Fair Value

9 Months Ended

Sep. 30, 2025

FAIR VALUE

The fair value of current financial assets and liabilities approximate their reported carrying amounts. The estimated fair values of the Company’s assets and liabilities have been determined using available market information. Because these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For further information on our valuation techniques and policies, see Note 5, “Fair Value” to IPALCO’s 2024 Form 10-K.

Financial Assets

VEBA Assets

IPALCO has VEBA investments that are to be used to fund certain employee postretirement health care benefit plans. These assets are primarily comprised of open-ended mutual funds, which are valued using the net assets value per unit. These investments are recorded at fair value within “Other non-current assets” on the accompanying Condensed Consolidated Balance Sheets and classified as equity securities. All changes to fair value on the VEBA investments are included in income in the period that the changes occur. These changes to fair value were not material for the periods covered by this report. Any unrealized gains or losses are recorded in “Other (expense) / income, net” on the accompanying Condensed Consolidated Statements of Operations.

FTRs

In connection with AES Indiana’s participation in MISO, in the second quarter of each year AES Indiana is granted financial instruments that can be converted into cash or FTRs based on AES Indiana’s forecasted peak load for the period. FTRs are used in the MISO market to hedge AES Indiana’s exposure to congestion charges, which result from constraints on the transmission system. AES Indiana’s FTRs are valued at the cleared auction prices for FTRs in MISO’s annual auction. Because of the infrequent nature of this valuation, the fair value assigned to the FTRs is considered a Level 3 input under the fair value hierarchy required by ASC 820. An offsetting regulatory liability has been recorded as these revenue or costs will be flowed through to customers through the FAC. As such, there is no impact on our Condensed Consolidated Statements of Operations.

Recurring Fair Value Measurements

The fair value of assets and liabilities at September 30, 2025 and December 31, 2024 measured on a recurring basis and the respective category within the fair value hierarchy for IPALCO was determined as follows:


	Fair Value as of September 30, 2025								Fair Value as of December 31, 2024
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In Thousands)
Financial assets:
VEBA investments:
Money market funds	$	105	$	—	$	—	$	105	$	86	$	—	$	—	$	86
Mutual funds	4,166		—		—		4,166		3,947		—		—		3,947
Total VEBA investments	4,271		—		—		4,271		4,033		—		—		4,033
FTRs	—		—		2,972		2,972		—		—		1,526		1,526

Total financial assets measured at fair value	$	4,271	$	—	$	2,972	$	7,243	$	4,033	$	—	$	1,526	$	5,559

The following table presents a roll forward of financial instruments, measured at fair value on a recurring basis, classified as Level 3 in the fair value hierarchy (note, amounts in this table indicate carrying values, which approximate fair values):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(In Thousands)
Beginning Balance	$	4,304	$	3,968	$	1,526	$	1,388
Issuances	—		—		4,718		3,811
Settlements	(1,332)		(1,151)		(3,272)		(2,382)
Ending Balance	$	2,972	$	2,817	$	2,972	$	2,817

Financial Instruments not Measured at Fair Value in the Condensed Consolidated Balance Sheets

Debt

The fair value of our outstanding fixed-rate debt has been determined on the basis of the quoted market prices of the specific securities issued and outstanding. In certain circumstances, the market for such securities was inactive and therefore the valuation was adjusted to consider changes in market spreads for similar securities. Accordingly, the purpose of this disclosure is not to approximate the value on the basis of how the debt might be refinanced.

The following table shows the face value and the fair value of fixed-rate and variable-rate indebtedness (Level 2) for the periods ending:


	September 30, 2025				December 31, 2024
	Face Value		Fair Value		Face Value		Fair Value
	(In Thousands)
Fixed-rate	$	3,948,800	$	3,838,582	$	3,638,800	$	3,404,473
Variable-rate	25,000		25,000		500,000		500,000
Total indebtedness	$	3,973,800	$	3,863,582	$	4,138,800	$	3,904,473

The difference between the face value and the carrying value of this indebtedness consists of the following:

•unamortized deferred financing costs of $37.2 million and $34.7 million at September 30, 2025 and December 31, 2024, respectively; and

•unamortized discounts of $10.4 million and $9.4 million at September 30, 2025 and December 31, 2024, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

IPALCO ENTERPRISES, INC. 10-Q