Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Part A — Report of Independent Registered Public Accounting Firm

Our auditors are Ernst & Young LLP, located in Tysons, Virginia. Their PCAOB ID number is 42.

Part B — Financial Statements and Supplementary Data

125 | 2022 Annual Report

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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 March 1, 2023, 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.

126 | 2022 Annual Report

						Goodwill Impairment Test for AES Andes and AES El Salvador Reporting Units
Description of the Matter						At December 31, 2022, the Company’s goodwill balance was $362 million. As discussed in Note 1 to the consolidated financial statements, the Company’s goodwill is tested for impairment at least annually. If goodwill is determined to be impaired, an impairment loss is measured at the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. The Company performed a quantitative impairment test for the AES Andes and AES El Salvador reporting units and utilized the income approach to determine the estimated fair value of these reporting units. As discussed in Note 9 to the consolidated financial statements, the estimated fair value was less than the carrying amount for both of these reporting units and as a result the Company recognized impairment expense of $777 million during the fourth quarter of 2022. Auditing the Company’s annual goodwill impairment tests for the AES Andes and AES El Salvador reporting units required judgment to evaluate the effects of macroeconomic and industry conditions and involved a high degree of subjectivity due to the significant estimation required to determine the fair value of these reporting units. In particular, the fair value estimates of the reporting units involve the use of significant unobservable inputs and are sensitive to changes in significant assumptions, such as the interest rates and country risk premiums, which are inputs used to determine the discount rates.
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 and testing process for the AES Andes and AES El Salvador reporting units. For example, we tested controls over management’s review of the valuation models, the significant assumptions described above, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value for the AES Andes and AES El Salvador reporting units, we performed audit procedures that included, among others, assessing the methodologies used to develop the estimated fair values, testing the significant assumptions discussed above, and evaluating 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. 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 units 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 rates used in the fair value estimate.
						Long-lived Asset Impairments and Re-evaluation of Useful Lives
Description of the Matter						At December 31, 2022, the Company's net property, plant and equipment was $23,039 million. As discussed in Note 1 to the consolidated financial statements, when circumstances indicate that 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. 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 is recognized for the amount by which the carrying amount of the asset group exceeds its fair value. The Company’s useful life estimates are continually evaluated for appropriateness as changes in the relevant factors arise, including when a long-lived asset group is tested for recoverability. As discussed in Note 22 to the consolidated financial statements, the Company recognized a total asset impairment expense of $661 million related to the Maritza and the TEG TEP asset groups in 2022.

127 | 2022 Annual Report

						Auditing the Company's identification of impairment indicators and re-evaluation of useful lives was complex and highly judgmental because of the many geographic, regulatory, and economic environments in which the Company operates. Also, due to the wide variety of events or changes in circumstances that may indicate that an asset group is not recoverable or that may result in a change in useful life, auditing the Company’s identification of impairment indicators and re-evaluation of useful lives involved a high degree of subjectivity, particularly given the Company’s decarbonization initiatives and shift towards clean energy platforms. In addition, auditing the Company’s valuation of long-lived assets used in the Maritza and TEG TEP impairment analyses involved significant judgment due to the significant unobservable inputs used in the estimation of the asset groups’ fair value. In particular, the significant assumptions for the income approach used to determine the fair value of the asset groups included the Company’s projections of revenue growth and discount rates, which are forward-looking assumptions and could be affected by future industry, market, and economic conditions.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the identification of impairment indicators, re-evaluation of estimated useful lives, and the valuation of the Maritza and TEG TEP long-lived asset impairments. For example, we tested management’s monitoring controls over the evaluation of events or changes in circumstances that would require an asset to be tested for recoverability. We also tested management’s review controls of the valuation models used in the impairment analyses, the significant assumptions used to develop the estimates, and the completeness and accuracy of the data used in the valuations. To test the Company's identification of impairment indicators and re-evaluation of useful lives, our audit procedures included, among others, making inquiries of management, including personnel in operations, to understand changes in the businesses and management’s strategic plans, and evaluate whether management has considered any identified changes in their analysis. We evaluated the results of earnings and the projected cash flows for significant coal generation assets and assessed whether there has been a deterioration in earnings or projected losses that would represent an impairment indicator. We also evaluated conditions and trends in the industry for the underlying economies, including any sale or disposition activities, and evaluated any adverse changes in the regulatory environment or the geographic areas to test the completeness and accuracy of the company's evaluation of potential impairment indicators. We evaluated the Company’s useful life estimates, in particular for its significant coal generation assets, considering the existing Power Purchase Agreements (PPAs) and the market for the use of these assets subsequent to the expiration of existing PPAs, based on the regulatory and market conditions. To test the impairment analyses for the Maritza and TEG TEP asset groups, our audit procedures included, among others, assessing the appropriateness of valuation 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 as well as historical results. We performed sensitivity analyses of certain 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 valuation methodology and the discount rates used in the fair value estimates.

/s/ Ernst & Young LLP

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

Tysons, Virginia

March 1, 2023

Consolidated Balance Sheets

December 31, 2022 and 2021

			2022						2021
			(in millions, except share and per share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	1,374					$	943
Restricted cash			536						304
Short-term investments			730						232
Accounts receivable, net of allowance for doubtful accounts of $5 and $5, respectively			1,799						1,418
Inventory			1,055						604
Prepaid expenses			98						142
Other current assets, net of CECL allowance of $2 and $0, respectively			1,533						897
Current held-for-sale assets			518						816
Total current assets			7,643						5,356
NONCURRENT ASSETS
Property, Plant and Equipment:
Land			470						426
Electric generation, distribution assets and other			26,599						25,552
Accumulated depreciation			(8,651)						(8,486)
Construction in progress			4,621						2,414
Property, plant and equipment, net			23,039						19,906
Other Assets:
Investments in and advances to affiliates			952						1,080
Debt service reserves and other deposits			177						237
Goodwill			362						1,177
Other intangible assets, net of accumulated amortization of $434 and $385, respectively			1,841						1,450
Deferred income taxes			319						409
Loan receivable, net of allowance of $26			1,051						—
Other noncurrent assets, net of allowance of $51 and $23, respectively			2,979						2,188
Noncurrent held-for-sale assets			—						1,160
Total other assets			7,681						7,701
TOTAL ASSETS			$	38,363					$	32,963
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable			$	1,730					$	1,153
Accrued interest			249						182
Accrued non-income taxes			249						266
Accrued and other liabilities			2,151						1,205
Non-recourse debt, including $416 and $302, respectively, related to variable interest entities			1,758						1,367
Current held-for-sale liabilities			354						559
Total current liabilities			6,491						4,732
NONCURRENT LIABILITIES
Recourse debt			3,894						3,729
Non-recourse debt, including $2,295 and $2,223, respectively, related to variable interest entities			17,846						13,603
Deferred income taxes			1,139						977
Other noncurrent liabilities			3,168						3,358
Noncurrent held-for-sale liabilities			—						740
Total noncurrent liabilities			26,047						22,407
Commitments and Contingencies (see Notes 12 and 13)
Redeemable stock of subsidiaries			1,321						1,257
EQUITY
THE AES CORPORATION STOCKHOLDERS’ EQUITY
Preferred stock (without par value, 50,000,000 shares authorized; 1,043,050 issued and outstanding at December 31, 2022 and December 31, 2021)			838						838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,790,001 issued and 668,743,464 outstanding at December 31, 2022 and 818,717,043 issued and 666,793,625 outstanding at December 31, 2021)			8						8
Additional paid-in capital			6,688						7,106
Accumulated deficit			(1,635)						(1,089)
Accumulated other comprehensive loss			(1,640)						(2,220)
Treasury stock, at cost (150,046,537 and 151,923,418 shares at December 31, 2022 and December 31, 2021, respectively)			(1,822)						(1,845)
Total AES Corporation stockholders’ equity			2,437						2,798
NONCONTROLLING INTERESTS			2,067						1,769
Total equity			4,504						4,567
TOTAL LIABILITIES AND EQUITY			$	38,363					$	32,963

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Operations

Years ended December 31, 2022, 2021, and 2020

			2022						2021						2020
			(in millions, except per share amounts)
Revenue:
Regulated			$	3,538					$	2,868					$	2,661
Non-Regulated			9,079						8,273						6,999
Total revenue			12,617						11,141						9,660
Cost of Sales:
Regulated			(3,162)						(2,448)						(2,235)
Non-Regulated			(6,907)						(5,982)						(4,732)
Total cost of sales			(10,069)						(8,430)						(6,967)
Operating margin			2,548						2,711						2,693
General and administrative expenses			(207)						(166)						(165)
Interest expense			(1,117)						(911)						(1,038)
Interest income			389						298						268
Loss on extinguishment of debt			(15)						(78)						(186)
Other expense			(68)						(60)						(53)
Other income			102						410						75
Loss on disposal and sale of business interests			(9)						(1,683)						(95)
Goodwill impairment expense			(777)						—						—
Asset impairment expense			(763)						(1,575)						(864)
Foreign currency transaction gains (losses)			(77)						(10)						55
Other non-operating expense			(175)						—						(202)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES			(169)						(1,064)						488
Income tax benefit (expense)			(265)						133						(216)
Net equity in losses of affiliates			(71)						(24)						(123)
INCOME (LOSS) FROM CONTINUING OPERATIONS			(505)						(955)						149
Gain from disposal of discontinued businesses, net of income tax expense of $0, $1, and $0, respectively			—						4						3
NET INCOME (LOSS)			(505)						(951)						152
Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries			(41)						542						(106)
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION			$	(546)					$	(409)					$	46
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
Income (loss) from continuing operations, net of tax			$	(546)					$	(413)					$	43
Income from discontinued operations, net of tax			—						4						3
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION			$	(546)					$	(409)					$	46
BASIC EARNINGS PER SHARE:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	(0.82)					$	(0.62)					$	0.06
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						0.01						0.01
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS			$	(0.82)					$	(0.61)					$	0.07
DILUTED EARNINGS PER SHARE:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	(0.82)					$	(0.62)					$	0.06
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax			—						0.01						0.01
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS			$	(0.82)					$	(0.61)					$	0.07

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income (Loss)

