Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of The AES Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The AES Corporation (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

119 | 2020 Annual Report

						Goodwill Impairment Evaluation of the Gener Reporting Unit
Description of the Matter						The Company’s goodwill balance was $1,061 million at December 31, 2020, of which $868 million relates to the Gener reporting unit. As disclosed in Note 1 to the consolidated financial statements, the Company’s goodwill is tested for impairment at least annually at the reporting unit level. The goodwill impairment test at the Gener reporting unit involves the use of significant unobservable inputs to determine the fair value of the reporting unit. This estimate of fair value is compared to the carrying value of the reporting unit to determine whether goodwill is impaired. Auditing the Company's measurement of the fair value of the Gener reporting unit involved a high degree of subjectivity given the lack of observable inputs to estimate the reporting unit’s fair value. Key inputs that had a significant impact on the valuation included the prospective financial information (including the estimated growth in renewable projects, forward electricity prices and developments in the Chilean capacity market) and the discount rate, which are forward-looking and based upon expectations about future economic and market conditions.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process at the Gener reporting unit. For example, we tested controls over management’s review of the valuation model, the significant assumptions used to develop the estimates, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the Company’s Gener reporting unit, we performed audit procedures that included, among others, assessing the methodologies used to develop the estimate of fair value, testing the significant assumptions discussed above, and testing the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends as well as historical results. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions. We also involved valuation specialists to assist in our evaluation of the overall methodologies and the discount rate used in the fair value estimate.
						Evaluation of Impairment Indicators and Re-evaluation of Useful Lives
Description of the Matter						At December 31, 2020, the Company's property, plant and equipment had an aggregate net carrying value of approximately $22,826 million. As disclosed in Note 1 to the consolidated financial statements, when circumstances indicate the carrying amount of long-lived assets in a held-for-use asset group may not be recoverable, the Company evaluates the assets for potential impairment, and re-evaluates the remaining useful life. These circumstances may include, but are not limited to, changes in the regulatory environment, demand, power prices or fuel costs, technological advancements, physical deterioration, or an expectation it is more likely than not that the asset will be disposed of before the end of its useful life. Auditing the Company's identification and evaluation of impairment indicators involved significant auditor judgment considering the many geographic, regulatory and economic environments in which the Company operates. Similarly, auditing the Company’s re-evaluation of useful lives required a high degree of subjectivity, particularly as it relates to the Company’s coal generation assets given the Company’s decarbonization initiatives and the potential risks associated with climate change that have led to increased regulation and other actions. These audit procedures required an evaluation of a wide variety of circumstances for potential changes in useful lives or impairment indicators.

120 | 2020 Annual Report

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of impairment indicators and estimation of useful lives (including any changes if necessary). This included management’s monitoring controls over businesses that have had been affected or are expected to be affected by the circumstances above. Our audit procedures included, among others, making inquiries of management (including personnel in operations) to understand changes in the businesses, reading industry journals and publications to independently identify changes in the regulatory environments or the geographic areas and evaluating whether management has considered identified changes, if any. We considered businesses for which current power prices are significantly less than contractual prices within Power Purchase Agreements (PPAs) that are also near expiration. We also considered the Company’s ability to re-contract certain of its coal generation assets upon the expiration of a PPA, given the most recent legislative or regulatory changes. We evaluated the Company’s analysis of the useful lives of its coal generation assets, considering the existing PPAs and the Company’s ability to use the assets subsequent to the expiration of a PPA, based on any regulatory or market changes. For projects that were still under construction, we compared the Company's actual progress to their budgets, inspected engineering reports when considered appropriate, and considered project overruns. We reviewed disaggregated financial results for deterioration in earnings performance compared to prior periods, negative cash flows from operations, and working capital deficiencies and assessed whether these would represent impairment indicators, when applicable. We also considered and assessed conditions and trends in the industry and the underlying economies and evaluated sale or disposition activities.
						Long-Lived Asset Impairment Evaluation of AES Gener
Description of the Matter						As disclosed in Footnote 22 to the consolidated financial statements, the Company recognized an asset impairment expense at AES Gener in Chile as a result of the early termination of two PPAs at the Angamos coal-fired plant and the Company’s intention to accelerate the retirement of the Ventanas 1 and Ventanas 2 coal-fired plants. Based on the impairment analyses, the Company determined that the carrying amounts of these asset groups were not recoverable and recognized a $781 million asset impairment expense, which represented the amount by which the carrying value exceeded the estimated fair value of $306 million. Auditing the Company’s long-lived asset impairment analyses involved significant judgment related to the assessment of the asset groups and estimation of the related fair value. The assessment of the asset groups required considerable judgment as varying facts and circumstances could justify different grouping of assets for impairment review. Auditing the Company’s estimates of the fair value of asset groups in AES Gener involved a high degree of subjectivity given the lack of observable inputs to estimate the fair value. Key inputs that had a significant impact on the valuation included the prospective financial information (including the retirement dates of the plants) and the discount rate, which are forward-looking and based upon expectations about future economic and market conditions.

121 | 2020 Annual Report

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s long-lived asset impairment process. For example, we tested controls over management’s review of the valuation model, the significant assumptions used to develop the estimates, and the completeness and accuracy of the data used in the valuations. Our audit procedures included, among others, obtaining an understanding of how the plants are managed at AES Gener given the regulatory changes, evaluating management’s assessment of the lowest level of identifiable cash flows, assessing the appropriateness of methodologies, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its analyses. We compared the significant assumptions used by management to current industry and economic trends, latest regulations as well as historical results. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the asset groups that would result from changes in the assumptions. We also involved valuation specialists to assist in our evaluation of the overall methodology and the discount rate used in the fair value estimate.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2008.

Tysons, Virginia

February 24, 2021

Consolidated Balance Sheets

December 31, 2020 and 2019

			2020						2019
			(in millions, except share and per share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	1,089					$	1,029
Restricted cash			297						336
Short-term investments			335						400
Accounts receivable, net of allowance for doubtful accounts of $13 and $20, respectively			1,300						1,479
Inventory			461						487
Prepaid expenses			102						80
Other current assets, net of allowance of $0			726						802
Current held-for-sale assets			1,104						618
Total current assets			5,414						5,231
NONCURRENT ASSETS
Property, Plant and Equipment:
Land			417						447
Electric generation, distribution assets and other			26,707						25,383
Accumulated depreciation			(8,472)						(8,505)
Construction in progress			4,174						5,249
Property, plant and equipment, net			22,826						22,574
Other Assets:
Investments in and advances to affiliates			835						966
Debt service reserves and other deposits			441						207
Goodwill			1,061						1,059
Other intangible assets, net of accumulated amortization of $330 and $307, respectively			827						469
Deferred income taxes			288						156
Loan receivable, net of allowance of $0			—						1,351
Other noncurrent assets, net of allowance of $21 and $0, respectively			1,660						1,635
Noncurrent held-for-sale assets			1,251						—
Total other assets			6,363						5,843
TOTAL ASSETS			$	34,603					$	33,648
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable			$	1,156					$	1,311
Accrued interest			191						201
Accrued non-income taxes			257						253
Deferred income			438						34
Accrued and other liabilities			1,223						987
Non-recourse debt, including $336 and $337, respectively, related to variable interest entities			1,430						1,868
Current held-for-sale liabilities			667						442
Total current liabilities			5,362						5,096
NONCURRENT LIABILITIES
Recourse debt			3,446						3,391
Non-recourse debt, including $3,918 and $3,872, respectively, related to variable interest entities			15,005						14,914
Deferred income taxes			1,100						1,213
Other noncurrent liabilities			3,241						2,917
Noncurrent held-for-sale liabilities			857						—
Total noncurrent liabilities			23,649						22,435
Commitments and Contingencies (see Notes 12 and 13)
Redeemable stock of subsidiaries			872						888
EQUITY
THE AES CORPORATION STOCKHOLDERS’ EQUITY
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,398,654 issued and 665,370,128 outstanding at December 31, 2020 and 817,843,916 issued and 663,952,656 outstanding at December 31, 2019)			8						8
Additional paid-in capital			7,561						7,776
Accumulated deficit			(680)						(692)
Accumulated other comprehensive loss			(2,397)						(2,229)
Treasury stock, at cost (153,028,526 and 153,891,260 shares at December 31, 2020 and December 31, 2019, respectively)			(1,858)						(1,867)
Total AES Corporation stockholders’ equity			2,634						2,996
NONCONTROLLING INTERESTS			2,086						2,233
Total equity			4,720						5,229
TOTAL LIABILITIES AND EQUITY			$	34,603					$	33,648

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Operations

Years ended December 31, 2020, 2019, and 2018

			2020						2019						2018
			(in millions, except per share amounts)
Revenue:
Regulated			$	2,661					$	3,028					$	2,939
Non-Regulated			6,999						7,161						7,797
Total revenue			9,660						10,189						10,736
Cost of Sales:
Regulated			(2,235)						(2,484)						(2,473)
Non-Regulated			(4,732)						(5,356)						(5,690)
Total cost of sales			(6,967)						(7,840)						(8,163)
Operating margin			2,693						2,349						2,573
General and administrative expenses			(165)						(196)						(192)
Interest expense			(1,038)						(1,050)						(1,056)
Interest income			268						318						310
Loss on extinguishment of debt			(186)						(169)						(188)
Other expense			(53)						(80)						(58)
Other income			75						145						72
Gain (loss) on disposal and sale of business interests			(95)						28						984
Asset impairment expense			(864)						(185)						(208)
Foreign currency transaction gains (losses)			55						(67)						(72)
Other non-operating expense			(202)						(92)						(147)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES			488						1,001						2,018
Income tax expense			(216)						(352)						(708)
Net equity in earnings (losses) of affiliates			(123)						(172)						39
INCOME FROM CONTINUING OPERATIONS			149						477						1,349
Loss from operations of discontinued businesses, net of income tax expense of $0, $0, and $2, respectively			—						—						(9)
Gain from disposal of discontinued businesses, net of income tax expense of $0, $0, and $44, respectively			3						1						225
NET INCOME			152						478						1,565
Less: Income from continuing operations attributable to noncontrolling interests and redeemable stock of subsidiaries			(106)						(175)						(364)
Less: Loss from discontinued operations attributable to noncontrolling interests			—						—						2
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION			$	46					$	303					$	1,203
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
Income from continuing operations, net of tax			$	43					$	302					$	985
Income from discontinued operations, net of tax			3						1						218
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION			$	46					$	303					$	1,203
BASIC EARNINGS PER SHARE:
Income from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.06					$	0.46					$	1.49
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			0.01						—						0.33
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS			$	0.07					$	0.46					$	1.82
DILUTED EARNINGS PER SHARE:
Income from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.06					$	0.45					$	1.48
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			0.01						—						0.33
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS			$	0.07					$	0.45					$	1.81

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income (Loss)

Years ended December 31, 2020, 2019, and 2018

			2020						2019						2018
			(in millions)
NET INCOME			$	152					$	478					$	1,565
Foreign currency translation activity:
Foreign currency translation adjustments, net of income tax (expense) benefit of $(8), $1, and $2, respectively			(52)						(33)						(161)
Reclassification to earnings, net of $0 income tax for all periods			192						23						(21)
Total foreign currency translation adjustments			140						(10)						(182)
Derivative activity:
Change in derivative fair value, net of income tax benefit of $110, $74, and $27, respectively			(368)						(265)						(67)
Reclassification to earnings, net of income tax expense of $17, $12, and $24, respectively			74						42						93
Total change in fair value of derivatives			(294)						(223)						26
Pension activity:
Change in pension adjustments due to prior service cost, net of income tax benefit of $0, $0, and $1, respectively			1						1						(2)
Change in pension adjustments due to net actuarial gain (loss) for the period, net of income tax benefit of $4, $10, and $1, respectively			(14)						(23)						(1)
Reclassification to earnings, net of income tax expense of $0, $13, and $2, respectively			—						28						8
Total pension adjustments			(13)						6						5
OTHER COMPREHENSIVE LOSS			(167)						(227)						(151)
COMPREHENSIVE INCOME (LOSS)			(15)						251						1,414
Less: Comprehensive loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries			4						(102)						(425)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION			$	(11)					$	149					$	989

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Changes in Equity

Years ended December 31, 2020, 2019, and 2018

			THE AES CORPORATION STOCKHOLDERS
			Common Stock												Treasury Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Noncontrolling Interests
(in millions)			Shares						Amount						Shares						Amount
Balance at December 31, 2017			816.3						$	8					155.9						$	(1,892)					$	8,501					$	(2,276)					$	(1,876)					$	2,380
Net income			—						—						—						—						—						1,203						—						360
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						(235)						53
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						14						10
Total pension adjustments, net of income tax			—						—						—						—						—						—						7						(2)
Total other comprehensive income (loss)			—						—						—						—						—						—						(214)						61
Cumulative effect of a change in accounting principle (1)			—						—						—						—						—						68						19						81
Fair value adjustment (2)			—						—						—						—						(4)						—						—						—
Disposition of business interests (3)			—						—						—						—						—						—						—						(250)
Distributions to noncontrolling interests			—						—						—						—						—						—						—						(343)
Contributions from noncontrolling interests			—						—						—						—						—						—						—						9
Dividends declared on AES common stock ($0.53/share)			—						—						—						—						(348)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			0.9						—						(1.0)						14						8						—						—						—
Sales to noncontrolling interests			—						—						—						—						(3)						—						—						98
Balance at December 31, 2018			817.2						$	8					154.9						$	(1,878)					$	8,154					$	(1,005)					$	(2,071)					$	2,396
Net income			—						—						—						—						—						303						—						182
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						—						(10)
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						(166)						(57)
Total pension adjustments, net of income tax			—						—						—						—						—						—						12						(6)
Total other comprehensive loss			—						—						—						—						—						—						(154)						(73)
Cumulative effect of a change in accounting principle (1)			—						—						—						—						—						10						(4)						—
Fair value adjustment (2)			—						—						—						—						(6)						—						—						—
Distributions to noncontrolling interests			—						—						—						—						—						—						—						(415)
Contributions from noncontrolling interests			—						—						—						—						—						—						—						7
Dividends declared on AES common stock ($0.5528/share)			—						—						—						—						(367)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			0.6						—						(1.0)						11						—						—						—						—
Sales to noncontrolling interests			—						—						—						—						(5)						—						—						136
Balance at December 31, 2019			817.8						$	8					153.9						$	(1,867)					$	7,776					$	(692)					$	(2,229)					$	2,233
Net income			—						—						—						—						—						46						—						98
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						192						(52)
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						(237)						(29)
Total pension adjustments, net of income tax			—						—						—						—						—						—						(12)						(1)
Total other comprehensive loss			—						—						—						—						—						—						(57)						(82)
Cumulative effect of a change in accounting principle (1)			—						—						—						—						—						(34)						—						(16)
Fair value adjustment (2)			—						—						—						—						(4)						—						—						—
Distributions to noncontrolling interests			—						—						—						—						—						—						—						(419)
Dividends declared on AES common stock ($0.5804/share)			—						—						—						—						(386)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			0.6						—						(0.9)						9						4						—						—						—
Sales to noncontrolling interests			—						—						—						—						260						—						9						210
Acquisitions of noncontrolling interests			—						—						—						—						(89)						—						(121)						(49)
Issuance of preferred shares in subsidiaries			—						—						—						—						—						—						1						111
Balance at December 31, 2020			818.4						$	8					153.0						$	(1,858)					$	7,561					$	(680)					$	(2,397)					$	2,086

(1) See Note 1—General and Summary of Significant Accounting Policies for further information.

(2) Adjustment to record the redeemable stock of Colon at fair value.

(3) See Note 25*—Held-for-Sale and Dispositions* for further information.

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

Years ended December 31, 2020, 2019, and 2018

			2020						2019						2018
OPERATING ACTIVITIES:			(in millions)
Net income			$	152					$	478					$	1,565
Adjustments to net income:
Depreciation and amortization			1,068						1,045						1,003
Loss (gain) on disposal and sale of business interests			95						(28)						(984)
Impairment expense			1,066						277						355
Deferred income taxes			(233)						(8)						313
Provisions for (reversals of) contingencies			(186)						3						14
Loss on extinguishment of debt			186						169						188
Loss (gain) on sale and disposal of assets			(19)						54						27
Net gain from disposal and impairments of discontinued businesses			—						—						(269)
Loss of affiliates, net of dividends			128						194						48
Other			208						321						269
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			48						73						(206)
(Increase) decrease in inventory			(20)						28						(36)
(Increase) decrease in prepaid expenses and other current assets			13						42						(22)
(Increase) decrease in other assets			(134)						(20)						(32)
Increase (decrease) in accounts payable and other current liabilities			(186)						(6)						62
Increase (decrease) in income tax payables, net and other tax payables			59						(83)						(7)
Increase (decrease) in deferred income			431						28						(12)
Increase (decrease) in other liabilities			79						(101)						67
Net cash provided by operating activities			2,755						2,466						2,343
INVESTING ACTIVITIES:
Capital expenditures			(1,900)						(2,405)						(2,121)
Acquisitions of business interests, net of cash and restricted cash acquired			(136)						(192)						(66)
Proceeds from the sale of business interests, net of cash and restricted cash sold			169						178						2,020
Sale of short-term investments			627						666						1,302
Purchase of short-term investments			(653)						(770)						(1,411)
Contributions and loans to equity affiliates			(332)						(324)						(145)
Insurance proceeds			9						150						17
Other investing			(79)						(24)						(101)
Net cash used in investing activities			(2,295)						(2,721)						(505)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities			2,420						2,026						1,865
Repayments under the revolving credit facilities			(2,479)						(1,735)						(2,238)
Issuance of recourse debt			3,419						—						1,000
Repayments of recourse debt			(3,366)						(450)						(1,933)
Issuance of non-recourse debt			4,680						5,828						1,928
Repayments of non-recourse debt			(4,136)						(4,831)						(1,411)
Payments for financing fees			(107)						(126)						(39)
Distributions to noncontrolling interests			(422)						(427)						(340)
Acquisitions of noncontrolling interests			(259)						—						—
Sales to noncontrolling interests			553						128						95
Issuance of preferred shares in subsidiaries			112						—						—
Dividends paid on AES common stock			(381)						(362)						(344)
Payments for financed capital expenditures			(60)						(146)						(275)
Other financing			(52)						9						49
Net cash used in financing activities			(78)						(86)						(1,643)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(24)						(18)						(54)
(Increase) decrease in cash, cash equivalents and restricted cash of held-for-sale businesses			(103)						(72)						74
Total increase (decrease) in cash, cash equivalents and restricted cash			255						(431)						215
Cash, cash equivalents and restricted cash, beginning			1,572						2,003						1,788
Cash, cash equivalents and restricted cash, ending			$	1,827					$	1,572					$	2,003
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized			$	908					$	946					$	1,003
Cash payments for income taxes, net of refunds			333						363						370
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not yet paid			100						95						90
Notes payable issued for the acquisition of the Ventus Wind Complex (see Note 26)			47						—						—
Refinancing of non-recourse debt at Mong Duong (see Note 11)			—						1,081						—
Contributions to equity affiliates (see Note 8)			—						61						20
Partial reinvestment of consideration from the sPower transaction (see Note 8)			—						58						—
Exchange of debentures for the acquisition of the Guaimbê Solar Complex (see Note 26)			—						—						119
Acquisition of the remaining interest in a Distributed Energy equity affiliate (see Note 26)			—						—						23
Acquisition of intangible assets			—						—						16

See Accompanying Notes to Consolidated Financial Statements.

127 | Notes to Consolidated Financial Statements | December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The AES Corporation is a holding company (the "Parent Company") that, through its subsidiaries and affiliates, (collectively, "AES" or "the Company") operates a geographically diversified portfolio of electricity generation and distribution businesses. Generally, the liabilities of individual operating entities are non-recourse to the Parent Company and are isolated to the operating entities. Most of our operating entities are structured as limited liability entities, which limit the liability of shareholders. The structure is generally the same regardless of whether a subsidiary is consolidated under a voting or variable interest model. The preparation of these consolidated financial statements is in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

PRINCIPLES OF CONSOLIDATION — The consolidated financial statements of the Company include the accounts of The AES Corporation and its controlled subsidiaries. Furthermore, VIEs in which the Company has an ownership interest and is the primary beneficiary, thus controlling the VIE, have been consolidated. Intercompany transactions and balances are eliminated in consolidation. Investments in entities where the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting.

NONCONTROLLING INTERESTS — Noncontrolling interests are classified as a separate component of equity in the Consolidated Balance Sheets and Consolidated Statements of Changes in Equity. Additionally, net income and comprehensive income attributable to noncontrolling interests are reflected separately from consolidated net income and comprehensive income on the Consolidated Statements of Operations and Consolidated Statements of Changes in Equity. Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and noncontrolling interests. Losses continue to be attributed to the noncontrolling interests, even when the noncontrolling interests' basis has been reduced to zero.

Equity securities with redemption features that are not solely within the control of the issuer are classified outside of permanent equity. Generally, initial measurement will be at fair value. Subsequent measurement and classification vary depending on whether the instrument is probable of becoming redeemable. When the equity instrument is not probable of becoming redeemable, subsequent allocation of income and dividends is classified in permanent equity. For those securities where it is probable that the instrument will become redeemable or that are currently redeemable, AES recognizes changes in the fair value at each accounting period against retained earnings or additional paid-in-capital in the absence of retained earnings, subject to the floor of the initial fair value. Further, the allocation of income and dividends, as well as the adjustment to fair value, is classified outside permanent equity. Instruments that are mandatorily redeemable are classified as a liability.

EQUITY METHOD INVESTMENTS — Investments in entities over which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting and reported in Investments in and advances to affiliates on the Consolidated Balance Sheets. The Company’s proportionate share of the net income or loss of these companies is included in Net equity in earnings (losses) of affiliates on the Consolidated Statements of Operations*.*

The Company utilizes the cumulative earning approach to determine whether distributions received from equity method investees are returns on investment or returns of investment. The Company discontinues the application of the equity method when an investment is reduced to zero and the Company is not otherwise committed to provide further financial support to the investee. The Company resumes the application of the equity method accounting to the extent that net income is greater than the share of net losses not previously recorded.

Upon acquiring the investment, we determine the fair value of the identifiable assets and assumed liabilities and the basis difference between each fair value and the carrying amount of the corresponding asset or liability in the financial statements of the investee. The AES share of the amortization of the basis difference is recognized in Net equity in earnings (losses) of affiliates in the Consolidated Statements of Operations over the life of the asset or liability.

The Company periodically assesses if impairment indicators exist at our equity method investments. When an impairment is observed, any excess of the carrying amount over its estimated fair value is recognized as impairment

128 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

expense when the loss in value is deemed other-than-temporary and included in Other non-operating expense in the Consolidated Statements of Operations.

BUSINESS INTERESTS — Acquisitions and disposals of business interests are generally transactions pertaining to operational legal entities, which may be accounted for as a consolidated business, an asset, or an equity method investment. Losses on expected sales of business interests are limited to the impairment of long-lived assets as of the date of execution of the sales agreement, which are recognized in Asset impairment expense in the Consolidated Statements of Operations. Any additional gains/(losses) on sales, which are primarily due to reclassification of cumulative translation adjustments, are recognized in Gain (loss) on disposal and sale of business interests in the Consolidated Statements of Operations upon completion of the sale.

ALLOCATION OF EARNINGS — Certain of the Company's businesses are subject to profit-sharing arrangements where the allocation of cash distributions and the sharing of tax benefits are not based on fixed ownership percentages. These arrangements exist for certain U.S. renewable generation partnerships to designate different allocations of value among investors, where the allocations change in form or percentage over the life of the partnership. For these businesses, the Company uses the hypothetical liquidation at book value (“HLBV”) method when it is a reasonable approximation of the profit-sharing arrangement. The HLBV method calculates the proceeds that would be attributable to each partner based on the liquidation provisions of the respective operating partnership agreement if the partnership was to be liquidated at book value at the balance sheet date. Each partner’s share of income in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions.

The HLBV method is used both to allocate the equity earnings attributable to AES when the Company accounts for the renewable business as an equity method investment and to calculate the earnings attributable to noncontrolling interest when the business is consolidated by AES. In the early months of operations of a renewable generation facility where HLBV results in a significant decrease in the hypothetical liquidation proceeds attributable to the tax equity investor due to the recognition of investment tax credits ("ITCs") or other adjustments as required by the U.S. Internal Revenue Code, the Company records the impact (sometimes referred to as the ‘Day one gain’) to income in the same period.

USE OF ESTIMATES — U.S. GAAP requires the Company to make estimates and assumptions that affect the asset and liability balances reported as of the date of the consolidated financial statements, as well as the revenues and expenses recognized during the reporting period. Actual results could differ from those estimates. Items subject to such estimates and assumptions include: the carrying amount and estimated useful lives of long-lived assets; asset retirement obligations; impairment of goodwill, long-lived assets and equity method investments; valuation allowances for receivables and deferred tax assets; the recoverability of regulatory assets; regulatory liabilities; the fair value of financial instruments; the fair value of assets and liabilities acquired as business combinations or as asset acquisitions by variable interest entities; contingent consideration arising from business combinations or asset acquisitions by variable interest entities; the measurement of equity method investments or noncontrolling interest using the HLBV method for certain renewable generation partnerships; pension liabilities; the incremental borrowing rates used in the determination of lease liabilities; the determination of lease and non-lease components in certain generation contracts; environmental liabilities; and potential litigation claims and settlements.

HELD-FOR-SALE DISPOSAL GROUPS— A disposal group classified as held-for-sale is reflected on the balance sheet at the lower of its carrying amount or estimated fair value less cost to sell. A loss is recognized if the carrying amount of the disposal group exceeds its estimated fair value less cost to sell. This loss is limited to the carrying value of long-lived assets until the completion of the sale, at which point, any additional loss is recognized. If the fair value of the disposal group subsequently exceeds the carrying amount while the disposal group is still held-for-sale, any impairment expense previously recognized will be reversed up to the lesser of the previously recognized expense or the subsequent excess.

Assets and liabilities related to a disposal group classified as held-for-sale are segregated in the current balance sheet in the period in which the disposal group is classified as held-for-sale. Assets and liabilities of held-for-sale disposal groups are classified as current when they are expected to be disposed of within twelve months. Transactions between the held-for-sale disposal group and businesses that are expected to continue to exist after the disposal are not eliminated to appropriately reflect the continuing operations and balances held-for-sale. See Note 25—Held-for-Sale and Dispositions for further information.

