the credit valuation adjustments of these derivative instruments. The following table presents a reconciliation of available-for-sale securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2012 and 2011:
|  |  |  | Three Months |  | Six Months
|  |  |  | Ended June 30, |  | Ended June 30,
|  |  |  | 2012 |  | 2011 |  | 2012 |  | 2011
|  |  | (in millions)
Balance at beginning of period |  | $ | - |  | $ | 40 |  | $ | - |  | $ | 42
| Settlements |  |  | - |  |  | - |  |  | - |  |  | (2)
Balance at June 30 |  | $ | - |  | $ | 40 |  | $ | - |  | $ | 40
Total gains/(losses) for the period included in |  |  |  |  |  |  |  |  |  |  |  |
| earnings attributable to the change in unrealized |  |  |  |  |  |  |  |  |  |  |  |
| gains/losses relating to assets held at the |  |  |  |  |  |  |  |  |  |  |  |
| end of the period |  | $ | - |  | $ | - |  | $ | - |  | $ | -
Nonrecurring Measurements For purposes of impairment evaluation, the Company measured the fair value of long-lived assets and equity method investments under the fair value measurement accounting guidance. Impairment expense is measured by comparing the f air value of asset groups at the evaluation date to the ir carrying amount at the end of the month prior to the evaluation date. 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 hierarch y:
|  |  |  |  | Six Months Ended June 30, 2012
|  |  |  | Carrying |  | Fair Value |  | Gross
|  | Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Loss
Assets |  | in million
| Long-lived assets held and used:(1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Kelanitissa |  | $ | 22 |  | $ | - |  | $ | - |  | $ | 10 |  | $ | 12
| Long-lived assets held for sale:(1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | St. Patrick |  |  | 33 |  |  | - |  |  | 22 |  |  | - |  |  | 11
| Equity method investments(2) |  |  | 205 |  |  | - |  |  | 155 |  |  | - |  |  | 50
|  |  |  |  | Six Months Ended June 30, 2011
|  |  |  | Carrying |  | Fair Value |  | Gross
|  | Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Loss
Assets |  | in million
| Long-lived assets held and used:(1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Kelanitissa |  | $ | 66 |  | $ | - |  | $ | - |  | $ | 33 |  | $ | 33
_______________________ (1) See Note 14―Asset Impairment Expense for further information. (2) See Note 15―Other Non-Operating Expense for further information. The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets during the period:
|  |  |  | Valuation |  |  |  |
| Fair Value |  | Technique |  | Unobservable Input |  | Range
|  | (in millions) |  |  |  |  |  |
Long-lived assets held and used: |  |  |  |  |  |  |  |
| Kelanitissa | $ | 10 |  | Discounted |  |  |  |
|  |  |  |  | cash flow |  | Annual revenue growth |  | -9% to 4%
|  |  |  |  |  |  | Annual pretax operating margin |  | -4% to 16%
|  |  |  |  |  |  | Weighted average cost of capital |  | 11.9%
Total | $ | 10 |  |  |  |  |  |
Financial Instruments n ot Measure d at Fair Value in the Condensed Consolidated Balance Sheet s The following table sets forth the carrying amount and fair value of the Company's financial assets and liabilities that are not measure d at fair value in the condensed consolidated balance sheet s as of June 30, 2012 and December 31, 2011, but for which fair value is disclosed. In addition, the fair value level hierarchy of such assets and liabilities is presented as of June 30, 2012:
|  |  | Carrying |  | Fair Value
June 30, 2012 | Amount |  |  | Total |  | Level 1 |  | Level 2 |  | Level 3
| (in millions)
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Trade receivables(1) | $ | 460 |  | $ | 398 |  | $ | - |  | $ | - |  | $ | 398
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-recourse debt |  | 15,537 |  |  | 16,021 |  |  | - |  |  | 11,944 |  |  | 4,077
| Recourse debt |  | 6,189 |  |  | 6,802 |  |  | - |  |  | 6,802 |  |  | -
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Trade receivables(1) | $ | 469 |  | $ | 484 |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-recourse debt |  | 15,535 |  |  | 15,862 |  |  |  |  |  |  |  |  |
| Recourse debt |  | 6,485 |  |  | 6,640 |  |  |  |  |  |  |  |  |
(1) Trade receivables are included in “Current Assets― Accounts Receivable” and “N oncurrent assets― O ther” i n the accompanying condense d consolidated balance sheets. Th ese receivables principally relate to amounts due from the independent system operator in Argentina. D uring the t hree months ended June 30, 2012, t he significant decline in fair value of these receivables wa s a result of the increase d credit risk in Argentina.

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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