Years ended December 31, 2022, 2021, and 2020

			2022						2021						2020
			(in millions)
NET INCOME (LOSS)			$	(505)					$	(951)					$	152
Foreign currency translation activity:
Foreign currency translation adjustments, net of income tax expense of $0, $0, and $8, respectively			(36)						(130)						(52)
Reclassification to earnings, net of $0 income tax for all periods			—						3						192
Total foreign currency translation adjustments			(36)						(127)						140
Derivative activity:
Change in derivative fair value, net of income tax (expense) benefit of $(191), $1, and $110, respectively			711						5						(368)
Reclassification to earnings, net of income tax expense of $9, $105, and $17, respectively			59						387						74
Total change in fair value of derivatives			770						392						(294)
Pension activity:
Change in pension adjustments due to prior service cost, net of $0 income tax for all periods			—						—						1
Change in pension adjustments due to net actuarial gain (loss) for the period, net of income tax (expense) benefit of $(5), $(10), and $4, respectively			13						26						(14)
Reclassification to earnings, net of income tax expense of $1, $3, and $0, respectively			1						1						—
Total pension adjustments			14						27						(13)
OTHER COMPREHENSIVE INCOME (LOSS)			748						292						(167)
COMPREHENSIVE INCOME (LOSS)			243						(659)						(15)
Less: Comprehensive loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries			(127)						438						4
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION			$	116					$	(221)					$	(11)

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Changes in Equity

Years ended December 31, 2022, 2021, and 2020

			THE AES CORPORATION STOCKHOLDERS
			Preferred Stock												Common Stock												Treasury Stock												Additional Paid-In Capital						Accumulated Deficit						Accumulated Other Comprehensive Loss						Noncontrolling Interests
(in millions)			Shares						Amount						Shares						Amount						Shares						Amount
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)
Adjustments to redemption value of redeemable stock of subsidiaries (2)			—						—						—						—						—						—						(4)						—						—						—
Distributions to noncontrolling interests			—						—						—						—						—						—						—						—						—						(419)
Acquisitions of noncontrolling interests			—						—						—						—						—						—						(89)						—						(121)						(49)
Sales to noncontrolling interests															—						—						—						—						260						—						9						210
Issuance of preferred shares in subsidiaries			—						—						—						—						—						—						—						—						1						111
Dividends declared on 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						—						—						—
Balance at December 31, 2020			—						$	—					818.4						$	8					153.0						$	(1,858)					$	7,561					$	(680)					$	(2,397)					$	2,086
Net loss			—						—						—						—						—						—						—						(409)						—						(536)
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						—						—						(83)						(44)
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						—						—						247						126
Total pension adjustments, net of income tax			—						—						—						—						—						—						—						—						24						3
Total other comprehensive income			—						—						—						—						—						—						—						—						188						85
Adjustments to redemption value of redeemable stock of subsidiaries (2)			—						—						—						—						—						—						(4)						—						—						—
Disposition of business interests			—						—						—						—						—						—						—						—						—						(132)
Distributions to noncontrolling interests			—						—						—						—						—						—						—						—						—						(281)
Acquisitions of noncontrolling interests			—						—						—						—						—						—						(9)						—						(11)						(4)
Contributions from noncontrolling interests			—						—						—						—						—						—						—						—						—						220
Sales to noncontrolling interests			—						—						—						—						—						—						(7)						—						—						180
Issuance of preferred shares in subsidiaries			—						—						—						—						—						—						—						—						—						151
Issuance of preferred stock (3)			1.0						838						—						—						—						—						(29)						—						—						—
Dividends declared on AES common stock ($0.6095/share)			—						—						—						—						—						—						(406)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			—						—						0.3						—						(1.0)						13						—						—						—						—
Balance at December 31, 2021 (3)			1.0						$	838					818.7						$	8					152.0						$	(1,845)					$	7,106					$	(1,089)					$	(2,220)					$	1,769
Net income (loss)			—						—						—						—						—						—						—						(546)						—						128
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						—						—						(37)						1
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						—						—						689						41
Total pension adjustments, net of income tax			—						—						—						—						—						—						—						—						10						4
Total other comprehensive income			—						—						—						—						—						—						—						—						662						46
Distributions to noncontrolling interests			—						—						—						—						—						—						—						—						—						(200)
Acquisitions of noncontrolling interests			—						—						—						—						—						—						(78)						—						(80)						(387)
Contributions from noncontrolling interests			—						—						—						—						—						—						—						—						—						178
Sales to noncontrolling interests			—						—						—						—						—						—						78						—						(2)						473
Issuance of preferred shares in subsidiaries			—						—						—						—						—						—						—						—						—						60
Dividends declared on AES common stock ($0.6399/share)			—						—						—						—						—						—						(428)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			—						—						0.1						—						(2.0)						23						10						—						—						—
Balance at December 31, 2022			1.0						$	838					818.8						$	8					150.0						$	(1,822)					$	6,688					$	(1,635)					$	(1,640)					$	2,067

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

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

(3) Includes a $13 million reclass from Additional paid-in capital to Preferred stock to reflect the retrospective adoption of ASU 2020-06. For further information, see Note 1—General and Summary of Significant Accounting Policies.

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

Years ended December 31, 2022, 2021, and 2020

			2022						2021						2020
OPERATING ACTIVITIES:			(in millions)
Net income (loss)			$	(505)					$	(951)					$	152
Adjustments to net income (loss):
Depreciation and amortization			1,053						1,056						1,068
Loss on disposal and sale of business interests			9						1,683						95
Impairment expense			1,715						1,575						1,066
Deferred income taxes			4						(406)						(233)
Reversals of contingencies			(1)						(10)						(186)
Loss on extinguishment of debt			15						78						186
Gain on remeasurement to acquisition date fair value			(5)						(254)						—
Loss of affiliates, net of dividends			111						36						128
Emissions allowance expense			425						337						135
Other			183						120						54
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(532)						(170)						48
(Increase) decrease in inventory			(417)						(93)						(20)
(Increase) decrease in prepaid expenses and other current assets			(40)						(168)						13
(Increase) decrease in other assets			433						(285)						(134)
Increase (decrease) in accounts payable and other current liabilities			470						(251)						(186)
Increase (decrease) in income tax payables, net and other tax payables			(51)						(271)						59
Increase (decrease) in deferred income			33						(314)						431
Increase (decrease) in other liabilities			(185)						190						79
Net cash provided by operating activities			2,715						1,902						2,755
INVESTING ACTIVITIES:
Capital expenditures			(4,551)						(2,116)						(1,900)
Acquisitions of business interests, net of cash and restricted cash acquired			(243)						(658)						(136)
Proceeds from the sale of business interests, net of cash and restricted cash sold			1						95						169
Sale of short-term investments			1,049						616						627
Purchase of short-term investments			(1,492)						(519)						(653)
Contributions and loans to equity affiliates			(232)						(427)						(332)
Affiliate repayments and returns of capital			149						320						158
Purchase of emissions allowances			(488)						(265)						(188)
Other investing			(29)						(97)						(40)
Net cash used in investing activities			(5,836)						(3,051)						(2,295)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities			5,424						2,802						2,420
Repayments under the revolving credit facilities			(4,687)						(2,420)						(2,479)
Issuance of recourse debt			200						7						3,419
Repayments of recourse debt			(29)						(26)						(3,366)
Issuance of non-recourse debt			5,788						1,644						4,680
Repayments of non-recourse debt			(3,144)						(2,012)						(4,136)
Payments for financing fees			(120)						(32)						(107)
Purchases under supplier financing arrangements			1,042						91						72
Repayments of obligations under supplier financing arrangements			(432)						(35)						(96)
Distributions to noncontrolling interests			(265)						(284)						(422)
Acquisitions of noncontrolling interests			(602)						(117)						(259)
Contributions from noncontrolling interests			233						365						1
Sales to noncontrolling interests			742						173						553
Issuance of preferred shares in subsidiaries			60						153						112
Issuance of preferred stock			—						1,014						—
Dividends paid on AES common stock			(422)						(401)						(381)
Payments for financed capital expenditures			(33)						(24)						(60)
Other financing			3						(101)						(29)
Net cash provided by (used in) financing activities			3,758						797						(78)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(56)						(46)						(24)
(Increase) decrease in cash, cash equivalents and restricted cash of held-for-sale businesses			22						55						(103)
Total increase (decrease) in cash, cash equivalents and restricted cash			603						(343)						255
Cash, cash equivalents and restricted cash, beginning			1,484						1,827						1,572
Cash, cash equivalents and restricted cash, ending			$	2,087					$	1,484					$	1,827
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized			$	928					$	815					$	908
Cash payments for income taxes, net of refunds			271						459						333
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not yet paid			111						105						100
Notes payable issued for the acquisition of business interests (see Notes 17 and 25)			—						258						47
Non-cash consideration transferred for AES Clean Energy acquisitions (see Note 25)			—						118						—

See Accompanying Notes to Consolidated Financial Statements.

133 | Notes to Consolidated Financial Statements | December 31, 2021, 2020 and 2019

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 as temporary equity and are included in Redeemable stock of subsidiaries on the Consolidated Balance Sheet. Generally, initial measurement will be at fair value. The subsequent allocation of income and dividends is classified in temporary equity. Subsequent measurement and classification vary depending on whether the instrument is probable of becoming redeemable. For those securities that are currently redeemable or where it is probable that the instrument will become redeemable, AES recognizes any changes from the carrying value to redemption value at each reporting period against retained earnings or additional paid-in capital in the absence of retained earnings; such adjustments are classified in temporary equity. When the equity instrument is not probable of becoming redeemable, no adjustment to the carrying value is recognized. 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 losses of affiliates on the Consolidated Statements of Operations*.*

The Company utilizes the cumulative earnings 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 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

134 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 gains/(losses) upon the completion of disposals, which include reclassification of cumulative translation adjustments, are recognized in 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 24—Held-for-Sale and Dispositions for further information.

135 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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.

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 of 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.

136 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022						December 31, 2021
Cash and cash equivalents			$	1,374					$	943
Restricted cash			536						304
Debt service reserves and other deposits			177						237
Cash, Cash Equivalents and Restricted Cash			$	2,087					$	1,484

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 Comprehensive Income (Loss). 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.

137 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 by performing the quantitative impairment test. If the carrying amount of an intangible asset being tested for impairment exceeds its fair value, the excess is recognized as impairment expense.

138 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 includes $662 million related to supplier financing arrangements, of which $296 million has a Parent Company guarantee; interest incurred for these arrangements is recorded on the Consolidated Statements of Operations within Interest expense or, if eligible for capitalization, to Property, plant and equipment, net on the Consolidated Balance Sheets. The remaining balance of other accrued liabilities includes 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.

