ASSET IMPAIRMENT EXPENSE



	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2015		2014		2015		2014
Kilroot	$	113	$	—	$	113	$	—
Buffalo Gap III	118		—		118		—
UK Wind	—		—		37		11
Ebute	—		15		—		67
DP&L (East Bend)	—		—		—		12
Other	—		—		8		—
Total asset impairment expense	$	231	$	15	$	276	$	90

Kilroot — During the third quarter of 2015, the Company tested the recoverability of long-lived assets at Kilroot, a coal and oil-fired plant in the United Kingdom, when the regulator established lower capacity prices for the Irish Single Electricity Market. The Company determined that the carrying amount of the asset group was not recoverable. The Kilroot asset group was determined to have a fair value of $78 million using the income approach. As a result, the Company recognized asset impairment expense of $113 million. Kilroot is reported in the Europe SBU reportable segment.

Buffalo Gap III — During the third quarter of 2015, the Company tested the recoverability of its long-lived assets at Buffalo Gap III, a wind farm in Texas with generation capacity of 170 MW. Impairment indicators were identified based on a decline in forward power curves coupled with the near term expiration of favorable contracted cash flows. The Company determined that the carrying amount was not recoverable. The Buffalo Gap III asset group was determined to have a fair value of $116 million using the income approach. As a result, the Company recognized asset impairment expense of $118 million. Buffalo Gap III is reported in the US SBU reportable segment.

UK Wind (Development Projects) — During the second quarter of 2015, the Company decided to no longer pursue two wind projects in the United Kingdom based on recent regulatory clarifications specific to these projects, resulting in a full impairment. Impairment indicators were also identified at four other wind projects based on their current development status and a reassessment of the likelihood that each project would be pursued given aviation concerns, regulatory changes, economic considerations and other factors. The Company determined that the carrying amounts of each of these asset groups, which totaled $38 million, were not recoverable. In aggregate, the asset groups were determined to have a fair value of $1 million using the market approach and, as a result, the Company recognized asset impairment expense of $37 million. The UK Wind (Development Projects) are reported in the Europe SBU reportable segment.

DP&L (East Bend) — During the first quarter of 2014, the Company tested the recoverability of long-lived assets at East Bend, a 186 MW coal-fired plant in Ohio jointly owned by DP&L (a wholly owned subsidiary of AES). Indications during that quarter that the fair value of the asset group was less than its carrying amount were determined to be impairment indicators given how narrowly these long-lived assets had passed the recoverability test during the fourth quarter of 2013. During the first quarter of 2014, the Company determined that the carrying amount of the asset group was not recoverable. The East Bend asset group was determined to have a fair value of $2 million using the market approach. As a result, the Company recognized asset impairment expense of $12 million. The Company’s interest in East Bend was sold in December 2014. Prior to its sale, East Bend was reported in the US SBU reportable segment.

Ebute — During the second quarter of 2014, the Company identified impairment indicators at Ebute in Nigeria, resulting from the continued lack of gas supply and the increased likelihood of selling the asset group before the end of its useful life. The Company determined that the carrying amount of the asset group was not recoverable. The Ebute asset group was determined to have a fair value of $47 million using primarily the market approach based on indications about the proceeds that could be received from a future sale, the amount of cash flows estimated to be received until that sale under its power purchase agreement and the amount of cash on hand. As a result, the Company recognized asset impairment expense of $52 million.

During the third quarter of 2014, the Company identified an additional impairment indicator resulting from lower indications about the potential proceeds that could be received from a future sale and a decline in expected cash flows remaining to be received until that sale. The Company determined that the carrying amount of the asset group was not recoverable. The Ebute asset group was determined to have a fair value of $36 million; as a result, the Company recognized an additional asset impairment expense of $15 million.

In November 2014, the Company completed the sale of its interest in Ebute. Prior to its sale, Ebute was reported in the Europe SBU reportable segment.

UK Wind (Newfield) — During the second quarter of 2014, the Company tested the recoverability of long-lived assets at its Newfield wind development project in the United Kingdom after the UK government refused to grant a permit necessary for the project to continue. The Company determined that the carrying amount of the asset group was not recoverable. The Newfield asset group was determined to have no fair value using the income approach. As a result, the Company recognized asset impairment expense of $11 million. UK Wind (Newfield) is reported in the Europe SBU reportable segment.