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):



	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	)



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
	Measurement Date	Carrying Amount ⁽¹⁾		Level 1		Level 2		Level 3		Pretax Loss
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	Measurement Date	Carrying Amount ⁽¹⁾		Level 1		Level 2		Level 3		Pretax Loss
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

_____________________________


⁽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	Carrying Amount		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.