129 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

DISCONTINUED OPERATIONS — Discontinued operations reporting occurs only when the disposal of a business or a group of businesses represents a strategic shift that has (or will have) a major effect on the Company's operations and financial results. The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Prior period amounts in the Consolidated Statements of Operations and Consolidated Balance Sheets are retrospectively revised to reflect the businesses determined to be discontinued operations. The cash flows of businesses that are determined to be discontinued operations are included within the relevant categories within operating, investing and financing activities on the face of the Consolidated Statements of Cash Flows.

Transactions between the businesses determined to be discontinued operations and businesses that are expected to continue to exist after the disposal are not eliminated to appropriately reflect the continuing operations and balances held-for-sale. The results of discontinued operations include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell, including gains or losses associated with noncontrolling interests upon completion of the disposal transaction. Adjustments related to components previously reported as discontinued operations under prior accounting guidance are presented as discontinued operations in the current period even if the disposed-of component to which the adjustments are related would not meet the criteria for presentation as a discontinued operation under current guidance. See Note 24—Discontinued Operations for further information.

FAIR VALUE — Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly, hypothetical transaction between market participants at the measurement date, or exit price. The Company applies the fair value measurement accounting guidance to financial assets and liabilities in determining the fair value of investments in marketable debt and equity securities, included in the Consolidated Balance Sheet line items Short-term investments and Other noncurrent assets; derivative assets, included in Other current assets and Other noncurrent assets; and, derivative liabilities, included in Accrued and other liabilities (current) and Other noncurrent liabilities. The Company applies the fair value measurement guidance to nonfinancial assets and liabilities upon the acquisition of a business or an asset acquisition by a variable interest entity, or in conjunction with the measurement of an asset retirement obligation or a potential impairment loss on an asset group, equity method investments, or goodwill.

When determining the fair value measurements for assets and liabilities required to be reflected at their fair values, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance. The Company is prohibited from including transaction costs and any adjustments for blockage factors in determining fair value.

In determining fair value measurements, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. Assets and liabilities are categorized within a fair value hierarchy based upon the lowest level of input that is significant to the fair value measurement:

• Level 1: Quoted prices in active markets for identical assets or liabilities;

• Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Any transfers between all levels within the fair value hierarchy levels are recognized at the end of the reporting period.

CASH AND CASH EQUIVALENTS — The Company considers unrestricted cash on hand, cash balances not restricted as to withdrawal or usage, deposits in banks, certificates of deposit and short-term marketable securities with original maturities of three months or less to be cash and cash equivalents.

RESTRICTED CASH AND DEBT SERVICE RESERVES — Cash balances restricted as to withdrawal or usage, primarily via contract, are considered restricted cash.

130 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table provides a summary of cash, cash equivalents, and restricted cash amounts reported on the Consolidated Balance Sheets that reconcile to the total of such amounts as shown on the Consolidated Statements of Cash Flows (in millions):

			December 31, 2020						December 31, 2019
Cash and cash equivalents			$	1,089					$	1,029
Restricted cash			297						336
Debt service reserves and other deposits			441						207
Cash, Cash Equivalents and Restricted Cash			$	1,827					$	1,572

INVESTMENTS IN MARKETABLE SECURITIES — The Company's marketable investments are primarily unsecured debentures, certificates of deposit, government debt securities and money market funds.

Short-term investments consist of marketable equity securities and debt securities with original maturities in excess of three months with remaining maturities of less than one year. Marketable debt securities where the Company has both the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost, net of any allowance for credit losses in accordance with ASC 326. Remaining marketable debt securities are classified as available-for-sale or trading and are carried at fair value.

Unrealized gains or losses on available-for-sale debt securities that are not credit-related are reflected in AOCL, a separate component of equity, and the Consolidated Statements of Operations, respectively. Any credit-related impairments are recognized as an allowance with a corresponding impact recognized as a credit loss in Other Expense. Unrealized gains or losses on equity investments are reported in Other income. Interest and dividends on investments are reported in Interest income and Other income, respectively. Gains and losses on sales of investments are determined using the specific identification method.

ACCOUNTS AND NOTES RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS — Accounts and notes receivable are carried at amortized cost. The Company periodically assesses the collectability of accounts receivable, considering factors such as historical collection experience, the age of accounts receivable and other currently available evidence supporting collectability, and records an allowance for doubtful accounts in accordance with ASC 326 for the estimated uncollectible amount as appropriate. Credit losses on accounts and notes receivable are generally recognized in Cost of Sales. Certain of our businesses charge interest on accounts receivable. Interest income is recognized on an accrual basis. When collection of such interest is not reasonably assured, interest income is recognized as cash is received. Individual accounts and notes receivable are written off when they are no longer deemed collectible.

INVENTORY — Inventory primarily consists of fuel and other raw materials used to generate power, and operational spare parts and supplies used to maintain power generation and distribution facilities. Inventory is carried at lower of cost or net realizable value. Cost is the sum of the purchase price and expenditures incurred to bring the inventory to its existing location. Inventory is primarily valued using the average cost method. Generally, if it is expected fuel inventory will not be recovered through revenue earned from power generation, an impairment is recognized to reflect the fuel at net realizable value. The carrying amount of spare parts and supplies is typically reduced only in instances where the items are considered obsolete.

LONG-LIVED ASSETS — Long-lived assets include property, plant and equipment, assets under finance leases and intangible assets subject to amortization (i.e., finite-lived intangible assets).

Property, plant and equipment — Property, plant and equipment are stated at cost, net of accumulated depreciation. The cost of renewals and improvements that extend the useful life of property, plant and equipment are capitalized.

Construction progress payments, engineering costs, insurance costs, salaries, interest and other costs directly relating to construction in progress are capitalized during the construction period, provided the completion of the construction project is deemed probable, or expensed at the time construction completion is determined to no longer be probable. The continued capitalization of such costs is subject to risks related to successful completion, including those related to government approvals, site identification, financing, construction permitting and contract compliance. Construction-in-progress balances are transferred to electric generation and distribution assets when an asset group is ready for its intended use. Government subsidies, liquidated damages recovered for construction delays, and income tax credits are recorded as a reduction to property, plant and equipment and reflected in cash flows from investing activities. Maintenance and repairs are charged to expense as incurred.

131 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Depreciation, after consideration of salvage value and asset retirement obligations, is computed using the straight-line method over the estimated useful lives of the assets, which are determined on a composite or component basis. Capital spare parts, including rotable spare parts, are included in electric generation and distribution assets. If the spare part is considered a component, it is depreciated over its useful life after the part is placed in service. If the spare part is deemed part of a composite asset, the part is depreciated over the composite useful life even when being held as a spare part.

Certain of the Company's subsidiaries operate under concession contracts. Certain estimates are utilized to determine depreciation expense for the subsidiaries, including the useful lives of the property, plant and equipment and the amounts to be recovered at the end of the concession contract. The amounts to be recovered under these concession contracts are based on estimates that are inherently uncertain and actual amounts recovered may differ from those estimates. These concession contracts are not within the scope of ASC 853—Service Concession Arrangements.

Intangible Assets Subject to Amortization — Finite-lived intangible assets are amortized over their useful lives which range from 1 – 50 years and are included in the Consolidated Balance Sheet line item Other intangible assets. The Company accounts for purchased emission allowances as intangible assets and records an expense when they are utilized or sold. Granted emission allowances are valued at zero.

Impairment of Long-lived Assets — When circumstances indicate the carrying amount of long-lived assets in a held-for-use asset group may not be recoverable, the Company evaluates the assets for potential impairment using internal projections of undiscounted cash flows resulting from the use and eventual disposal of the assets. Events or changes in circumstances that may necessitate a recoverability evaluation include, but are not limited to, adverse changes in the regulatory environment, unfavorable changes in power prices or fuel costs, increased competition due to additional capacity in the grid, technological advancements, declining trends in demand, or an expectation it is more likely than not that the asset will be disposed of before the end of its previously estimated useful life. If the carrying amount of the assets exceeds the undiscounted cash flows, an impairment expense is recognized for the amount by which the carrying amount of the asset group exceeds its fair value (subject to the carrying amount not being reduced below fair value for any individual long-lived asset that is determinable without undue cost and effort). An impairment expense for certain assets may be reduced by the establishment of a regulatory asset if recovery through approved rates is probable.

DEBT ISSUANCE COSTS — Costs incurred in connection with the issuance of long-term debt are deferred and presented as a direct reduction from the face amount of that debt and amortized over the related financing period using the effective interest method. Debt issuance costs related to a line-of-credit or revolving credit facility are deferred and presented as an asset and amortized over the related financing period. Make-whole payments in connection with early debt retirements are classified as cash flows used in financing activities.

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS — The Company evaluates goodwill and indefinite-lived intangible assets for impairment on an annual basis and whenever events or changes in circumstances necessitate an evaluation for impairment. The Company's annual impairment testing date is October 1st.

Goodwill — Goodwill represents the excess of the purchase price of the business acquisition over the fair value of identifiable net assets acquired. Goodwill resulting from an acquisition is assigned to the reporting units that are expected to benefit from the synergies of the acquisition. Generally, each AES business with a goodwill balance constitutes a reporting unit as they are not similar to other businesses in a segment nor are they reported to segment management together with other businesses.

Goodwill is evaluated for impairment either under the qualitative assessment option or the quantitative test option to determine the fair value of the reporting unit. If goodwill is determined to be impaired, an impairment loss measured at the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill, is recorded.

Indefinite-Lived Intangible Assets — The Company's indefinite-lived intangible assets primarily include land-use rights and water rights. Indefinite-lived intangible assets are evaluated for impairment either under the qualitative assessment option or the two-step quantitative test. If the carrying amount of an intangible asset being tested for impairment exceeds its fair value, the excess is recognized as impairment expense.

132 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES — Accounts payable consists of amounts due to trade creditors related to the Company's core business operations. These payables include amounts owed to vendors and suppliers for items such as energy purchased for resale, fuel, maintenance, inventory and other raw materials. Other accrued liabilities include items such as income taxes, regulatory liabilities, legal contingencies and employee-related costs, including payroll, and benefits.

REGULATORY ASSETS AND LIABILITIES — The Company recognizes assets and liabilities that result from regulated ratemaking processes. Regulatory assets generally represent incurred costs which have been deferred due to the probable future recovery via customer rates. Generally, returns earned on regulatory assets are reflected in the Consolidated Statements of Operations within Interest Income. Regulatory liabilities generally represent obligations to refund customers. Management continually assesses whether regulatory assets are probable of future recovery and regulatory liabilities are probable of future payment by considering factors such as applicable regulatory changes, recent rate orders applicable to other regulated entities, and the status of any pending or potential deregulation legislation. If future recovery of costs previously deferred ceases to be probable, the related regulatory assets are written off and recognized in income from continuing operations.

PENSION AND OTHER POSTRETIREMENT PLANS — The Company recognizes in its Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in actuarial gains or losses recognized in AOCL, except for those plans at certain of the Company's regulated utilities that can recover portions of their pension and postretirement obligations through future rates. All plan assets are recorded at fair value. AES follows the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

INCOME TAXES — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities, and their respective income tax basis. The Company establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company's tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions have been classified as noncurrent income tax liabilities unless expected to be paid within one year. The Company's policy for interest and penalties related to income tax exposures is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

The Company has elected to treat GILTI as an expense in the period in which the tax is accrued. Accordingly, no deferred tax assets or liabilities are recorded related to GILTI.

The Company applies the flow-through method to account for its investment tax credits.

ASSET RETIREMENT OBLIGATIONS — The Company records the fair value of a liability for a legal obligation to retire an asset in the period in which the obligation is incurred. When a new liability is recognized, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, the Company eliminates the liability and, based on the actual cost to retire, may incur a gain or loss.

FOREIGN CURRENCY TRANSLATION — A business's functional currency is the currency of the primary economic environment in which the business operates and is generally the currency in which the business generates and expends cash. Subsidiaries and affiliates whose functional currency is a currency other than the U.S. dollar translate their assets and liabilities into U.S. dollars at the current exchange rates in effect at the end of the fiscal period. Adjustments arising from the translation of the balance sheet of such subsidiaries are included in AOCL. The revenue and expense accounts of such subsidiaries and affiliates are translated into U.S. dollars at the average exchange rates for the period. Gains and losses on intercompany foreign currency transactions that are long-term in nature and which the Company does not intend to settle in the foreseeable future, are also recognized in AOCL. Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in determining net income. Accumulated foreign currency translation adjustments are reclassified from AOCL to net income only when realized upon sale or upon complete or substantially complete liquidation of the investment in a foreign entity. The accumulated adjustments are included in

133 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

carrying amounts in impairment assessments where the Company has committed to a plan that will cause the accumulated adjustments to be reclassified to earnings.

REVENUE RECOGNITION — Revenue is earned from the sale of electricity from our utilities and the production and sale of electricity and capacity from our generation facilities. Revenue is recognized upon the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recorded net of any taxes assessed on and collected from customers, which are remitted to the governmental authorities.

Utilities — Our utilities sell electricity directly to end-users, such as homes and businesses, and bill customers directly. The majority of our utility contracts have a single performance obligation, as the promises to transfer energy, capacity, and other distribution and/or transmission services are not distinct. Additionally, as the performance obligation is satisfied over time as energy is delivered, and the same method is used to measure progress, the performance obligation meets the criteria to be considered a series. Utility revenue is classified as regulated on the Consolidated Statements of Operations.

In exchange for the right to sell or distribute electricity in a service territory, our utility businesses are subject to government regulation. This regulation sets the framework for the prices (“tariffs”) that our utilities are allowed to charge customers for electricity. Since tariffs are determined by the regulator, the price that our utilities have the right to bill corresponds directly with the value to the customer of the utility's performance completed in each period. The Company also has some month-to-month contracts. Revenue under these contracts is recognized using an output method measured by the MWh delivered each month, which best depicts the transfer of goods or services to the customer, at the approved tariff.

The Company has businesses where it sells and purchases power to and from ISOs and RTOs. Our utility businesses generally purchase power to satisfy the demand of customers that is not contracted through separate PPAs. In these instances, the Company accounts for these transactions on a net hourly basis because the transactions are settled on a net hourly basis. In limited situations, a utility customer may choose to receive generation services from a third-party provider, in which case the Company may serve as a billing agent for the provider and recognize revenue on a net basis.

Generation — Most of our generation fleet sells electricity under contracts to customers such as utilities, industrial users, and other intermediaries. Our generation contracts, based on specific facts and circumstances, can have one or more performance obligations as the promise to transfer energy, capacity, and other services may or may not be distinct depending on the nature of the market and terms of the contract. As the performance obligations are generally satisfied over time and use the same method to measure progress, the performance obligations meet the criteria to be considered a series. In measuring progress toward satisfaction of a performance obligation, the Company applies the "right to invoice" practical expedient when available, and recognizes revenue in the amount to which the Company has a right to consideration from a customer that corresponds directly with the value of the performance completed to date. Revenue from generation businesses is classified as non-regulated on the Consolidated Statements of Operations.

For contracts determined to have multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price using a market or expected cost plus margin approach. Additionally, the Company allocates variable consideration to one or more, but not all, distinct goods or services that form part of a single performance obligation when (1) the variable consideration relates specifically to the efforts to transfer the distinct good or service and (2) the variable consideration depicts the amount to which the Company expects to be entitled in exchange for transferring the promised good or service to the customer.

Revenue from generation contracts is recognized using an output method, as energy and capacity delivered best depicts the transfer of goods or services to the customer. Performance obligations including energy or ancillary services (such as operations and maintenance and dispatch services) are generally measured by the MWh delivered. Capacity, which is a stand-ready obligation to deliver energy when required by the customer, is measured using MWs. In certain contracts, if plant availability exceeds a contractual target, the Company may receive a performance bonus payment, or if the plant availability falls below a guaranteed minimum target, we may incur a non-availability penalty. Such bonuses or penalties represent a form of variable consideration and are estimated and recognized when it is probable that there will not be a significant reversal.

In assessing whether variable quantities are considered variable consideration or an option to acquire additional goods and services, the Company evaluates the nature of the promise and the legally enforceable rights

134 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

in the contract. In some contracts, such as requirement contracts, the legally enforceable rights merely give the customer a right to purchase additional goods and services which are distinct. In these contracts, the customer's action results in a new obligation, and the variable quantities are considered an option.

When energy or capacity is sold or purchased in the spot market or to ISOs, the Company assesses the facts and circumstances to determine gross versus net presentation of spot revenues and purchases. Generally, the nature of the performance obligation is to sell surplus energy or capacity above contractual commitments, or to purchase energy or capacity to satisfy deficits. Generally, on an hourly basis, a generator is either a net seller or a net buyer in terms of the amount of energy or capacity transacted with the ISO. In these situations, the Company recognizes revenue for the hours where the generator is a net seller and cost of sales for the hours where the generator is a net buyer.

Certain generation contracts contain operating leases where capacity payments are generally considered lease elements. In such cases, the allocation between the lease and non-lease elements is made at the inception of the lease following the guidance in ASC 842.

The transaction price allocated to a construction performance obligation is recognized as revenue over time as construction activity occurs, with revenue being fully recognized upon completion of construction. These contracts may include a difference in timing between revenue recognition and the collection of cash receipts, which may be collected over the term of the entire arrangement. The timing difference could result in a significant financing component for the construction performance obligation if determined to be a material component of the transaction price. The Company accounts for a significant financing component under the effective interest rate method, recognizing a long-term receivable for the expected future payments related to the construction performance obligation in the Loan Receivable line item on the Consolidated Balance Sheets. As payments are collected from the customer over the term of the contract, consideration related to the construction performance obligation is bifurcated between the principal repayment of the long-term receivable and the related interest income, recognized in the Consolidated Statements of Operations.

Contract Balances — The timing of revenue recognition, billings, and cash collections results in accounts receivable and contract liabilities. Accounts receivable represent unconditional rights to consideration and consist of both billed amounts and unbilled amounts typically resulting from sales under long-term contracts when revenue recognized exceeds the amount billed to the customer. We bill both generation and utilities customers on a contractually agreed-upon schedule, typically at periodic intervals (e.g., monthly). The calculation of revenue earned but not yet billed is based on the number of days not billed in the month, the estimated amount of energy delivered during those days and the estimated average price per customer class for that month.

Our contract liabilities consist of deferred revenue which is classified as current or noncurrent based on the timing of when we expect to recognize revenue. The current portion of our contract liabilities is reported in Accrued and other liabilities and the noncurrent portion is reported in Other noncurrent liabilities on the Consolidated Balance Sheets.

Remaining Performance Obligations — The transaction price allocated to remaining performance obligations represents future consideration for unsatisfied (or partially unsatisfied) performance obligations at the end of the reporting period. The Company has elected to apply the optional disclosure exemptions under ASC 606. Therefore, the amount disclosed in Note 20—Revenue excludes contracts with an original length of one year or less, contracts for which we recognize revenue based on the amount we have the right to invoice for services performed, and variable consideration allocated entirely to a wholly unsatisfied performance obligation when the consideration relates specifically to our efforts to satisfy the performance obligation and depicts the amount to which we expect to be entitled. As such, consideration for energy is excluded from the amount disclosed as the variable consideration relates to the amount of energy delivered and reflects the value the Company expects to receive for the energy transferred. Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase additional goods or services that do not represent material rights to the customer.

LEASES — The Company has operating and finance leases for energy production facilities, land, office space, transmission lines, vehicles and other operating equipment in which the Company is the lessee. Operating leases with an initial term of 12 months or less are not recorded on the balance sheet, but are expensed on a straight-line basis over the lease term. The Company’s leases do not contain any material residual value guarantees, restrictive covenants or subleases.

135 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Right-of-use assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized on commencement of the lease based on the present value of lease payments over the lease term. Generally, the rate implicit in the lease is not readily determinable; as such, we use the subsidiaries’ incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company determines discount rates based on its existing credit rates of its unsecured borrowings, which are then adjusted for the appropriate lease term and currency. The right-of-use asset also includes any lease payments made and excludes lease incentives that are paid or payable to the lessee at commencement. The lease term includes the option to extend or terminate the lease if it is reasonably certain that the option will be exercised.

The Company has operating leases for certain generation contracts that contain provisions to provide capacity to a customer, which is a stand-ready obligation to deliver energy when required by the customer in which the Company is the lessor. Capacity payments are generally considered lease elements as they cover the majority of available output from a facility. The allocation of contract payments between the lease and non-lease elements is made at the inception of the lease. Fixed lease payments from such contracts are recognized as lease revenue on a straight-line basis over the lease term, whereas variable lease payments are recognized when earned.

The Company has sales-type leases for BESS in which the Company is the lessor. These arrangements allow customers the ability to determine when to charge and discharge the BESS, representing the transfer of control and constitutes the arrangement as a sales-type lease. Upon commencement of the lease, the book value of the leased asset is removed from the balance sheet and a net investment in sales-type lease is recognized based on the present value of fixed payments under the contract and the residual value of the underlying asset.

SHARE-BASED COMPENSATION — The Company grants share-based compensation in the form of stock options, restricted stock units, performance stock units, and performance cash units. The expense is based on the grant-date fair value of the equity or liability instrument issued and is recognized on a straight-line basis over the requisite service period, net of estimated forfeitures. The Company uses a Black-Scholes option pricing model to estimate the fair value of stock options granted to its employees.

GENERAL AND ADMINISTRATIVE EXPENSES — General and administrative expenses include corporate and other expenses related to corporate staff functions and initiatives, primarily executive management, finance, legal, human resources and information systems, which are not directly allocable to our business segments. Additionally, all costs associated with corporate business development efforts are classified as general and administrative expenses.

DERIVATIVES AND HEDGING ACTIVITIES — Under the accounting standards for derivatives and hedging, the Company recognizes all contracts that meet the definition of a derivative, except those designated as normal purchase or normal sale at inception, as either assets or liabilities in the Consolidated Balance Sheets and measures those instruments at fair value. See Note 5—Fair Value and Fair value in this section for additional discussion regarding the determination of fair value.

PPAs and fuel supply agreements are evaluated to assess if they contain either a derivative or an embedded derivative requiring separate valuation and accounting. Generally, these agreements do not meet the definition of a derivative, often due to the inability to be net settled. On a quarterly basis, we evaluate the markets for commodities to be delivered under these agreements to determine if facts and circumstances have changed such that the agreements could be net settled and meet the definition of a derivative.

The Company typically designates its derivative instruments as cash flow hedges if they meet the criteria specified in ASC 815, Derivatives and Hedging. The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. Foreign currency contracts are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities. The objective of these practices is to minimize the impact of foreign currency fluctuations on operating results. The Company also enters into commodity contracts to economically hedge price variability inherent in electricity sales arrangements. The objectives of the commodity contracts are to minimize the impact of variability in spot electricity prices and stabilize estimated revenue streams. The Company does not use derivative instruments for speculative purposes.

For our hedges, changes in fair value are deferred in AOCL and are recognized into earnings as the hedged transactions affect earnings. If a derivative is no longer highly effective, hedge accounting will be discontinued prospectively. For cash flow hedges of forecasted transactions, AES estimates the future cash flows of the forecasted transactions and evaluates the probability of the occurrence and timing of such transactions.

136 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Changes in the fair value of derivatives not designated and qualifying as cash flow hedges are immediately recognized in earnings. Regardless of when gains or losses on derivatives are recognized in earnings, they are generally classified as interest expense for interest rate and cross-currency derivatives, foreign currency transaction gains or losses for foreign currency derivatives, and non-regulated revenue or non-regulated cost of sales for commodity and other derivatives. Cash flows arising from derivatives are included in the Consolidated Statements of Cash Flows as an operating activity given the nature of the underlying risk being economically hedged and the lack of significant financing elements, except that cash flows on designated and qualifying hedges of variable-rate interest during construction are classified as an investing activity. The Company has elected not to offset net derivative positions in the financial statements.

CREDIT LOSSES — In accordance with ASC 326, the Company records an allowance for current expected credit losses (“CECL”) for accounts and notes receivable, financing receivables, contract assets, net investments in leases recognized as a lessor, held-to-maturity debt securities, financial guarantees related to the non-payment of a financial obligation, and off-balance sheet credit exposures not accounted for as insurance. The CECL allowance is based on the asset's amortized cost and reflects management's expected risk of credit losses over the remaining contractual life of the asset. CECL allowances are estimated using relevant information about the collectibility of cash flows and consider information about past events, current conditions, and reasonable and supportable forecasts of future economic conditions. See New Accounting Pronouncements below for further information regarding the impact on the Company's financial statements upon adoption of ASC 326.

NEW ACCOUNTING PRONOUNCEMENTS — The following table provides a brief description of recent accounting pronouncements that had an impact on the Company’s consolidated financial statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Adopted
ASU Number and Name			Description			Date of Adoption			Effect on the financial statements upon adoption
2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, 2020-03, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments			See discussion of the ASU below.			January 1, 2020			See impact upon adoption of the standard below.
2016-02, 2018-01, 2018-10, 2018-11, 2018-20, 2019-01, Leases (Topic 842)			See discussion of the ASU below.			January 1, 2019			See impact upon adoption of the standard below.
2016-02, 2018-01, 2018-10, 2018-11, 2018-20, 2019-01, Leases (Topic 842)			ASC 842 was adopted by sPower on January 1, 2020. sPower was not required to adopt ASC 842 using the public adoption date, as sPower is an equity method investee that meets the definition of a public business entity only by virtue of the inclusion of its summarized financial information in the Company’s SEC filings.			January 1, 2020			The adoption of this standard resulted in a $4 million decrease to accumulated deficit attributable to the AES Corporation stockholders’ equity.

ASC 326 — Financial Instruments — Credit Losses

On January 1, 2020, the Company adopted ASC 326 Financial Instruments — Credit Losses and its subsequent corresponding updates (“ASC 326”). The new standard updates the impairment model for financial assets measured at amortized cost, known as the Current Expected Credit Loss (“CECL”) model. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities are required to use a new forward-looking "expected loss" model that generally results in the earlier recognition of an allowance for credit losses. For available-for-sale debt securities with unrealized losses, entities measure credit losses as it was done under previous GAAP, except that unrealized losses due to credit-related factors are now recognized as an allowance on the balance sheet with a corresponding adjustment to earnings in the income statement.

