1.0.0.3 false OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS false 1 $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 5 OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS 3 aes_OffBalanceSheetArrangementsAndRelatedPartyTransactionsDisclosureTextBlock aes false na duration string Disclosure pertaining to the company's off-balance sheet arrangements and related party transactions. false false false false false false false false false 1 false false 0 0 <div> 25. OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS IPL, a consolidated subsidiary of the Company, formed IPL Funding Corporation (“IPL Funding”) in 1996 as a special purpose entity to purchase, on a revolving basis, the receivables originated by IPL. IPL Funding is not a qualified special purpose entity and is consolidated by IPL and IPALCO. IPL Funding entered into a sale facility with unrelated parties (“the Purchasers”) pursuant to which the Purchasers agree to purchase from IPL Funding, on a revolving basis, interests in the pool of receivables purchased from IPL up to the lesser of (1) an amount determined pursuant to the sale facility that takes into account certain eligibility requirements and reserves relating to the receivables, or (2) $50 million. Historically that amount has remained at $50 million, but during the fourth quarter of 2009, IPL’s eligible receivables balance was below $50 million and IPL was required to repay the Purchasers the shortfall, which was approximately $10 million as of December 31, 2009. As collections reduce accounts receivable included in the pool, IPL Funding sells ownership interests in additional receivables acquired from IPL to return the ownership interests sold to the maximum amount permitted by the sale facility. During the second quarter of 2009, this agreement was extended through May 25, 2010. Accounts receivable on the Company’s consolidated balance sheets are stated net of the $40 million and $50 million sold as of December 31, 2009 and 2008, respectively and include $88 million and $87 million as of December 31, 2009 and 2008, respectively, related to IPL Funding’s accounts receivable. IPL retains servicing responsibilities for its role as a collection agent on the amounts due on the sold receivables. However, the Purchasers assume the risk of collection on the purchased receivables without recourse to IPL in the event of a loss. While no direct recourse to IPL exists, it risks loss in the event collections are not sufficient to allow for full recovery of its retained interests. No servicing asset or liability is recognized since the servicing fee paid to IPL approximates a market rate. The carrying values of the retained interests are determined by allocating the carrying value of the receivables between the assets sold and the interests retained based on relative fair value. The key assumptions in estimating fair value are credit losses, the selection of discount rates and expected receivables turnover rate. The hypothetical effect on the fair value of the retained interests assuming both a 10% and a 20% unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. The losses recognized on the sales of receivables were $1 million, $2 million and $3 million for the years ended December 31, 2009, 2008 and 2007, respectively. These losses are included in other expense on the consolidated statements of operations. The amount of the losses recognized depends on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the interests that continue to be held by the transferor based on their relative fair value at the date of transfer, and the proceeds received. There were no proceeds from new securitizations for each of the years ended December 31, 2009 and 2008. IPL Funding pays IPL annual service fees totaling $1 million, which is financed by capital contributions from IPL to IPL Funding. The following table shows the receivables sold and retained interests as of December 31, 2009 and 2008:   <table border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr> <td width="82%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2009</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2008</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="5" align="center">(in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Receivables at IPL Funding </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">128</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">137</td> </tr> <tr> <td valign="top"> Less: Retained interests </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">88</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">87</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net receivables sold </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">50</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table> The following table shows the cash flows for the years ended December 31, 2009, 2008 and 2007:   <table border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="76%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2009</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2008</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2007</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" colspan="8" align="center">(in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Cash proceeds from interest retained </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">690</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">623</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">541</td> </tr> <tr> <td valign="top"> Cash proceeds from sold receivables </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">315</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">363</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">419</td> </tr> </table> IPL and IPL Funding provide certain indemnities to the Purchasers, including indemnification in the event that there is a breach of representations and warranties made with respect to the purchased receivables. IPL Funding and IPL each have agreed to indemnify the Purchasers on an after-tax basis for any and all damages, losses, claims, liabilities, penalties, taxes, costs and expenses at any time imposed on or incurred by the indemnified parties arising out of, or otherwise relating to, the sale facility, subject to certain limitations as defined in the sale facility.   Under the sale facility, if IPL fails to maintain certain financial covenants including, but not limited to interest coverage and debt to capital ratios, it would constitute a “termination event.” As of December 31, 2009, IPL was in compliance with such covenants. In the event that IPL’s credit rating falls below a threshold identified in the sale facility, the facility agent has the ability to replace IPL as the collection agent and declare a “lock-box” event. Under a lock-box event or a termination event, the facility agent has the ability to require all proceeds of purchased receivables of IPL to be directed to lock-box accounts within 45 days of notifying IPL. In addition, a termination event would also give the facility agent the option to take control of the lock-box account, give the Purchasers the option to discontinue the purchase of new receivables, and require all proceeds to be used to reduce the Purchaser’s investment and pay other amounts owed to the Purchasers and the facility agent. This could reduce the operating capital available to IPL by the aggregate amount of any purchased receivables up to $50 million. Our generation businesses in Panama are partially owned by the Government of Panama (the “Government”). The Government, in turn, partially owns the distribution companies within Panama. For the years ended December 31, 2009, 2008 and 2007, our Panamanian businesses recognized electricity sales to the Government totaling $143 million, $203 million and $168 million, respectively. For the same period, our Panamanian businesses purchased electricity, which excludes transmission charges from the Government, totaling $25 million, $27 million and $24 million, respectively. As of December 31, 2009 and 2008, our Panamanian businesses owed the Government $7 million and $2 million, respectively, payable on normal trade terms. For the same period, the Government owed our Panamanian businesses $25 million and $29 million, respectively, payable on normal trade terms.   </div> 25. OFF-BALANCE SHEET ARRANGEMENTS AND RELATED PARTY TRANSACTIONS IPL, a consolidated subsidiary of the Company, formed IPL Funding Corporation (“IPL false false Disclosure pertaining to the company's off-balance sheet arrangements and related party transactions. 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