The Company's accounting policy for releasing the income tax effects from AOCL occurs on a portfolio basis.

The Company has elected an accounting policy not to consider the effects of being subject to the corporate alternative minimum tax in future periods when assessing the realizability of our deferred tax assets, carryforwards, and tax credits. Any effect on the realization of deferred tax assets will be recognized in the period they arise.

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

139 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 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,the production and sale of electricity and capacity from our generation facilities, and development and construction of 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.

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.

If the contract is determined to contain a performance obligation related to capacity, the performance obligation is generally satisfied over time, and if we 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.

140 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Energy performance obligations are recognized using an output method, as energy delivered best depicts the transfer of goods or services to the customer. Performance obligations to deliver energy are generally satisfied when the MW is generated. 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.

Certain generation contracts contain operating and sales-type 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.

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 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.

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

141 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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.

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 restricted stock units, performance stock units, performance cash units, and stock options. 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

142 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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.

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.

The following table represents the rollforward of the allowance for credit losses for the periods indicated (in millions):

Twelve Months Ended December 31, 2022			Accounts Receivable (1)						Mong Duong Loan Receivable						Argentina Receivables**(2)**						Lease Receivable (3)						Other						Total
CECL reserve balance at beginning of period			$	9					$	30					$	23					$	—					$	1					$	63
Current period provision			10						—						22						20						1						53
Write-offs charged against allowance			(19)						—						—						—												(19)
Recoveries collected			3						(2)						(1)						—						—						—
Foreign exchange			—						—						(14)						—						—						(14)
CECL reserve balance at end of period			$	3					$	28					$	30					$	20					$	2					$	83

Twelve Months Ended December 31, 2021			Accounts Receivable (1)						Mong Duong Loan Receivable						Argentina Receivables						Other						Total
CECL reserve balance at beginning of period			$	9					$	32					$	20					$	1					$	62
Current period provision			9						—						7						—						16
Write-offs charged against allowance			(11)						—						—						—						(11)
Recoveries collected			2						(2)						—						—						—
Foreign exchange			—						—						(4)						—						(4)
CECL reserve balance at end of period			$	9					$	30					$	23					$	1					$	63

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(1)Excludes operating lease receivable allowances and contractual dispute allowances of $1 million and $2 million as of December 31, 2022 and 2021, respectively. Those reserves are not in scope under ASC 326.

(2)Increase in CECL reserve balance for regulatory receivables in Argentina.

(3)Lease receivable credit losses allowance at Southland Energy (AES Gilbert).

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.

143 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

New Accounting Standards Adopted
ASU Number and Name			Description			Date of Adoption			Effect on the financial statements upon adoption
2021-05, Leases (Topic 842), Lessors—Certain Leases with Variable Lease Payments			The amendments in this update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (a) The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3, (b) The lessor would have otherwise recognized a day-one loss. This update could be applied either (1) retrospectively to leases that commenced or were modified on or after the adoption of Update 2016-02 or (2) prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments.			January 1, 2022			The Company adopted this standard on a prospective basis and it did not have a material impact on the financial statements.
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.			January 1, 2022			The Company adopted this standard on a fully retrospective basis and its adoption resulted in a $13 million increase to Preferred Stock and a corresponding decrease to Additional paid-in capital. No impact to Earnings per Share amounts reported in 2021 or 2022.
2020-04, 2021-01, and 2022-06 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, 2024).			Effective for all entities as of March 12, 2020 through December 31, 2024			The Company adopted this standard on a prospective basis and it did not have a material impact on the financial statements.

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):

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			802						(2)						800
Deferred income taxes			156						9						165
Loan receivable, net of allowance of $32			1,351						(32)						1,319
Other noncurrent assets (1)			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 noncurrent assets include Argentina financing receivables.

144 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 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 Andes recorded $33 million of noncurrent receivables at December 31, 2020 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.

145 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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
2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers			This update is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following: 1. Recognition of an acquired contract liability 2. Payment terms and their effect on subsequent revenue recognized by the acquirer. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.			For fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.			The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2022-04,Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations			This update is to provide additional information and disclosures about an entity’s use of supplier finance programs to see how these programs will affect an entity’s working capital, liquidity, and cash flows. Entities that use supplier finance programs as the buyer party should disclose (1) the key terms of the payment terms and assets pledged as security or other forms of guarantees provided and (2) the unpaid amount outstanding, a description of where those obligations are presented on the balance sheet, and a rollforward of those obligations during the annual period. In each interim reporting period, the buyer must disclose the unpaid amount outstanding at the end of the interim period.			For fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.			The ASU only requires disclosures related to the Company's supplier finance programs and does not affect the recognition, measurement, or presentation of supplier finance program obligations on the balance sheet or cash flow statement. The Company expects to adopt the new disclosure requirements in the first quarter of 2023, except for the annual requirement to disclose rollforward information, which the Company expects to adopt and present prospectively beginning in the 2024 annual 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,						2022						2021
Fuel and other raw materials						$	733					$	366
Spare parts and supplies						322						238
Total						$	1,055					$	604

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.

146 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

			Estimated Useful Life						December 31,
			(in years)			2022						2021
Electric generation and distribution facilities			5-39						$	24,135					$	22,909
Other buildings			3-51						1,197						1,552
Furniture, fixtures and equipment			3-30						348						356
Other			1-40						919						735
Total electric generation and distribution assets and other									26,599						25,552
Accumulated depreciation									(8,651)						(8,486)
Net electric generation and distribution assets and other									$	17,948					$	17,066

The following table summarizes depreciation expense (including the amortization of assets recorded under finance leases 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,						2022						2021						2020
Depreciation expense						$	982					$	972					$	1,004
Interest capitalized during development and construction						224						226						307

Property, plant and equipment, net of accumulated depreciation, of $9 billion was mortgaged, pledged or subject to liens as of both December 31, 2022 and 2021, 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,						2022						2021
Regulated generation and distribution assets and other, gross						$	9,709					$	9,151
Regulated accumulated depreciation						(4,067)						(3,655)
Regulated generation and distribution assets and other, net						5,642						5,496
Non-regulated generation and distribution assets and other, gross						16,890						16,401
Non-regulated accumulated depreciation						(4,584)						(4,831)
Non-regulated generation and distribution assets and other, net						12,306						11,570
Net electric generation and distribution assets and other						$	17,948					$	17,066

4. ASSET RETIREMENT OBLIGATIONS

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

						2022						2021
Balance at January 1						$	606					$	462
Additional liabilities incurred						97						27
Liabilities assumed in acquisition						15						96
Liabilities settled						(29)						(15)
Accretion expense						30						22
Change in estimated cash flows						35						13
Other						3						1
Balance at December 31						$	757					$	606

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, 2022, the Company increased the asset retirement obligations and corresponding assets at Southland Energy, AES Clean Energy, AES Indiana, and AES Brasil by $75 million, $27 million, $27 million, and $16 million, respectively. The increase at Southland Energy is mostly due to additional liabilities incurred related to a demolition obligation at Alamitos. The increase at AES Clean Energy is mostly due to additional liabilities incurred as a result of new development projects. The increase at AES Indiana is primarily due to an upward revision of estimated cash flows at the Petersburg, Eagle Valley, and Harding Street plants. The

147 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

increase at AES Brasil is primarily due to the initial recognition of asset retirement obligations as a result of the Cubico II acquisition.

During the year ended December 31, 2021, the Company increased the asset retirement obligations and corresponding assets at AES Clean Energy and Chile by $93 million and $36 million, respectively. The increase at AES Clean Energy is mostly due to the initial recognition of asset retirement obligations as a result of the New York Wind acquisition. The increase in Chile is primarily due to shortened useful lives of the Ventanas and Angamos coal plants, additional liabilities incurred due to the development of the Andes Solar 2b plant, and an upward revision of estimated cash flows at the Los Cururos plant.

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, SOFR, 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

148 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022. The Company is not aware of any factors that would significantly affect the fair value amounts subsequent to December 31, 2022.

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

149 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022																								December 31, 2021
						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Assets
DEBT SECURITIES:
Available-for-sale:
Unsecured debentures						$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Certificates of deposit						—						698						—						698						—						199						—						199
Government debt securities						—						3						—						3						—						—						—						—
Total debt securities						—						701						—						701						—						199						—						199
EQUITY SECURITIES:
Mutual funds						38						—						—						38						31						13						—						44
Total equity securities						38						—						—						38						31						13						—						44
DERIVATIVES:
Interest rate derivatives						—						314						—						314						—						51						2						53
Cross-currency derivatives						—						—						—						—						—						5						—						5
Foreign currency derivatives						—						22						64						86						—						29						108						137
Commodity derivatives						—						232						13						245						—						32						6						38
Total derivatives — assets						—						568						77						645						—						117						116						233
TOTAL ASSETS						$	38					$	1,269					$	77					$	1,384					$	31					$	329					$	116					$	476
Liabilities
DERIVATIVES:
Interest rate derivatives						$	—					$	6					$	—					$	6					$	—					$	286					$	8					$	294
Cross-currency derivatives						—						42						—						42						—						11						—						11
Foreign currency derivatives						—						20						—						20						—						35						—						35
Commodity derivatives						—						346						60						406						—						37						7						44
Total derivatives — liabilities						—						414						60						474						—						369						15						384
TOTAL LIABILITIES						$	—					$	414					$	60					$	474					$	—					$	369					$	15					$	384

As of December 31, 2022, all available-for-sale debt securities had stated maturities within one year. For the years ended December 31, 2022 and 2021, no impairments of marketable securities were recognized in earnings or Other Comprehensive Income (Loss). Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from sale of available-for-sale securities for the periods indicated (in millions):

Year Ended December 31,						2022						2021						2020
Gross proceeds from sale of available-for-sale securities						$	1,065					$	578					$	582

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, 2022 and 2021 (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.