The Company applied the modified retrospective method of adoption for ASC 326. Under this transition method, the Company applied the transition provisions starting at the date of adoption. The cumulative effect of the adoption of ASC 326 on our January 1, 2020 Condensed Consolidated Balance Sheet was as follows (in millions):

137 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Condensed Consolidated Balance Sheet			Balance at December 31, 2019						Adjustments Due to ASC 326						Balance at January 1, 2020
Assets
Accounts receivable, net of allowance for doubtful accounts of $20			$	1,479					$	—					$	1,479
Other current assets (1)			802						(2)						800
Deferred income taxes			156						9						165
Loan receivable, net of allowance of $32 (2)			1,351						(32)						1,319
Other noncurrent assets (3)			1,635						(30)						1,605
Liabilities and Equity
Accumulated deficit			$	(692)					$	(39)					$	(731)
Noncontrolling interests			2,233						(16)						2,217

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(1)Other current assets include the short-term portion of the Mong Duong loan receivable, which was reclassified to Current held-for-sale assets on the Consolidated Balance Sheet as of December 31, 2020.

(2)Loan receivable at Mong Duong was reclassified to Noncurrent held-for-sale assets on the Consolidated Balance Sheet as of December 31, 2020.

(3)Other noncurrent assets include Argentina financing receivables.

Mong Duong — The Mong Duong II power plant in Vietnam is the primary driver of changes in credit reserves under the new standard. This plant is operated under a build, operate, and transfer (“BOT”) contract and will be transferred to the Vietnamese government after the completion of a 25-year PPA. A loan receivable was recognized in 2018 upon the adoption of ASC 606 in order to account for the future expected payments for the construction performance obligation portion of the BOT contract. As the payments for the construction performance obligation occur over a 25-year term, a significant financing element was determined to exist which is accounted for under the effective interest rate method. Historically, the Company has not incurred any losses on this arrangement, of which no directly comparable assets exist in the market. In order to determine expected credit losses under ASC 326 arising from this $1.4 billion loan receivable as of January 1, 2020, the Company considered average historical default and recovery rates on similarly rated sovereign bonds, which formed an initial basis for developing a probability of default, net of expected recoveries, to be applied as a key credit quality indicator for this arrangement. A resulting estimated loss rate of 2.4% was applied to the weighted-average remaining life of the loan receivable, after adjustments for certain asset-specific characteristics, including the Company’s status as a large foreign direct investor in Vietnam, Mong Duong’s status as critical energy infrastructure in Vietnam, and cash flows from the operations of the plant, which are under the Company’s control until the end of the BOT contract. As a result of this analysis, the Company recognized an opening CECL reserve of $34 million as an adjustment to Accumulated deficit and Noncontrolling interests as of January 1, 2020.

Argentina — Exposure to CAMMESA, the administrator of the wholesale energy market in Argentina, is the driver of credit reserves in Argentina. As discussed in Note 7*—Financing Receivables*, the Company has credit exposures through the FONINVEMEM Agreements, other agreements related to resolutions passed by the Argentine government in which AES Argentina will receive compensation for investments in new generation plants and technologies, as well as regular accounts receivable balances. The timing of collections depends on corresponding agreements and collectability of these receivables are assessed on an ongoing basis.

Collection of the principal and interest on these receivables is subject to various business risks and uncertainties, including, but not limited to, the continued operation of power plants which generate cash for payments of these receivables, regulatory changes that could impact the timing and amount of collections, and economic conditions in Argentina. The Company monitors these risks, including the credit ratings of the Argentine government, on a quarterly basis to assess the collectability of these receivables. Historically, the Company has not incurred any credit-related losses on these receivables. In order to determine expected credit losses under ASC 326, the Company considered historical default probabilities utilizing similarly rated sovereign bonds and historic recovery rates for Argentine government bond defaults. This information formed an initial basis for developing a probability of default, net of expected recoveries, to be applied as a key credit quality indicator across the underlying financing receivables. A resulting estimated weighted average loss rate of 41.2% was applied to the remaining balance of these receivables, after adjustments for certain asset-specific characteristics, including AES Argentina’s role in providing critical energy infrastructure to Argentina, our history of collections on these receivables, and the average term that the receivables are expected to be outstanding. As a result of this analysis, the Company recognized an opening CECL reserve of $29 million as an adjustment to Accumulated deficit as of January 1, 2020.

Other financial assets — Application of ASC 326 to the Company’s $1.5 billion of trade accounts receivable and $326 million of available-for-sale debt securities at January 1, 2020 did not result in any material adjustments, primarily due to the short-term duration and high turnover of these financial assets. Additionally, a large portion of

138 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

our trade accounts receivables and amounts reserved for doubtful accounts under legacy GAAP arise from arrangements accounted for as an operating lease under ASC 842, which are excluded from the scope of ASC 326.

As discussed in Note 7*—Financing Receivables*, AES Gener recorded $33 million of noncurrent receivables at December 31, 2019 pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Fund created by the Chilean government in October 2019. The Company expects to collect these noncurrent receivables through the execution of sale agreements with third parties. However, given the investment grade rating of Chile and the history of zero credit losses for regulated customers, management determined that no incremental CECL reserves were required to be recognized as of January 1, 2020.

The following table represents the rollforward of the allowance for credit losses from January 1, 2020 to December 31, 2020 (in millions):

Rollforward of CECL Reserves by Portfolio Segment			Reserve at January 1, 2020						Current Period Provision						Write-offs charged against allowance						Recoveries Collected						Foreign Exchange						Reserve at December 31, 2020
Accounts Receivable (1)			$	4					$	11					$	(9)					$	3					$	—					$	9
Mong Duong Loan Receivable (2)			34						—						—						(2)						—						32
Argentina Receivables			29						1						—						(1)						(9)						20
Other			1						—						—						—						—						1
Total CECL Reserves			$	68					$	12					$	(9)					$	—					$	(9)					$	62

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(1)Excludes operating lease receivable allowances and contractual dispute allowances of $16 million and $4 million as of January 1, 2020 and December 31, 2020, respectively. Those reserves are not in scope under ASC 326.

(2)Mong Duong Loan Receivable credit losses allowance was reclassified to held-for-sale assets on the Consolidated Balance Sheet as of December 31, 2020.

ASC 842 — Leases

On January 1, 2019, the Company adopted ASC 842 Leases and its subsequent corresponding updates (“ASC 842”). Under this standard, lessees are required to recognize assets and liabilities for most leases on the balance sheet, and recognize expenses in a manner similar to the prior accounting method. For lessors, the guidance modifies the lease classification criteria and the accounting for sales-type and direct financing leases. The guidance eliminates previous real estate-specific provisions.

Under ASC 842, fewer of our contracts contain a lease. However, due to the elimination of the real estate-specific guidance and changes to certain lessor classification criteria, more leases qualify as sales-type leases and direct financing leases. Under these two models, a lessor derecognizes the asset and recognizes a lease receivable. According to ASC 842, the net investment in the lease includes the fair value of residual interest in the asset after the contract period as well as the present value of the fixed lease payments, but does not include any variable payments under the lease. Therefore, the net investment in the lease could be significantly different than the carrying amount of the underlying asset at lease commencement. In such circumstances, the difference between the initially recognized net investment in the lease and the carrying amount of the underlying asset is recognized as a gain/loss at lease commencement.

During the course of adopting ASC 842, the Company applied various practical expedients including:

• The package of practical expedients (applied to all leases) that allowed lessees and lessors not to reassess:

a.whether any expired or existing contracts are or contain leases,

b.lease classification for any expired or existing leases, and

c.whether initial direct costs for any expired or existing leases qualify for capitalization under ASC 842.

• The transition practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements, and

• The transition practical expedient for lessees that allowed businesses to not separate lease and non-lease components. The Company applied the practical expedient to all classes of underlying assets when valuing right-of-use assets and lease liabilities. Contracts where the Company is the lessor were separated between the lease and non-lease components.

139 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The Company applied the modified retrospective method of adoption and elected to continue to apply the guidance in ASC 840 Leases to the comparative periods presented in the year of adoption. Under this transition method, the Company applied the transition provisions starting at the date of adoption. The cumulative effect of the adoption of ASC 842 on our January 1, 2019 Consolidated Balance Sheet was as follows (in millions):

Consolidated Balance Sheet			Balance at December 31, 2018						Adjustments Due to ASC 842						Balance at January 1, 2019
Assets
Other noncurrent assets			$	1,514					$	253					$	1,767
Liabilities
Accrued and other liabilities			962						27						989
Other noncurrent liabilities			2,723						226						2,949

The primary impact of adoption was due to the recognition of a right-of-use-asset and lease liability for an operating land lease in Panama associated with the Colon LNG power plant and regasification terminal.

New Accounting Pronouncements Issued But Not Yet Effective — The following table provides a brief description of recent accounting pronouncements that could have a material impact on the Company’s consolidated financial statements once adopted. Accounting pronouncements not listed below were assessed and determined to be either not applicable or are expected to have no material impact on the Company’s consolidated financial statements.

New Accounting Standards Issued But Not Yet Effective
ASU Number and Name			Description			Date of Adoption			Effect on the financial statements upon adoption
2020-06, Debt - Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Equity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Equity’s Own Equity			The amendments in this update affect entities that issue convertible instruments and/or contracts indexed to and potentially settled in an entity’s own equity. The new ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.			For fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.			The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting			The amendments in these updates provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate reform, and clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective for a limited period of time (March 12, 2020 - December 31, 2022).			Effective for all entities as of March 12, 2020 through December 31, 2022.			The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.

2. INVENTORY

Inventory is valued primarily using the average-cost method. The following table summarizes the Company's inventory balances as of the dates indicated (in millions):

December 31,						2020						2019
Fuel and other raw materials						$	223					$	230
Spare parts and supplies						238						257
Total						$	461					$	487

3. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes the components of the electric generation and distribution assets and other property, plant and equipment (in millions) with their estimated useful lives (in years). The amounts are stated net of all prior asset impairment losses recognized.

140 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

			Estimated Useful Life						December 31,
			(in years)			2020						2019
Electric generation and distribution facilities			5-40						$	24,239					$	22,869
Other buildings			5-51						1,507						1,612
Furniture, fixtures and equipment			3-30						333						319
Other			5-39						628						583
Total electric generation and distribution assets and other									26,707						25,383
Accumulated depreciation									(8,472)						(8,505)
Net electric generation and distribution assets and other									$	18,235					$	16,878

The following table summarizes depreciation expense (including the amortization of assets recorded under finance leases in 2020 and 2019 or capital leases in 2018, and the amortization of asset retirement obligations) and interest capitalized during development and construction on qualifying assets for the periods indicated (in millions):

Years Ended December 31,						2020						2019						2018
Depreciation expense						$	1,004					$	977					$	960
Interest capitalized during development and construction						307						238						199

Property, plant and equipment, net of accumulated depreciation, of $10 billion was mortgaged, pledged or subject to liens as of December 31, 2020 and 2019, including assets classified as held-for-sale.

The following table summarizes regulated and non-regulated generation and distribution property, plant and equipment and accumulated depreciation as of the dates indicated (in millions):

December 31,						2020						2019
Regulated generation and distribution assets and other, gross						$	8,858					$	8,570
Regulated accumulated depreciation						(3,329)						(3,029)
Regulated generation and distribution assets and other, net						5,529						5,541
Non-regulated generation and distribution assets and other, gross						17,849						16,813
Non-regulated accumulated depreciation						(5,143)						(5,476)
Non-regulated generation and distribution assets and other, net						12,706						11,337
Net electric generation and distribution assets and other						$	18,235					$	16,878

4. ASSET RETIREMENT OBLIGATIONS

The following table presents amounts recognized related to asset retirement obligations for the periods indicated (in millions):

						2020						2019
Balance at January 1						$	428					$	415
Additional liabilities incurred						42						19
Liabilities settled						(20)						(12)
Accretion expense						22						21
Change in estimated cash flows						3						58
Sale of plants						(13)						(71)
Other						—						(2)
Balance at December 31						$	462					$	428

The Company's asset retirement obligations include active ash landfills, water treatment basins and the removal or dismantlement of certain plants and equipment. The Company uses the cost approach to determine the initial value of ARO liabilities, which is estimated by discounting expected cash outflows to their present value using market-based rates at the initial recording of the liabilities. Cash outflows are based on the approximate future disposal costs as determined by market information, historical information or other management estimates. Subsequent downward revisions of ARO liabilities are discounted using the market-based rates that existed when the liability was initially recognized. These inputs to the fair value of the ARO liabilities are considered Level 3 inputs under the fair value hierarchy.

During the year ended December 31, 2020, the Company increased the asset retirement obligations and corresponding assets at Chile and Hawaii, by $17 million and $12 million, respectively, and decreased the asset retirement obligation at DPL by $13 million. The increase at Chile is mostly due to the initial recognition of the ARO at Planta Solar II. The increase at Hawaii reflects the shortened useful life of the coal plant resulting from the passage of Senate Bill 2629, which prohibits issuing or renewing permits for coal power plants after December 31,

141 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

2022 and calls for ceasing all coal burning for electricity generation by that date. The decrease at DPL is attributable to the sale of the Hutchings facility in December 2020.

During the year ended December 31, 2019, the Company increased the asset retirement obligation and corresponding asset at IPL by $75 million and decreased the asset retirement obligation at DPL by $87 million. The increase at IPL reflects an increase to estimated ash pond closure costs, including groundwater remediation as required by the EPA under the Resource Conservation and Recovery Act. The decrease at DPL was attributable to a revision of the estimated liabilities resulting from the retirement of the Stuart and Killen facilities, and their subsequent transfer in December 2019.

5. FAIR VALUE

The fair value of current financial assets and liabilities, debt service reserves, and other deposits 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.

Valuation Techniques — The fair value measurement accounting guidance describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach, (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on current market expectations of the return on those future amounts. The cost approach is based on the amount that would currently be required to replace an asset. The Company measures its investments and derivatives at fair value on a recurring basis. Additionally, in connection with annual or event-driven impairment evaluations, certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis. These include long-lived tangible assets (i.e., property, plant and equipment), goodwill, and intangible assets (e.g., sales concessions, land use rights and water rights, etc.). In general, the Company determines the fair value of investments and derivatives using the market approach and the income approach, respectively. In the nonrecurring measurements of nonfinancial assets and liabilities, all three approaches are considered; however, the value estimated under the income approach is often the most representative of fair value.

Investments — The Company's investments measured at fair value generally consist of marketable debt and equity securities. Equity securities are either measured at fair value using quoted market prices or based on comparisons to market data obtained for similar assets. Debt securities primarily consist of unsecured debentures and certificates of deposit held by our Brazilian subsidiaries. Returns and pricing on these instruments are generally indexed to the market interest rates in Brazil. Debt securities are measured at fair value based on comparisons to market data obtained for similar assets.

Derivatives — Derivatives are measured at fair value using quoted market prices or the income approach utilizing volatilities, spot and forward benchmark interest rates (such as LIBOR and EURIBOR), foreign exchange rates, credit data, and commodity prices, as applicable. When significant inputs are not observable, the Company uses relevant techniques to determine the inputs, such as regression analysis or prices for similarly traded instruments available in the market.

The Company's methodology to fair value its derivatives is to start with any observable inputs; however, in certain instances the published forward rates or prices may not extend through the remaining term of the contract, and management must make assumptions to extrapolate the curve, which necessitates the use of unobservable inputs, such as proxy commodity prices or historical settlements to forecast forward prices. Specifically, where there is limited forward curve data with respect to foreign exchange contracts beyond the traded points, the Company utilizes the interest rate differential approach to construct the remaining portion of the forward curve. Similarly, in certain instances, the spread that reflects the credit or nonperformance risk is unobservable, requiring the use of proxy yield curves of similar credit quality.

To determine the fair value of a derivative, cash flows are discounted using the relevant spot benchmark interest rate. The Company then makes a credit valuation adjustment ("CVA"), as applicable, by further discounting the cash flows for nonperformance or credit risk based on the observable or estimated debt spread of the Company's subsidiary or its counterparty and the tenor of the respective derivative instrument. The CVA for potential

142 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

future scenarios in which the derivative is in an asset position is based on the counterparty's credit ratings, credit default swap spreads, and debt spreads, as available. The CVA for potential future scenarios in which the derivative is in a liability position is based on the Parent Company's or the subsidiary's current debt spread. In the absence of readily obtainable credit information, the Parent Company's or the subsidiary's estimated credit rating (based on applying a standard industry model to historical financial information and then considering other relevant information) and spreads of comparably rated entities or the respective country's debt spreads are used as a proxy. All derivative instruments are analyzed individually and are subject to unique risk exposures.

The fair value hierarchy of an asset or a liability is based on the level of significance of the input assumptions. An input assumption is considered significant if it affects the fair value by at least 10%. Assets and liabilities are classified as Level 3 when the use of unobservable inputs is significant. When the use of unobservable inputs is insignificant, assets and liabilities are classified as Level 2. Transfers between Level 3 and Level 2 result from changes in significance of unobservable inputs used to calculate the CVA.

Debt — Recourse and non-recourse debt are carried at amortized cost. The fair value of recourse debt is estimated based on quoted market prices. The fair value of non-recourse debt is estimated based upon interest rates and other features of the loan. In general, the carrying amount of variable rate debt is a close approximation of its fair value. For fixed rate loans, the fair value is estimated using quoted market prices or discounted cash flow ("DCF") analyses. The fair value of recourse and non-recourse debt excludes accrued interest at the valuation date. The fair value was determined using available market information as of December 31, 2020. The Company is not aware of any factors that would significantly affect the fair value amounts subsequent to December 31, 2020.

Nonrecurring measurements — For nonrecurring measurements derived using the income approach, fair value is generally determined using valuation models based on the principles of DCF. The income approach is most often used in the impairment evaluation of long-lived tangible assets, equity method investments, goodwill, and intangible assets. Where the use of market observable data is limited or not available for certain input assumptions, the Company develops its own estimates using a variety of techniques such as regression analysis and extrapolations. Depending on the complexity of a valuation, an independent valuation firm may be engaged to assist management in the valuation process.

For nonrecurring measurements derived using the market approach, recent market transactions involving the sale of identical or similar assets are considered. The use of this approach is limited because it is often difficult to identify sale transactions of identical or similar assets. This approach is used in impairment evaluations of certain intangible assets. Otherwise, it is used to corroborate the fair value determined under the income approach.

For nonrecurring measurements derived using the cost approach, fair value is typically based upon a replacement cost approach. This approach involves a considerable amount of judgment, which is why its use is limited to the measurement of long-lived tangible assets. Like the market approach, this approach is also used to corroborate the fair value determined under the income approach.

Fair Value Considerations — In determining fair value, the Company considers the source of observable market data inputs, liquidity of the instrument, the credit risk of the counterparty, and the risk of the Company's or its counterparty's nonperformance. The conditions and criteria used to assess these factors are:

Sources of market assumptions — The Company derives most of its market assumptions from market efficient data sources (e.g., Bloomberg and Reuters). To determine fair value where market data is not readily available, management uses comparable market sources and empirical evidence to develop its own estimates of market assumptions.

Market liquidity — The Company evaluates market liquidity based on whether the financial or physical instrument, or the underlying asset, is traded in an active or inactive market. An active market exists if the prices are fully transparent to market participants, can be measured by market bid and ask quotes, the market has a relatively large proportion of trading volume as compared to the Company's current trading volume, and the market has a significant number of market participants that will allow the market to rapidly absorb the quantity of assets traded without significantly affecting the market price. Another factor the Company considers when determining whether a market is active or inactive is the presence of government or regulatory controls over pricing that could make it difficult to establish a market-based price when entering into a transaction.

Nonperformance risk — Nonperformance risk refers to the risk that an obligation will not be fulfilled and affects the value at which a liability is transferred or an asset is sold. Nonperformance risk includes, but may not be limited

143 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

to, the Company's or its counterparty's credit and settlement risk. Nonperformance risk adjustments are dependent on credit spreads, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. The Company is party to various interest rate swaps and options, foreign currency options and forwards, and derivatives and embedded derivatives, which subject the Company to nonperformance risk. The financial and physical instruments held at the subsidiary level are generally non-recourse to the Parent Company.

Nonperformance risk on the investments held by the Company is incorporated in the fair value derived from quoted market data to mark the investments to fair value.

Recurring Measurements — The following table presents, by level within the fair value hierarchy as described in Note 1—General and Summary of Significant Accounting Policies, the Company's financial assets and liabilities that were measured at fair value on a recurring basis as of the dates indicated (in millions). For the Company's investments in marketable debt securities, the security classes presented were determined based on the nature and risk of the security and are consistent with how the Company manages, monitors, and measures its marketable securities:

						December 31, 2020																								December 31, 2019
						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Assets
DEBT SECURITIES:
Available-for-sale:
Unsecured debentures						$	—					$	21					$	—					$	21					$	—					$	—					$	—					$	—
Certificates of deposit						—						238						—						238						—						326						—						326
Total debt securities						—						259						—						259						—						326						—						326
EQUITY SECURITIES:
Mutual funds						28						51						—						79						22						61						—						83
Total equity securities						28						51						—						79						22						61						—						83
DERIVATIVES:
Interest rate derivatives						—						13						—						13						—						31						—						31
Cross-currency derivatives						—						5						—						5						—						—						—						—
Foreign currency derivatives						—						15						146						161						—						17						93						110
Commodity derivatives						—						8						2						10						—						28						2						30
Total derivatives — assets						—						41						148						189						—						76						95						171
TOTAL ASSETS						$	28					$	351					$	148					$	527					$	22					$	463					$	95					$	580
Liabilities
DERIVATIVES:
Interest rate derivatives						$	—					$	374					$	236					$	610					$	—					$	144					$	184					$	328
Cross-currency derivatives						—						2						2						4						—						10						11						21
Foreign currency derivatives						—						43						—						43						—						44						—						44
Commodity derivatives						—						22						—						22						—						29						2						31
Total derivatives — liabilities						—						441						238						679						—						227						197						424
TOTAL LIABILITIES						$	—					$	441					$	238					$	679					$	—					$	227					$	197					$	424

As of December 31, 2020, all AFS debt securities had stated maturities within one year. For the years ended December 31, 2019, and 2018, no other-than-temporary impairment of marketable securities were recognized in earnings or Other Comprehensive Income (Loss) and as of January 1, 2020, credit-related impairments are recognized in earnings under ASC 326. See Note 1—General and Summary of Significant Accounting Policies for further information. Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from sale of AFS securities for the periods indicated (in millions):

Year Ended December 31,						2020						2019						2018
Gross proceeds from sale of AFS securities						$	582					$	663					$	1,403

The following tables present a reconciliation of net derivative assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019 (presented net by type of derivative in millions). Transfers between Level 3 and Level 2 principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.

144 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Year Ended December 31, 2020			Interest Rate						Cross Currency						Foreign Currency						Commodity						Total
Balance at January 1			$	(184)					$	(11)					$	94					$	(1)					$	(102)
Total realized and unrealized gains (losses):
Included in earnings			3						(2)						67						2						70
Included in other comprehensive income — derivative activity			(84)						(10)						23						—						(71)
Settlements			34						21						(39)						1						17
Transfers of assets/(liabilities), net into Level 3			(6)						—						—						—						(6)
Transfers of (assets)/liabilities, net out of Level 3			1						—						1						—						2
Balance at December 31			$	(236)					$	(2)					$	146					$	2					$	(90)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period			$	—					$	(2)					$	35					$	2					$	35

Year Ended December 31, 2019			Interest Rate						Cross Currency						Foreign Currency						Commodity						Total
Balance at January 1			$	(140)					$	—					$	199					$	4					$	63
Total realized and unrealized gains (losses):
Included in earnings			(1)						—						(65)						(2)						(68)
Included in other comprehensive income — derivative activity			(97)						—						(17)						—						(114)
Included in regulatory (assets) liabilities			—						—						—						(5)						(5)
Settlements			8						—						(23)						2						(13)
Transfers of assets/(liabilities), net into Level 3			(2)						(11)						—						—						(13)
Transfers of (assets)/liabilities, net out of Level 3			48						—						—						—						48
Balance at December 31			$	(184)					$	(11)					$	94					$	(1)					$	(102)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period			$	—					$	—					$	(67)					$	(2)					$	(69)

The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of December 31, 2020 (in millions, except range amounts):

Type of Derivative						Fair Value						Unobservable Input						Amount or Range (Weighted Average)
Interest rate						$	(236)					Subsidiaries’ credit spreads						0.6% - 3.6% (3.5%)
Cross-currency						(2)						Subsidiaries’ credit spreads						3.6% - 3.6% (3.6%)
Foreign currency:
Argentine peso						146						Argentine peso to USD currency exchange rate after one year						86 - 1,027 (405)
Commodity:
Other						2
Total						$	(90)

For interest rate derivatives and foreign currency derivatives, increases (decreases) in the estimates of the Company's own credit spreads would decrease (increase) the value of the derivatives in a liability position. For foreign currency derivatives, increases (decreases) in the estimate of the above exchange rate would increase (decrease) the value of the derivative.

Nonrecurring Measurements

The Company measures fair value using the applicable fair value measurement guidance. Impairment expense is measured by comparing the fair value at the evaluation date to the then-latest available carrying amount. The following table summarizes our major categories of assets measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):

Year Ended December 31, 2020						Measurement Date						Carrying Amount (1)						Fair Value																		Pre-tax Loss
Assets									Level 1						Level 2						Level 3
Long-lived assets held and used:
AES Gener (2)						8/1/2020						$	1,087					$	—					$	—					$	306					$	781
Hawaii (2)						8/31/2020						114						—						—						76						38
Estrella del Mar I (2)						9/30/2020						44						—						—						14						30
Equity method investments:
OPGC (3)						03/31/2020						195						—						—						152						43
OPGC (3)						06/30/2020						272						—						104						—						158

145 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Year Ended December 31, 2019						Measurement Date						Carrying Amount (1)						Fair Value																		Pre-tax Loss
Assets									Level 1						Level 2						Level 3
Dispositions and held-for-sale businesses: (4)
Kilroot and Ballylumford						04/12/2019						$	232					$	—					$	118					$	—					$	115
Long-lived assets held and used:
Hawaii (2)						12/31/2019						163						—						—						103						60
Equity method investments:
OPGC (3)						12/31/2019						304						—						—						212						92

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(1)Represents the carrying values at the dates of initial measurement, before fair value adjustment.

