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Derivative Instruments and Hedging Activities | 3 Months Ended
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Mar. 31, 2013
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 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 to Item 8.—Financial St atements and Supplementary Data in the 2012 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, 2013 regardless of whether the derivative instruments are in qualifying cash flow hedging relationships:
|  |  | March 31, 2013
|  |  | Current |  | Maximum |  |  |  |
|  |  |  |  | Derivative |  |  |  | Derivative |  | Weighted |  | % of Debt
|  |  |  |  | Notional |  |  |  | Notional |  | Average |  | Currently
|  |  | Derivative |  | Translated |  | Derivative |  | Translated |  | Remaining |  | Hedged
Interest Rate and Cross Currency |  | Notional |  | to USD |  | Notional |  | to USD |  | Term |  | by Index(2)
|  |  | (in millions) |  | (in years) |  |
Interest Rate Derivatives:(1) |  |  |  |  |  |  |  |  |  |  |  |  |  |
LIBOR (U.S. Dollar) |  | 3,451 |  | $ | 3,451 |  | 4,226 |  | $ | 4,226 |  | 9 |  | 70%
EURIBOR (Euro) |  | 605 |  |  | 776 |  | 605 |  |  | 776 |  | 9 |  | 67%
LIBOR (British Pound) |  | 69 |  |  | 105 |  | 69 |  |  | 105 |  | 13 |  | 83%
Cross Currency Swaps: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Chilean Unidad de Fomento |  | 6 |  |  | 271 |  | 6 |  |  | 271 |  | 9 |  | 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, 2013 and the maturity of the derivative instrument, which includes forward starting derivative instruments. The interest rate and cross currency derivative s range in maturity through 2030 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 h as no interest rate derivatives.
|  |  | March 31, 2013
|  |  |  |  |  |  |  | Weighted
|  |  |  |  | Notional |  | Average
|  |  |  |  | Translated |  | Remaining
Foreign Currency Derivatives |  | Notional(1) |  | to USD |  | Term(2)
|  |  | (in millions) |  | (in years)
Foreign Currency Options and Forwards: |  |  |  |  |  |  |
Chilean Peso |  | 80,558 |  | $ | 166 |  | <1
Brazilian Real |  | 240 |  |  | 118 |  | <1
Euro |  | 29 |  |  | 41 |  | <1
Colombian Peso |  | 53,208 |  |  | 28 |  | <1
Argentine Peso |  | 83 |  |  | 14 |  | <1
British Pound |  | 3 |  |  | 5 |  | <1
Embedded Foreign Currency Derivatives |  |  |  |  |  |  |
Argentine Peso |  | 829 |  |  | 169 |  | 11
Kazakhstani Tenge |  | 1,009 |  |  | 7 |  | 5
Euro |  | 2 |  |  | 2 |  | 10
_____________________________ (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 derivative s range in maturity through 2014 and 2026, respectively.
|  |  | March 31, 2013 |
|  |  |  |  | Weighted Average |
| Commodity Derivatives |  | Notional |  | Remaining Term(1) |
|  |  | (in millions) |  | (in years) |
| Aluminum (MWh)(2) |  | 14 |  | 7 |
| Power (MWh) |  | 6 |  | 3 |
_____________________________ (1) Represents the remaining tenor of our commodity derivatives weighted by the corresponding volume. These derivative s range in maturity through 2019. (2) Our exposure is to fluctuations in the price of aluminum while the notional is based on the amount of power we sell under the PPA. Accounting and Reporting Assets and Liabilities The following table s set forth the Company's derivative instruments as of March 31, 2013 and December 31, 2012, first by whether or not they are designated hedging instruments, then by whether they are current or non-current, by the extent to which 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, 2013 |  | December 31, 2012
|  |  |  | Designated |  | Not Designated |  | Total |  | Designated |  | Not Designated |  | Total
|  |  |  | (in millions) |  | (in millions)
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest rate derivatives |  | $ | - |  | $ | 2 |  | $ | 2 |  | $ | - |  | $ | 2 |  |  | 2
| Cross currency derivatives |  |  | 8 |  |  | - |  |  | 8 |  |  | 6 |  |  | - |  |  | 6
| Foreign currency derivatives |  |  | 1 |  |  | 87 |  |  | 88 |  |  | - |  |  | 81 |  |  | 81
| Commodity derivatives |  |  | - |  |  | 7 |  |  | 7 |  |  | 2 |  |  | 9 |  |  | 11
|  | Total assets |  | $ | 9 |  | $ | 96 |  | $ | 105 |  | $ | 8 |  | $ | 92 |  | $ | 100
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest rate derivatives |  | $ | 523 |  | $ | 18 |  | $ | 541 |  | $ | 544 |  | $ | 21 |  |  | 565
| Cross currency derivatives |  |  | 3 |  |  | - |  |  | 3 |  |  | 6 |  |  | - |  |  | 6
| Foreign currency derivatives |  |  | 7 |  |  | 11 |  |  | 18 |  |  | 7 |  |  | 7 |  |  | 14
| Commodity derivatives |  |  | 11 |  |  | 82 |  |  | 93 |  |  | 8 |  |  | 64 |  |  | 72
|  | Total liabilities |  | $ | 544 |  | $ | 111 |  | $ | 655 |  | $ | 565 |  | $ | 92 |  | $ | 657
|  |  | March 31, 2013 |  | December 31, 2012
|  |  | Assets |  | Liabilities |  | Assets |  | Liabilities
|  |  | (in millions) |  | (in millions)
Current |  | $ | 18 |  | $ | 175 |  | $ | 14 |  | $ | 186
Noncurrent |  |  | 87 |  |  | 480 |  |  | 86 |  |  | 471