150 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Year Ended December 31, 2022			Interest Rate						Cross Currency						Foreign Currency						Commodity						Total
Balance at January 1			$	(6)					$	—					$	108					$	(1)					$	101
Total realized and unrealized gains (losses):
Included in earnings			4						—						(26)						—						(22)
Included in other comprehensive income — derivative activity			15						—						(6)						(54)						(45)
Included in regulatory (assets) liabilities			—						—						—						8						8
Settlements			(2)						—						(12)						2						(12)
Transfers of assets/(liabilities), net into Level 3			(1)						—						—						—						(1)
Transfers of (assets)/liabilities, net out of Level 3			(10)						—						—						(2)						(12)
Balance at December 31			$	—					$	—					$	64					$	(47)					$	17
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			$	3					$	—					$	(34)					$	5					$	(26)

Year Ended December 31, 2021			Interest Rate						Cross Currency						Foreign Currency						Commodity						Total
Balance at January 1			$	(236)					$	(2)					$	146					$	2					$	(90)
Total realized and unrealized gains (losses):
Included in earnings			13						(10)						(7)						(1)						(5)
Included in other comprehensive income — derivative activity			4						—						(3)						(5)						(4)
Included in regulatory (assets) liabilities			—						—						—						1						1
Settlements			216						3						(28)						(1)						190
Transfers of assets/(liabilities), net into Level 3			(3)						—						—						3						—
Transfers of (assets)/liabilities, net out of Level 3			—						9						—						—						9
Balance at December 31			$	(6)					$	—					$	108					$	(1)					$	101
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					$	4					$	(35)					$	—					$	(29)

The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of December 31, 2022 (in millions, except range amounts):

Type of Derivative						Fair Value						Unobservable Input						Amount or Range (Weighted Average)
Foreign currency:
Argentine peso						$	64					Argentine peso to USD currency exchange rate after one year						323 - 742 (547)
Commodity:
CAISO Energy Swap						(59)						Forward energy prices per MWh after 2030						$7.06 - $64.78 ($34.71)
Other						12
Total						$	17

For the Argentine peso foreign currency derivatives, increases (decreases) in the estimate of the above exchange rate would increase (decrease) the value of the derivative. For the CAISO Energy Swap, increases (decreases) in the estimate above would decrease (increase) 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, 2022						Measurement Date						Carrying Amount (1)						Fair Value																		Pre-tax Loss
Assets									Level 1						Level 2						Level 3
Long-lived assets held and used: (2)
Maritza						4/30/2022						$	920					$	—					$	—					$	452					$	468
TEG TEP						10/1/2022						504						—						—						311						193
Held-for-sale businesses: (3)
Jordan (4)						9/30/2022						$	216					$	—					$	170					$	—					$	51
Jordan (4)						12/31/2022						190						—						170						—						25
Goodwill: (5)
AES Andes						10/1/2022						$	644					$	—					$	—					$	—					$	644
AES El Salvador						10/1/2022						133						—						—						—						133
Equity method investments: (6)
sPower						12/31/2022						$	607					$	—					$	—					$	432					$	175

151 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Year Ended December 31, 2021						Measurement Date						Carrying Amount (1)						Fair Value																		Pre-tax Loss
Assets									Level 1						Level 2						Level 3
Long-lived assets held and used: (2)
Puerto Rico						3/31/2021						$	548					$	—					$	—					$	73					$	475
Mountain View I & II						4/30/2021						78						—						—						11						67
Ventanas 3 & 4						6/30/2021						661						—						—						12						649
Angamos						6/30/2021						241						—						—						86						155
Buffalo Gap III						12/31/2021						91						—						—						—						91
Buffalo Gap II						12/31/2021						73						—						—						—						73
Buffalo Gap I						12/31/2021						29						—						—						—						29
Dispositions and held-for-sale businesses: (3)
Estrella del Mar I						9/30/2021						$	17					$	—					$	6					$	—					$	11
Alto Maipo (7)						11/30/2021						2,339						—						—						2,043						—

---

(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 24*—Held-for-Sale and Dispositions* for further information.

(4)The pre-tax loss recognized was calculated using the $170 million fair value of the Jordan disposal group less cost to sell of $5 million.

(5)See Note 9—Goodwill and Other Intangible Assets for further information.

(6)See Note 8—Investments in and Advances to Affiliates for further information.

(7)Fair value measurement performed for purposes of allocating $224 million of goodwill to the carrying amount of Alto Maipo in determining the loss on disposal. The goodwill allocation was determined based on the relative fair value of Alto Maipo, which was included in the AES Andes reporting unit. Note that the pre-tax loss column excludes the loss on disposal as this fair value measurement is only one component of such loss. See Note 24*—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 and equity method investments measured on a nonrecurring basis during the year ended December 31, 2022 (in millions, except range amounts):

December 31, 2022						Fair Value						Valuation Technique						Unobservable Input						Range (Weighted Average)
Long-lived assets held and used:
Maritza						$	452					Discounted cash flow						Annual revenue growth						(66)% to 11% (-11%)
																		Annual variable margin						(66)% to 23% (-1%)
																		Discount rate						20% to 25% (21%)
TEG TEP						311						Discounted cash flow						Annual revenue growth						(15)% to 2% (0%)
																		Annual variable margin						36% to 43% (37%)
																		Discount rate						13% to 20% (15%)
Equity method investments:
sPower						432						Discounted cash flow						Annual dividend growth						(36)% to 41% (2%)
																		Discount rate						7		%
Total						$	1,195

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, 2022
									Carrying Amount						Fair Value
									Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (1)						$	301					$	340					$	—					$	—					$	340
Liabilities:			Non-recourse debt						19,429						18,527						—						17,089						1,438
			Recourse debt						3,894						3,505						—						3,505						—

									December 31, 2021
									Carrying Amount						Fair Value
									Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (2)						$	55					$	117					$	—					$	—					$	117
Liabilities:			Non-recourse debt						14,811						16,091						—						16,065						26
			Recourse debt						3,754						3,818						—						3,818						—

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(1)These amounts primarily relate to amounts impacted by the Stabilization Fund enacted by the Chilean government, and future premium payments on a heat rate call option entered into on behalf of the Southland Energy CCGT units. The premium payments are expected to be received in 2024. These amounts are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. See Note 7—Financing Receivables for further information.

152 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

(2)These amounts primarily relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and amounts impacted by the Stabilization Fund enacted by the Chilean government, and are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The fair value and carrying amount of the Argentina receivables exclude VAT of $2 million as of December 31, 2021. See Note 7—Financing Receivables for further information.

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, 2022, regardless of whether they are in qualifying 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, SOFR and EURIBOR)						$	6,040					2059
Cross-currency swaps (Brazilian Reais)						293						2034
Foreign currency:
Euro						198						2025
Chilean peso						167						2025
Colombian peso						57						2024
Brazilian real						32						2024
Argentine peso						5						2026

Commodity Derivatives						Maximum Notional						Latest Maturity
Natural Gas (in MMBtu)						71						2030
Power (in MWhs)						15						2040
Coal (in Tons or Metric Tonnes)						6						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, 2022																		December 31, 2021
Assets						Designated						Not Designated						Total						Designated						Not Designated						Total
Interest rate derivatives						$	313					$	1					$	314					$	53					$	—					$	53
Cross-currency derivatives						—						—						—						5						—						5
Foreign currency derivatives						27						59						86						28						109						137
Commodity derivatives						—						245						245						6						32						38
Total assets						$	340					$	305					$	645					$	92					$	141					$	233
Liabilities
Interest rate derivatives						$	6					$	—					$	6					$	288					$	6					$	294
Cross-currency derivatives						42						—						42						11						—						11
Foreign currency derivatives						9						11						20						23						12						35
Commodity derivatives						59						347						406						11						33						44
Total liabilities						$	116					$	358					$	474					$	333					$	51					$	384

						December 31, 2022												December 31, 2021
Fair Value						Assets						Liabilities						Assets						Liabilities
Current						$	271					$	168					$	85					$	83
Noncurrent						374						306						148						301
Total						$	645					$	474					$	233					$	384

Credit Risk-Related Contingent Features			December 31, 2022						December 31, 2021
Present value of liabilities subject to collateralization			$	104					$	—
Cash collateral held by third parties or in escrow			42						—

153 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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,
2022						2021						2020
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives						$	869					$	51					$	(511)
Cross-currency derivatives						—						(11)						3
Foreign currency derivatives						17						(34)						25
Commodity derivatives						16						(1)						5
Total						$	902					$	5					$	(478)
Gains (losses) reclassified from AOCL to earnings
Interest rate derivatives						$	(72)					$	(419)					$	(75)
Cross-currency derivatives						—						(15)						(5)
Foreign currency derivatives						2						(62)						(9)
Commodity derivatives						2						4						(2)
Total						$	(68)					$	(492)					$	(91)
Gains (Losses) on fair value hedging relationship
Cross Currency contracts
Derivatives designated as hedging instruments						$	(35)					$	(6)					$	—
Hedged items						26						4						—
Total						$	(9)					$	(2)					$	—
Loss reclassified from AOCL to earnings due to impairment of assets						$	(16)					$	—					$	(14)
Gain reclassified from AOCL to earnings due to discontinuance of hedge accounting						$	26					$	—					$	—
Gain (losses) recognized in earnings related to
Not designated as hedging instruments:
Interest rate derivatives						$	4					$	105					$	(1)
Foreign currency derivatives						21						29						68
Commodity derivatives and other						(43)						(28)						(68)
Total						$	(18)					$	106					$	(1)

AOCL is expected to decrease pre-tax income from continuing operations for the twelve months ended December 31, 2023 by $13 million, primarily due to interest rate and commodity 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).

			December 31, 2022																		December 31, 2021
			Gross Receivable						Allowance						Net Receivable						Gross Receivable						Allowance						Net Receivable
Chile			$	239					$	—					$	239					$	17					$	—					$	17
U.S.			46						—						46						—						—						—
Argentina			5						—						5						11						1						10
Other			13						—						13						30						—						30
Total			$	303					$	—					$	303					$	58					$	1					$	57

Chile — AES Andes has recorded receivables pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Funds created by the Chilean government in October 2019 and August 2022, in conjunction with the Tariff Stabilization Laws. Historically, the government updated the prices for these contracts every six months to reflect the contracts' indexation to exchange rates and commodities prices. The Tariff Stabilization Laws do 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 to supply regulated contracts. Consequently, costs incurred in excess of the July 1, 2019 price are accumulated and borne by generators. Through different programs, AES Andes aims to reduce its exposure and has already sold a significant portion of the receivables accumulated as of December 31, 2021.

As of December 31, 2022, $26 million of current receivables and $227 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets, respectively, pertaining to the Stabilization Funds. Additionally, $12 million of payment deferrals granted to mining customers as part of our green blend agreements were recorded as financing receivables included in Other noncurrent assets at December 31, 2022.