(2)See Note 22—Asset Impairment Expense for further information.

(3)See Note 8—Investments In and Advances to Affiliates for further information.

(4)Per the Company's policy, pre-tax loss is limited to the impairment of long-lived assets. Any additional loss will be recognized on completion of the sale. See Note 22—Asset Impairment Expense and Note 25—Held-for-Sale and Dispositions for further information.

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets held and used measured on a nonrecurring basis during the year ended December 31, 2020 (in millions, except range amounts):

December 31, 2020						Fair Value						Valuation Technique						Unobservable Input						Range (Weighted Average)
Long-lived assets held and used:
AES Gener						$	306					Discounted cash flow						Annual revenue growth						(90)% to 10% (-2%)
																		Variable margin						(94)% to 24% (-3%)
																		Weighted-average cost of capital						7% to 10%
Hawaii						76						Discounted cash flow						Monthly revenue growth						(12)% to 13% (0%)
																		Pre-tax operating margin						24% to 35% (29%)
																		Weighted-average cost of capital						10% to 13%
Estrella del Mar I						14						Comparable market transactions						Sale price per kilowatt (USD)						$160 to $520 ($315)
																		Age of unit when sold (years)						15 to 25 (18)
Equity method investments:
OPGC (1)						152						Expected present value						Annual dividend growth						(25)% to 40% (2%)
																		Weighted-average cost of equity						12		%
Total						$	548

---

(1)Fair value measurement performed as of March 31, 2020, which included the Level 3 inputs shown above. The fair value measurement performed at June 30, 2020 included only Level 2 inputs; therefore, it is not included in this table.

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

The following table presents (in millions) the carrying amount, fair value, and fair value hierarchy of the Company's financial assets and liabilities that are not measured at fair value in the Consolidated Balance Sheets as of the periods indicated, but for which fair value is disclosed:

									December 31, 2020
									Carrying Amount						Fair Value
									Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (1)						$	97					$	197					$	—					$	—					$	197
Liabilities:			Non-recourse debt						16,354						18,403						5						15,301						3,097
			Recourse debt						3,446						3,677						—						3,677						—

									December 31, 2019
									Carrying Amount						Fair Value
									Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (1)						$	98					$	145					$	—					$	—					$	145
Liabilities:			Non-recourse debt						16,712						16,579						—						15,804						775
			Recourse debt						3,396						3,529						—						3,529						—

---

(1)These amounts primarily relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and amounts related to green blend and extend agreements in Chile and are included in Other noncurrent assets in the accompanying Consolidated Balance Sheets. The fair value and carrying amount of the Argentina receivables exclude VAT of $4 million and $11 million as of December 31, 2020 and 2019, respectively. See Note 7—Financing Receivables for further information.

146 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Volume of Activity — The following table presents the Company's maximum notional (in millions) over the remaining contractual period by type of derivative as of December 31, 2020, regardless of whether they are in qualifying cash flow hedging relationships, and the dates through which the maturities for each type of derivative range:

Interest Rate and Foreign Currency Derivatives						Maximum Notional Translated to USD						Latest Maturity
Interest Rate (LIBOR and EURIBOR)						$	4,772					2047
Cross-currency swaps (Chilean Unidad de Fomento and Brazilian Reais)						246						2028
Foreign Currency:
Argentine peso						56						2026
Chilean peso						318						2022
Colombian peso						190						2023
Euro						149						2023
Others, primarily with weighted average remaining maturities of a year or less						31						2022

Commodity Derivatives						Maximum Notional						Latest Maturity
Natural Gas (in MMBtu)						23						2021
Power (in MWhs)						6						2024
Coal (in Tons or Metric Tonnes)						7						2027

Accounting and Reporting — Assets and Liabilities — The following tables present the fair value of assets and liabilities related to the Company's derivative instruments as of the periods indicated (in millions):

Fair Value						December 31, 2020																		December 31, 2019
Assets						Designated						Not Designated						Total						Designated						Not Designated						Total
Interest rate derivatives						$	13					$	—					$	13					$	31					$	—					$	31
Cross-currency derivatives						5						—						5						—						—						—
Foreign currency derivatives						40						121						161						31						79						110
Commodity derivatives						2						8						10						—						30						30
Total assets						$	60					$	129					$	189					$	62					$	109					$	171
Liabilities
Interest rate derivatives						$	506					$	104					$	610					$	323					$	5					$	328
Cross-currency derivatives						4						—						4						21						—						21
Foreign currency derivatives						8						35						43						22						22						44
Commodity derivatives						—						22						22						2						29						31
Total liabilities						$	518					$	161					$	679					$	368					$	56					$	424

						December 31, 2020												December 31, 2019
Fair Value						Assets						Liabilities						Assets						Liabilities
Current						$	51					$	236					$	72					$	126
Noncurrent						138						443						99						298
Total						$	189					$	679					$	171					$	424

Credit Risk-Related Contingent Features (1)			December 31, 2020						December 31, 2019
Present value of liabilities subject to collateralization			$	6					$	—
Cash collateral held by third parties or in escrow			6						—

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(1) Based on the credit rating of certain subsidiaries

147 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

As of December 31, 2019, all derivative instruments subject to credit risk-related contingent features were in an asset position.

Earnings and Other Comprehensive Income (Loss) — The following table presents the pre-tax gains (losses) recognized in AOCL and earnings related to all derivative instruments for the periods indicated (in millions):

						Years Ended December 31,
2020						2019						2018
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives						$	(511)					$	(290)					$	(16)
Cross-currency derivatives						3						(26)						(26)
Foreign currency derivatives						25						(23)						(52)
Commodity derivatives						5						—						—
Total						$	(478)					$	(339)					$	(94)
Gains (losses) reclassified from AOCL to earnings
Interest rate derivatives						$	(75)					$	(28)					$	(52)
Cross-currency derivatives						(5)						(12)						(43)
Foreign currency derivatives						(9)						(13)						(16)
Commodity derivatives						(2)						(1)						(6)
Total						$	(91)					$	(54)					$	(117)
Loss reclassified from AOCL to earnings due to discontinuance of hedge accounting (1)						$	—					$	(2)					$	—
Gain (losses) recognized in earnings related to
Ineffective portion of cash flow hedges						$	—					$	—					$	(7)
Not designated as hedging instruments:
Interest rate derivatives						(1)						—						—
Foreign currency derivatives						68						(46)						148
Commodity derivatives and other						(68)						(6)						25
Total						$	(1)					$	(52)					$	173

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(1) Cash flow hedge was discontinued on a cross-currency swap in 2019 because the underlying debt was prepaid.

AOCL is expected to decrease pre-tax income from continuing operations for the twelve months ended December 31, 2021 by $98 million, primarily due to interest rate derivatives.

7. FINANCING RECEIVABLES

Receivables with contractual maturities of greater than one year are considered financing receivables. The following table presents financing receivables by country as of the dates indicated (in millions). As the Company applied the modified retrospective method of adoption for ASC 326 effective January 1, 2020, CECL reserves are included in the receivable balance as of December 31, 2020. See Note 1—General and Summary of Significant Accounting Policies for further information.

			December 31, 2020																		December 31, 2019
December 31,			Gross Receivable						Allowance						Net Receivable						Receivable
Argentina			$	48					$	9					$	39					$	64
Chile			31						—						31						33
Other			31						—						31						12
Total			$	110					$	9					$	101					$	109

Argentina

Collection of the principal and interest on these receivables is subject to various business risks and uncertainties, including, but not limited to, the continued operation of power plants which generate cash for payments of these receivables, regulatory changes that could impact the timing and amount of collections, and economic conditions in Argentina. The Company monitors these risks, including the credit ratings of the Argentine government, on a quarterly basis to assess the collectability of these receivables. The Company accrues interest on these receivables once the recognition criteria have been met. The Company's collection estimates are based on assumptions that it believes to be reasonable, but are inherently uncertain. Actual future cash flows could differ from these estimates. The decrease in Argentina financing receivables was primarily due to planned collections and unfavorable FX impacts.

FONINVEMEM Agreements — As a result of energy market reforms in 2004 and 2010, AES Argentina entered into three agreements with the Argentine government, referred to as the FONINVEMEM Agreements, to contribute a

148 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

portion of their accounts receivable into a fund for financing the construction of combined cycle and gas-fired plants. These receivables accrue interest and are collected in monthly installments over 10 years once the related plant begins operations.

The FONINVEMEM receivables are denominated in Argentine pesos, but indexed to USD, which represents a foreign currency derivative. Due to differences between spot rates, used to remeasure the receivables, and discounted forward rates, used to value the foreign currency derivative, these two items will not perfectly offset over the life of the receivable. Once settled, the foreign currency derivative will offset the accumulated unrealized foreign currency losses resulting from the devaluation of the FONINVEMEM receivable. As of December 31, 2020 and 2019, the amount of the foreign currency-related derivative assets associated with the FONINVEMEM financing receivables that were excluded from the table above had a fair value of $146 million and $94 million, respectively.

The receivables under the FONINVEMEM Agreements have been actively collected since the related plants commenced operations in 2010 and 2016. In assessing the collectability of the receivables under these agreements, the Company also considers historic collection evidence in accordance with the agreements.

Other Agreements — Other agreements primarily consist of resolutions passed by the Argentine government in which AES Argentina will receive compensation for investments in new generation plants and technologies. The timing of collections depend on corresponding agreements and collectability of these receivables are assessed on an ongoing basis.

Chile

AES Gener has recorded receivables pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Fund created by the Chilean government in October 2019, in conjunction with the Tariff Stabilization Law. Historically, the government updated the prices for these contracts every six months to reflect the indexation the contracts have to exchange rates and commodities prices. The Stabilization Fund does not allow the pass-through of these contractual indexation updates to customers beyond the pricing in effect at July 1, 2019, until new lower-cost renewable contracts are incorporated into pricing in 2023. Consequently, costs incurred in excess of the July 1, 2019 price will be accumulated and borne by generators.

On December 31, 2020, AES Gener executed an agreement for the sale of $105 million of receivables generated pursuant the Tariff Stabilization Law at a discount of $20 million. As a result of the agreement, as of December 31, 2020, $77 million of current receivables and $8 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets, respectively, pertaining to the Stabilization Fund. Additionally, $23 million of payment deferrals granted to mining customers as part of our green blend and extend agreements were recorded as financing receivables included in Other noncurrent assets at December 31, 2020.

8. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The following table summarizes the relevant effective equity ownership interest and carrying values for the Company's investments accounted for under the equity method as of the periods indicated:

December 31,									2020						2019						2020						2019
Affiliate			Country						Carrying Value (in millions)												Ownership Interest %
sPower (1)			United States						$	551					$	442					50		%				50		%
Uplight			United States						85						91						32		%				32		%
Mesa La Paz			Mexico						60						66						50		%				50		%
Energía Natural Dominicana Enadom (2)			Dominican Republic						49						48						43		%				43		%
OPGC			India						—						212						49		%				49		%
Guacolda (3)			Chile						—						74						34		%				33		%
Barry (4)			United Kingdom						—						—						100		%				100		%
Other affiliates (5)			Various						90						33
Total									$	835					$	966

---

(1)In January 2021, the sPower and AES Distributed Energy development platforms were merged to form AES Clean Energy Development. See Note 31—Subsequent Events for further information.

(2)The Company's ownership in Energía Natural Dominicana Enadom is held through AES Andres, an 85%-owned consolidated subsidiary. AES Andres owns 50% of Energía Natural Dominicana Enadom, resulting in an AES effective ownership of 43%.

(3)The Company's ownership in Guacolda is held through AES Gener, a 67%-owned consolidated subsidiary. AES Gener owns 50% of Guacolda, resulting in an AES effective ownership of 34%.

(4)Represents a VIE in which the Company holds a variable interest, but is not the primary beneficiary.

(5)Includes Bosforo, Fluence, and Tucano equity method investments, and others, as well as a $67 million loan facility granted from Colon to an equity method affiliate in 2020.

149 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

OPGC — In December 2019, an other-than-temporary impairment was identified at OPGC primarily due to the estimated market value of the Company's investment and other negative developments impacting future expected cash flows at the investee. A calculation of the fair value of the Company’s investment in OPGC was required to evaluate whether there was a loss in the carrying value of the investment. Based on management’s estimate of fair value of $212 million, the Company recognized an other-than-temporary impairment of $92 million in Other non-operating expense in December 2019. In March 2020, management’s updated estimate of fair value was $152 million and the Company recognized an additional other-than-temporary impairment of $43 million due to the economic slowdown.

In June 2020, the Company agreed to sell its entire 49% stake in OPGC resulting in an additional other-than-temporary impairment of $158 million. Total other-than-temporary impairment for the year ended December 31, 2020 was $201 million, recognized in Other non-operating expense. In December 2020, the Company completed the sale for $135 million, resulting in a pre-tax gain on sale of $23 million, primarily due to the write-off of cumulative translation adjustments. Prior to its sale, the OPGC equity method investment was reported in the Eurasia SBU reportable segment.

Fluence — In December 2020, Fluence entered into an agreement with the QIA whereby QIA will invest $125 million in Fluence. Following the completion of the transaction, which is expected in the second quarter of 2021, AES and Siemens are expected to each own approximately 44% of Fluence. The Fluence equity method investment is reported as part of Corporate and Other.

Guacolda — In October 2019, Guacolda management reviewed the recoverability of the Guacolda asset group and determined the undiscounted cash flows did not exceed the carrying amount. Guacolda recognized a long-lived asset impairment at the investee level, which negatively impacted the Company's Net equity in earnings (losses) of affiliates by $158 million.

In September 2020, Guacolda management identified additional impairment indicators primarily as a result of inability to re-contract Guacolda’s generation after expiration of its existing PPAs driven by lower energy prices in Chile and reduced forecasted cash flows resulting from decarbonization initiatives of the Chilean Government. Guacolda recognized a long-lived asset impairment at the investee level, which negatively impacted the Company's Net equity in earnings (losses) of affiliates by $127 million. As a result, the Company’s basis in its investment in Guacolda was reduced to zero and the equity method of accounting was suspended. As of December 31, 2020, the Company has not recognized $99 million of equity method losses which were in excess of the Company’s carrying amount. The Guacolda equity method investment is reported in the South America SBU reportable segment.

Energía Natural Dominicana Enadom — In September 2019, AES Andres established a joint venture with Energas Group for the purpose of selling natural gas and related terminal services, storage, regasification, and transportation to customers in the Dominican Republic. Gas Natural del Este (subsequently renamed Energía Natural Dominicana Enadom), a wholly-owned subsidiary of the joint venture, acquired the Eastern Pipeline development project from AES Andres for total consideration of $55 million, resulting in a gain of $2 million. The transaction was considered a contribution of a nonfinancial asset in exchange for a noncontrolling interest in the joint venture. As the Company does not control the joint venture, it is accounted for as an equity method investment and is reported in the MCAC SBU reportable segment.

Uplight — In July 2019, Simple Energy merged with Tendril, a previously unrelated party, to form Uplight, a new company that offers a comprehensive platform for utility customer engagement. As part of this merger, the Company contributed its ownership interest in Simple Energy and $53 million of cash in exchange for an ownership interest in the merged company. This transaction resulted in a gain on sale of $12 million and a total investment in Uplight of $98 million. As the Company does not control Uplight, it is accounted for as an equity method investment and is reported as part of Corporate and Other.

sPower — In April 2019, the Company closed on the sale of approximately 48% of its interest in a portfolio of sPower’s operating assets for $173 million, subject to customary purchase price adjustments, of which $58 million was used to pay down debt at sPower. This sale resulted in a pre-tax gain on sale of business interests of $28 million. After the sale, the Company’s ownership interest in this portfolio of sPower’s operating assets decreased from 50% to approximately 26%. The sPower equity method investment is reported in the US and Utilities SBU reportable segment.

Barry — The Company holds a 100% ownership interest in AES Barry Ltd. ("Barry"), a dormant entity in the U.K. that disposed of its generation and other operating assets. Due to a debt agreement, no material financial or

150 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

operating decisions can be made without the banks' consent, and the Company does not control Barry. As of December 31, 2020 and 2019, other long-term liabilities included $46 million and $44 million related to this debt agreement.

Summarized Financial Information — The following tables summarize financial information of the Company's 50%-or-less-owned affiliates and majority-owned unconsolidated subsidiaries that are accounted for using the equity method (in millions):

			50%-or-less Owned Affiliates																		Majority-Owned Unconsolidated Subsidiaries
Years ended December 31,			2020						2019						2018						2020						2019						2018
Revenue			$	1,880					$	1,122					$	962					$	1					$	49					$	40
Operating margin (loss)			213						124						135						(3)						(5)						3
Net income (loss)			(538)						(724)						14						(4)						(7)						(3)
December 31,			2020						2019												2020						2019
Current assets			$	1,017					$	831											$	159					$	166
Noncurrent assets			6,230						7,220												886						982
Current liabilities			1,294						1,271												121						141
Noncurrent liabilities			3,671						3,966												981						1,052
Stockholders' equity			2,282						2,814												(57)						(45)

At December 31, 2020, retained earnings included $120 million related to the undistributed losses of the Company's 50%-or-less owned affiliates. Distributions received from these affiliates were $14 million, $23 million, and $83 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, the underlying equity in the net assets of our equity affiliates exceeded the aggregate carrying amount of our investments in equity affiliates by $150 million.

9. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill — The following table summarizes the carrying amount of goodwill by reportable segment for the years ended December 31, 2020 and 2019 (in millions):

			US and Utilities						South America						MCAC						Eurasia						Total
Balance as of December 31, 2019
Goodwill			$	2,786					$	868					$	16					$	—					$	3,670
Accumulated impairment losses			(2,611)						—						—						—						(2,611)
Net balance			175						868						16						—						1,059
Balance as of December 31, 2020
Goodwill			2,788						868						16						—						3,672
Accumulated impairment losses			(2,611)						—						—						—						(2,611)
Net balance			$	177					$	868					$	16					$	—					$	1,061

Other Intangible Assets — The following table summarizes the balances comprising Other intangible assets in the accompanying Consolidated Balance Sheets (in millions) as of the periods indicated:

			December 31, 2020																		December 31, 2019
			Gross Balance						Accumulated Amortization						Net Balance						Gross Balance						Accumulated Amortization						Net Balance
Subject to Amortization
Internal-use software			$	386					$	(255)					$	131					$	367					$	(228)					$	139
Contracts			157						(38)						119						134						(29)						105
Project development rights (1)			203						(5)						198						100						(1)						99
Emissions allowances (2)			64						—						64						24						—						24
Concession rights			201						(18)						183						39						(35)						4
Other (3)			59						(14)						45						43						(14)						29
Subtotal			1,070						(330)						740						707						(307)						400
Indefinite-Lived Intangible Assets
Land use rights			39						—						39						21						—						21
Water rights			20						—						20						20						—						20
Transmission rights			22						—						22						23						—						23
Other			6						—						6						5						—						5
Subtotal			87						—						87						69						—						69
Total			$	1,157					$	(330)					$	827					$	776					$	(307)					$	469

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(1)Includes emission offset fee to the Air Quality Management District (AQMD) in order to transfer emission offsets from retired legacy Southland units to the new CCGT.

151 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

(2)Acquired or purchased emissions allowances are finite-lived intangible assets that are expensed when utilized and included in net income for the year.

(3)Includes management rights, renewable energy credits and incentives, and other individually insignificant intangible assets.

The following tables summarize other intangible assets acquired during the periods indicated (in millions):

December 31, 2020			Amount						Subject to Amortization/Indefinite-Lived						Weighted Average Amortization Period (in years)						Amortization Method
Internal-use software			$	35					Subject to Amortization						4						Straight-line
Contracts			28						Subject to Amortization						20						Straight-line
Project development rights			109						Subject to Amortization						30						Straight-line
Emissions allowances			56						Subject to Amortization						Various						As utilized
Transmission rights			20						Indefinite-Lived						N/A						N/A
Concession rights (1)			184						Subject to Amortization						12						Straight-line
Other			22						Various						N/A						N/A
Total			$	454

December 31, 2019			Amount						Subject to Amortization/Indefinite-Lived						Weighted Average Amortization Period (in years)						Amortization Method
Internal-use software			$	61					Subject to Amortization						5						Straight-line
Contracts			2						Subject to Amortization						35						Straight-line
Project development rights			8						Subject to Amortization						29						Straight-line
Emissions allowances			22						Subject to Amortization						Various						As utilized
Transmission rights			23						Indefinite-Lived						N/A						N/A
Other			5						Various						N/A						N/A
Total			$	121

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(1)Represents the fair value assigned to the extension of the Tietê hydroelectric plants' concession agreement with ANEEL, expected to be finalized in the first quarter of 2021. See Note 13—Contingencies for further information.

The following table summarizes the estimated amortization expense by intangible asset category for 2021 through 2025:

(in millions)			2021						2022						2023						2024						2025
Internal-use software			$	36					$	30					$	25					$	23					$	21
Contracts			9						9						9						6						6
Concession rights			16						16						17						16						16
Other			9						9						8						8						7
Total			$	70					$	64					$	59					$	53					$	50

Intangible asset amortization expense was $54 million, $45 million and $47 million for the years ended December 31, 2020, 2019 and 2018, respectively.

152 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

10. REGULATORY ASSETS AND LIABILITIES

The Company has recorded regulatory assets and liabilities (in millions) that it expects to pass through to its customers in accordance with, and subject to, regulatory provisions as follows:

December 31,			2020						2019						Recovery/Refund Period
Regulatory assets
Current regulatory assets:
El Salvador energy pass through costs recovery			$	40					$	56					Quarterly
Other			73						57						1 year
Total current regulatory assets			113						113
Noncurrent regulatory assets:
IPL and DPL defined benefit pension obligations (1)			244						262						Various
IPL environmental costs			81						85						Various
IPL Petersburg Unit 1 retirement costs			75						—						Over life of assets
IPL deferred Midwest ISO costs			61						75						6 years
Other			126						108						Various
Total noncurrent regulatory assets			587						530
Total regulatory assets			$	700					$	643
Regulatory liabilities
Current regulatory liabilities:
Overcollection of costs to be passed back to customers			$	47					$	80					1 year
Other			1						1						Various
Total current regulatory liabilities			48						81
Noncurrent regulatory liabilities:
IPL and DPL accrued costs of removal and AROs			863						863						Over life of assets
IPL and DPL income taxes payable to customers through rates			174						209						Various
Other			21						18						Various
Total noncurrent regulatory liabilities			1,058						1,090
Total regulatory liabilities			$	1,106					$	1,171

---

(1)Past expenditures on which the Company earns a rate of return.

Our regulatory assets and current regulatory liabilities primarily consist of under or overcollection of costs that are generally non-controllable, such as purchased electricity, energy transmission, fuel costs, and other sector costs. These costs are recoverable or refundable as defined by the laws and regulations in our markets. Our regulatory assets also include defined pension and postretirement benefit obligations equal to the previously unrecognized actuarial gains and losses and prior service costs that are expected to be recovered through future rates. Additionally, our regulatory assets include the expected carrying value of IPL's Petersburg Unit 1 at its anticipated retirement date, which will be amortized over the life of the asset beginning on the date of retirement. Other current and noncurrent regulatory assets primarily consist of:

• Undercollections on rate riders such as wholesale margin sharing and MISO costs at IPL and energy efficiency and storm costs at DPL;

• Unamortized premiums reacquired or redeemed on long-term debt at IPL and DPL, which are amortized over the lives of the original issuances; and

• OVEC costs at DPL.

Our noncurrent regulatory liabilities primarily consist of obligations for removal costs which do not have an associated legal retirement obligation. Our noncurrent regulatory liabilities also include deferred income taxes related to differences in income recognition between tax laws and accounting methods, which will be passed through to our regulated customers via a decrease in future retail rates.

In the accompanying Consolidated Balance Sheets, current regulatory assets and liabilities are reflected in Other current assets and Accrued and other liabilities, respectively, and noncurrent regulatory assets and liabilities are reflected in Other noncurrent assets and Other noncurrent liabilities, respectively. All of the regulatory assets and liabilities as of December 31, 2020 and December 31, 2019 are related to the US and Utilities SBU.

153 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

11. DEBT

NON-RECOURSE DEBT — The following table summarizes the carrying amount and terms of non-recourse debt at our subsidiaries as of the periods indicated (in millions):

NON-RECOURSE DEBT			Weighted Average Interest Rate						Maturity						December 31,
2020						2019
Variable Rate:
Bank loans			3.93%						2021 – 2050						$	3,494					$	3,389
Notes and bonds			3.11%						2023 – 2030						800						1,056
Debt to (or guaranteed by) multilateral, export credit agencies or development banks (1)			1.67%						2023 – 2033						457						460
Fixed Rate:
Bank loans			4.72%						2021 – 2040						2,965						2,900
Notes and bonds			5.20%						2021 – 2079						8,907						8,098
Debt to (or guaranteed by) multilateral, export credit agencies or development banks (1)			3.41%						2021 – 2023						34						1,110
Other			4.20%						2061						18						17
Unamortized (discount) premium & debt issuance (costs), net															(321)						(318)
Subtotal															$	16,354					$	16,712
Less: Current maturities (2)															(1,426)						(1,865)
Noncurrent maturities (2)															$	14,928					$	14,847

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(1) Multilateral loans include loans funded and guaranteed by bilaterals, multilaterals, development banks and other similar institutions.

(2) Excludes $4 million and $3 million (current) and $77 million and $67 million (noncurrent) finance lease liabilities included in the respective non-recourse debt line items on the Consolidated Balance Sheet as of December 31, 2020 and 2019, respectively. See Note 14—Leases for further information.

The interest rate on variable rate debt represents the total of a variable component that is based on changes in an interest rate index and of a fixed component. The Company has interest rate swaps and option agreements that economically fix the variable component of the interest rates on the portion of the variable rate debt being hedged in an aggregate notional principal amount of approximately $2 billion on non-recourse debt outstanding at December 31, 2020.

