v3.25.2
Derivative Instruments and Hedging Activities (Notes)
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block] DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
For further information on the Company’s derivative and hedge accounting policies, see Note 1, “Overview and Summary of Significant Accounting Policies - Financial Derivatives” and Note 6, “Derivative Instruments and Hedging Activities” to IPALCO’s 2024 Form 10-K.

At June 30, 2025, AES Indiana’s outstanding derivative instruments were as follows:
Commodity
Accounting Treatment
UnitNotional
(in thousands)		Sales
(in thousands)		Net Notional
(in thousands)
FTRsNot DesignatedMWh8,067 — 8,067 

Cash Flow Hedges

As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair values of cash flow hedges are determined by current public market prices. The change in the fair value of a hedging instrument is recorded in AOCI and amounts deferred are reclassified to earnings in the same income statement line as the hedged item in the period in which it settles.

IPALCO’s three forward-starting interest rate swaps with a combined notional value of $400.0 million were terminated for total cash proceeds of $23.1 million in conjunction with the issuance of the 2034 IPALCO Notes in March 2024. AOCI of $95.4 million associated with the interest rate swaps through the date of the termination is currently being amortized into interest expense over the 10-year life of the 2034 IPALCO Notes. IPALCO previously de-designated three forward-starting interest rate swaps used to hedge the interest risk associated with refinancing the IPALCO 2020 maturities. AOCL of $72.3 million was frozen at the date of de-designation, which is currently being amortized into interest expense over the remaining life of the 2030 IPALCO Notes.
The following table provides information on gains or losses recognized in AOCI for the cash flow hedges for the periods indicated:

Interest Rate Hedges for the Three Months Ended June 30,Interest Rate Hedges for the Six Months Ended June 30,
$ in thousands (net of tax)2025202420252024
Beginning accumulated derivative gain
$34,944 $36,680 $35,378 $29,294 
Net gains associated with current period hedging transactions
— — — 6,626 
Net (gains) / losses reclassified to interest expense, net of tax
(434)(434)(868)326 
Ending accumulated derivative gain in AOCI$34,510 $36,246 $34,510 $36,246 
Net gain expected to be reclassified to earnings in the next twelve months
1,737

Derivatives Not Designated as Hedge

AES Indiana’s FTRs do not qualify for hedge accounting or the normal purchases and sales exceptions under ASC 815. Accordingly, FTRs are recorded at fair value using the income approach when acquired and subsequently amortized over the annual period as they are used. When applicable, IPALCO has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of June 30, 2025 and December 31, 2024, IPALCO did not have any offsetting positions.

The following table summarizes the fair value, balance sheet classification and hedging designation of IPALCO’s derivative instruments (in thousands):

CommodityHedging DesignationBalance sheet classificationJune 30, 2025December 31, 2024
FTRs
Not a Cash Flow Hedge
Derivative assets, current
$4,304 $1,526