Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities

DPL previously entered into various financial instruments, including derivative financial instruments. We used derivatives principally to manage the interest rate risk associated with our long-term debt. The derivative instruments were used for risk management purposes and were designated as cash flow hedges if they qualified under FASC 815 for accounting purposes.

In August 2020, the two interest rate swaps to hedge the variable interest on the $140.0 million variable interest rate tax-exempt First Mortgage Bonds expired, as the associated debt reached maturity. The interest rate swaps had a combined notional amount of $140.0 million and settled monthly based on a one-month LIBOR. The AOCL associated with the swaps was amortized out of AOCL into interest expense over the life of the underlying debt.

We also had previously entered into interest rate derivative contracts to manage interest rate exposure related to anticipated borrowings of fixed-rate debt. These interest rate derivative contracts were settled in 2013 and we continue to amortize amounts out of AOCL into interest expense.

We used the income approach to value the swaps, which consists of forecasting future cash flows based on

contractual notional amounts and applicable and available market data as of the valuation date. The most common market data inputs used in the income approach include volatilities, spot and forward benchmark interest rates (LIBOR). Forward rates with the same tenor as the derivative instrument being valued are generally obtained from published sources, with these forward rates being assessed quarterly at a portfolio-level for reasonableness versus comparable published rates. We reclassified gains and losses on the swaps out of AOCL and into earnings in those periods in which hedged interest payments occurred.

The following tables provide information on gains or losses recognized in AOCL for the cash flow hedges for the periods indicated:


	Years ended December 31,
	2021		2020		2019
$ in millions (net of tax)	Interest Rate Hedge		Interest Rate Hedge		Power		Interest Rate Hedge
Beginning accumulated derivative gain in AOCL	$	13.6	$	14.5	$	0.4	$	16.6

Net losses associated with current period hedging transactions	—		—		—		(1.0)
Net gains reclassified to earnings:
Interest expense	(0.8)		(0.9)		—		(1.1)
Income from discontinued operations before income tax	—		—		(0.4)		—
Ending accumulated derivative gain in AOCL	$	12.8	$	13.6	$	—	$	14.5

Portion expected to be reclassified to earnings in the next twelve months	$	(0.8)

THE DAYTON POWER AND LIGHT COMPANY [Member]

Derivative Instruments and Hedging Activities

AES Ohio previously entered into various financial instruments, including derivative financial instruments. We used derivatives principally to manage the interest rate risk associated with our long-term debt. The derivative instruments were used for risk management purposes and were designated as cash flow hedges if they qualified under FASC 815 for accounting purposes.

We used the income approach to value the swaps, which consists of forecasting future cash flows based on

The following tables provide information on gains or losses recognized in AOCL for the cash flow hedges for the periods indicated:


	Years ended December 31,
	2020		2019
$ in millions (net of tax)	Interest Rate Hedge		Interest Rate Hedge
Beginning accumulated derivative gain / (loss) in AOCL	$	(0.4)	$	0.6

Net losses associated with current period hedging transactions	(0.2)		(0.8)
Net losses / (gains) reclassified to earnings:
Interest expense	0.6		(0.2)
Ending accumulated derivative loss in AOCL	$	—	$	(0.4)