Non-recourse debt as of December 31, 2020 is scheduled to reach maturity as shown below (in millions):

December 31,			Annual Maturities
2021			$	1,439
2022			516
2023			1,017
2024			1,307
2025			996
Thereafter			11,400
Unamortized (discount) premium & debt issuance (costs), net			(321)
Total			$	16,354

As of December 31, 2020, AES subsidiaries with facilities under construction had a total of approximately $215 million of committed but unused credit facilities available to fund construction and other related costs. Excluding these facilities under construction, AES subsidiaries had approximately $868 million in various unused committed credit lines to support their working capital, debt service reserves and other business needs. These credit lines can be used for borrowings, letters of credit, or a combination of these uses.

154 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Significant transactions — During the year ended December 31, 2020, the Company's subsidiaries had the following significant debt transactions:

Subsidiary			Transaction Period						Issuances						Repayments						Gain (Loss) on Extinguishment of Debt
Southland (1)			Q1, Q2, Q4						$	283					$	(125)					$	(1)
AES Brasil			Q2, Q3, Q4						375						(1)						—
Gener			Q1, Q2						90						(8)						—
DPL (2)			Q2, Q3						555						(520)						(34)
IPALCO			Q2						475						(470)						(2)
Mong Duong			Q2						150						—						—
Panama (3)			Q3						1,485						(1,228)						(16)
Cochrane			Q3						485						(445)						(1)
Angamos			Q3						—						(309)						(5)

---

(1)Issuances relate to the June 2017 long-term non-recourse debt financing to fund the Southland repowering construction projects.

(2)Includes transactions at DPL and its subsidiary, DP&L.

(3)Repayments relate to existing obligations at AES Panama, Changuinola, and Colon.

Panama — In August 2020, AES Panama issued $1.4 billion aggregate principal of 4.375% senior secured notes and a $105 million term loan due in 2030 and 2023, respectively. The proceeds from the issuance were used to prepay $447 million, $171 million, and $610 million of outstanding indebtedness at AES Panama, Changuinola, and Colon, respectively. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $16 million.

Cochrane — In November 2019, Cochrane issued $430 million aggregate principal of 5.50% senior unsecured notes due in 2027 and entered into a $445 million 6.25% senior secured facility agreement due in 2034. The net proceeds from the issuance and draw down were used to prepay the outstanding principal of $833 million under its variable rate notes due in 2030. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $24 million.

In July 2020, Cochrane issued $485 million aggregate principal of 6.25% senior secured notes due in 2034. The net proceeds from the issuance were used to prepay the outstanding principal of $445 million plus accrued interest on its senior secured facility agreement executed in 2019.

DPL — In April 2019, DPL issued $400 million aggregate principal of 4.35% senior unsecured notes due in 2029. The net proceeds from the issuance were used to redeem $400 million of the $780 million aggregate principal outstanding of its 7.25% senior unsecured notes due in 2021. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $43 million.

In June 2020, DPL issued $415 million aggregate principal of 4.125% senior secured notes due in 2025. In July 2020, the net proceeds from the issuance were used to prepay the outstanding principal of $380 million of its 7.25% senior unsecured notes due in 2021. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $34 million.

IPALCO — In April 2020, IPALCO issued $475 million aggregate principal of 4.25% senior secured notes due in 2030. The net proceeds from the issuance were used to prepay the outstanding principal of $405 million of its 3.45% senior unsecured notes and a $65 million term loan both due in July 2020. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $2 million.

Gener — In March 2019, Gener issued $550 million aggregate principal of 7.125% senior unsecured notes due in 2079. The net proceeds from the issuance were used to purchase via tender offer the outstanding principal of $450 million of its 8.375% senior unsecured notes due in 2073.

In October 2019, Gener issued $450 million aggregate principal of 6.35% senior unsecured notes due in 2079. The net proceeds from the issuance were used to fund the acquisition of Los Cururos, purchase via tender offer $73 million and $55 million aggregate principal of its senior unsecured notes due in 2021 and 2025, respectively, and prepay the remaining outstanding principal of $119 million of its senior unsecured notes due in 2021. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $29 million.

Mong Duong — In August 2019, Mong Duong refinanced $1.1 billion aggregate principal of its existing senior secured notes due in 2029 with variable interest rates ranging from LIBOR + 2.25% to LIBOR + 4.15% in exchange for a fixed rate loan with a newly formed SPV, accounted for as an equity affiliate, due in 2029 with interest rates

155 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

that vary from 4.41% to 7.18%. This refinancing was a non-cash transaction as the SPV acquired all of the outstanding rights and obligations of the original Mong Duong lenders. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $31 million. As of December 31, 2020, Mong Duong met the held-for-sale criteria and the outstanding debt balances were reclassified to held-for-sale liabilities on the Consolidated Balance Sheet.

DP&L — In June 2019, DP&L issued $425 million aggregate principal of 3.95% First Mortgage Bonds due in 2049. The net proceeds from the issuance were used to prepay the outstanding principal of $435 million under its variable rate $445 million credit agreement due in 2022.

Non-Recourse Debt Covenants, Restrictions and Defaults — The terms of the Company's non-recourse debt include certain financial and nonfinancial covenants. These covenants are limited to subsidiary activity and vary among the subsidiaries. These covenants may include, but are not limited to, maintenance of certain reserves and financial ratios, minimum levels of working capital and limitations on incurring additional indebtedness.

As of December 31, 2020 and 2019, approximately $587 million and $372 million, respectively, of restricted cash was maintained in accordance with certain covenants of the non-recourse debt agreements, and these amounts were included within Restricted cash and Debt service reserves and other deposits in the accompanying Consolidated Balance Sheets.

Various lender and governmental provisions restrict the ability of certain of the Company's subsidiaries to transfer their net assets to the Parent Company. Such restricted net assets of subsidiaries amounted to approximately $1.7 billion at December 31, 2020.

The following table summarizes the Company's subsidiary non-recourse debt in default (in millions) as of December 31, 2020. Due to the defaults, these amounts are included in the current portion of non-recourse debt:

			Primary Nature of Default						December 31, 2020
Subsidiary			Debt in Default						Net Assets
AES Puerto Rico			Covenant						$	238					$	171
AES Ilumina (Puerto Rico)			Covenant						31						19
AES Jordan Solar			Covenant						7						1
Total									$	276

The above defaults are not payment defaults. In Puerto Rico, the subsidiary non-recourse debt defaults were triggered by failure to comply with covenants or other requirements contained in the non-recourse debt documents due to the bankruptcy of the offtaker.

The AES Corporation's recourse debt agreements include cross-default clauses that will trigger if a subsidiary or group of subsidiaries for which the non-recourse debt is in default provides 20% or more of the Parent Company's total cash distributions from businesses for the four most recently completed fiscal quarters. As of December 31, 2020, the Company had no defaults which resulted in or were at risk of triggering a cross-default under the recourse debt of the Parent Company. In the event the Parent Company is not in compliance with the financial covenants of its revolving credit facility, restricted payments will be limited to regular quarterly shareholder dividends at the then-prevailing rate. Payment defaults and bankruptcy defaults would preclude the making of any restricted payments.

156 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

RECOURSE DEBT — The following table summarizes the carrying amount and terms of recourse debt of the Company as of the periods indicated (in millions):

			Interest Rate						Final Maturity						December 31, 2020						December 31, 2019
Senior Unsecured Note			4.00%						2021						—						500
Senior Secured Term Loan			LIBOR + 1.75%						2022						—						18
Senior Unsecured Note			4.875%						2023						—						613
Senior Unsecured Note			4.50%						2023						—						500
Drawings on revolving credit facility			LIBOR + 1.75%						2024						70						180
Senior Unsecured Note			5.50%						2024						—						63
Senior Unsecured Note			5.50%						2025						—						544
Senior Unsecured Note			3.30%						2025						900						—
Senior Unsecured Note			6.00%						2026						—						500
Senior Unsecured Note			1.375%						2026						800						—
Senior Unsecured Note			5.125%						2027						—						500
Senior Unsecured Note			3.95%						2030						700						—
Senior Unsecured Note			2.45%						2031						1,000						—
Other (1)			CDI + 7.00%						2026						18						—
Unamortized (discount) premium & debt issuance (costs), net															(41)						(22)
Subtotal															$	3,447					$	3,396
Less: Current maturities															(1)						(5)
Noncurrent maturities															$	3,446					$	3,391

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(1)Represents project-level limited recourse debt at AES Holdings Brasil Ltda.

The following table summarizes the principal amounts due under our recourse debt for the next five years and thereafter (in millions):

December 31,			Net Principal Amounts Due
2021			$	1
2022			3
2023			3
2024			74
2025			903
Thereafter			2,504
Unamortized (discount) premium & debt issuance (costs), net			(41)
Total recourse debt			$	3,447

During the first quarter of 2020, the Company drew $840 million on revolving lines of credit at the Parent Company, of which approximately $250 million was used to enhance our liquidity position due to the uncertain economic conditions surrounding the COVID-19 pandemic, and the remaining $590 million was used for other general corporate purposes. During the remainder of 2020, the Parent Company drew an additional $755 million and repaid $1.5 billion on these revolving lines of credit. The entire $250 million related to the COVID-19 pandemic was repaid during the second quarter of 2020. As of December 31, 2020, we had approximately $70 million of outstanding indebtedness on the Parent Company credit facility at a weighted average interest rate of 1.86%.

In May 2020, the Company issued $900 million aggregate principal of 3.30% senior unsecured notes due in 2025 and $700 million of 3.95% senior unsecured notes due in 2030. The Company used the net proceeds from these issuances to purchase via tender offer a portion of the 4.00%, 4.50%, and 4.875% senior notes due in 2021, 2023, and 2023, respectively. Subsequent to the tender offers, the Company redeemed the remaining balance of its 4.00% and 4.875% senior notes due in 2021 and 2023, respectively, and $7 million of the remaining 4.50% senior notes due in 2023. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $37 million.

In December 2020, the Company issued $800 million aggregate principal of 1.375% senior unsecured notes due in 2026 and $1 billion aggregate principal of 2.45% senior unsecured notes due in 2031. The Company used the net proceeds from these issuances to purchase via tender offer the remaining balance of its 5.50%, 6.00%, and 5.125% senior notes due 2025, 2026, and 2027, respectively. Subsequent to the tender offers, the Company redeemed the remaining balance of its 4.50% and 5.50% notes due 2023 and 2024, respectively. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $108 million.

In September 2019, the Company prepaid $343 million aggregate principal of its LIBOR + 1.75% existing senior secured term loan due in 2022 and $100 million of its 4.875% senior unsecured notes due in 2023. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $5 million.

157 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Recourse Debt Covenants and Guarantees — The Company's obligations under the revolving credit facility and indentures governing the senior notes due 2025 and 2030 are currently unsecured following the achievement of two investment grade ratings and the release of security in accordance with the terms of the facility and the notes. If the Company’s credit rating falls below "Investment Grade" from at least two of Fitch Investors Service Inc., Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc., as determined in accordance with the terms of the revolving credit facility and indenture dated May 15, 2020 (BBB-, or in the case of Moody’s Investor Services, Inc. Baa3), then the obligations under the revolving credit facility and the indentures governing the senior notes due 2025 and 2030 become, subject to certain exceptions, secured by (i) all of the capital stock of domestic subsidiaries owned directly by the Company or certain subsidiaries and 65% of the capital stock of certain foreign subsidiaries owned directly by the Company and certain subsidiaries,and (ii) certain intercompany receivables, certain intercompany notes and certain intercompany tax sharing agreements.

The revolving credit facility is subject to mandatory prepayment under certain circumstances, including the sale of certain assets. In such a situation, a portion of the net cash proceeds from the sale must be applied pro rata to repay loans outstanding under the revolving credit facility and certain other indebtedness, if any, subject to customary reinvestment rights.

The revolving credit facility contains customary covenants and restrictions on the Company's ability to engage in certain activities, including, but not limited to, limitations on other indebtedness, liens, investments and guarantees; limitations on restricted payments such as shareholder dividends and equity repurchases; restrictions on mergers and acquisitions, sales of assets, leases, transactions with affiliates and off-balance sheet or derivative arrangements; and other financial reporting requirements.

The revolving credit facility also contains financial covenants, evaluated quarterly, requiring the Company to maintain a minimum ratio of adjusted operating cash flow to interest charges on recourse debt of 2.5 times and a maximum ratio of recourse debt to adjusted operating cash flow of 5.75 times.

The terms of the Company's senior notes contain certain customary covenants, including limitations on the Company's ability to incur liens or enter into sale and leaseback transactions.

12. COMMITMENTS

The Company enters into long-term contracts for construction projects, maintenance and service, transmission of electricity, operations services and purchases of electricity and fuel. In general, these contracts are subject to variable quantities or prices and are terminable only in limited circumstances. The following table shows the future minimum commitments for continuing operations under these contracts as of December 31, 2020 for 2021 through 2025 and thereafter as well as actual purchases under these contracts for the years ended December 31, 2020, 2019, and 2018 (in millions):

Actual purchases during the year ended December 31,			Electricity Purchase Contracts						Fuel Purchase Contracts						Other Purchase Contracts
2018			$	827					$	1,838					$	1,671
2019			1,597						1,824						1,684
2020			756						1,573						1,506
Future commitments for the year ending December 31,
2021			$	700					$	1,370					$	1,904
2022			500						815						636
2023			447						609						605
2024			434						495						570
2025			434						457						526
Thereafter			5,037						1,445						1,816
Total			$	7,552					$	5,191					$	6,057

13. CONTINGENCIES

Guarantees and Letters of Credit — In connection with certain project financings, acquisitions and dispositions, power purchases, and other agreements, the Parent Company has expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events. In the normal course of business, the Parent Company has entered into various agreements, mainly guarantees and letters of credit, to provide financial or performance assurance to third parties on behalf of AES businesses. These agreements are entered into primarily to support or enhance the creditworthiness otherwise achieved by a business on a stand-alone basis, thereby facilitating the availability of sufficient credit to accomplish

158 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

their intended business purposes. Most of the contingent obligations relate to future performance commitments which the Company or its businesses expect to fulfill within the normal course of business. The expiration dates of these guarantees vary from less than one year to no more than 15 years.

The following table summarizes the Parent Company's contingent contractual obligations as of December 31, 2020. Amounts presented in the following table represent the Parent Company's current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees. There were 5 obligations made by the Parent Company for the direct benefit of the lenders associated with the non-recourse debt of its businesses.

Contingent Contractual Obligations						Amount (in millions)						Number of Agreements						Maximum Exposure Range for Each Agreement (in millions)
Guarantees and commitments						$	1,358					69						$0 — 157
Letters of credit under the unsecured credit facilities						110						25						$0 — 56
Letters of credit under the revolving credit facility						77						17						$0 — 62
Surety bond						1						1						$1
Total						$	1,546					112

During the year ended December 31, 2020, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts of letters of credit.

Environmental — The Company periodically reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. For the periods ended December 31, 2020 and 2019, the Company recognized liabilities of $5 million and $4 million for projected environmental remediation costs, respectively. Due to the uncertainties associated with environmental assessment and remediation activities, future costs of compliance or remediation could be higher or lower than the amount currently accrued. Moreover, where no liability has been recognized, it is reasonably possible that the Company may be required to incur remediation costs or make expenditures in amounts that could be material but could not be estimated as of December 31, 2020. In aggregate, the Company estimates the range of potential losses related to environmental matters, where estimable, to be up to $12 million. The amounts considered reasonably possible do not include amounts accrued as discussed above.

Litigation — The Company is involved in certain claims, suits and legal proceedings in the normal course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has recognized aggregate liabilities for all claims of approximately $28 million and $55 million as of December 31, 2020 and 2019, respectively. These amounts are reported on the Consolidated Balance Sheets within Accrued and other liabilities and Other noncurrent liabilities. A significant portion of these accrued liabilities relate to regulatory matters and commercial disputes in international jurisdictions. There can be no assurance that these accrued liabilities will be adequate to cover all existing and future claims or that we will have the liquidity to pay such claims as they arise.

Where no accrued liability has been recognized, it is reasonably possible that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material but could not be estimated as of December 31, 2020. The material contingencies where a loss is reasonably possible primarily include disputes with offtakers, suppliers and EPC contractors; alleged breaches of contract; alleged violation of laws and regulations; income tax and non-income tax matters with tax authorities; and regulatory matters. In aggregate, the Company estimates the range of potential losses, where estimable, related to these reasonably possible material contingencies to be between $245 million and $933 million. The amounts considered reasonably possible do not include the amounts accrued, as discussed above. These material contingencies do not include income tax-related contingencies which are considered part of our uncertain tax positions.

Tietê GSF Settlement — In December 2020, ANEEL published a regulation establishing the terms and conditions for compensation to Tietê for the non-hydrological risk charged to hydro generators through the incorrect application of the GSF mechanism from 2013 until 2018. In accordance with the regulation, this compensation will be in the form of a concession extension period of approximately 2.6 years. As a result, the previously recognized contingent liabilities related to GSF payments were updated to reflect the Company's best estimate for the fair value of compensation to be received from the concession extension offered in conjunction with the regulation. This compensation was estimated to have a fair value of $184 million, and was recorded as a reversal of Non-Regulated Cost of Sales on the Consolidated Statements of Operations. The concession extension also met the criteria for

159 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

recognition as a definite-lived intangible asset, which will be amortized from the date of the agreement until the end of the new concession period. The value of the concession extension is based on a preliminary time-value equivalent calculation made by the CCEE and subsequent adjustments requested by Tietê, which has been determined to be fair value. Both the concession extension period and its equivalent asset value are subject to a final agreement between ANEEL and AES.

14. LEASES

LESSEE — Right-of-use assets are long-term by nature. The following table summarizes the amounts recognized on the Consolidated Balance Sheets related to lease asset and liability balances as of the periods indicated (in millions):

						Consolidated Balance Sheet Classification						December 31, 2020									December 31, 2019
Assets
Right-of-use assets — finance leases						Electric generation, distribution assets and other						$	74								$	67
Right-of-use assets — operating leases						Other noncurrent assets						275									248
Total right-of-use assets												$	349								$	315
Liabilities
Finance lease liabilities (current)						Non-recourse debt (current liabilities)						$	4								$	3
Finance lease liabilities (noncurrent)						Non-recourse debt (noncurrent liabilities)						77									67
Total finance lease liabilities												81									70
Operating lease liabilities (current)						Accrued and other liabilities						17									16
Operating lease liabilities (noncurrent)						Other noncurrent liabilities						293									261
Total operating lease liabilities												310									277
Total lease liabilities												$	391								$	347

The following table summarizes supplemental balance sheet information related to leases as of the periods indicated:

Lease Term and Discount Rate			December 31, 2020						December 31, 2019
Weighted-average remaining lease term — finance leases			31 years						32 years
Weighted-average remaining lease term — operating leases			23 years						23 years
Weighted-average discount rate — finance leases			4.11		%				4.99		%
Weighted-average discount rate — operating leases			6.81		%				6.99		%

The following table summarizes the components of lease expense recognized in Cost of Sales on the Consolidated Statements of Operations for the years ended (in millions):

			Twelve Months Ended December 31,
Components of Lease Cost			2020						2019
Operating lease cost			$	36					$	46
Finance lease cost:
Amortization of right-of-use assets			3						2
Interest on lease liabilities			4						2
Short-term lease costs			13						38
Variable lease cost			—						1
Total lease cost			$	56					$	89

Operating cash outflows from operating leases included in the measurement of lease liabilities were $41 million and $48 million for the twelve months ended December 31, 2020 and 2019, respectively, and operating cash outflows from finance leases were $2 million for the twelve months ended December 31, 2020. Right-of-use assets obtained in exchange for new operating lease liabilities were $37 million for the twelve months ended December 31, 2020.

160 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table shows the future lease payments under operating and finance leases for continuing operations together with the present value of the net lease payments as of December 31, 2020 for 2021 through 2025 and thereafter (in millions):

			Maturity of Lease Liabilities
			Finance Leases						Operating Leases
2021			$	5					$	29
2022			5						29
2023			5						28
2024			4						27
2025			4						25
Thereafter			134						507
Total			157						645
Less: Imputed interest			(76)						(335)
Present value of lease payments			$	81					$	310

LESSOR — The Company has operating leases for certain generation contracts that contain provisions to provide capacity to a customer, which is a stand-ready obligation to deliver energy when required by the customer. Capacity payments are generally considered lease elements as they cover the majority of available output from a facility. The allocation of contract payments between the lease and non-lease elements is made at the inception of the lease. Lease payments from such contracts are recognized as lease revenue on a straight-line basis over the lease term, whereas variable lease payments are recognized when earned.

The following table presents lease revenue from operating leases in which the Company is the lessor for the periods indicated (in millions):

									Twelve Months Ended December 31,
Lease Income															2020						2019
Total Lease Revenue															$	580					$	600
Less: Variable Lease Payments															66						70
Total Non-Variable Lease Revenue															$	514					$	530

The following table presents the underlying gross assets and accumulated depreciation of operating leases included in Property, Plant and Equipment for the periods indicated (in millions):

						Twelve Months Ended December 31,
Lease Income						2020						2019
Gross Assets						$	3,103					$	2,909
Accumulated Depreciation						1,011						707
Net Assets						$	2,092					$	2,202

The option to extend or terminate a lease is based on customary early termination provisions in the contract, such as payment defaults, bankruptcy, and lack of performance on energy delivery. The Company has not recognized any early terminations as of December 31, 2020. Certain leases may provide for variable lease payments based on usage or index-based (e.g., the U.S. Consumer Price Index) adjustments to lease payments.

The following table shows the future lease receipts as of December 31, 2020 for 2021 through 2025 and thereafter (in millions):

			Future Cash Receipts for
			Sales-Type Leases						Operating Leases
2021			$	2					$	489
2022			2						475
2023			3						411
2024			3						412
2025			3						412
Thereafter			39						1,034
Total			52						$	3,233
Less: Imputed interest			(24)
Present value of total lease receipts			$	28

Battery Storage Lease Arrangements — The Company is constructing and operating projects that pair BESS with solar energy systems, which allows the project more flexibility on when to provide energy to the grid. The Company will enter into PPAs for the full output of the facility that allow customers the ability to determine when to charge and discharge the BESS. These arrangements include both lease and non-lease elements under ASC 842, with the BESS component constituting a sales-type lease. Upon commencement of the lease, the book value of the

161 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

leased asset is removed from the balance sheet and a net investment in sales-type lease is recognized based on the present value of fixed payments under the contract and the residual value of the underlying asset. Due to the variable nature of lease payments under these contracts, the Company recorded losses at commencement of sales-type leases of $36 million for the year ended December 31, 2019. These amounts are recognized in Other expense in the Consolidated Statement of Operations. See Note 21—Other Income and Expense for further information. The Company recognized lease income on sales-type leases through variable payments of $5 million and interest income of $2 million for the year ended December 31, 2020.

15. BENEFIT PLANS

Defined Contribution Plan — The Company sponsors four defined contribution plans ("the DC Plans"). Two plans cover U.S. non-union employees; one for Parent Company and certain US and Utilities SBU business employees, and one for DPL employees. The remaining two plans include union and non-union employees at IPL and union employees at DPL. The DC Plans are qualified under section 401 of the Internal Revenue Code. Most U.S. employees of the Company are eligible to participate in the appropriate plan except for those employees who are covered by a collective bargaining agreement, unless such agreement specifically provides that the employee is considered an eligible employee under a plan. Within the DC Plans, the Company provides matching contributions in addition to other non-matching contributions. Participants are fully vested in their own contributions. The Company's contributions vest over various time periods ranging from immediate up to five years. For the years ended December 31, 2020, 2019 and 2018, costs for defined contribution plans were approximately $21 million, $19 million and $21 million, respectively.

Defined Benefit Plans — Certain of the Company's subsidiaries have defined benefit pension plans covering substantially all of their respective employees ("the DB Plans"). Pension benefits are based on years of credited service, age of the participant, and average earnings. Of the 28 active DB Plans as of December 31, 2020, five are at U.S. subsidiaries and the remaining plans are at foreign subsidiaries.

The following table reconciles the Company's funded status, both domestic and foreign, as of the periods indicated (in millions):

						2020												2019
						U.S.						Foreign						U.S.						Foreign
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation as of January 1						$	1,242					$	224					$	1,118					$	417
Service cost						12						6						11						8
Interest cost						35						14						44						19
Employee contributions						—						—						—						—
Plan amendments						1						—						—						—
Plan curtailments						—						(6)						—						—
Plan settlements						—						—						—						—
Benefits paid						(81)						(9)						(65)						(9)
Plan combinations						—						—						—						—
Divestitures						—						—						—						(244)
Actuarial (gain) loss						122						19						134						37
Effect of foreign currency exchange rate changes						—						(30)						—						(4)
Benefit obligation as of December 31						$	1,331					$	218					$	1,242					$	224
CHANGE IN PLAN ASSETS:
Fair value of plan assets as of January 1						$	1,154					$	129					$	1,026					$	410
Actual return on plan assets						168						13						185						19
Employer contributions						8						5						8						5
Employee contributions						—						—						—						—
Plan settlements						—						—						—						—
Benefits paid						(81)						(9)						(65)						(9)
Divestitures						—						—						—						(296)
Effect of foreign currency exchange rate changes						—						(26)						—						—
Fair value of plan assets as of December 31						$	1,249					$	112					$	1,154					$	129
RECONCILIATION OF FUNDED STATUS
Funded status as of December 31						$	(82)					$	(106)					$	(88)					$	(95)

162 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table summarizes the amounts recognized on the Consolidated Balance Sheets related to the funded status of the DB Plans, both domestic and foreign, as of the periods indicated (in millions):

December 31,						2020												2019
Amounts Recognized on the Consolidated Balance Sheets						U.S.						Foreign						U.S.						Foreign
Noncurrent assets						$	9					$	—					$	—					$	—
Accrued benefit liability—current						—						(8)						—						(7)
Accrued benefit liability—noncurrent						(91)						(98)						(88)						(88)
Net amount recognized at end of year						$	(82)					$	(106)					$	(88)					$	(95)

The following table summarizes the Company's U.S. and foreign accumulated benefit obligation as of the periods indicated (in millions):

December 31,			2020												2019
			U.S.						Foreign						U.S.						Foreign
Accumulated Benefit Obligation			$	1,306					$	199					$	1,224					$	188
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation			$	494					$	218					$	1,242					$	197
Accumulated benefit obligation			481						199						1,224						178
Fair value of plan assets			403						112						1,154						114
Information for pension plans with a projected benefit obligation in excess of plan assets:
Projected benefit obligation			$	494					$	218					$	1,242					$	224
Fair value of plan assets			403						112						1,154						129

The following table summarizes the significant weighted average assumptions used in the calculation of benefit obligation and net periodic benefit cost, both domestic and foreign, as of the periods indicated:

December 31,						2020												2019
						U.S.						Foreign						U.S.						Foreign
Benefit Obligation:			Discount rate			2.45		%				7.53		%				3.32		%				7.58		%
			Rate of compensation increase			2.75		%				5.69		%				3.33		%				6.11		%
Periodic Benefit Cost:			Discount rate			3.32		%				7.58		%	(1)			4.35		%				5.62		%	(1)
			Expected long-term rate of return on plan assets			5.24		%				7.18		%				5.08		%				4.10		%
			Rate of compensation increase			2.86		%				6.13		%				3.34		%				4.78		%

---

(1)Includes an inflation factor that is used to calculate future periodic benefit cost, but is not used to calculate the benefit obligation.

