Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

12.    Fair Value Measurements

Assets and Liabilities Accounted for at Fair Value

Our assets and liabilities that are measured at fair value on a recurring basis include the following (in millions):

			Fair Value Measurements at September 30, 2012 Using
	Total		Quoted Prices  in Active Markets (Level  1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	270	$	270	$	—	$	—
Available-for-sale securities		164		139		—		25
Electricity commodity derivatives		1		—		1		—
Total assets	$	435	$	409	$	1	$	25
Liabilities:
Electricity commodity derivatives	$	4	$	—	$	4	$	—
Foreign exchange derivatives		16		—		16		—
Interest rate derivatives		42		—		42		—
Total liabilities	$	62	$	—	$	62	$	—

			Fair Value Measurements at December 31, 2011 Using
	Total		Quoted Prices  in Active Markets (Level  1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	120	$	120	$	—	$	—
Available-for-sale securities		179		154		—		25
Interest rate derivatives		73		—		73		—
Electricity commodity derivatives		5		—		5		—
Total assets	$	377	$	274	$	78	$	25
Liabilities:
Interest rate derivatives	$	74	$	—	$	74	$	—
Foreign exchange derivatives		2		—		2		—
Total liabilities	$	76	$	—	$	76	$	—

Fair Value of Available-for-sale Securities — The available-for-sale securities measured using Level 1 inputs are primarily included in long-term “Other assets” in our Condensed Consolidated Balance Sheets. The fair value of available-for-sale securities measured using Level 3 inputs consists of redeemable preferred stock that was acquired in November 2011 and is included in “Investments in unconsolidated entities” in our Condensed Consolidated Balance Sheets. The redeemable preferred stock is recorded at fair value based on other third-party investors’ recent or pending transactions in these securities, which are considered to be the best evidence of fair value currently available. When this evidence is not available, we use other valuation techniques as appropriate and available. These valuation methodologies may include transactions in similar instruments, discounted cash flow techniques, third-party appraisals or industry multiples and public comparables.

Fair Value of Debt

At September 30, 2012, the carrying value of our debt was approximately $10.0 billion compared with $9.8 billion at December 31, 2011. The carrying value of our debt includes adjustments associated with fair value hedge accounting related to our interest rate swaps as discussed in Note 4.

The estimated fair value of our debt was approximately $11.5 billion at September 30, 2012 and approximately $10.8 billion at December 31, 2011. The estimated fair value of our senior notes is based on quoted market prices. The carrying value of remarketable debt and borrowings under our revolving credit facilities approximates fair value due to the short-term nature of the interest rates. The fair value of our other debt is estimated using discounted cash flow analysis, based on current market rates for similar types of instruments. The increase in the fair value of our debt when comparing September 30, 2012 with December 31, 2011 is attributable to net borrowings during 2012, increases in market prices for corporate debt securities and decreases in current market rates on fixed-rate tax-exempt bonds.

Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values. The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of September 30, 2012 and December 31, 2011. These amounts have not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts presented.