XML 22 R9.htm IDEA: XBRL DOCUMENT v3.24.3
Fair Value
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE
The fair value of current financial assets and liabilities approximate their reported carrying amounts. The estimated fair values of the Company’s assets and liabilities have been determined using available market information. Because these amounts are 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. For further information on our valuation techniques and policies, see Note 4, “Fair Value” to IPALCO’s 2023 Form 10-K.

Financial Assets

VEBA Assets

IPALCO has VEBA investments that are to be used to fund certain employee postretirement health care benefit plans. These assets are primarily comprised of open-ended mutual funds, which are valued using the net assets value per unit. These investments are recorded at fair value within “Other non-current assets” on the accompanying Condensed Consolidated Balance Sheets and classified as equity securities. All changes to fair value on the VEBA investments are included in income in the period that the changes occur. These changes to fair value were not material for the periods covered by this report. Any unrealized gains or losses are recorded in “Other (expense) / income, net” on the accompanying Condensed Consolidated Statements of Operations.

FTRs

In connection with AES Indiana’s participation in MISO, in the second quarter of each year AES Indiana is granted financial instruments that can be converted into cash or FTRs based on AES Indiana’s forecasted peak load for the period. FTRs are used in the MISO market to hedge AES Indiana’s exposure to congestion charges, which result from constraints on the transmission system. AES Indiana’s FTRs are valued at the cleared auction prices for FTRs in MISO’s annual auction. Because of the infrequent nature of this valuation, the fair value assigned to the FTRs is considered a Level 3 input under the fair value hierarchy required by ASC 820. An offsetting regulatory liability has been recorded as these revenue or costs will be flowed through to customers through the FAC. As such, there is no impact on our Condensed Consolidated Statements of Operations.

Interest Rate Hedges

In March 2024, IPALCO’s interest rate hedges with a combined notional value of $400.0 million were terminated in conjunction with the issuance of the 2034 IPALCO Notes. See also Note 4, “Derivative Instruments and Hedging Activities - Cash Flow Hedges” for further information.
Recurring Fair Value Measurements

The fair value of assets and liabilities at September 30, 2024 and December 31, 2023 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:

Fair Value as of September 30, 2024Fair Value as of December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
(In Thousands)
Financial assets:
VEBA investments:
     Money market funds$83 $— $— $83 $127 $— $— $127 
     Mutual funds3,855 — — 3,855 3,425 — — 3,425 
          Total VEBA investments3,938 — — 3,938 3,552 — — 3,552 
FTRs— — 2,817 2,817 — — 1,388 1,388 
Interest rate hedges— — — — — 14,294 — 14,294 
Total financial assets measured at fair value$3,938 $— $2,817 $6,755 $3,552 $14,294 $1,388 $19,234 

The following table presents a roll forward of financial instruments, measured at fair value on a recurring basis, classified as Level 3 in the fair value hierarchy (note, amounts in this table indicate carrying values, which approximate fair values):

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(In Thousands)
Beginning Balance$3,968 $3,294 $1,388 $7,545 
Issuances— — 3,811 3,624 
Settlements(1,151)(943)(2,382)(8,818)
Ending Balance$2,817 $2,351 $2,817 $2,351 

Financial Instruments not Measured at Fair Value in the Condensed Consolidated Balance Sheets
 
Debt
 
The fair value of our outstanding fixed-rate debt has been determined on the basis of the quoted market prices of the specific securities issued and outstanding. In certain circumstances, the market for such securities was inactive and therefore the valuation was adjusted to consider changes in market spreads for similar securities. Accordingly, the purpose of this disclosure is not to approximate the value on the basis of how the debt might be refinanced.

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:  
 September 30, 2024December 31, 2023
 Face ValueFair ValueFace ValueFair Value
 (In Thousands)
Fixed-rate$3,678,800 $3,644,584 $3,033,800 $2,860,467 
Variable-rate350,000 350,000 455,000 455,000 
Total indebtedness$4,028,800 $3,994,584 $3,488,800 $3,315,467 
 
The difference between the face value and the carrying value of this indebtedness consists of the following:

•unamortized deferred financing costs of $35.3 million and $24.8 million at September 30, 2024 and December 31, 2023, respectively; and

•unamortized discounts of $9.5 million and $6.8 million at September 30, 2024 and December 31, 2023, respectively.