The Company establishes its estimated long-term return on plan assets considering various factors, which include the targeted asset allocation percentages, historic returns, and expected future returns.

The measurement of pension obligations, costs, and liabilities is dependent on a variety of assumptions. These assumptions include estimates of the present value of projected future pension payments to all plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. These assumptions may have an effect on the amount and timing of future contributions.

The assumptions used in developing the required estimates include the following key factors: discount rates, salary growth, retirement rates, inflation, expected return on plan assets, and mortality rates. The effects of actual results differing from the Company's assumptions are accumulated and amortized over future periods and, therefore, generally affect the Company's recognized expense in such future periods. Unrecognized gains or losses are amortized using the “corridor approach,” under which the net gain or loss in excess of 10% of the greater of the projected benefit obligation or the market-related value of the assets, if applicable, is amortized.

Sensitivity of the Company's pension funded status to the indicated increase or decrease in the discount rate and long-term rate of return on plan assets assumptions is shown below. Note that these sensitivities may be asymmetric and are specific to the base conditions at year-end 2020. They also may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown. The funded status as of December 31, 2020 is affected by the assumptions as of that date. Pension expense for 2020 is affected by the December 31, 2019 assumptions. The impact on pension expense from a one percentage point change in these assumptions is shown in the following table (in millions):

Increase of 1% in the discount rate						$	(9)
Decrease of 1% in the discount rate						6
Increase of 1% in the long-term rate of return on plan assets						(12)
Decrease of 1% in the long-term rate of return on plan assets						12

163 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table summarizes the components of the net periodic benefit cost, both domestic and foreign, for the years indicated (in millions):

December 31,						2020												2019												2018
Components of Net Periodic Benefit Cost:						U.S.						Foreign						U.S.						Foreign						U.S.						Foreign
Service cost						$	12					$	6					$	11					$	8					$	15					$	12
Interest cost						35						14						44						19						40						22
Expected return on plan assets						(58)						(7)						(52)						(14)						(64)						(17)
Amortization of prior service cost						5						—						5						—						5						—
Amortization of net loss						14						2						15						1						18						3
Curtailment loss recognized						—						—						—						—						1						—
Settlement loss recognized						—						—						—						—						—						4
Total pension cost						$	8					$	15					$	23					$	14					$	15					$	24

The following table summarizes the amounts reflected in AOCL, including AOCL attributable to noncontrolling interests, on the Consolidated Balance Sheet as of December 31, 2020, that have not yet been recognized as components of net periodic benefit cost (in millions):

December 31, 2020			Accumulated Other Comprehensive Income (Loss)
			U.S.						Foreign
Prior service cost			$	(3)					$	1
Unrecognized net actuarial loss			(34)						(69)
Total			$	(37)					$	(68)

The following table summarizes the Company's target allocation for 2020 and pension plan asset allocation, both domestic and foreign, as of the periods indicated:

															Percentage of Plan Assets as of December 31,
			Target Allocations												2020												2019
Asset Category			U.S.						Foreign						U.S.						Foreign						U.S.						Foreign
Equity securities			41%						13%						43.79		%				14.85		%				32.22		%				15.37		%
Debt securities			57%						82%						55.87		%				82.30		%				67.17		%				81.67		%
Real estate			2%						2%						—		%				1.12		%				0.22		%				1.16		%
Other			—%						3%						0.34		%				1.73		%				0.39		%				1.80		%
Total pension assets															100.00		%				100.00		%				100.00		%				100.00		%

The U.S. DB Plans seek to achieve the following long-term investment objectives:

• maintenance of sufficient income and liquidity to pay retirement benefits and other lump sum payments;

• long-term rate of return in excess of the annualized inflation rate;

• long-term rate of return, net of relevant fees, that meets or exceeds the assumed actuarial rate; and

• long-term competitive rate of return on investments, net of expenses, that equals or exceeds various benchmark rates.

The asset allocation is reviewed periodically to determine a suitable asset allocation which seeks to manage risk through portfolio diversification and takes into account the above-stated objectives, in conjunction with current funding levels, cash flow conditions, and economic and industry trends. The following table summarizes the Company's U.S. DB Plan assets by category of investment and level within the fair value hierarchy as of the periods indicated (in millions):

						December 31, 2020																								December 31, 2019
U.S. Plans						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Equity securities: (2)			Mutual funds			$	—					$	547					$	—					$	547					$	—					$	372					$	—					$	372
Debt securities: (2)			Mutual funds (1)			—						698						—						698						—						775						—						775
Real estate: (2)			Real estate			—						—						—						—						—						3						—						3
Other:			Cash and cash equivalents			4						—						—						4						4						—						—						4
			Total plan assets			$	4					$	1,245					$	—					$	1,249					$	4					$	1,150					$	—					$	1,154

---

(1)Mutual funds categorized as debt securities consist of mutual funds for which debt securities are the primary underlying investment.

(2)In 2019, the U.S. plans moved all investments except cash and cash equivalents into collective trusts; therefore, the balances under the equity securities, debt securities, and real estate categories shown above represent investments through collective trusts. The plans have chosen collective trusts for which the underlying investments are mutual funds, mutual funds for which debt securities are the primary underlying investment, or real estate in alignment with the target asset allocation.

164 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The investment strategy of the foreign DB Plans seeks to maximize return on investment while minimizing risk. The assumed asset allocation has less exposure to equities in order to closely match market conditions and near term forecasts. The following table summarizes the Company's foreign DB plan assets by category of investment and level within the fair value hierarchy as of the periods indicated (in millions):

						December 31, 2020																								December 31, 2019
Foreign Plans						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Equity securities:			Mutual funds			$	16					$	—					$	—					$	16					$	19					$	—					$	—					$	19
			Private equity			—						—						1						1						—						—						1						1
Debt securities:			Government debt securities			—						—						—						—						—						—						—						—
			Mutual funds (1)			18						74						—						92						17						88						—						105
Real estate:			Real estate			—						—						1						1						—						—						2						2
Other:			Cash and cash equivalents			—						—						—						—						—						—						—						—
			Other assets			1						—						1						2						1						—						1						2
			Total plan assets			$	35					$	74					$	3					$	112					$	37					$	88					$	4					$	129

---

(1)Mutual funds categorized as debt securities consist of mutual funds for which debt securities are the primary underlying investment.

The following table summarizes the estimated cash flows for U.S. and foreign expected employer contributions and expected future benefit payments, both domestic and foreign (in millions):

						U.S.						Foreign
Expected employer contribution in 2021						$	8					$	15
Expected benefit payments for fiscal year ending:
2021						70						15
2022						71						13
2023						71						14
2024						71						16
2025						72						17
2026 - 2030						354						105

16. REDEEMABLE STOCK OF SUBSIDIARIES

The following table is a reconciliation of changes in redeemable stock of subsidiaries (in millions):

December 31,			2020						2019
Balance at the beginning of the period			$	888					$	879
Contributions from holders of redeemable stock of subsidiaries			—						10
Net income (loss) attributable to redeemable stock of subsidiaries			8						(7)
Fair value adjustment			4						6
Other comprehensive loss attributable to redeemable stock of subsidiaries			(28)						—
Balance at the end of the period			$	872					$	888

The following table summarizes the Company's redeemable stock of subsidiaries balances as of the periods indicated (in millions):

December 31,						2020						2019
IPALCO common stock						$	618					$	618
Colon quotas (1)						194						210
IPL preferred stock						60						60
Total redeemable stock of subsidiaries						$	872					$	888

---

(1)Characteristics of quotas are similar to common stock.

Colon — Our partner in Colon made capital contributions of $10 million during the year ended December 31, 2019. No contributions were made in 2020. Any subsequent adjustments to allocate earnings and dividends to our partner, or measure the investment at fair value, will be classified as temporary equity each reporting period as it is probable that the shares will become redeemable.

IPL — IPL had $60 million of cumulative preferred stock outstanding at December 31, 2020 and 2019, which represents five series of preferred stock. The total annual dividend requirements were approximately $3 million at December 31, 2020 and 2019. Certain series of the preferred stock were redeemable solely at the option of the issuer at prices between $100 and $118 per share. Holders of the preferred stock are entitled to elect a majority of IPL's board of directors if IPL has not paid dividends to its preferred stockholders for four consecutive quarters. Based on the preferred stockholders' ability to elect a majority of IPL's board of directors in this circumstance, the

165 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

redemption of the preferred shares is considered to be not solely within the control of the issuer and the preferred stock is considered temporary equity.

17. EQUITY

Equity Transactions with Noncontrolling Interests

Southland Energy — In November 2020, the Company completed the sale of 35% of its ownership interest in the Southland Energy assets for $424 million, which decreased the Company's economic interest to 65%. However, under the terms of the purchase and sale agreement, the Company is entitled to all earnings or losses until March 1, 2021, and any distributions related thereto. This transaction resulted in a $275 million increase in Parent Company Stockholder's Equity due to an increase in additional paid-in-capital of $266 million, net of tax and transaction costs, and the reclassification of accumulated other comprehensive losses from AOCL to NCI of $9 million. As the Company maintained control after the sale, Southland Energy continues to be consolidated by the Company within the US and Utilities SBU reportable segment.

Cochrane — In September 2020, AES Gener completed the sale of a portion of its stake in Cochrane. The transaction included the issuance of preferred shares and the sale of 5% of its stake in the subsidiary for $113 million, which decreased the Company’s economic interest in Cochrane to 38%. The preferred shareholders have the preferential right to receive an annual amount equal to $12 million, from any dividends or distributions of capital, until reaching the original investment of $113 million plus a specified rate of return. In November 2020, Cochrane distributed $12 million to the preferred shareholders. As the Company maintained control after the sale, Cochrane continues to be consolidated by the Company within the South America SBU reportable segment.

AES Brasil — In August 2020, AES Holdings Brasil Ltda. ("AHB") completed the acquisition of an additional 18.5% ownership in AES Brasil for $240 million. During the fourth quarter of 2020*,* through multiple transactions, AHB acquired another 1.3% ownership in AES Brasil for $16 million. In aggregate, these transactions increased the Company’s economic interest in AES Brasil to 44.1% and resulted in a $214 million decrease in Parent Company Stockholders’ Equity due to a decrease in additional paid-in-capital of $94 million and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $120 million. AES Brasil is reported in the South America SBU reportable segment.

Distributed Energy — In 2020, 2019 and 2018, Distributed Energy, through multiple transactions, sold noncontrolling interests in multiple project companies to tax equity partners. These transactions resulted in a $144 million, $133 million, and $98 million increase to noncontrolling interest in 2020, 2019, and 2018 respectively. Distributed Energy is reported in the US and Utilities SBU reportable segment.

The following table summarizes the net income attributable to The AES Corporation and all transfers (to) from noncontrolling interests for the periods indicated (in millions):

						December 31,
						2020						2019						2018
Net income attributable to The AES Corporation						$	46					$	303					$	1,203
Transfers from noncontrolling interest:
Increase (decrease) in The AES Corporation's paid-in capital for sale of subsidiary shares						260						(5)						(3)
Increase (decrease) in The AES Corporation's paid-in-capital for purchase of subsidiary shares						(89)						—						—
Net transfers (to) from noncontrolling interest						171						(5)						(3)
Change from net income attributable to The AES Corporation and transfers (to) from noncontrolling interests						$	217					$	298					$	1,200

166 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Accumulated Other Comprehensive Loss — The changes in AOCL by component, net of tax and noncontrolling interests, for the periods indicated were as follows (in millions):

			Foreign currency translation adjustment, net						Derivative gains (losses), net						Unfunded pension obligations, net						Total
Balance at December 31, 2018			$	(1,721)					$	(300)					$	(50)					$	(2,071)
Other comprehensive loss before reclassifications			(23)						(202)						(15)						(240)
Amount reclassified to earnings			23						36						27						86
Other comprehensive income (loss)			—						(166)						12						(154)
Cumulative effect of a change in accounting principle			—						(4)						—						(4)
Balance at December 31, 2019			$	(1,721)					$	(470)					$	(38)					$	(2,229)
Other comprehensive loss before reclassifications			—						(309)						(12)						(321)
Amount reclassified to earnings			192						72						—						264
Other comprehensive income (loss)			192						(237)						(12)						(57)
Reclassification from NCI due to share sales and repurchases			(115)						8						(4)						(111)
Balance at December 31, 2020			$	(1,644)					$	(699)					$	(54)					$	(2,397)

Reclassifications out of AOCL are presented in the following table. Amounts for the periods indicated are in millions and those in parenthesis indicate debits to the Consolidated Statements of Operations:

Details About												December 31,
AOCL Components						Affected Line Item in the Consolidated Statements of Operations						2020						2019						2018
Foreign currency translation adjustments, net
						Gain (loss) on disposal and sale of business interests						$	(192)					$	(23)					$	19
						Net gain from disposal of discontinued operations						—						—						2
						Net income (loss) attributable to The AES Corporation						$	(192)					$	(23)					$	21
Derivative gains (losses), net
						Non-regulated revenue						$	(1)					$	(1)					$	(6)
						Non-regulated cost of sales						(3)						(12)						(3)
						Interest expense						(60)						(26)						(49)
						Gain (loss) on disposal and sale of business interests						—						1						—
						Asset impairment expense						(10)						—						—
						Foreign currency transaction gains (losses)						(7)						(12)						(59)
						Income (loss) from continuing operations before taxes and equity in earnings of affiliates						(81)						(50)						(117)
						Income tax benefit (expense)						17						13						24
						Net equity in earnings (losses) of affiliates						(10)						(5)						—
						Income (loss) from continuing operations						(74)						(42)						(93)
						Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries						2						6						15
						Net income (loss) attributable to The AES Corporation						$	(72)					$	(36)					$	(78)
Amortization of defined benefit pension actuarial losses, net
						Regulated cost of sales						$	(1)					$	—					$	—
						Non-regulated cost of sales						1						—						—
						Other expense						—						(2)						(6)
						Gain (loss) on disposal and sale of business interests						—						(26)						—
						Income (loss) from continuing operations before taxes and equity in earnings of affiliates						—						(28)						(6)
						Income tax benefit (expense)						—						—						2
						Income (loss) from continuing operations						—						(28)						(4)
						Net gain (loss) from disposal of discontinued operations						—						—						(2)
						Net income (loss)						—						(28)						(6)
						Less: Income from continuing operations attributable to noncontrolling interests and redeemable stock of subsidiaries						—						1						(1)
						Net income (loss) attributable to The AES Corporation						$	—					$	(27)					$	(7)
Total reclassifications for the period, net of income tax and noncontrolling interests												$	(264)					$	(86)					$	(64)

Common Stock Dividends — The Parent Company paid dividends of $0.1433 per outstanding share to its common stockholders during the first, second, third and fourth quarters of 2020 for dividends declared in December 2019, February 2020, July 2020, and October 2020, respectively.

On December 4, 2020, the Board of Directors declared a quarterly common stock dividend of $0.1505 per share payable on February 12, 2021 to shareholders of record at the close of business on January 29, 2021.

Stock Repurchase Program — No shares were repurchased in 2020. The cumulative repurchases from the commencement of the Stock Repurchase Program in July 2010 through December 31, 2020 totaled 154.3 million shares for a total cost of $1.9 billion, at an average price per share of $12.12 (including a nominal amount of

167 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

commissions). As of December 31, 2020, $264 million remained available for repurchase under the Stock Repurchase Program.

The common stock repurchased has been classified as treasury stock and accounted for using the cost method. A total of 153,028,526 and 153,891,260 shares were held as treasury stock at December 31, 2020 and December 31, 2019, respectively. Restricted stock units under the Company's employee benefit plans are issued from treasury stock. The Company has not retired any common stock repurchased since it began the Stock Repurchase Program in July 2010.

18. SEGMENTS AND GEOGRAPHIC INFORMATION

The segment reporting structure uses the Company's management reporting structure as its foundation to reflect how the Company manages the businesses internally and is mainly organized by geographic regions which provides a socio-political-economic understanding of our business. The management reporting structure is organized by four SBUs led by our President and Chief Executive Officer: US and Utilities, South America, MCAC, and Eurasia SBUs. Using the accounting guidance on segment reporting, the Company determined that its four operating segments are aligned with its four reportable segments corresponding to its SBUs.

Corporate and Other — Included in "Corporate and Other" are the results of the AES self-insurance company and certain equity affiliates, corporate overhead costs which are not directly associated with the operations of our four reportable segments, and certain intercompany charges such as self-insurance premiums which are fully eliminated in consolidation.

The Company uses Adjusted PTC as its primary segment performance measure. Adjusted PTC, a non-GAAP measure, is defined by the Company as pre-tax income from continuing operations attributable to The AES Corporation excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; (f) costs directly associated with a major restructuring program, including, but not limited to, workforce reduction efforts, relocations, and office consolidation; and (g) net gains at Angamos, one of our businesses in the South America SBU, associated with the early contract terminations with Minera Escondida and Minera Spence. Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis adjusted for the same gains or losses excluded from consolidated entities. The Company has concluded Adjusted PTC better reflects the underlying business performance of the Company and is the most relevant measure considered in the Company's internal evaluation of the financial performance of its segments. Additionally, given its large number of businesses and complexity, the Company concluded that Adjusted PTC is a more transparent measure that better assists investors in determining which businesses have the greatest impact on the Company's results.

Revenue and Adjusted PTC are presented before inter-segment eliminations, which includes the effect of intercompany transactions with other segments except for interest, charges for certain management fees, and the write-off of intercompany balances, as applicable. All intra-segment activity has been eliminated within the segment. Inter-segment activity has been eliminated within the total consolidated results.

The following tables present financial information by segment for the periods indicated (in millions):

			Total Revenue
Year Ended December 31,			2020						2019						2018
US and Utilities SBU			$	3,918					$	4,058					$	4,230
South America SBU			3,159						3,208						3,533
MCAC SBU			1,766						1,882						1,728
Eurasia SBU			828						1,047						1,255
Corporate and Other			231						46						41
Eliminations			(242)						(52)						(51)
Total Revenue			$	9,660					$	10,189					$	10,736

168 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Reconciliation from Income from Continuing Operations before Taxes and Equity in Earnings of Affiliates:			Total Adjusted PTC
Year Ended December 31,			2020						2019						2018
Income from continuing operations before taxes and equity in earnings of affiliates			$	488					$	1,001					$	2,018
Add: Net equity in earnings (losses) of affiliates			(123)						(172)						39
Less: Income from continuing operations before taxes, attributable to noncontrolling interests			(192)						(277)						(509)
Pre-tax contribution			173						552						1,548
Unrealized derivative and equity securities losses (gains)			3						113						33
Unrealized foreign currency losses (gains)			(10)						36						51
Disposition/acquisition losses (gains)			112						12						(934)
Impairment losses			928						406						307
Loss on extinguishment of debt			223						121						180
Net gains from early contract terminations at Angamos			(182)						—						—
Total Adjusted PTC			$	1,247					$	1,240					$	1,185

			Total Adjusted PTC
Year Ended December 31,			2020						2019						2018
US and Utilities SBU			$	505					$	569					$	511
South America SBU			534						504						519
MCAC SBU			287						367						300
Eurasia SBU			177						159						222
Corporate and Other			(256)						(347)						(346)
Eliminations			—						(12)						(21)
Total Adjusted PTC			$	1,247					$	1,240					$	1,185

			Total Assets																		Depreciation and Amortization																		Capital Expenditures
Year Ended December 31,			2020						2019						2018						2020						2019						2018						2020						2019						2018
US and Utilities SBU			$	14,464					$	13,334					$	12,286					$	534					$	465					$	449					$	1,099					$	1,484					$	1,373
South America SBU			11,329						11,314						10,941						294						315						300						650						692						662
MCAC SBU			4,847						4,770						4,462						164						183						141						183						344						302
Eurasia SBU			3,621						3,990						4,538						63						67						99						9						30						51
Corporate and Other			342						240						294						13						15						14						19						1						8
Total			$	34,603					$	33,648					$	32,521					$	1,068					$	1,045					$	1,003					$	1,960					$	2,551					$	2,396

			Interest Income																		Interest Expense
Year Ended December 31,			2020						2019						2018						2020						2019						2018
US and Utilities SBU			$	17					$	18					$	10					$	371					$	301					$	287
South America SBU			64						95						92						237						285						283
MCAC SBU			14						22						20						157						142						124
Eurasia SBU			171						180						186						113						127						145
Corporate and Other			2						3						2						160						195						217
Total			$	268					$	318					$	310					$	1,038					$	1,050					$	1,056

			Investments in and Advances to Affiliates																		Net Equity in Earnings (Losses) of Affiliates
Year Ended December 31,			2020						2019						2018						2020						2019						2018
US and Utilities SBU			$	568					$	465					$	538					$	(8)					$	11					$	35
South America SBU			13						77						213						(80)						(129)						15
MCAC SBU			168						107						5						(11)						(13)						(7)
Eurasia SBU			1						215						293						4						(9)						14
Corporate and Other			85						102						65						(28)						(32)						(18)
Total			$	835					$	966					$	1,114					$	(123)					$	(172)					$	39

169 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table presents information, by country, about the Company's consolidated operations for each of the three years ended December 31, 2020, 2019, and 2018, and as of December 31, 2020 and 2019 (in millions). Revenue is recorded in the country in which it is earned and assets are recorded in the country in which they are located.

			Total Revenue																		Long-Lived Assets (1)
Year Ended December 31,			2020						2019						2018						2020						2019
United States (2)			$	3,243					$	3,230					$	3,462					$	10,360					$	9,762
Non-U.S.:
Chile			2,092						1,839						2,087						5,831						5,982
Dominican Republic			896						877						884						843						1,006
El Salvador			666						824						768						361						351
Panama			519						601						438						1,939						1,945
Bulgaria			444						459						426						1,149						1,106
Brazil			401						525						527						1,091						1,266
Colombia			358						472						428						355						340
Mexico			349						402						399						623						649
Argentina			308						373						487						484						393
Vietnam (3)			285						343						245						—						2
Jordan (4)			96						95						95						44						—
United Kingdom (5)			—						147						390						—						—
Philippines (6)			—						—						93						—						—
Other Non-U.S.			3						2						7						23						20
Total Non-U.S.			6,417						6,959						7,274						12,743						13,060
Total			$	9,660					$	10,189					$	10,736					$	23,103					$	22,822

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(1) For purposes of this disclosure, long-lived assets implies hard assets that cannot be readily removed, and thus excludes intangibles. Long-lived assets disclosed above include amounts recorded in Property, plant and equipment, net and right-of-use assets for operating leases recorded in Other noncurrent assets on the Consolidated Balance Sheets.

(2) Includes Puerto Rico revenues of $298 million, $294 million, and $257 million for the years ended December 31, 2020, 2019, and 2018, respectively, and long-lived assets of $533 million and $538 million as of December 31, 2020 and 2019, respectively.

(3) The Mong Duong 2 power project is operated under a BOT contract. Future expected payments for the construction performance obligation are recognized in Loan receivable on the Consolidated Balance Sheets as of December 31, 2019. Mong Duong assets were classified as held-for-sale as of December 31, 2020. See Notes 20—Revenue and 25—Held-For-Sale and Dispositions for further information.

(4) The long-lived assets in Jordan were classified as held-for-sale as of December 31, 2019. As of June 30, 2020, Jordan solar assets were reclassified back to held-and-used. See Note 25—Held-For-Sale and Dispositions for further information.

(5) The Kilroot and Ballylumford long-lived assets were deconsolidated upon completion of the sale in June 2019. See Note 25—Held-For-Sale and Dispositions for further information.

(6) The Masinloc long-lived assets were deconsolidated upon completion of the sale in March 2018. See Note 25—Held-For-Sale and Dispositions for further information.

19. SHARE-BASED COMPENSATION

RESTRICTED STOCK

Restricted Stock Units — The Company issues RSUs under its long-term compensation plan. The RSUs are generally granted based upon a percentage of the participant's base salary. The units have a three-year vesting schedule and vest in one-third increments over the three-year period. In all circumstances, RSUs granted by AES do not entitle the holder the right, or obligate AES, to settle the RSU in cash or other assets of AES.

For the years ended December 31, 2020, 2019, and 2018, RSUs issued had a grant date fair value equal to the closing price of the Company's stock on the grant date. The Company does not discount the grant date fair values to reflect any post-vesting restrictions. RSUs granted to employees during the years ended December 31, 2020, 2019, and 2018 had grant date fair values per RSU of $20.75, $17.53, and $10.55, respectively.

The following table summarizes the components of the Company's stock-based compensation related to its employee RSUs recognized in the Company's consolidated financial statements (in millions):

December 31,						2020						2019						2018
RSU expense before income tax						$	10					$	10					$	11
Tax benefit						(2)						(1)						(2)
RSU expense, net of tax						$	8					$	9					$	9
Total value of RSUs converted (1)						$	11					$	12					$	10
Total fair value of RSUs vested						$	10					$	10					$	16

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(1)Amount represents fair market value on the date of conversion.

170 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Cash was not used to settle RSUs or compensation cost capitalized as part of the cost of an asset for the years ended December 31, 2020, 2019, and 2018. As of December 31, 2020, total unrecognized compensation cost related to RSUs of $12 million is expected to be recognized over a weighted average period of approximately 1.8 years. There were no modifications to RSU awards during the year ended December 31, 2020.