| Total |  | $ | 105 |  | $ | 655 |  | $ | 100 |  | $ | 657
Derivatives subject to master netting agreement or similar agreement: |  |  |  |  |  |  |  |  |  |  |  |
| Gross (which equals net) amounts recognized in the balance sheet |  | $ | 19 |  | $ | 520 |  | $ | 25 |  | $ | 522
| Gross amounts of derivative instruments not offset |  |  | (8) |  |  | (8) |  |  | (9) |  |  | (9)
| Gross amounts of cash collateral received/pledged not offset |  |  | - |  |  | (14) |  |  | - |  |  | (5)
| Net amount |  | $ | 11 |  | $ | 498 |  | $ | 16 |  | $ | 508
Other balances that had been, but no longer need to be, accounted |  |  |  |  |  |  |  |  |  |  |  |
| for as derivatives at fair value that are to be amortized to earnings |  |  |  |  |  |  |  |  |  |  |  |
| over the remaining term of the associated PPA |  | $ | 181 |  | $ | 191 |  | $ | 186 |  | $ | 191
Effective Portion of Cash Flow Hedges The following tables set forth the pre-tax 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 three months ended March 31, 2013 and 2012:
|  |  | Gains (Losses) |  | Classification in |  | Gains (Losses) Reclassified
|  |  | Recognized in AOCL |  | Condensed Consolidated |  | from AOCL into Earnings
Type of Derivative |  | 2013 |  | 2012 |  | Statements of Operations |  | 2013 |  | 2012
|  |  | (in millions) |  |  |  |  | (in millions)
Interest rate derivatives |  | $ | (13) |  | $ | 11 |  | Interest expense |  | $ | (32) |  | $ | (32)
|  |  |  |  |  |  |  |  | Non-regulated cost of sales |  |  | (1) |  |  | (2)
|  |  |  |  |  |  |  |  | Net equity in earnings of |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | affiliates |  |  | (2) |  |  | (1)
|  |  |  |  |  |  |  |  | Gain on sale of investments |  |  | - |  |  | (92)
Cross currency derivatives |  |  | 1 |  |  | 14 |  | Interest expense |  |  | (3) |  |  | (3)
|  |  |  |  |  |  |  |  | Foreign currency transaction |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | gains (losses) |  |  | 5 |  |  | 18
Foreign currency derivatives |  |  | 1 |  |  | 6 |  | Foreign currency transaction |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | gains (losses) |  |  | 2 |  |  | -
Commodity derivatives |  |  | (5) |  |  | (6) |  | Non-regulated revenue |  |  | - |  |  | (2)
Total |  | $ | (16) |  | $ | 25 |  |  |  |  | $ | (31) |  | $ | (114)
The pre-tax 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 mon t hs as of March 31, 2013 is $(146) milli on for interest rate hedges, $(11) million for cross currency swaps, $(6) million for foreign currency hedges, and $(9) million for commodity and other hedges. Ineffective Portion of Cash Flow Hedges The following table sets forth the pre-tax 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 three months ended March 31, 2013 and 2012:
|  |  | Classification in Condensed |  | Gains (Losses)
|  |  | Consolidated Statements |  | Recognized in Earnings
Type of Derivative |  | of Operations |  | 2013 |  | 2012
|  |  |  |  |  | (in millions)
Interest rate derivatives |  | Interest expense |  | $ | (1) |  | $ | (1)
Total |  |  |  |  | $ | (1) |  | $ | (1)
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 no longer need to be, accounted for as derivatives at fair value, for the three months ended March 31, 2013 and 2012:
|  |  | Classification |  | Gains (Losses)
|  |  | in Condensed Consolidated |  | Recognized in Earnings
Type of Derivative |  | Statements of Operations |  | 2013 |  | 2012
|  |  |  |  |  | (in millions)
Interest rate derivatives |  | Interest expense |  | $ | 1 |  | $ | (2)
|  |  | Net equity in earnings of affiliates |  |  | (6) |  |  | -
Foreign currency derivatives |  | Foreign currency transaction gains (losses) |  |  | 6 |  |  | (38)
|  |  | Net equity in earnings of affiliates |  |  | (3) |  |  | -
Commodity and other derivatives |  | Non-regulated revenue |  |  | (21) |  |  | 14
|  |  | Regulated revenue |  |  | (3) |  |  | (4)
|  |  | Non-regulated cost of sales |  |  | 1 |  |  | 3
|  |  | Regulated cost of sales |  |  | - |  |  | (4)
Total |  |  |  |  | $ | (25) |  | $ | (31)
Credit Risk-Related Contingent Features DP&L, our utility in Ohio, 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 their 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 $23 million and $13 million as of March 31, 2013 and December 31, 2012, respectively, for all derivatives with credit risk-related contingent features. As of March 31, 2013 and December 31, 2012, DP&L had posted $14 million and $5 million, respectively, of cash collateral directly with third parties and in a broker margin account a nd DP&L held $0 million and $0 million of cash collateral that it received 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 provide additional collateral of $5 million and $2 million as of March 31, 2013 and December 31, 2012.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -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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