U.S. — AES has recorded a non-current receivable in connection with future premium payments on a heat rate

154 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

call option entered into on behalf of the Southland Energy CCGT units. The premium payments are expected to be received in 2024.

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.

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 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, 2022 and 2021, 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 $64 million and $108 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.

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,									2022						2021						2022						2021
Affiliate			Country						Carrying Value (in millions)												Ownership Interest %
sPower (1)			United States						$	432					$	492					50		%				50		%
Fluence			United States						205						304						34		%				34		%
Grupo Energía Gas Panamá			Panama						82						41						49		%				49		%
Uplight			United States						81						103						29		%				29		%
Energía Natural Dominicana Enadom (2)			Dominican Republic						64						53						43		%				43		%
Mesa La Paz			Mexico						32						48						50		%				50		%
Barry (3)			United Kingdom						—						—						100		%				100		%
Other affiliates (4)			Various						56						39
Total									$	952					$	1,080

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(1)In February 2021, the sPower and AES Renewable Holdings development platforms were merged to form AES Clean Energy Development. See Note 25—Acquisitions for further information.

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

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

(4)Includes Bosforo, Tucano and various other equity method investments.

sPower — In February 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, a consolidated entity, which will serve as the development vehicle for all future renewable projects in the U.S. Since the sPower development platform was carved-out of AES’ existing equity method investment, this transaction resulted in a $102 million decrease in the carrying value of the sPower investment and the Company recognized a gain of $214 million in Other income.

In December 2021, AES acquired an additional 25% ownership in specifically identified projects of the sPower development platform. As a result, the Company recognized a gain of $35 million in Other income. Subsequent to the transaction, AES has a 75% ownership interest in specifically identified projects of sPower through its ownership of AES Clean Energy Development, and 50% ownership interest in the sPower equity method investment. See Note

155 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

25*—Acquisitions* for further information. As the Company still does not control sPower after these transactions, it continues to be accounted for as an equity method investment.

In December 2022, the Company agreed to sell 49% of its indirect interest in a portfolio of sPower's operating assets ("OpCo B"). At the time the purchase and sale agreement was signed, a loss was expected upon closing the transaction, which occurred on February 28, 2023. The expected loss on sale was identified as a triggering event and the Company evaluated whether its investment in sPower was other-than-temporarily impaired. Based on management’s estimate of fair value of $432 million, the Company recognized an other-than-temporary impairment of $175 million in Other non-operating expense in December 2022.

sPower primarily holds operating assets where the tax credits associated with underlying projects have already been allocated to tax equity partners. The application of HLBV accounting increases the carrying value of these investments, as earnings are initially disproportionately allocated to the sponsor entity. Since sPower does not have any ongoing development or other value creation activities following the transfer of these activities to AES Clean Energy Development, the impairment adjusts the carrying value to the fair market value of the operating assets. sPower is reported in the US and Utilities SBU reportable segment.

Alto Maipo — In May 2022, Alto Maipo emerged from bankruptcy in accordance with Chapter 11 of the U.S. Bankruptcy Code. Alto Maipo, as restructured, is considered a VIE. As the Company lacks the power to make significant decisions, it does not meet the criteria to be considered the primary beneficiary of Alto Maipo and therefore will not consolidate the entity. The Company has elected the fair value option to account for its investment in Alto Maipo as management believes this approach will better reflect the economics of its equity interest. As of December 31, 2022, the fair value is insignificant. Alto Maipo is reported in the South America SBU reportable segment.

Fluence — In June 2021, Fluence issued new shares to the Qatar Investment Authority (“QIA”) for $125 million, which following the completion of the transaction, represented a 13.6% ownership interest in Fluence. As a result of the transaction, which AES has accounted for as a partial disposition, AES’ ownership interest in Fluence decreased from 50% to 43.2%, and the Company recognized a gain of $60 million in Loss on disposal and sale of business interests.

On November 1, 2021, Fluence completed its IPO of 35,650,000 of its Class A common stock at a price of $28 per share, including the exercise of the underwriters’ option. Fluence received approximately $936 million in proceeds, after expenses, as a result of the transaction. AES’ ownership interest in Fluence decreased to 34.2%. The Company recognized a gain of $325 million in Loss on disposal and sale of business interests. AES' ownership interest further decreased to 33.5% as of December 31, 2022 as a result of the settlement of share based awards at Fluence. As the Company still does not control Fluence after these transactions, it continues to be accounted for as an equity method investment and is reported as part of Corporate and Other.

Uplight — In July 2021, the Company closed on a transaction involving existing and new shareholders of Uplight. As part of the transaction, the Company contributed $37 million to Uplight; however, AES’s ownership interest in Uplight decreased from 32.3% to 29.6% primarily due to larger contributions from other investors. The transaction was accounted for as a partial disposition in which AES recognized a loss of $25 million in Loss on disposal and sale of business interests, mainly as a result of the settlement of share based awards at Uplight as well as the expenses associated with the transaction.

In October 2021, the Company contributed an additional $23 million to Uplight. AES' ownership interest decreased to 29.4% as a result of equity granted to retained executives at a company acquired by Uplight. As the Company still does not control Uplight after the transaction, it continues to be accounted for as an equity method investment and is reported as part of Corporate and Other.

Gas Natural Atlántico II — In September 2021, the Company acquired the remaining equity interest in Gas Natural Atlántico II, S. de. R.L., a partnership whose purpose is to construct transmission lines for Colon. After additional assets were acquired, the Company remeasured the investment at the acquisition-date fair value, resulting in the recognition of a $6 million gain, recorded in Other income. The partnership, previously recorded as an equity method investment, is now consolidated by AES and is reported in the MCAC SBU reportable segment.

Grupo Energía Gas Panamá — In April 2021, Grupo Energía Gas Panamá, a joint venture between AES and InterEnergy Power & Gas Limited, completed the acquisition of the Gatun combined cycle natural gas development project. AES holds a 49% ownership interest in the affiliate. The Company contributed $44 million to the joint venture as of December 31, 2021 and has contributed a total of $45 million as of December 31, 2022. As the Company does not control the joint venture, it is accounted for as an equity method investment and is reported in

156 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

the MCAC SBU reportable segment.

Guacolda — In September 2020, Guacolda management reviewed the recoverability of the Guacolda asset group and determined the undiscounted cash flows did not exceed the carrying amount. Impairment indicators were identified 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 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.

In February 2021, AES Andes entered into an agreement to sell its 50% ownership interest in Guacolda for $34 million. On July 20, 2021, the Company completed the sale, resulting in a pre-tax gain on sale of $34 million, recorded in Loss on disposal and sale of business interests. Prior to its sale, the Guacolda equity method investment was reported in the South America 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 operating decisions can be made without the banks' consent, and the Company does not control Barry. As of December 31, 2022 and 2021, other long-term liabilities included $39 million and $44 million, respectively, 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,			2022						2021						2020						2022						2021						2020
Revenue			$	1,780					$	1,316					$	1,880					$	1					$	1					$	1
Operating margin (loss)			(361)						(53)						213						(1)						(1)						(3)
Net income (loss)			(527)						(242)						(538)						—						(3)						(4)
Net income (loss) attributable to affiliates			(405)						(40)						(411)						—						(3)						(4)
December 31,			2022						2021												2022						2021
Current assets			$	2,223					$	1,180											$	125					$	122
Noncurrent assets			7,522						6,497												643						771
Current liabilities			1,931						1,414												118						126
Noncurrent liabilities			4,040						3,602												677						793
Stockholders' equity			2,978						1,792												(26)						(26)
Noncontrolling interests			796						869												(1)						—

At December 31, 2022, retained earnings included $288 million related to the undistributed losses of the Company's 50%-or-less owned affiliates. Distributions received from these affiliates were $47 million, $25 million, and $14 million for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, the underlying equity in the net assets of our equity affiliates exceeded the aggregate carrying amount of our investments in equity affiliates by $202 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, 2022 and 2021 (in millions):

			US and Utilities						South America						MCAC						Eurasia						Corporate and Other						Total
Balance as of December 31, 2021
Goodwill			$	3,127					$	644					$	16					$	—					$	1					$	3,788
Accumulated impairment losses			(2,611)						—						—						—						—						(2,611)
Net balance			516						644						16						—						1						1,177
Impairment losses			(133)						(644)						—						—						—						(777)
Goodwill acquired during the year			—						—						—						—						3						3
Goodwill derecognized during the year			(40)						—						—						—						(1)						(41)
Balance as of December 31, 2022
Goodwill			3,087						644						16						—						3						3,750
Accumulated impairment losses			(2,744)						(644)						—						—						—						(3,388)
Net balance			$	343					$	—					$	16					$	—					$	3					$	362

157 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

AES Andes — During the fourth quarter of 2022, the Company performed the annual goodwill impairment test for the AES Andes reporting unit. The fair value of the reporting unit was determined under the income approach using a discounted cash flow valuation model. The estimated fair value was less than its carrying amount and as a result the Company recognized impairment expense of $644 million, reducing the goodwill balance of AES Andes to zero. The decrease in fair value since the date of our last impairment test was primarily driven by a higher discount rate resulting from increased interest rates and country risk premiums, as well as a decrease in forecasted energy prices and other unfavorable macroeconomic assumptions in Colombia.

AES El Salvador — During the fourth quarter of 2022, the Company performed the annual goodwill impairment test for the El Salvador reporting unit. The Company performed a quantitative impairment test and utilized the income approach. The estimated fair value was less than its carrying amount and as a result the Company recognized goodwill impairment expense of $133 million, reducing the goodwill balance of AES El Salvador to zero. Since the date of our last impairment test in 2021, the Company has seen market participants substantially increase return expectations for the perceived country risk for El Salvador. The impact of the increase has substantially increased our discount rate, resulting in a full impairment.

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, 2022																		December 31, 2021
			Gross Balance						Accumulated Amortization						Net Balance						Gross Balance						Accumulated Amortization						Net Balance
Subject to Amortization
Internal-use software			$	582					$	(307)					$	275					$	457					$	(279)					$	178
Contracts			342						(40)						302						183						(48)						135
Project development rights (1)			991						(17)						974						819						(8)						811
Emissions allowances (2)			37						—						37						18						—						18
Concession rights			207						(50)						157						195						(33)						162
Other (3)			57						(20)						37						111						(17)						94
Subtotal			2,216						(434)						1,782						1,783						(385)						1,398
Indefinite-Lived Intangible Assets
Land use rights			42						—						42						28						—						28
Water rights			—						—						—						3						—						3
Transmission rights			16						—						16						19						—						19
Other			1						—						1						2						—						2
Subtotal			59						—						59						52						—						52
Total			$	2,275					$	(434)					$	1,841					$	1,835					$	(385)					$	1,450

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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.

