EQUITY

Changes in Equity — The following table is a reconciliation of the beginning and ending equity attributable to stockholders of The AES Corporation, noncontrolling interests (“NCI”) and total equity as of the periods indicated (in millions):



	Nine Months Ended September 30, 2015									Nine Months Ended September 30, 2014
	The Parent Stockholders’ Equity			NCI			Total Equity			The Parent Stockholders’ Equity			NCI			Total Equity
Balance at the beginning of the period	$	4,272		$	3,053		$	7,325		$	4,330		$	3,321		$	7,651
Net income	391			330			721			563			286			849
Total change in fair value of AFS securities, net of income tax	—			—			—			(1		)	—			(1		)
Total foreign currency translation adjustment, net of income tax	(498		)	(359		)	(857		)	(269		)	(82		)	(351		)
Total change in derivative fair value, net of income tax	10			(37		)	(27		)	(79		)	(106		)	(185		)
Total pension adjustments, net of income tax	3			10			13			15			21			36
Balance sheet reclassification related to an equity method investment ⁽¹⁾	—			—			—			40			—			40
Cumulative effect of a change in accounting principle	(5		)	—			(5		)	—			—			—
Capital contributions from noncontrolling interests	—			117			117			—			131			131
Distributions to noncontrolling interests	—			(182		)	(182		)	—			(380		)	(380		)
Acquisition of business ⁽²⁾	—			11			11			—			—			—
Disposition of businesses	—			(49		)	(49		)	—			(152		)	(152		)
Acquisition of treasury stock	(408		)	—			(408		)	(140		)	—			(140		)
Issuance and exercise of stock-based compensation benefit plans, net of income tax	23			—			23			23			—			23
Dividends declared on common stock	(138		)	—			(138		)	(72		)	—			(72		)
Sale of subsidiary shares to noncontrolling interests	(83		)	—			(83		)	—			130			130
Acquisition of subsidiary shares from noncontrolling interests	—			—			—			(13		)	—			(13		)
Balance at the end of the period	$	3,567		$	2,894		$	6,461		$	4,397		$	3,169		$	7,566

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⁽¹⁾Reclassification resulting from SRP transaction during the third quarter of 2014. See Note 7—Investments In and Advances to Affiliates for further information.

⁽²⁾Fair value of a tax equity partner’s right to preferential returns recognized as a result of the acquisition of Solar Power PR, LLC (Solar Puerto Rico), which was previously accounted for as an equity method investment.

Equity Transactions with Noncontrolling Interests

IPALCO — On December 14, 2014, the Company executed sale and subscription agreements with CDPQ, whereby in the first quarter of 2015, CDPQ acquired a 15% noncontrolling interest in AES US Investments, Inc., a wholly-owned subsidiary, for $247 million. Prior to these agreements, AES US Investments, Inc. owned 100% of IPALCO. Under the subscription agreement, CDPQ committed to invest an additional $349 million in IPALCO through 2016 in exchange for a 17.65% equity stake, by funding existing growth and environmental projects at Indianapolis Power & Light Company. In April 2015, CDPQ invested $214 million of the $349 million in IPALCO, which resulted in CDPQ’s combined equity interest in IPALCO to be 24.90%. Upon investing the remaining commitment of $135 million, CDPQ's equity interests in IPALCO will total 30%.

As a result of these transactions, $82 million in taxes and transaction costs were recognized as a net decrease to equity. The Company also recognized an increase of $377 million to additional paid-in capital and a reduction to retained earnings of $377 million for the excess of the fair value of the shares over their book value. Since the noncontrolling interest is contingently redeemable, the fair value of the consideration received of $461 million is classified in temporary equity as redeemable stock of subsidiaries on the Condensed Consolidated Balance Sheets. No gain or loss was recognized in net income as the sale is not considered to be a sale of in-substance real estate. Any subsequent adjustments to allocate earnings and dividends to CDPQ will be classified as noncontrolling interest within permanent equity and adjustments to the amount in temporary equity will occur only if and when it is probable that the shares will become redeemable. As the Company maintained control after the sale, IPALCO continues to be accounted for as a consolidated subsidiary within the US SBU reportable segment.

Jordan — On March 15, 2015, the Company executed an agreement to sell 40% of its interest in a wholly owned subsidiary in Jordan that owns a controlling interest in the 247 MW Jordan IPP4 gas-fired plant for $30 million. The sale is expected to be completed during 2015.

Dominican Republic — In September 2014, the Company executed an agreement with the Estrella-Linda group, an investor-based group in the Dominican Republic (“DR”), to form a strategic partnership. Under the terms of the agreement, Estrella Linda acquired an 8% noncontrolling interest in our businesses in the DR for $96 million, with an option to acquire an additional 2% for $24 million at any time between the closing date and December 31, 2015, and an additional 10% for $125 million at any time between the closing date and December 31, 2016. The transaction closed in December 2014 and $29 million was recognized in equity as Additional Paid-In Capital. No gain or loss was recognized in net income as the sale is not considered to be a sale of in-substance real estate. As the Company maintained control after the sale, our businesses in the DR continue to be consolidated by the Company within the MCAC SBU reportable segment.