A summary of the activity of RSUs for the year ended December 31, 2020 follows (RSUs in thousands):

						RSUs						Weighted Average Grant Date Fair Values						Weighted Average Remaining Vesting Term
Nonvested at December 31, 2019						1,484						$	13.73
Vested						(806)						12.95
Forfeited and expired						(47)						15.71
Granted						579						20.75
Nonvested at December 31, 2020						1,210						$	17.53					1.4
Vested and expected to vest at December 31, 2020						1,104						$	17.35

The Company initially recognizes compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. In 2020, AES has estimated a weighted average forfeiture rate of 7.23% for RSUs granted in 2020. This estimate will be revised if subsequent information indicates that the actual number of instruments forfeited is likely to differ from previous estimates. Based on the estimated forfeiture rate, the Company expects to expense $11 million on a straight-line basis over a three-year period.

The following table summarizes the RSUs that vested and were converted during the periods indicated (RSUs in thousands):

Year Ended December 31,						2020						2019						2018
RSUs vested during the year						806						996						1,428
RSUs converted during the year, net of shares withheld for taxes						547						666						950
Shares withheld for taxes						259						329						478

OTHER SHARE BASED COMPENSATION

The Company has three other share-based award programs. The Company has recorded expenses of $21 million, $22 million, and $20 million for 2020, 2019, and 2018, respectively, related to these programs.

Stock options — AES grants options to purchase shares of common stock under stock option plans to non-employee directors. Under the terms of the plans, the Company may issue options to purchase shares of the Company's common stock at a price equal to 100% of the market price at the date the option is granted. Stock options issued in 2018, 2019, and 2020 have a three-year vesting schedule and vest in one-third increments over the three-year period. The stock options have a contractual term of 10 years. In all circumstances, stock options granted by AES do not entitle the holder the right, or obligate AES, to settle the stock option in cash or other assets of AES.

Performance Stock Units — In 2018, 2019, and 2020, the Company issued PSUs to officers under its long-term compensation plan. PSUs are stock units which include performance conditions. Performance conditions are based on the Company's Proportional Free Cash Flow targets for 2018 and 2019. For 2020, performance conditions are based on the Company’s Parent Free Cash Flow target. The performance conditions determine the vesting and final share equivalent per PSU and can result in earning an award payout range of 0% to 200%, depending on the achievement. The Company believes it is probable that the performance condition will be met and will continue to be evaluated throughout the performance period. In all circumstances, PSUs granted by AES do not entitle the holder the right, or obligate AES, to settle the stock units in cash or other assets of AES.

Performance Cash Units — In 2018, 2019, and 2020, the Company issued PCUs to its officers under its long-term compensation plan. The value of the 2018 and 2019 units is dependent on the market condition of total stockholder return on AES common stock as compared to the total stockholder return of the Standard and Poor's 500 Utilities Sector Index, Standard and Poor's 500 Index, and MSCI Emerging Market Index over a three-year measurement period. The value for the 2020 units is dependent on the market condition of total stockholder return on AES common stock as compared to the total stockholder return of the Standard and Poor's 500 Utilities Sector Index, Standard and Poor's 500 Index, and MSCI Emerging Markets Latin America Index over a three-year measurement period. Since PCUs are settled in cash, they qualify for liability accounting and periodic measurement is required.

171 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

20. REVENUE

The following table presents our revenue from contracts with customers and other revenue for the periods indicated (in millions):

			Year Ended December 31, 2020
			US and Utilities SBU						South America SBU						MCAC SBU						Eurasia SBU						Corporate, Other and Eliminations						Total
Regulated Revenue
Revenue from contracts with customers			$	2,626					$	—					$	—					$	—					$	—					$	2,626
Other regulated revenue			35						—						—						—						—						35
Total regulated revenue			2,661						—						—						—						—						2,661
Non-Regulated Revenue
Revenue from contracts with customers			1,015						3,151						1,668						594						(10)						6,418
Other non-regulated revenue (1)			242						8						98						234						(1)						581
Total non-regulated revenue			1,257						3,159						$	1,766					828						(11)						6,999
Total revenue			$	3,918					$	3,159					$	1,766					$	828					$	(11)					$	9,660

			Year Ended December 31, 2019
			US and Utilities SBU						South America SBU						MCAC SBU						Eurasia SBU						Corporate, Other and Eliminations						Total
Regulated Revenue
Revenue from contracts with customers			$	2,979					$	—					$	—					$	—					$	—					$	2,979
Other regulated revenue			49						—						—						—						—						49
Total regulated revenue			3,028						—						$	—					—						$	—					3,028
Non-Regulated Revenue
Revenue from contracts with customers			767						3,205						1,788						$	799					(4)						$	6,555
Other non-regulated revenue (1)			263						3						94						248						(2)						606
Total non-regulated revenue			1,030						$	3,208					1,882						$	1,047					(6)						$	7,161
Total revenue			$	4,058					$	3,208					$	1,882					$	1,047					$	(6)					$	10,189

			Year Ended December 31, 2018
			US and Utilities SBU						South America SBU						MCAC SBU						Eurasia SBU						Corporate, Other and Eliminations						Total
Regulated Revenue
Revenue from contracts with customers			$	2,885					$	—					$	—					$	—					$	—					$	2,885
Other regulated revenue			54						—						—						—						—						54
Total regulated revenue			2,939						—						$	—					—						$	—					2,939
Non-Regulated Revenue
Revenue from contracts with customers			972						3,529						1,642						$	943					(11)						$	7,075
Other non-regulated revenue (1)			319						4						86						312						1						722
Total non-regulated revenue			1,291						$	3,533					1,728						$	1,255					(10)						$	7,797
Total revenue			$	4,230					$	3,533					$	1,728					$	1,255					$	(10)					$	10,736

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(1)Other non-regulated revenue primarily includes lease and derivative revenue not accounted for under ASC 606.

Contract Balances — The timing of revenue recognition, billings, and cash collections results in accounts receivable and contract liabilities. The contract liabilities from contracts with customers were $531 million and $117 million as of December 31, 2020 and December 31, 2019, respectively.

During the years ended December 31, 2020 and 2019, we recognized revenue of $14 million and $13 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

In August 2020, AES Gener reached an agreement with Minera Escondida and Minera Spence to early terminate two PPAs of the Angamos coal-fired plant in Chile, further accelerating AES Gener's decarbonization strategy. As a result of the termination payment, Angamos recognized a contract liability of $655 million, of which $55 million will be derecognized each month through the end of the remaining performance obligation in August 2021. As of December 31, 2020, the remaining contract liability is $383 million.

A significant financing arrangement exists for our Mong Duong plant in Vietnam. The plant was constructed under a BOT contract and will be transferred to the Vietnamese government after the completion of a 25 year PPA. The performance obligation to construct the facility was substantially completed in 2015. Approximately $1.4 billion of contract consideration related to the construction, but not yet collected through the 25 year PPA, was reflected as

172 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

a loan receivable as of December 31, 2019. As of December 31, 2020, Mong Duong met the held-for-sale criteria and the loan receivable balance of $1.3 billion, net of CECL reserve of $32 million, was reclassified to held-for-sale assets. Of the loan receivable balance, $80 million was classified as Current held-for-sale assets and $1.2 billion was classified as Noncurrent held-for-sale assets on the Consolidated Balance Sheet.

Remaining Performance Obligations — The transaction price allocated to remaining performance obligations represents future consideration for unsatisfied (or partially unsatisfied) performance obligations at the end of the reporting period. As of December 31, 2020, the aggregate amount of transaction price allocated to remaining performance obligations was $11 million, primarily consisting of fixed consideration for the sale of renewable energy credits in long-term contracts in the U.S. We expect to recognize revenue on approximately one-fifth of the remaining performance obligations in 2021 and 2022, with the remainder recognized thereafter.

21. OTHER INCOME AND EXPENSE

Other income generally includes gains on insurance recoveries in excess of property damage, gains on asset sales and liability extinguishments, favorable judgments on contingencies, allowance for funds used during construction, and other income from miscellaneous transactions. Other expense generally includes losses on asset sales and dispositions, losses on legal contingencies, defined benefit plan non-service costs, and losses from other miscellaneous transactions. The components are summarized as follows (in millions):

			Year Ended December 31,			2020						2019						2018
Other Income			Gain on sale of assets (1)			$	46					$	—					$	—
			Gain on insurance proceeds (2)			—						118						—
			Gain on remeasurement of contingent consideration (3)			—						—						32
			AFUDC (US Utilities)			5						3						8
			Other			24						24						32
			Total other income			$	75					$	145					$	72
Other Expense			Loss on sale of receivables (4)			$	20					$	—					$	—
			Legal contingencies and settlements			15						2						2
			Loss on sale and disposal of assets (5)			7						22						30
			Non-service pension and other postretirement costs			2						17						10
			Loss on commencement of sales-type leases (6)			—						36						—
			Allowance for other receivables			—						—						7
			Other			9						3						9
			Total other expense			$	53					$	80					$	58

---

(1)Primarily associated with the gain on sale of Redondo Beach land at Southland. See Note 25*—Held-for-Sale and Dispositions* for further information.

(2)Associated with recoveries for property damage at the Andres facility in the Dominican Republic from a lightning incident in September 2018 and the upgrade of the tunnel lining at Changuinola.

(3)Related to the amendment of the Oahu purchase agreement. See Note 26—Acquisitions for further information.

(4)Associated with a loss on sale of Stabilization Fund receivables at Gener. See Note 7—Financing Receivables for further information.

(5)Associated with a loss due to the upgrade of the tunnel lining at Changuinola in 2019 and a loss due to damage from a lightning incident at the Andres facility in the Dominican Republic in September 2018.

(6)Related to losses recognized at commencement of sales-type leases at Distributed Energy. See Note 14—Leases for further information.

22. ASSET IMPAIRMENT EXPENSE

Year ended December 31, (in millions)						2020						2019						2018
AES Gener						$	781					$	—					$	—
Hawaii						38						60						—
Estrella del Mar I						30						—						—
Kilroot and Ballylumford						—						115						—
Shady Point						—						—						157
Nejapa						—						—						37
Other						15						10						14
Total						$	864					$	185					$	208

AES Gener — In August 2020, AES Gener reached an agreement with Minera Escondida and Minera Spence to early terminate two PPAs of the Angamos coal-fired plant in Chile, further accelerating AES Gener’s decarbonization strategy. AES Gener also announced its intention to accelerate the retirement of the Ventanas 1 and Ventanas 2 coal-fired plants. Management will no longer be pursuing a contracting strategy for these assets and the plants will primarily be utilized as peaker plants and for grid stability. Due to these developments, the Company performed an impairment analysis and determined that the carrying amounts of these asset groups were

173 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

not recoverable. As a result, the Company recognized asset impairment expense of $781 million. AES Gener is reported in the South America SBU reportable segment.

Hawaii — During the fourth quarter of 2019, the Company tested the recoverability of its long-lived coal-fired asset in Hawaii. Uncertainty around the ability to contract the asset upon expiration of its existing PPA resulted in management's decision to reassess the economic useful life of the generation facility. A decrease in the useful life was identified as an impairment indicator and the Company determined that the carrying amount was not recoverable. The asset group, consisting of property, plant and equipment and intangible assets, was determined to have a fair value of $103 million using the income approach. As a result, the Company recognized asset impairment expense of $60 million as of December 31, 2019.

In July 2020, the Hawaii State Legislature passed Senate Bill 2629 which will prohibit AES Hawaii from generating electricity from coal after December 31, 2022. Therefore, management further reassessed the economic useful life of the generation facility and a decrease in the useful life was identified as an impairment indicator. The Company performed an impairment analysis and determined that the carrying amount of the asset group was not recoverable. As a result, the Company recognized additional asset impairment expense of $38 million during the third quarter of 2020. Hawaii is reported in the US and Utilities SBU reportable segment.

Estrella del Mar I — In August 2020, the Estrella del Mar I power barge was disconnected from the Panama grid and AES Panama is currently evaluating its options for the asset. Upon disconnection, the Company concluded that the barge was no longer part of the AES Panama asset group and performed an impairment analysis. The Company determined that the carrying amount of the asset was not recoverable and recognized asset impairment expense of $30 million. The asset met the held-for-sale criteria as of December 31, 2020. See Note 25*—Held-for-Sale and Dispositions* for further information. Estrella del Mar I is reported in the MCAC SBU reportable segment.

Kilroot and Ballylumford — In April 2019, the Company entered into an agreement to sell its entire 100% interest in the Kilroot coal and oil-fired plant and energy storage facility and the Ballylumford gas-fired plant in the United Kingdom. Upon meeting the held-for-sale criteria, the Company performed an impairment analysis and determined that the carrying value of the asset group of $232 million was greater than its fair value less costs to sell of $114 million. As a result, the Company recognized asset impairment expense of $115 million. The Company completed the sale of Kilroot and Ballylumford in June 2019. See Note 25*—Held-for-Sale and Dispositions* for further information. Prior to their sale, Kilroot and Ballylumford were reported in the Eurasia SBU reportable segment.

Shady Point — In December 2018, the Company entered into an agreement to sell Shady Point, a coal-fired generation facility in the U.S. Due first to the uncertainty around future cash flows, and then upon meeting the held-for-sale criteria, the Company performed an impairment analysis of the Shady Point asset group in the second, third and fourth quarters of 2018, resulting in the recognition of total asset impairment expense of $157 million for the year ended December 31, 2018. Using the market approach, the asset group was determined to have a fair value of $30 million as of December 31, 2018. The sale was completed in May 2019. See Note 25—Held-for-Sale and Dispositions for further information. Prior to the sale, Shady Point was reported in the US and Utilities SBU reportable segment.

Nejapa — During the fourth quarter of 2018, the Company tested the recoverability of its long-lived assets at Nejapa, a landfill gas plant in El Salvador. Decreased production as a result of the landfill owner's failure to perform improvements necessary to continue extracting gas from the landfill was identified as an impairment indicator. The Company determined that the carrying amount was not recoverable. The asset group, consisting of property, plant, and equipment and intangible assets, was determined to have a fair value of $5 million using the income approach. As a result, the Company recognized asset impairment expense of $37 million as of December 31, 2018. Nejapa is reported in the US and Utilities SBU reportable segment.

174 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

23. INCOME TAXES

Income Tax Provision — The following table summarizes the expense for income taxes on continuing operations for the periods indicated (in millions):

December 31,						2020						2019						2018
Federal:			Current			$	(8)					$	(7)					$	7
			Deferred			(17)						(4)						186
State:			Current			—						(1)						2
			Deferred			2						—						5
Foreign:			Current			458						368						378
			Deferred			(219)						(4)						130
Total						$	216					$	352					$	708

Effective and Statutory Rate Reconciliation — The following table summarizes a reconciliation of the U.S. statutory federal income tax rate to the Company's effective tax rate as a percentage of income from continuing operations before taxes for the periods indicated:

December 31,						2020						2019						2018
Statutory Federal tax rate						21		%				21		%				21		%
State taxes, net of Federal tax benefit						(6)		%				6		%				2		%
Taxes on foreign earnings						15		%				12		%				9		%
Valuation allowance						16		%				(2)		%				(2)		%
Change in tax law						3		%				(1)		%				6		%
US Investment Tax Credit						(8)		%				—		%				—		%
Other—net						3		%				(1)		%				(1)		%
Effective tax rate						44		%				35		%				35		%

For 2020, the 15% taxes on foreign earnings item includes $20 million of tax benefit associated with the Company's equity investment in Guacolda. Included in the 2020 (8)% U.S. investment tax credit is $35 million of benefit associated with the Na Pua Makani wind facility. Not included in the 2020 effective tax rate is $75 million of income tax expense recorded to additional paid-in-capital related to the Company's sale of 35% of its ownership interest in the Southland Energy assets. See Note 17—Equity for details of the sale.

For 2019, the 12% taxes on foreign earnings item includes $19 million of tax benefit associated with the Company's equity investment in Guacolda. Included in the 2019 change in tax law amount of (1)% are the downward adjustments to the U.S. one-time transition tax expense and deferred tax remeasurement benefit resulting from the issuance of the final regulations in 2019, offset by the impact of deferred tax remeasurement expense related to the December 2019 Argentina tax law change.

For 2018, the 6% change in tax law item relates primarily to changes in estimate under SAB 118 of the impacts of adoption of the TCJA. The Company recognized tax expense of $194 million related to revised estimates of the one-time transition tax in accordance with proposed regulations issued by the U.S. Treasury in 2018. The adjustment was due in large part to the approach the proposed regulations adopted to determine the fair value of our interests in publicly traded subsidiaries. The Company also recognized tax benefit of $77 million related to revised estimates of deferred tax remeasurement. Included in the 9% taxes on foreign earnings item is $124 million of U.S. GILTI tax expense related to foreign subsidiaries, including the sale of our interest in Masinloc.

Income Tax Receivables and Payables — The current income taxes receivable and payable are included in Other Current Assets and Accrued and Other Liabilities, respectively, on the accompanying Consolidated Balance Sheets. The noncurrent income taxes receivable and payable are included in Other Noncurrent Assets and Other Noncurrent Liabilities, respectively, on the accompanying Consolidated Balance Sheets. The following table summarizes the income taxes receivable and payable as of the periods indicated (in millions):

December 31,						2020						2019
Income taxes receivable—current						$	138					$	131
Income taxes receivable—noncurrent						9						10
Total income taxes receivable						$	147					$	141
Income taxes payable—current						$	284					$	172
Income taxes payable—noncurrent						—						—
Total income taxes payable						$	284					$	172

Deferred Income Taxes — Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for

175 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

income tax purposes and (b) operating loss and tax credit carryforwards. These items are stated at the enacted tax rates that are expected to be in effect when taxes are actually paid or recovered.

As of December 31, 2020, the Company had federal net operating loss carryforwards for tax return purposes of approximately $2.1 billion, of which approximately $950 million expire in years 2033 to 2036 and $1.2 billion carry forward indefinitely. The Company also had federal general business tax credit carryforwards of approximately $66 million, of which $16 million expire in years 2021 to 2031 and $50 million expire in years 2032 to 2040. Additionally, the Company had state net operating loss carryforwards as of December 31, 2020 of approximately $7.3 billion expiring primarily in years 2021 to 2040. As of December 31, 2020, the Company had foreign net operating loss carryforwards of approximately $2.0 billion that expire at various times beginning in 2021 and some of which carry forward without expiration, and tax credits available in foreign jurisdictions of approximately $14 million, $13 million of which expire in 2021.

Valuation allowances decreased $190 million during 2020 to $634 million at December 31, 2020. This net decrease was primarily the result of valuation allowance activity due to the liquidation of certain holding companies with net operating losses with full valuation allowances.

Valuation allowances decreased $44 million during 2019 to $824 million at December 31, 2019. This net decrease was primarily the result of valuation allowance activity at certain of our Brazil subsidiaries and U.S. states.

The Company believes that it is more likely than not that the net deferred tax assets as shown below will be realized when future taxable income is generated through the reversal of existing taxable temporary differences and income that is expected to be generated by businesses that have long-term contracts or a history of generating taxable income.

The following table summarizes deferred tax assets and liabilities, as of the periods indicated (in millions):

December 31,						2020						2019
Differences between book and tax basis of property						$	(1,308)					$	(1,426)
Investment in U.S. tax partnerships						(332)						(44)
Other taxable temporary differences						(403)						(287)
Total deferred tax liability						(2,043)						(1,757)
Operating loss carryforwards						1,156						1,060
Capital loss carryforwards						73						57
Bad debt and other book provisions						87						74
Tax credit carryforwards						78						33
Other deductible temporary differences						471						300
Total gross deferred tax asset						1,865						1,524
Less: Valuation allowance						(634)						(824)
Total net deferred tax asset						1,231						700
Net deferred tax liability						$	(812)					$	(1,057)

The Company considers undistributed earnings of certain foreign subsidiaries to be indefinitely reinvested outside of the U.S. Except for the one-time transition tax in the U.S., no taxes have been recorded with respect to our indefinitely reinvested earnings in accordance with the relevant accounting guidance for income taxes. Should the earnings be remitted as dividends, the Company may be subject to additional foreign withholding and state income taxes. Under the TCJA, future distributions from foreign subsidiaries will generally be subject to a federal dividends received deduction in the U.S. As of December 31, 2020, the cumulative amount of U.S. GAAP foreign un-remitted earnings upon which additional income taxes have not been provided is approximately $4 billion. It is not practicable to estimate the amount of any additional taxes which may be payable on the undistributed earnings.

Income from operations in certain countries is subject to reduced tax rates as a result of satisfying specific commitments regarding employment and capital investment. The Company's income tax benefits related to the tax status of these operations are estimated to be $33 million, $26 million and $35 million for the years ended December 31, 2020, 2019 and 2018, respectively. The per share effect of these benefits after noncontrolling interests was $0.03, $0.02 and $0.04 for the years ended December 31, 2020, 2019 and 2018, respectively. Included in the Company's income tax benefits is the benefit related to our operations in Vietnam, which is estimated to be $16 million, $13 million and $19 million for the years ended December 31, 2020, 2019 and 2018, respectively. The per share effect of these benefits related to our operations in Vietnam after noncontrolling interest was $0.01, $0.01 and $0.01 for the years ended December 31, 2020, 2019 and 2018, respectively.

176 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The following table shows the income (loss) from continuing operations, before income taxes, net equity in earnings of affiliates and noncontrolling interests, for the periods indicated (in millions):

December 31,						2020						2019						2018
U.S.						$	(135)					$	(57)					$	(218)
Non-U.S.						623						1,058						2,236
Total						$	488					$	1,001					$	2,018

Uncertain Tax Positions — Uncertain tax positions have been classified as noncurrent income tax liabilities unless they are expected to be paid within one year. The Company's policy for interest and penalties related to income tax exposures is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations. The following table shows the total amount of gross accrued income taxes related to interest and penalties included in the Consolidated Balance Sheets for the periods indicated (in millions):

December 31,						2020						2019
Interest related						$	1					$	2
Penalties related						—						—

The following table shows the expense/(benefit) related to interest and penalties on unrecognized tax benefits for the periods indicated (in millions):

December 31,						2020						2019						2018
Total benefit for interest related to unrecognized tax benefits						$	—					$	(2)					$	(3)
Total expense for penalties related to unrecognized tax benefits						—						—						—

We are potentially subject to income tax audits in numerous jurisdictions in the U.S. and internationally until the applicable statute of limitations expires. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years potentially subject to examination in the significant tax and business jurisdictions in which we operate:

Jurisdiction						Tax Years Subject to Examination
Argentina						2014-2020
Brazil						2015-2020
Chile						2017-2020
Colombia						2016-2020
Dominican Republic						2015-2020
El Salvador						2017-2020
Netherlands						2014-2020
Panama						2017-2020
United Kingdom						2017-2020
United States (Federal)						2017-2020

As of December 31, 2020, 2019 and 2018, the total amount of unrecognized tax benefits was $458 million, $465 million and $463 million, respectively. The total amount of unrecognized tax benefits that would benefit the effective tax rate as of December 31, 2020, 2019 and 2018 is $439 million, $448 million and $446 million, respectively, of which $33 million for each year would be in the form of tax attributes that would warrant a full valuation allowance. Further, the total amount of unrecognized tax benefit that would benefit the effective tax rate as of 2020 would be reduced by approximately $161 million of tax expense related to remeasurement from 35% to 21%.

The total amount of unrecognized tax benefits anticipated to result in a net decrease to unrecognized tax benefits within 12 months of December 31, 2020 is estimated to be between $0 million and $10 million, primarily relating to statute of limitation lapses and tax exam settlements.

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the periods indicated (in millions):

						2020						2019						2018
Balance at January 1						$	465					$	463					$	348
Additions for current year tax positions						—						6						2
Additions for tax positions of prior years						3						4						146
Reductions for tax positions of prior years						(6)						(5)						(26)
Lapse of statute of limitations						(4)						(3)						(7)
Balance at December 31						$	458					$	465					$	463

177 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The Company and certain of its subsidiaries are currently under examination by the relevant taxing authorities for various tax years. The Company regularly assesses the potential outcome of these examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe we have appropriately accrued for our uncertain tax benefits. However, audit outcomes and the timing of audit settlements and future events that would impact our previously recorded unrecognized tax benefits and the range of anticipated increases or decreases in unrecognized tax benefits are subject to significant uncertainty. It is possible that the ultimate outcome of current or future examinations may exceed our provision for current unrecognized tax benefits in amounts that could be material, but cannot be estimated as of December 31, 2020. Our effective tax rate and net income in any given future period could therefore be materially impacted.

24. DISCONTINUED OPERATIONS

Eletropaulo — Due to a portfolio evaluation in the first half of 2016, management decided to pursue a strategic shift to reduce the Company's exposure to the Brazilian distribution market. In December 2017, all criteria were met for Eletropaulo to qualify as a discontinued operation. Therefore, its results of operations and financial position were reported as such in the consolidated financial statements for all periods presented.

In June 2018, the Company completed the sale of its entire 17% ownership interest in Eletropaulo through a bidding process hosted by the Brazilian securities regulator, CVM. Gross proceeds of $340 million were received at our subsidiary in Brazil, subject to the payment of taxes. Upon disposal of Eletropaulo, the Company recorded a pre-tax gain on sale of $243 million (after-tax $199 million). Prior to its classification as discontinued operations, Eletropaulo was reported in the South America SBU reportable segment.

Borsod — In 2011, Borsod, which held two coal and biomass-fired generation plants in Hungary, filed for liquidation and was deconsolidated with its historical operating results reflected in discontinued operations under prior accounting guidance.

In October 2018, the liquidation was completed and the Company recognized a deferred gain of $26 million, primarily comprised of a $20 million write-off of cumulative translation balances. Prior to its classification as discontinued operations, Borsod was reported in the Eurasia SBU reportable segment.

Excluding the gain on sale of Eletropaulo and the deferred gain on liquidation of Borsod, income from discontinued operations and cash flows from operating and investing activities of discontinued operations were immaterial for the year ended December 31, 2018.

25. HELD-FOR-SALE AND DISPOSITIONS

Held-for-Sale

Mong Duong — In December 2020, the Company entered into an agreement to sell its entire 51% ownership interest in Mong Duong, a coal-fired plant in Vietnam, and 51% equity interest in Mong Duong Finance Holdings B.V, an SPV accounted for as an equity affiliate. The sale is subject to regulatory approval and is expected to close in early 2022. As of December 31, 2020, the Mong Duong plant and SPV were classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the plant and SPV held-for-sale as of December 31, 2020 was $472 million. Mong Duong is reported in the Eurasia SBU reportable segment.