(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, 2022			Amount						Subject to Amortization/Indefinite-Lived						Weighted Average Amortization Period (in years)						Amortization Method
Internal-use software			$	136					Subject to Amortization						14						Straight-line
Contracts			196						Subject to Amortization						23						Straight-line
Project development rights			67						Subject to Amortization						4						Straight-line
Emissions allowances			35						Subject to Amortization						Various						As utilized
Land use rights			13						Indefinite-Lived						N/A						N/A
Transmission rights			—						Indefinite-Lived						N/A						N/A
Other			1						Various						N/A						N/A
Total			$	448

158 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

December 31, 2021			Amount						Subject to Amortization/Indefinite-Lived						Weighted Average Amortization Period (in years)						Amortization Method
Internal-use software			$	89					Subject to Amortization						6						Straight-line
Contracts			35						Subject to Amortization						12						Straight-line
Project development rights			667						Subject to Amortization						35						Straight-line
Emissions allowances			22						Subject to Amortization						Various						As utilized
Transmission rights			—						Indefinite-Lived						N/A						N/A
Concession rights (1)			7						Subject to Amortization						12						Straight-line
Other			2						Various						N/A						N/A
Total			$	822

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(1)Represents the fair value assigned to the extension of the Tietê hydroelectric plants' concession agreement with ANEEL. See Note 13—Contingencies for further information.

The following table summarizes the estimated amortization expense by intangible asset category for 2023 through 2027:

(in millions)			2023						2024						2025						2026						2027
Internal-use software			$	29					$	28					$	27					$	26					$	25
Contracts			20						17						16						16						16
Concession rights			17						16						16						16						16
Other			5						6						7						7						7
Total			$	71					$	67					$	66					$	65					$	64

Intangible asset amortization expense was $71 million, $69 million and $54 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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,			2022						2021						Recovery/Refund Period
Regulatory assets
Current regulatory assets:
AES Indiana deferred fuel and purchased power costs			$	80					$	9					1 year
El Salvador energy pass through costs recovery			78						80						Quarterly
Other			79						79						1 year
Total current regulatory assets			237						168
Noncurrent regulatory assets:
AES Indiana Petersburg Units 1 and 2 retirement costs			287						300						Over life of assets
AES Indiana and AES Ohio defined benefit pension obligations (1)			194						191						Various
AES Indiana environmental costs			73						76						Various
AES Indiana deferred Midwest ISO costs			34						48						4 years
AES Indiana deferred fuel and purchased power costs			21						84						2 years
Other			115						135						Various
Total noncurrent regulatory assets			724						834
Total regulatory assets			$	961					$	1,002
Regulatory liabilities
Current regulatory liabilities:
Overcollection of costs to be passed back to customers			$	46					$	18					1 year
Other			18						1						Various
Total current regulatory liabilities			64						19
Noncurrent regulatory liabilities:
AES Indiana and AES Ohio accrued costs of removal and AROs			657						868						Over life of assets
AES Indiana and AES Ohio income taxes payable to customers through rates			134						158						Various
Other			22						30						Various
Total noncurrent regulatory liabilities			813						1,056
Total regulatory liabilities			$	877					$	1,075

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(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

159 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

unrecognized actuarial gains and losses and prior service costs that are expected to be recovered through future rates. Additionally, our regulatory assets include the carrying value of AES Indiana's Petersburg Unit 1 at its retirement date and the expected carrying value of Petersburg Unit 2 at its anticipated retirement date, which are amortized over the life of the assets beginning on the dates of retirement. Other current and noncurrent regulatory assets primarily consist of:

• Undercollections on rate riders such as demand side management costs and deferred Midwest ISO costs at AES Indiana and competitive bidding and energy efficiency costs at AES Ohio;

• Deferred TDSIC costs and unamortized premiums reacquired or redeemed on long-term debt, which are amortized over the lives of the original issuances, at AES Indiana; and

• Vegetation management costs, decoupling deferral, and storm costs at AES Ohio.

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, 2022 and December 31, 2021 are related to the US and Utilities SBU.

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,
2022						2021
Variable Rate:
Bank loans			7.42%						2023 - 2041						$	3,971					$	2,345
Notes and bonds			1.48%						2023 - 2045						2,137						1,121
Debt to (or guaranteed by) multilateral, export credit agencies or development banks (1)			6.59%						2023 - 2023						4						79
Other			6.64%						2023 - 2030						1,234						125
Fixed Rate:
Bank loans			6.12%						2023 - 2057						461						359
Notes and bonds			5.05%						2023 - 2079						11,130						10,914
Debt to (or guaranteed by) multilateral, export credit agencies or development banks (1)			6.75%						2024 - 2024						3						3
Other			4.95%						2023 - 2061						798						79
Unamortized (discount) premium & debt issuance (costs), net															(309)						(214)
Subtotal															$	19,429					$	14,811
Less: Current maturities (2)															(1,752)						(1,361)
Noncurrent maturities (2) (3)															$	17,677					$	13,450

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

(2) Excludes $6 million and $6 million (current) and $169 million and $128 million (noncurrent) finance lease liabilities included in the respective non-recourse debt line items on the Consolidated Balance Sheet as of December 31, 2022 and 2021, respectively. See Note 14—Leases for further information.

(3) Excludes $25 million of failed sale-leaseback transaction liabilities included in the non-recourse debt line items on the Consolidated Balance Sheet as of December 31, 2021.

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 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 $1.3 billion on non-recourse debt outstanding at December 31, 2022.

160 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Non-recourse debt as of December 31, 2022 is scheduled to reach maturity as shown below (in millions):

December 31,			Annual Maturities
2023			$	1,761
2024			2,687
2025			2,237
2026			1,040
2027			2,720
Thereafter			9,293
Unamortized (discount) premium & debt issuance (costs), net			(309)
Total			$	19,429

As of December 31, 2022, AES subsidiaries with facilities under construction had a total of approximately $283 million of committed but unused credit facilities available to fund construction and other related costs. Excluding these facilities under construction, AES subsidiaries had approximately $1.4 billion 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.

161 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Significant transactions — During the year ended December 31, 2022, the Company's subsidiaries had the following significant debt transactions:

Subsidiary			Transaction Period						Issuances						Repayments						Loss on Extinguishment of Debt
AES Andes (1)			Q1, Q2, Q3, Q4						$	999					$	(217)					$	—
AES Brasil			Q1, Q2, Q4						779						(201)						—
AES Clean Energy (2)			Q2, Q3, Q4						1,153						(815)						(12)
AES Indiana			Q2, Q4						550						(200)						—
United Kingdom			Q1						710						(350)						—
Netherlands/Panama			Q1						500						—						—
El Salvador			Q2						348						(345)						—
AES Ohio			Q2						140						—						—
AES Dominicana Renewable Energy			Q3						120						—						—
Bulgaria			Q4						159						—						—

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(1)Issuances and repayments relate to AES Andes S.A. and AES Colombia.

(2)Issuances and repayments relate to AES Clean Energy Development and AES Renewable Holdings entities

AES Clean Energy — In December 2022, AES Renewable Holdings OpCo 1, LLC executed a term loan in the amount of $632 million due in 2027. The proceeds were used to prepay the outstanding principal of $692 million of its six credit facilities. As a result of this transaction, the Company recognized a loss on extinguishment of debt of $12 million.

Netherlands and Panama — In March 2022, AES Hispanola Holdings BV, a Netherlands based company, and Colon, as co-borrowers, executed a $500 million bridge loan due in 2023. The Company allocated $450 million and $50 million of the proceeds from the agreement to AES Hispanola Holdings BV and Colon, respectively.

United Kingdom — On January 6, 2022, Mercury Chile HoldCo LLC (“Mercury Chile”), a UK based company, executed a $350 million bridge loan and used the proceeds, as well as an additional capital contribution of $196 million from the Parent Company, to purchase the minority interest in AES Andes through intermediate holding companies (see Note 17—Equity for further information). On January 24, 2022, Mercury Chile issued $360 million aggregate principal of 6.5% senior secured notes due in 2027 and used the proceeds from the issuance to fully prepay the $350 million bridge loan.

Joint and Several Liability Arrangements — In December 2022, AES Clean Energy Development, AES Renewable Holdings, and sPower, an equity method investment, collectively referred to as the Issuers, entered into an agreement whereby long-term notes will be issued from time to time to finance or refinance operating wind, solar, and storage projects that are owned by the Issuers. On December 13, 2022, the Issuers entered into the Note Purchase Agreement for the issuance of up to $647 million of 6.55% Senior Notes due in 2047. The Notes were sold on December 14, 2022, at par for $647 million. Each of the Issuers is considered a “Co-Issuer” and will be jointly and severally liable with each other Co-Issuer for all obligations under the facility. As a result of the issuance, AES Clean Energy Development recorded a liability of $37 million, which represents its share of the Notes issued. As of December 31, 2022, the aggregate carrying amount of the Notes attributable to AES Clean Energy Development and AES Renewable Holdings was $37 million and is reflected within Non-recourse debt in the accompanying Consolidated Balance Sheets.

In 2021, AES Clean Energy Development, AES Renewable Holdings, and sPower, collectively referred to as the Borrowers, executed two Credit Agreements with aggregate commitments of $1.2 billion and maturity dates in December 2024 and September 2025. The Borrowers executed amendments to the revolving credit facilities, which resulted in an aggregate increase in the commitments of $1.3 billion, bringing the total commitments under the new agreements to $2.5 billion. There was no change to the maturity dates under the amendments. Each of the Borrowers is considered a “Co-Borrower” and will be jointly and severally liable with each other Co-Borrower for all obligations under the facilities. As a result of the amendments and increases in commitments used, AES Clean Energy Development and AES Renewable Holdings recorded, in aggregate, an increase in liabilities of $964 million in 2022, resulting in total commitments used under the revolving credit facilities, as of December 31, 2022, of $1.3 billion, which is reflected within Non-recourse debt in the accompanying Consolidated Balance Sheets. As of December 31, 2022, the aggregate commitments used under the revolving credit facilities for the Co-Borrowers was $1.8 billion.

