AES Corp. (NYSE: AES) reported in its Nov. 4 quarterly Form 10-Q filing with the SEC that it has written down the values of three companion wind farms in Texas by tens of millions of dollars.
They are:
- Buffalo Gap I — During the third quarter of 2016, AES tested the recoverability of its long-lived assets at Buffalo Gap I, a 121-MW facility. As a result of decreases in wind production, management enhanced the methodology for forecasting wind dispatch. The change in management’s estimate of dispatch resulted in lower forecasted revenues from September 2016 through the end of the asset group’s useful life. AES determined that the carrying amount of the Buffalo Gap I asset group was not recoverable. The Buffalo Gap I asset group was determined to have a fair value of $35 million using the income approach. As a result, AES recognized an asset impairment expense of $78 million ($23 million attributable to AES).
- Buffalo Gap II — During the first quarter of 2016, AES tested the recoverability of its long-lived assets at Buffalo Gap II, with 233 MW of capacity. Impairment indicators were identified based on a decline in forward power curves. AES determined that the carrying amount was not recoverable. The Buffalo Gap II asset group was determined to have a fair value of $92 million using the income approach. As a result, AES recognized an asset impairment expense of $159 million ($49 million attributable to AES).
- Buffalo Gap III — During the third quarter of 2015, the company tested the recoverability of its long-lived assets at Buffalo Gap III, with 170 MW of capacity. Impairment indicators were identified based on a decline in forward power curves coupled with the near-term expiration of favorable contracted cash flows. AES 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, AES recognized an asset impairment expense of $118 million.
The Buffalo Gap wind farms are located in Nolan and Taylor counties, about 20 miles south west of Abilene, Texas.