Estrella del Mar I — The Estrella del Mar I power barge met the held-for-sale criteria as of December 31, 2020, but did not meet criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the power barge held-for-sale as of December 31, 2020 was $16 million. Estrella del Mar I is reported in the MCAC SBU reportable segment.

Itabo — In June 2020, the Company entered into an agreement to sell its 43% ownership interest in Itabo, a coal-fired plant and gas turbine in Dominican Republic, for $101 million. In the fourth quarter of 2020, the expected sales price was reduced to $92 million, reflecting dividends distributed by Itabo. In February 2021, the sale was approved by the Superintendence of Electricity and is expected to close in the first quarter of 2021. As of December 31, 2020, Itabo was classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the Itabo facility held-for-sale as of December 31, 2020 was $189 million. Itabo is reported in the MCAC SBU reportable segment.

178 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Jordan — In February 2019, the Company entered into an agreement to sell its 36% ownership interest in two generation plants, IPP1 and IPP4, and a solar plant in Jordan. In December 2019, the original sales agreement expired, and in April 2020, one of the potential buyers withdrew from the transaction due to the uncertain economic conditions surrounding the COVID-19 pandemic. As of June 30, 2020, the solar plant no longer met the held-for-sale criteria, while the Company continued with an active process to complete the sale of its controlling interest in IPP1 and IPP4 and believed the sale remained probable. As such, the solar plant was reclassified as held and used as of June 30, 2020.

In November 2020, the Company signed an agreement to sell 26% ownership interest in IPP1 and IPP4 for $58 million. The sale is expected to close in the second quarter of 2021. After completion of the sale, the Company will retain a 10% ownership interest in IPP1 and IPP4, which will be accounted for as an equity method investment. As of December 31, 2020, the generation plants were classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the plants held-for-sale as of December 31, 2020 was $154 million. Jordan is reported in the Eurasia SBU reportable segment.

Excluding any impairment charges, pre-tax income attributable to AES of businesses held-for-sale as of December 31, 2020 was as follows (in millions):

Year Ended December 31,			2020						2019						2018
Mong Duong			$	55					$	34					$	48
Estrella del Mar I			5						12						17
Itabo			41						30						33
Jordan			20						18						11
Total			$	121					$	94					$	109

Dispositions

Uruguaiana — In September 2020, the Company completed the sale of its entire interest in AES Uruguaiana, resulting in a pre-tax loss on sale of $90 million, primarily due to the write-off of cumulative translation adjustments. As part of the sale agreement, the Company has guaranteed payment of certain contingent liabilities and provided indemnifications to the buyer which were estimated to have a fair value of $22 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Uruguaiana was reported in the South America SBU reportable segment.

Kazakhstan Hydroelectric — Affiliates of the Company (the “Affiliates”) previously operated Shulbinsk HPP and Ust-Kamenogorsk HPP (the “HPPs”), two hydroelectric plants in Kazakhstan, under a concession agreement with the Republic of Kazakhstan (“ROK”). In April 2017, the ROK initiated the process to transfer these plants back to the ROK. The ROK indicated that arbitration would be necessary to determine the correct Return Share Transfer Payment ("RST") and, rather than paying the Affiliates, deposited the RST into an escrow account. In exchange, the Affiliates transferred 100% of the shares in the HPPs to the ROK, under protest and with a full reservation of rights. In February 2018, the Affiliates initiated the arbitration process in international court to recover at least $75 million of the RST placed in escrow, based on the September 30, 2017 RST calculation.

In May 2020, the arbitrator issued a final decision in favor of the Affiliates, awarding the Affiliates a net amount of damages of approximately $45 million, which has been collected. AES recorded the remaining $30 million as a loss on sale during the quarter ended June 30, 2020. Prior to their transfer, the Kazakhstan HPPs were reported in the Eurasia SBU reportable segment.

Redondo Beach Land — In March 2020, the Company completed the sale of land held by AES Redondo Beach, a gas-fired generating facility in California. The land’s carrying value was $24 million, resulting in a pre-tax gain on sale of $41 million, reported in Other income on the Condensed Consolidated Statement of Operations. AES Redondo Beach will lease back the land from the purchaser for the remainder of the generation facility’s useful life. Redondo Beach is reported in the US and Utilities SBU reportable segment.

Stuart and Killen — In December 2019, DPL completed the transfer of the co-owned Stuart coal-fired and diesel-fired generating units and the Killen coal-fired generating unit and combustion turbine retired in May 2018, including the associated environmental liabilities. The transfer resulted in cash expenditures of $51 million and a gain on disposal of $20 million. Prior to their transfer, Stuart and Killen were reported in the US and Utilities SBU reportable segment. See Note 22*—Asset Impairment Expense* for further information.

179 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

Kilroot and Ballylumford — In June 2019, the Company completed the sale of its entire interest in the Kilroot coal and oil-fired plant and energy storage facility and the Ballylumford gas-fired plant in the United Kingdom for $118 million, resulting in a pre-tax loss on sale of $33 million primarily due to the write-off of cumulative translation adjustments and accumulated other comprehensive income balances. The sale did not meet the criteria to be reported as discontinued operations. Prior to the sale, Kilroot and Ballylumford were reported in the Eurasia SBU reportable segment. See Note 22*—Asset Impairment Expense* for further information.

Shady Point — In May 2019, the Company completed the sale of Shady Point, a U.S. coal-fired generating facility, for $29 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Shady Point was reported in the US and Utilities SBU reportable segment. See Note 22*—Asset Impairment Expense* for further information.

CTNG — In December 2018, AES Gener completed the sale of CTNG, an entity that holds transmission lines in Chile, for $225 million, resulting in a pre-tax gain on sale of $126 million after post-closing adjustments. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, CTNG was reported in the South America SBU reportable segment.

Electrica Santiago — In May 2018, AES Gener completed the sale of Electrica Santiago for total consideration of $287 million, resulting in a final pre-tax gain on sale of $70 million after post-closing adjustments. Electrica Santiago consisted of four gas and diesel-fired generation plants in Chile. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Electrica Santiago was reported in the South America SBU reportable segment.

Masinloc — In March 2018, the Company completed the sale of its entire 51% equity interest in Masinloc for cash proceeds of $1.05 billion, resulting in a pre-tax gain on sale of $772 million after post-closing adjustments, subject to U.S. income tax. Masinloc consisted of a coal-fired generation plant in operation, a coal-fired generation plant under construction and an energy storage facility all located in the Philippines. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Masinloc was reported in the Eurasia SBU reportable segment.

DPL peaker assets — In March 2018, DPL completed the sale of six of its combustion turbine and diesel-fired generation facilities and related assets ("DPL peaker assets") for total proceeds of $239 million, resulting in a loss on sale of $2 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to their sale, the DPL peaker assets were reported in the US and Utilities SBU reportable segment.

Beckjord facility — In February 2018, DPL transferred its interest in Beckjord, a coal-fired generation facility retired in 2014, including its obligations to remediate the facility and its site. The transfer resulted in cash expenditures of $15 million, inclusive of disposal charges, and a loss on disposal of $12 million. Prior to the transfer, Beckjord was reported in the US and Utilities SBU reportable segment.

Advancion Energy Storage — In January 2018, the Company deconsolidated the AES Advancion energy storage development business and contributed it to the Fluence joint venture, resulting in a gain on sale of $23 million. See Note 8*—Investments in and Advances to Affiliates* for further discussion. Prior to the transfer, the AES Advancion energy storage development business was reported as part of Corporate and Other.

Excluding any impairment charge or gain/loss on sale, pre-tax income (loss) attributable to AES of disposed businesses was immaterial for the year ended December 31, 2020. The following table summarizes, excluding any impairment charge or gain/loss on sale, the pre-tax income (loss) attributable to AES of disposed businesses for the periods indicated (in millions):

Year Ended December 31,									2019						2018
Kilroot and Ballylumford									$	(1)					$	35
Stuart and Killen (1)									52						77
Shady Point									(5)						19
Masinloc									—						9
Other									(2)						14
Total									$	44					$	154

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(1)After the retirement of Stuart and Killen in 2018, the Company entered into contracts to buy back all open capacity years for the plants at prices lower than the PJM capacity revenue prices. As such, the Company continued to earn capacity margin until the plants were transferred in December 2019. Reductions in the asset retirement obligations for ash ponds and landfills at Stuart and Killen in 2018 resulted in a $32 million reduction to cost of sales. See Note 4—Asset Retirement Obligations for further information.

180 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

26. ACQUISITIONS

Ventus Wind Complex — In December 2020, AES Brasil completed the acquisition of the Ventus Wind Complex ("Ventus") for $91 million, including $4 million of expected working capital adjustments. At closing, the Company made an initial cash payment of $44 million. The remainder was recorded as a note payable, which will be substantially satisfied via a second installment payment expected to occur in the second quarter of 2021. The transaction was accounted for as an asset acquisition; therefore, the total amount of consideration, plus transaction costs, was allocated to the individual assets and liabilities assumed based on their relative fair values. Any differences arising from post-closing adjustments will be allocated accordingly. Ventus is reported in the South America SBU reportable segment.

Penonome I — In May 2020, AES Panama completed the acquisition of the Penonome I wind farm from Goldwind International for $80 million. The transaction was accounted for as an asset acquisition, therefore the consideration transferred, plus transaction costs, was allocated to the individual assets and liabilities assumed based on their relative fair values. Any differences arising from post-closing adjustments will be allocated accordingly. Penonome I is reported in the MCAC SBU reportable segment.

Los Cururos — In November 2019, AES Gener completed the acquisition of the Los Cururos wind farm and transmission lines in Chile from EPM Chile S.A. for total consideration of $143 million, including $5 million in working capital adjustments paid in the first quarter of 2020. The transaction was accounted for as an asset acquisition, therefore the consideration transferred, plus transaction costs, was allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Los Cururos is reported in the South America SBU reportable segment.

Distributed Energy — In December 2018, Distributed Energy acquired the outstanding noncontrolling interest in a partnership holding various solar projects from its tax equity partner for $23 million of consideration in a non-cash transaction through the assumption of debt, increasing the Company's ownership to 100%. The partnership was previously classified as an equity method investment. The transaction was accounted for as an asset acquisition, therefore the Company remeasured the equity investment at fair value and recognized a loss of $5 million in Other expense in the Consolidated Statement of Operations. The fair value of the investment, along with the consideration transferred, plus transaction costs, was allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Distributed Energy is reported in the US and Utilities SBU reportable segment.

Oahu — In November 2018, AES Oahu amended a 2017 agreement to acquire 100% of Na Pua Makani Power Partners, a partnership designed to develop and hold a wind project in Hawaii. The fair value of the initial consideration was $53 million, of which $48 million was contingent on meeting predefined development milestones. The transaction was accounted for as an acquisition of a variable interest entity that did not meet the definition of a business, therefore the assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration. As a result of the amendment, the Company paid $11 million in 2018 and the contingent consideration was reduced to $5 million, resulting in a $32 million gain on remeasurement of contingent consideration recorded in Other income in the Consolidated Statement of Operations. AES Oahu is reported in the US and Utilities SBU reportable segment.

Guaimbê Solar Complex — In September 2018, AES Brasil completed the acquisition of the Guaimbê Solar Complex (“Guaimbê”) from Cobra do Brasil for $152 million, comprised of the exchange of $119 million of non-convertible debentures in project financing and additional cash consideration of $33 million. The transaction was accounted for as an asset acquisition, therefore the consideration transferred, plus transaction costs, was allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Guaimbê is reported in the South America SBU reportable segment.

27. EARNINGS PER SHARE

Basic and diluted earnings per share are based on the weighted-average number of shares of common stock and potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted earnings per share, includes the effects of dilutive RSUs and stock options. The effect of such potential common stock is computed using the treasury stock method.

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for income from continuing operations for the years ended December 31, 2020, 2019 and 2018,

181 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

where income represents the numerator and weighted-average shares represent the denominator.

Year Ended December 31,			2020																		2019																		2018
(in millions, except per share data)			Income						Shares						$ per Share						Income						Shares						$ per Share						Income						Shares						$ per Share
BASIC EARNINGS PER SHARE
Income (loss) from continuing operations attributable to The AES Corporation common stockholders			$	43					665						$	0.06					$	302					664						$	0.46					$	985					662						$	1.49
EFFECT OF DILUTIVE SECURITIES
Stock options			—						1						—						—						—						—						—						—						—
Restricted stock units			—						2						—						—						3						(0.01)						—						3						(0.01)
DILUTED EARNINGS PER SHARE			$	43					668						$	0.06					$	302					667						$	0.45					$	985					665						$	1.48

The calculation of diluted earnings per share excluded 2 million outstanding stock awards for the year ended December 31, 2018, which would be anti-dilutive. These stock awards could potentially dilute basic earnings per share in the future.

28. RISKS AND UNCERTAINTIES

AES is a diversified power generation and utility company organized into four market-oriented SBUs. See additional discussion of the Company's principal markets in Note 18—Segments and Geographic Information. Within our four SBUs, we have two primary lines of business: generation and utilities. The generation line of business uses a wide range of fuels and technologies to generate electricity such as coal, gas, hydro, wind, solar, and biomass. Our utilities business comprises businesses that transmit, distribute, and in certain circumstances, generate power. In addition, the Company has operations in the renewables area. These efforts include projects primarily in wind, solar, and energy storage.

Operating and Economic Risks — The Company operates in several developing economies where macroeconomic conditions are typically more volatile than developed economies. Deteriorating market conditions and evolving industry expectations to transition away from fossil fuel sources for generation expose the Company to the risk of decreased earnings and cash flows due to, among other factors, adverse fluctuations in the commodities and foreign currency spot markets, and potential changes in the estimated useful lives of our thermal plants. Additionally, credit markets around the globe continue to tighten their standards, which could impact our ability to finance growth projects through access to capital markets. Currently, the Company has an investment grade rating from both Standard & Poor's and Fitch of BBB-, and a below-investment grade rating from Moody's of Ba1. A downgrade in our current investment grade ratings could affect the Company's ability to finance new and/or existing development projects at competitive interest rates. As of December 31, 2020, the Company had $1 billion of unrestricted cash and cash equivalents.

During 2020, 66% of our revenue was generated outside the U.S. and a significant portion of our international operations is conducted in developing countries. We continue to invest in several developing countries to expand our existing platform and operations. International operations, particularly the operation, financing, and development of projects in developing countries, entail significant risks and uncertainties, including, without limitation:

• economic, social, and political instability in any particular country or region;

• inability to economically hedge energy prices;

• volatility in commodity prices;

• adverse changes in currency exchange rates;

• government restrictions on converting currencies or repatriating funds;

• unexpected changes in foreign laws, regulatory framework, or in trade, monetary or fiscal policies;

• high inflation and monetary fluctuations;

• restrictions on imports of solar panels, wind turbines, coal, oil, gas, or other raw materials required by our generation businesses to operate;

• threatened or consummated expropriation or nationalization of our assets by foreign governments;

• unwillingness of governments, government agencies, similar organizations, or other counterparties to honor their commitments;

• unwillingness of governments, government agencies, courts, or similar bodies to enforce contracts that are economically advantageous to subsidiaries of the Company and economically unfavorable to

182 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

counterparties, against such counterparties, whether such counterparties are governments or private parties;

• inability to obtain access to fair and equitable political, regulatory, administrative, and legal systems;

• adverse changes in government tax policy;

• potentially adverse tax consequences of operating in multiple jurisdictions;

• difficulties in enforcing our contractual rights, enforcing judgments, or obtaining a just result in local jurisdictions; and

• inability to obtain financing on expected terms.

Any of these factors, individually or in combination with others, could materially and adversely affect our business, results of operations, and financial condition. In addition, our Latin American operations experience volatility in revenue and earnings which have caused and are expected to cause significant volatility in our results of operations and cash flows. The volatility is caused by regulatory and economic difficulties, political instability, indexation of certain PPAs to fuel prices, and currency fluctuations being experienced in many of these countries. This volatility reduces the predictability and enhances the uncertainty associated with cash flows from these businesses.

Our inability to predict, influence or respond appropriately to changes in law or regulatory schemes, including any inability to obtain reasonable increases in tariffs or tariff adjustments for increased expenses, could adversely impact our results of operations or our ability to meet publicly announced projections or analysts' expectations. Furthermore, changes in laws or regulations or changes in the application or interpretation of regulatory provisions in jurisdictions where we operate, particularly our utility businesses where electricity tariffs are subject to regulatory review or approval, could adversely affect our business, including, but not limited to:

• changes in the determination, definition, or classification of costs to be included as reimbursable or pass-through costs;

• changes in the definition or determination of controllable or noncontrollable costs;

• adverse changes in tax law;

• changes in the definition of events which may or may not qualify as changes in economic equilibrium;

• changes in the timing of tariff increases;

• other changes in the regulatory determinations under the relevant concessions; or

• changes in environmental regulations, including regulations relating to GHG emissions in any of our businesses.

Any of the above events may result in lower margins for the affected businesses, which can adversely affect our results of operations.

COVID-19 Pandemic — The COVID-19 pandemic has severely impacted global economic activity, including electricity and energy consumption, and caused significant volatility in financial markets. For the year ended December 31, 2020, the COVID-19 pandemic has had an impact on demand for electricity and, as a result, on the financial results and operations of the Company. The magnitude and duration of the COVID-19 pandemic is unknown at this time and may have material and adverse effects on our results of operations, financial condition and cash flows in future periods.

Goodwill — The Company considers a reporting unit at risk of impairment when its fair value does not exceed its carrying amount by more than 10%. In 2019, during the annual goodwill impairment test performed as of October 1, the Company determined that the fair value of its Gener reporting unit exceeded its carrying value by 3%. Therefore, Gener's $868 million goodwill balance was considered to be "at risk", largely due to the Chilean Government's announcement to phase out coal generation by 2040, and a decline in long-term energy prices.

As a result of the long-lived asset impairments at Gener during the third quarter of 2020, the Company determined there was a triggering event requiring a reassessment of goodwill impairment at September 1, 2020. The Company determined the fair value of its Gener reporting unit exceeded its carrying value by 13%. Although the fair value exceeds its carrying value by more than 10%, the Company continues to monitor the Gener reporting unit for potential interim goodwill impairment triggering events.

183 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

The Company monitors its reporting units at risk of impairment for interim impairment indicators, and believes that the estimates and assumptions used in the calculations are reasonable as of December 31, 2020. Should the fair value of any of the Company’s reporting units fall below its carrying amount because of reduced operating performance, market declines, changes in the discount rate, regulatory changes, or other adverse conditions, goodwill impairment charges may be necessary in future periods.

Foreign Currency Risks — AES operates businesses in many foreign countries and such operations could be impacted by significant fluctuations in foreign currency exchange rates. Fluctuations in currency exchange rate between the USD and the following currencies could create significant fluctuations in earnings and cash flows: the Argentine peso, the Brazilian real, the Chilean peso, the Colombian peso, the Dominican Republic peso, the Euro, the Indian rupee, and the Mexican peso.

Argentina — In September 2019, currency controls were established by the Argentine government in order to control the devaluation of the Argentine peso and keep Argentine central bank reserves at acceptable levels. Restrictions on the flow of capital have limited the availability of international credit, and economic conditions in Argentina have further deteriorated, triggering additional devaluation of the Argentine peso and a deterioration of the country’s risk profile.

Concentrations — Due to the geographical diversity of its operations, the Company does not have any significant concentration of customers or sources of fuel supply. Several of the Company's generation businesses rely on PPAs with one or a limited number of customers for the majority of, and in some cases all of, the relevant businesses' output over the term of the PPAs. However, no single customer accounted for 10% or more of total revenue in 2020, 2019 or 2018.

The cash flows and results of operations of our businesses depend on the credit quality of our customers and the continued ability of our customers and suppliers to meet their obligations under PPAs and fuel supply agreements. If a substantial portion of the Company's long-term PPAs and/or fuel supply were modified or terminated, the Company would be adversely affected to the extent that it would be unable to replace such contracts at equally favorable terms.

29. RELATED PARTY TRANSACTIONS

Certain of our businesses in Panama and the Dominican Republic are partially owned by governments either directly or through state-owned institutions. In the ordinary course of business, these businesses enter into energy purchase and sale transactions, and transmission agreements with other state-owned institutions which are controlled by such governments. At two of our generation businesses in Mexico, the offtakers exercise significant influence, but not control, through representation on these businesses' Boards of Directors. These offtakers are also required to hold a nominal ownership interest in such businesses. In Chile, we provide capacity and energy under contractual arrangements to our investment which is accounted for under the equity method of accounting. Additionally, the Company provides certain support and management services to several of its affiliates under various agreements.

The Company's Consolidated Statements of Operations included the following transactions with related parties for the periods indicated (in millions):

Years Ended December 31,			2020						2019						2018
Revenue—Non-Regulated			$	1,506					$	1,544					$	1,533
Cost of Sales—Non-Regulated			504						531						342
Interest income			20						21						14
Interest expense			131						74						54

The following table summarizes the balances receivable from and payable to related parties included in the Company's Consolidated Balance Sheets as of the periods indicated (in millions):

December 31,			2020						2019
Receivables from related parties			$	252					$	370
Accounts and notes payable to related parties (1)			1,765						1,976

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(1)Includes $1 billion of debt to Mong Duong Finance Holdings B.V., an SPV accounted for as an equity affiliate as of December 31, 2020 and 2019 (see Note 11—Debt). As of December 31, 2020, the debt balance at the SPV was reclassified to held-for-sale liabilities on the Consolidated Balance Sheet. Also includes $181 million and $415 million of debt to Banco General S.A., a bank in Panama where our minority partner in Colon is part of its board of directors as of December 31, 2020 and 2019, respectively; and $379 million and $287 million of debt to Strabag, our EPC contractor and minority partner in Alto Maipo as of December 31, 2020 and 2019, respectively.

184 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

30. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly Financial Data — The following tables summarize the unaudited quarterly Condensed Consolidated Statements of Operations for the Company for 2020 and 2019 (amounts in millions, except per share data). Amounts have been restated to reflect discontinued operations in all periods presented and reflect all adjustments necessary in the opinion of management for a fair statement of the results for interim periods.

Quarter Ended 2020			Mar 31						Jun 30						Sep 30						Dec 31
Revenue			$	2,338					$	2,217					$	2,545					$	2,560
Operating margin			507						524						756						906
Income (loss) from continuing operations, net of tax (1)			229						—						(481)						401
Income from discontinued operations, net of tax			—						3						—						—
Net income (loss)			$	229					$	3					$	(481)					$	401
Net income (loss) attributable to The AES Corporation			$	144					$	(83)					$	(333)					$	318
Basic earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.22					$	(0.13)					$	(0.50)					$	0.48
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						0.01						—						—
Net income (loss) attributable to The AES Corporation common stockholders			$	0.22					$	(0.12)					$	(0.50)					$	0.48
Diluted earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.22					$	(0.13)					$	(0.50)					$	0.47
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						0.01						—						—
Net income (loss) attributable to The AES Corporation common stockholders			$	0.22					$	(0.12)					$	(0.50)					$	0.47
Dividends declared per common share			$	0.14					$	—					$	0.14					$	0.29

Quarter Ended 2019			Mar 31						Jun 30						Sep 30						Dec 31
Revenue			$	2,650					$	2,483					$	2,625					$	2,431
Operating margin			586						502						701						560
Income (loss) from continuing operations, net of tax (2)			233						66						298						(120)
Income from discontinued operations, net of tax			—						1						—						—
Net income (loss)			$	233					$	67					$	298					$	(120)
Net income (loss) attributable to The AES Corporation			$	154					$	17					$	210					$	(78)
Basic earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.23					$	0.02					$	0.32					$	(0.12)
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						—						—						—
Net income (loss) attributable to The AES Corporation common stockholders			$	0.23					$	0.02					$	0.32					$	(0.12)
Diluted earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	0.23					$	0.02					$	0.32					$	(0.12)
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						—						—						—
Net income (loss) attributable to The AES Corporation common stockholders			$	0.23					$	0.02					$	0.32					$	(0.12)
Dividends declared per common share			$	0.14					$	—					$	0.14					$	0.28

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(1)Includes pre-tax impairment expense of $849 million in the third quarter of 2020 (See Note 22—Asset Impairment Expense), other-than-temporary impairment of OPGC of $43 million and $158 million in the first and second quarters of 2020, respectively, and net equity in losses of affiliates, primarily at Guacolda, of $112 million in the third quarter of 2020 (See Note 8—Investments in and Advances to Affiliates).

(2)Includes pre-tax impairment expense of $116 million and $69 million in the second and fourth quarters of 2019, respectively (See Note 22—Asset Impairment Expense), other-than-temporary impairment of OPGC of $92 million, and net equity in losses of affiliates, primarily at Guacolda, of $175 million in the fourth quarter of 2019 (See Note 8—Investments in and Advances to Affiliates).

185 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2020, 2019 and 2018

31. SUBSEQUENT EVENTS

Guacolda — In February 2021, AES Gener entered into an agreement to sell its 50% ownership interest in Guacolda, a coal-fired plant in Chile, for $34 million. The sale is subject to regulatory approval and is expected to close in the first half of 2021. As of December 31, 2020, the carrying value of the investment was zero. Pre-tax loss attributable to AES was $54 million and $88 million for the years ended December 31, 2020 and 2019, respectively. Pre-tax income attributable to AES was $11 million for the year ended December 31, 2018. Guacolda is reported in the South America SBU reportable segment.

AES Clean Energy — On January 4, 2021, the sPower and AES Distributed Energy development platforms were merged to form AES Clean Energy Development, which will serve as the development vehicle for all future renewable projects in the U.S. Pro forma information has not been presented as the impact of this transaction, individually and in the aggregate, was not material to our consolidated financial results.

Gener — On December 29, 2020, AES Gener commenced a preemptive rights offering for its existing shareholders to subscribe for up to 1,980,000,000 of newly issued shares to fund its renewable growth program. The period ended on February 5, 2021 and Inversiones Cachagua SpA, an AES subsidiary, subscribed for 1,347,200,571 shares at a cost of $205 million, increasing AES' indirect beneficial interest in AES Gener from 67.0% to 67.2%.

186 | 2020 Annual Report