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

162 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022 and 2021, approximately $424 million and $370 million, respectively, of restricted cash was maintained in accordance with certain covenants of the non-recourse debt agreements. Of these amounts, $285 million and $175 million, respectively, were included within Restricted cash and $139 million and $195 million, respectively, were included within 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 $1.2 billion at December 31, 2022.

The following table summarizes the Company's subsidiary non-recourse debt in default (in millions) as of December 31, 2022. Due to the defaults, these amounts are included in the current portion of non-recourse debt:

			Primary Nature of Default						December 31, 2022
Subsidiary			Debt in Default						Net Assets
AES Puerto Rico			Covenant						$	143					$	(178)
AES Ilumina (Puerto Rico)			Covenant						27						27
AES Jordan Solar			Covenant						7						10
Total									$	177

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, 2022, 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.

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, 2022						December 31, 2021
Senior Variable Rate Term Loan			SOFR + 1.125%						2024						200						—
Senior Unsecured Note			3.30%						2025						900						900
Drawings on revolving credit facility			SOFR + 1.75%						2027						325						365
Senior Unsecured Note			1.375%						2026						800						800
Senior Unsecured Note			3.95%						2030						700						700
Senior Unsecured Note			2.45%						2031						1,000						1,000
Other (1)			CDI + 7.00%						2022						—						25
Unamortized (discount) premium & debt issuance (costs), net															(31)						(36)
Subtotal															$	3,894					$	3,754
Less: Current maturities															—						(25)
Noncurrent maturities															$	3,894					$	3,729

---

(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):

163 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

December 31,			Net Principal Amounts Due
2023			$	—
2024			200
2025			900
2026			800
2027			325
Thereafter			1,700
Unamortized (discount) premium & debt issuance (costs), net			(31)
Total recourse debt			$	3,894

In September 2022, AES executed an amendment to its revolving credit facility. The aggregate commitment under the new agreement is $1.5 billion and matures in August 2027. Prior to this amendment, the credit agreement had an aggregate commitment of $1.25 billion and a maturity date in September 2026. As of December 31, 2022, AES had outstanding drawings under its revolving credit facility of $325 million.

In September 2022, the AES Corporation entered into a term loan agreement, under which AES can obtain term loans in an aggregate principal amount of up to $200 million, with all term loans to mature no later than September 30, 2024. On September 30, 2022 the AES Corporation borrowed $200 million under this agreement with a maturity date of September 30, 2024.

In July 2021, AES offered to exchange up to $800 million of the newly registered 1.375% Senior Notes due in 2026 for up to $800 million of the existing unregistered 1.375% Senior Notes due in 2026 and up to $1 billion of our newly registered 2.45% Senior Notes due in 2031 for up to $1 billion of the existing unregistered 2.45% Senior Notes due in 2031. The terms of the new notes are identical in all material respects to the terms of the old notes with the exception that the new notes have been registered under the Securities Act of 1933, as amended. In August 2021, $798 million and $997 million of the 2026 and 2031 Notes were exchanged under the offer, respectively. Although not all investors participated in the exchange, there was no change to the outstanding indebtedness.

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 contains customary covenants and restrictions on the Company's ability to engage in certain activities, including, but not limited to, limitations on liens; restrictions on mergers and acquisitions and the disposition of assets; and other financial reporting requirements.

The revolving credit facility also contains one financial covenant, evaluated quarterly, requiring the Company to maintain 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.

164 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022 for 2023 through 2027 and thereafter as well as actual purchases under these contracts for the years ended December 31, 2022, 2021, and 2020 (in millions):

Actual purchases during the year ended December 31,			Electricity Purchase Contracts						Fuel Purchase Contracts						Other Purchase Contracts
2020			$	756					$	1,573					$	1,506
2021			709						2,070						1,261
2022			1,156						3,375						3,602
Future commitments for the year ending December 31,
2023			$	1,190					$	3,702					$	4,642
2024			873						2,624						477
2025			639						1,706						303
2026			588						1,099						215
2027			586						1,117						189
Thereafter			5,924						3,134						1,515
Total			$	9,800					$	13,382					$	7,341

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 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 16 years.

The following table summarizes the Parent Company's contingent contractual obligations as of December 31, 2022. 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.

Contingent Contractual Obligations						Amount (in millions)						Number of Agreements						Maximum Exposure Range for Each Agreement (in millions)
Guarantees and commitments						$	2,406					81						< $1 — 400
Letters of credit under the unsecured credit facilities						128						39						< $1 — 36
Letters of credit under bilateral agreements						123						2						$59 — 64
Letters of credit under the revolving credit facility						34						16						< $1 — 15
Surety bonds						2						2						< $1 — 1
Total						$	2,693					140

During the year ended December 31, 2022, 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, 2022 and 2021, the Company recognized liabilities of $10 million and $4 million, respectively, for projected environmental remediation costs. 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, 2022. 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.

165 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 $22 million and $23 million as of December 31, 2022 and 2021, 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, 2022. 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 $51 million and $88 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. See Note 23—Income Taxes of this Form 10-K for further information.

Tietê GSF Settlement — In December 2020, ANEEL published a regulation establishing the terms and conditions for compensation for the non-hydrological risk charged to hydro generators through the incorrect application of the GSF mechanism between 2013 and 2018. In accordance with the regulation, Tietê will be compensated in the form of a concession extension period, initially determined to be 2.7 years, which will be amortized from the date of the agreement until the end of the new concession period. As of December 31, 2020, the compensation to be received from the concession extension was estimated to have a fair value of $184 million, based on a preliminary time-value equivalent calculation made by the CCEE, and was recorded as a reversal of Non-Regulated Cost of Sales on the Consolidated Statements of Operations for the year ended December 31, 2020. In March 2021, the CCEE’s final calculation of fair value was $190 million and the Company recognized an additional reversal of Non-Regulated Cost of Sales of $6 million. In August 2021, ANEEL published Resolution 2.919/2021, establishing an extension for the end of the concession originally granted to AES Brasil’s hydroelectric plants, from 2029 to 2032. On April 14, 2022, the amended term was finalized and agreed upon by 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, 2022									December 31, 2021
Assets
Right-of-use assets — finance leases						Electric generation, distribution assets and other						$	160								$	125
Right-of-use assets — operating leases						Other noncurrent assets						356									278
Total right-of-use assets												$	516								$	403
Liabilities
Finance lease liabilities (current)						Non-recourse debt (current liabilities)						$	6								$	6
Finance lease liabilities (noncurrent)						Non-recourse debt (noncurrent liabilities)						169									128
Total finance lease liabilities												175									134
Operating lease liabilities (current)						Accrued and other liabilities						26									20
Operating lease liabilities (noncurrent)						Other noncurrent liabilities						374									294
Total operating lease liabilities												400									314
Total lease liabilities												$	575								$	448

166 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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

Lease Term and Discount Rate			December 31, 2022						December 31, 2021
Weighted-average remaining lease term — finance leases			33 years						32 years
Weighted-average remaining lease term — operating leases			25 years						23 years
Weighted-average discount rate — finance leases			4.59		%				4.65		%
Weighted-average discount rate — operating leases			6.22		%				6.70		%

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

			Twelve Months Ended December 31,
Components of Lease Cost			2022						2021
Operating lease cost			$	46					$	36
Finance lease cost:
Amortization of right-of-use assets			8						4
Interest on lease liabilities			8						4
Short-term lease costs			28						21
Variable lease cost			1						1
Total lease cost			$	91					$	66

Operating cash outflows from operating leases included in the measurement of lease liabilities were $54 million and $39 million for the twelve months ended December 31, 2022 and 2021, respectively, and operating cash outflows from finance leases were $22 million and $2 million for the twelve months ended December 31, 2022 and 2021, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities were $14 million for the twelve months ended December 31, 2022.

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, 2022 for 2023 through 2027 and thereafter (in millions):

			Maturity of Lease Liabilities
			Finance Leases						Operating Leases
2023			$	10					$	36
2024			9						35
2025			9						33
2026			9						32
2027			9						30
Thereafter			310						650
Total			356						816
Less: Imputed interest			(181)						(416)
Present value of lease payments			$	175					$	400

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, recognized in Revenue on the Consolidated Statements of Operations for the periods indicated (in millions):

									Twelve Months Ended December 31,
Lease Income															2022						2021
Total lease revenue															$	527					$	595
Less: Variable lease revenue															(49)						(75)
Total non-variable lease revenue															$	478					$	520

167 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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

Lease Assets						December 31, 2022						December 31, 2021
Gross assets						$	1,319					$	2,423
Accumulated depreciation						(139)						(765)
Net assets						$	1,180					$	1,658

The option to extend or terminate a lease is based on customary early termination provisions in the contract, such as payment defaults, bankruptcy, or lack of performance on energy delivery. The Company has not recognized any early terminations as of December 31, 2022. 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, 2022 for 2023 through 2027 and thereafter (in millions):

			Future Cash Receipts for
			Sales-Type Leases						Operating Leases
2023			$	25					$	387
2024			25						387
2025			25						388
2026			25						279
2027			25						203
Thereafter			367						545
Total			492						$	2,189
Less: Imputed interest			(264)
Present value of total lease receipts			$	228

Battery Storage Lease Arrangements — The Company constructs and operates projects consisting only of a stand-alone battery energy storage system (“BESS”) facility, as well as projects that pair a BESS with solar energy systems. These projects allow 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 typically constituting a sales-type lease. The Company recognized lease income on sales-type leases through variable payments of $2 million and $3 million and interest income of $23 million and $15 million for the years ended December 31, 2022 and 2021, respectively. During the second quarter of 2022, the Company recognized a full allowance of $20 million on a sales-type lease receivable at AES Gilbert. See Note 21—Other Income and Expense for further information.

Prior to January 1, 2022, due to the variable-based nature of lease payments under certain contracts, the Company recorded a loss at commencement of sales-type leases of $13 million for the year ended December 31, 2021. These amounts are recognized in Other expense in the Condensed Consolidated Statement of Operations. See Note 21—Other Income and Expense for further information. Effective January 1, 2022, the Company adopted ASU 2021-05 in which lessors classify and account for certain leases with primarily variable-based lease payments as operating leases. The Company adopted this standard on a prospective basis. See Note 1—General and Summary of Significant Accounting Policies for further information.

15. BENEFIT PLANS

Defined Contribution Plans — 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 AES Ohio employees. The remaining two plans include union and non-union employees at AES Indiana and union employees at AES Ohio. 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, 2022, 2021 and 2020, costs for defined contribution plans were approximately $31 million, $26 million and $21 million, respectively.