Masinloc — On June 25, 2014, the Company executed an agreement to sell approximately 45% of its interest in Masin-AES Pte Ltd., a wholly-owned subsidiary that owns the Company’s business interests in the Philippines, for $453 million, subject to certain purchase price adjustments. On July 15, 2014, the Company completed the Masinloc sale transaction and received net proceeds of $436 million, including $23 million contingent upon the achievement of certain restructuring efficiencies. The transaction was accounted for as a sale of real estate. Noncontrolling interest of $130 million and a pretax gain of approximately $283 million, net of transaction costs, was recognized as a gain on sale of investment during the third quarter of 2014. The portion of the gain related to the contingency has been deferred.

After completion of the sale, the Company continues to own a 51% net ownership interest in Masinloc and will continue to manage and operate the plant, with 41% owned by Electricity Generating Public Company Limited and 8% owned by the International Finance Corporation. As the Company maintained control after the sale, Masinloc will continue to be accounted for as a consolidated subsidiary within the Asia SBU reportable segment.

Accumulated Other Comprehensive Loss — See below for the changes in AOCL by component, net of tax and noncontrolling interests, for the nine months ended September 30, 2015 (in millions):



	Unrealized derivative gains (losses), net			Unfunded pension obligations, net			Foreign currency translation adjustment, net			Total
Balance at the beginning of the period	$	(396	)	$	(295	)	$	(2,595	)	$	(3,286	)
Other comprehensive income (loss) before reclassifications	(21		)	—			(498		)	(519		)
Amount reclassified to earnings	31			3			—			34
Other comprehensive income (loss)	10			3			(498		)	(485		)
Cumulative effect of a change in accounting principle	—			—			13			13
Balance at the end of the period	$	(386	)	$	(292	)	$	(3,080	)	$	(3,758	)

Reclassifications out of AOCL are presented in the following table. Amounts for the periods indicated are in millions and those in parenthesis indicate debits to the Condensed Consolidated Statements of Operations:



Details About		Three Months Ended September 30,						Nine Months Ended September 30,
AOCL Components	Affected Line Item in the Condensed Consolidated Statements of Operations	2015			2014			2015			2014
Foreign currency translation adjustment, net
	Gain on disposals and sale of investments	$	—		$	4		$	—		$	4
	Net loss from disposal and impairments of discontinued businesses	—			—			—			$	47
	Net income attributable to The AES Corporation	$	—		$	4		$	—		$	51
Unrealized derivative gains (losses), net
	Non-regulated revenue	$	12		$	4		$	27		$	23
	Non-regulated cost of sales	(5		)	(2		)	(10		)	$	(4	)
	Interest expense	(28		)	(39		)	(84		)	(102		)
	Gain on disposals and sale of investments	(4		)	—			(4		)	—
	Foreign currency transaction gains (losses)	12			(17		)	20			(13		)
	Income from continuing operations before taxes and equity in earnings of affiliates	(13		)	(54		)	(51		)	(96		)
	Income tax expense	—			10			6			23
	Net equity in earnings of affiliates	(1		)	—			(1		)	(3		)
	Income from continuing operations	(14		)	(44		)	(46		)	(76		)
	Income from continuing operations attributable to noncontrolling interests	6			9			15			24
	Net income attributable to The AES Corporation	$	(8	)	$	(35	)	$	(31	)	$	(52	)
Amortization of defined benefit pension actuarial loss, net
	Regulated cost of sales	$	(7	)	$	(8	)	$	(21	)	$	(25	)
	Other income	—			—			—			(2		)
	Income from continuing operations before taxes and equity in earnings of affiliates	(7		)	(8		)	(21		)	(27		)
	Income tax expense	3			3			8			4
	Income from continuing operations	(4		)	(5		)	(13		)	(23		)
	Net loss from disposal and impairments of discontinued businesses	—			—			—			2
	Net income	(4		)	(5		)	(13		)	(21		)
	Income from continuing operations attributable to noncontrolling interests	3			3			10			14
	Net income attributable to The AES Corporation	$	(1	)	$	(2	)	$	(3	)	$	(7	)
Total reclassifications for the period, net of income tax and noncontrolling interests		$	(9	)	$	(33	)	$	(34	)	$	(8	)

Common Stock Dividends — The Company paid dividends of $0.10 per outstanding share to its common stockholders during each of the first, second and third quarters of 2015 for dividends declared in December 2014, April 2015, and July 2015, respectively. For information on dividends declared after the third quarter of 2015, see Note 21—Subsequent Events.

Secondary Offering and Concurrent Stock Repurchase — On May 18, 2015, the Parent Company completed an underwritten secondary public offering (the “Offering”) of approximately 60 million shares of its common stock by the Terrific Investment Corporation (the “Selling Stockholder”), a subsidiary controlled by China Investment Corporation at a price of $13.25 per share. Of the 60 million shares, 40 million were sold to the market and 20 million were reserved to be repurchased by the Parent Company. The Parent Company did not receive any of the proceeds from the Offering and the Selling Stockholder has fully sold its stake in AES common stock. Concurrent with this offering, on May 18, 2015, the Parent Company completed the repurchase of the 20 million shares of its common stock from the Selling Stockholder at a price per share of $13.07, for an aggregate purchase price of $261 million.

Stock Repurchase Program — During the three months ended September 30, 2015, the Parent Company repurchased 8.4 million shares of its common stock at a total cost of $101 million under the existing stock repurchase program (the “Program”). The cumulative repurchases from the commencement of the Program in July 2010 through September 30, 2015 totaled 137.9 million shares for a total cost of $1.7 billion, at an average price per share of $12.44 (including a nominal amount of commissions). As of September 30, 2015, $16 million remained available for repurchase under the Program. For information on stock repurchases after the third quarter of 2015, see Note 21—Subsequent Events.