DISCONTINUED OPERATIONS

Due to a portfolio evaluation in the first half of 2016, management decided to pursue a strategic shift of its distribution companies in Brazil, Sul and Eletropaulo, to reduce the Company's exposure to the Brazilian distribution market.

Eletropaulo — In November 2017, Eletropaulo converted its preferred shares into ordinary shares and transitioned the listing of those shares into the Novo Mercado, which is a listing segment of the Brazilian stock exchange with the highest standards of corporate governance. Upon conversion of the preferred shares into ordinary shares, AES no longer controlled Eletropaulo, but maintained significant influence over the business. As a result, the Company deconsolidated Eletropaulo. After deconsolidation, the Company's 17% ownership interest is reflected as an equity method investment. The Company recorded an after-tax loss on deconsolidation of $611 million, which primarily consisted of $455 million related to cumulative translation losses and $243 million related to pension losses reclassified from AOCL.

In December 2017, all the remaining criteria were met for Eletropaulo to qualify as a discontinued operation. Therefore, its results of operations and financial position were reported as such in the consolidated financial statements for all periods presented. Eletropaulo's pre-tax loss attributable to AES, including the loss on deconsolidation, for the years ended December 31, 2017 and 2016 was $633 million and $192 million, respectively. Eletropaulo's pre-tax income attributable to AES for the year ended December 31, 2015 was $73 million. Prior to its classification as discontinued operations, Eletropaulo was reported in the Brazil SBU reportable segment.

Sul — The Company executed an agreement for the sale of Sul, a wholly-owned subsidiary, in June 2016. The results of operations and financial position of Sul are reported as discontinued operations in the consolidated financial statements for all periods presented. Upon meeting the held-for-sale criteria, the Company recognized an after-tax loss of $382 million comprised of a pre-tax impairment charge of $783 million, offset by a tax benefit of $266 million related to the impairment of the Sul long lived assets and a tax benefit of $135 million for deferred taxes related to the investment in Sul. Prior to the impairment charge, the carrying value of the Sul asset group of $1.6 billion was greater than its approximate fair value less costs to sell. However, the impairment charge was limited to the carrying value of the long lived assets of the Sul disposal group.

On October 31, 2016, the Company completed the sale of Sul and received final proceeds less costs to sell of $484 million, excluding contingent consideration. Upon disposal of Sul, the Company incurred an additional after-tax loss on sale of $737 million. The cumulative impact to earnings of the impairment and loss on sale was $1.1 billion. This includes the reclassification of approximately $1 billion of cumulative translation losses resulting in a net reduction to the Company’s stockholders’ equity of $92 million.

Sul’s pre-tax loss attributable to AES for the years ended December 31, 2016 and 2015 was $1.4 billion and $32 million, respectively. Prior to its classification as discontinued operations, Sul was reported in the Brazil SBU reportable segment.

The following table summarizes the carrying amounts of the major classes of assets and liabilities of discontinued operations at December 31, 2017 and December 31, 2016:



(in millions)	December 31, 2017		December 31, 2016
Assets of discontinued operations and held-for-sale businesses:
Cash and cash equivalents	$	—	$	61
Short-term investments	—		268
Accounts receivable, net of allowance for doubtful accounts of $0 and $94, respectively	—		745
Other current assets	—		499
Property, plant and equipment and intangibles, net	—		2,504
Investments in and advances to affiliates⁽¹⁾	86		—
Deferred income taxes	—		554
Other classes of assets that are not major	—		305
Total assets of discontinued operations	$	86	$	4,936
Other assets of businesses classified as held-for-sale ⁽²⁾	1,948		—
Total assets of discontinued operations and held-for-sale businesses ⁽³⁾	$	2,034	$	4,936
Liabilities of discontinued operations and held-for-sale businesses:
Accounts payable	$	—	$	418
Accrued and other liabilities	—		954
Non-recourse debt	—		1,009
Pension and other postretirement liabilities	—		1,159
Other noncurrent liabilities	—		678
Other classes of liabilities that are not major	—		31
Total liabilities of discontinued operations	$	—	$	4,249
Other liabilities of businesses classified as held-for-sale ⁽²⁾	1,033		—
Total liabilities of discontinued operations and held-for-sale businesses ⁽³⁾	$	1,033	$	4,249

_____________________________


⁽¹⁾	Represents the Company's 17% ownership interest in Eletropaulo.


⁽²⁾	Masinloc, Eletrica Santiago, and the DPL peaker assets were classified as held-for-sale as of December 31, 2017. See Note 22—Held-for-Sale Businesses and Dispositions for further information.


⁽³⁾	Amounts at December 31, 2016 are classified as both current and long-term on the Consolidated Balance Sheet.

The following table summarizes the major line items constituting losses from discontinued operations for the periods indicated (in millions):



December 31,	2017			2016			2015
Income (loss) from discontinued operations, net of tax:
Revenue — regulated	$	3,320		$	4,036		$	4,430
Cost of sales	(3,151		)	(3,954		)	(4,227		)
Other income and expense items that are not major ⁽¹⁾	(166		)	(160		)	(70		)
Income (loss) from operations of discontinued businesses	3			(78		)	133
Loss from disposal and impairments of discontinued businesses	(611		)	(1,385		)	—
Income (loss) from discontinued operations	(608		)	(1,463		)	133
Less: Net income attributable to noncontrolling interests	(25		)	(142		)	(92		)
Income (loss) from discontinued operations attributable to The AES Corporation	(633		)	(1,605		)	41
Income tax benefit (expense)	(21		)	495			(53		)
Loss from discontinued operations, net of tax	$	(654	)	$	(1,110	)	$	(12	)

_____________________________


⁽¹⁾	Includes a loss contingency recognized by our equity method investment in discontinued operations.

The following table summarizes the operating and investing cash flows from discontinued operations for the periods indicated (in millions):



December 31,	2017			2016			2015
Cash flows provided by (used in) operating activities of discontinued operations	$	164		$	529		$	(125	)
Cash flows used in investing activities of discontinued operations	(288		)	(368		)	(65		)