168 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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, 2022, 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):

						2022												2021
						U.S.						Foreign						U.S.						Foreign
Change in projected benefit obligation:
Benefit obligation as of January 1						$	1,225					$	173					$	1,331					$	218
Service cost						14						4						14						6
Interest cost						28						17						24						15
Plan amendments						—						—						8						—
Plan curtailments						—						—						—						(23)
Plan settlements						—						—						—						(1)
Benefits paid						(65)						(13)						(101)						(10)
Divestitures						—						(1)						—						—
Actuarial (gain) loss						(288)						(11)						(51)						(16)
Effect of foreign currency exchange rate changes						—						8						—						(16)
Benefit obligation as of December 31						$	914					$	177					$	1,225					$	173
Change in plan assets:
Fair value of plan assets as of January 1						$	1,218					$	106					$	1,249					$	112
Actual return on plan assets						(250)						7						60						9
Employer contributions						8						5						10						4
Plan settlements						—						—						—						(1)
Benefits paid						(65)						(13)						(101)						(10)
Effect of foreign currency exchange rate changes						—						9						—						(8)
Fair value of plan assets as of December 31						$	911					$	114					$	1,218					$	106
Reconciliation of funded status:
Funded status as of December 31						$	(3)					$	(63)					$	(7)					$	(67)

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,						2022												2021
Amounts Recognized on the Consolidated Balance Sheets						U.S.						Foreign						U.S.						Foreign
Noncurrent assets						$	34					$	7					$	49					$	7
Accrued benefit liability—current						—						(8)						—						(7)
Accrued benefit liability—noncurrent						(37)						(62)						(56)						(67)
Net amount recognized at end of year						$	(3)					$	(63)					$	(7)					$	(67)

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

December 31,			2022												2021
			U.S.						Foreign						U.S.						Foreign
Accumulated benefit obligation			$	900					$	170					$	1,199					$	165
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation			$	340					$	169					$	458					$	165
Accumulated benefit obligation			333						163						442						159
Fair value of plan assets			304						98						402						91
Information for pension plans with a projected benefit obligation in excess of plan assets:
Projected benefit obligation			$	340					$	169					$	458					$	165
Fair value of plan assets			304						98						402						91

169 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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,						2022												2021
						U.S.						Foreign						U.S.						Foreign
Benefit Obligation:			Discount rate			5.41		%				13.23		%				2.82		%				10.45		%
			Rate of compensation increase			2.75		%				11.06		%				2.75		%				7.76		%
Periodic Benefit Cost:			Discount rate			2.82		%				10.45		%	(1)			2.45		%				7.53		%	(1)
			Expected long-term rate of return on plan assets			4.50		%				6.36		%				4.91		%				8.02		%
			Rate of compensation increase			2.75		%				7.76		%				2.75		%				5.69		%

---

(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 2022. 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, 2022 is affected by the assumptions as of that date. Pension expense for 2022 is affected by the December 31, 2021 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						$	(1)
Decrease of 1% in the discount rate						4
Increase of 1% in the long-term rate of return on plan assets						(13)
Decrease of 1% in the long-term rate of return on plan assets						13

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

December 31,						2022												2021												2020
Components of Net Periodic Benefit Cost:						U.S.						Foreign						U.S.						Foreign						U.S.						Foreign
Service cost						$	14					$	4					$	14					$	6					$	12					$	6
Interest cost						28						17						24						15						35						14
Expected return on plan assets						(53)						(7)						(59)						(8)						(58)						(7)
Amortization of prior service cost						4						—						4						—						5						—
Amortization of net loss						8						1						15						3						14						2
Curtailment (gain) loss recognized						—						—						—						(17)						—						—
Total pension cost						$	1					$	15					$	(2)					$	(1)					$	8					$	15

The following table summarizes the amounts reflected in AOCL, including AOCL attributable to noncontrolling interests, on the Consolidated Balance Sheet as of December 31, 2022, that have not yet been recognized as components of net periodic benefit cost (in millions):

December 31, 2022			Accumulated Other Comprehensive Income (Loss)
			U.S.						Foreign
Prior service cost			$	(3)					$	3
Unrecognized net actuarial loss			(20)						(27)
Total			$	(23)					$	(24)

170 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

The following table summarizes the Company's target allocation for 2022 and pension plan asset allocation, both domestic and foreign, as of the periods indicated:

															Percentage of Plan Assets as of December 31,
			Target Allocations												2022												2021
Asset Category			U.S.						Foreign						U.S.						Foreign						U.S.						Foreign
Equity securities			22%						12%						22.17		%				3.53		%				31.26		%				14.76		%
Debt securities			78%						82%						77.28		%				92.14		%				68.37		%				82.40		%
Real estate			—%						2%						—		%				1.09		%				—		%				1.11		%
Other			—%						4%						0.55		%				3.24		%				0.37		%				1.73		%
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, 2022																								December 31, 2021
U.S. Plans			Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Equity securities: (1)			$	—					$	202					$	—					$	202					$	—					$	381					$	—					$	381
Debt securities: (1)			—						704						—						704						—						833						—						833
Cash and cash equivalents			5						—						—						5						4						—						—						4
Total plan assets			$	5					$	906					$	—					$	911					$	4					$	1,214					$	—					$	1,218

---

(1)For the U.S. plans, the balances under the equity securities and debt securities categories represent investments through common collective trusts, for which the underlying investments are equity and debt securities.

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, 2022																								December 31, 2021
Foreign Plans						Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Equity securities:			Mutual funds			$	—					$	3					$	—					$	3					$	15					$	—					$	—					$	15
			Private equity			—						—						1						1						—						—						1						1
Debt securities:			Mutual funds (1)			35						70						—						105						18						69						—						87
Real estate:			Real estate			—						—						1						1						—						—						1						1
Other:			Other assets			1						2						1						4						1						—						1						2
			Total plan assets			$	36					$	75					$	3					$	114					$	34					$	69					$	3					$	106

---

(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 2023						$	8					$	10
Expected benefit payments for fiscal year ending:
2023						68						18
2024						69						16
2025						69						17
2026						69						19
2027						69						21
2028 - 2032						342						125

171 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

16. REDEEMABLE STOCK OF SUBSIDIARIES

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

December 31,			2022						2021
Balance at the beginning of the period			$	1,257					$	872
Net loss			(87)						(6)
Other comprehensive income			40						19
Adjustments to redemption value			—						4
Distributions to holders of redeemable stock of subsidiaries			(64)						—
Acquisitions and reclassification of redeemable stock of subsidiaries			(60)						(211)
Contributions from holders of redeemable stock of subsidiaries			67						579
Sales of redeemable stock of subsidiaries			168						—
Balance at the end of the period			$	1,321					$	1,257

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

December 31,						2022						2021
IPALCO common stock						$	782					$	700
AES Clean Energy Development common stock						436						497
AES Clean Energy Development tax equity partnerships						86						—
Potengi common and preferred stock						17						—
AES Indiana preferred stock						—						60
Total redeemable stock of subsidiaries						$	1,321					$	1,257

AES Indiana — AES Indiana had $60 million of cumulative preferred stock outstanding as of December 31, 2021, which represented five series of preferred stock. The redemption of the preferred shares was considered to be not solely within the control of the issuer and the preferred stock was considered temporary equity. In December 2022, AES Indiana redeemed all of its outstanding preferred shares for $60 million. The preferred shares were retired upon redemption as there is no intention for the shares to be reissued. AES Indiana is reported in the US and Utilities SBU reportable segment.

AES Clean Energy Development Tax Equity Partnerships — The majority of solar projects under AES Clean Energy Development have been financed with tax equity structures, in which tax equity investors receive a portion of the economic attributes of the facilities, including tax attributes, that vary over the life of the projects. In some cases, these agreements contain certain partnership rights, though not currently in effect, that would enable the tax equity investor to exit in the future. As a result, the minority ownership interest is considered temporary equity.

In 2022, AES Clean Energy Development, through multiple transactions, sold noncontrolling interests in multiple project companies to tax equity partners, resulting in a $157 million increase to Redeemable stock of subsidiaries. AES Clean Energy Development is reported in the US and Utilities SBU reportable segment.

IPALCO — In December 2021, CDPQ made equity capital contributions of $34 million to AES U.S. Investments, subsequently contributed to IPALCO by AES U.S. Investments, and $48 million to IPALCO as part of a capital call to raise proceeds for AES Indiana's TDSIC and replacement generation projects. In December 2022, CDPQ made additional capital contributions of $77 million. The Company and CDPQ made capital contributions on a proportional share basis; therefore, the capital calls did not change CDPQ or AES' ownership interests in IPALCO. IPALCO is reported in the US and Utilities SBU reportable segment.

172 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Potengi — In March 2022, Tucano Holding I (“Tucano”), a subsidiary of AES Brasil, issued new shares in the Potengi wind development project. BRF S.A. (“BRF”) acquired shares representing 24% of the equity in the project for $12 million, reducing the Company’s indirect ownership interest in Potengi to 35.5%. As the Company maintained control after the transaction, Potengi continues to be consolidated by the Company. As part of the transaction, BRF was given an option to sell its entire ownership interest at the conclusion of the PPA term. As a result, the minority ownership interest is considered temporary equity, which will be adjusted for earnings or losses allocated to the noncontrolling interest under ASC 810. Any subsequent changes in the redemption value of the exit rights will be recognized against permanent equity in accordance with ASC 480-10-S99, as it is probable that the shares will become redeemable. Potengi is reported in the South America SBU reportable segment.

Colon — In September 2021, the Company acquired the remaining 49.9% minority ownership interest in Colon, reducing the value of the Colon temporary equity to zero. See Note 17—Equity for further information. Colon is reported in the MCAC SBU reportable segment.

AES Clean Energy Development — On February 1, 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, which will serve as the development vehicle for all future renewable projects in the U.S. As part of the transaction, AlMCo, our existing partner in the sPower equity method investment, received a 25% minority ownership interest in the newly formed entity along with certain partnership rights, though not currently in effect, that would enable AIMCo to exit in the future. As a result, the minority ownership interest is considered temporary equity.

During the second quarter of 2021, the Company recorded measurement period adjustments to the estimated fair values of the sPower and AES Renewable Holdings development platforms and the value of the partnership rights initially recorded in the first quarter of 2021, which resulted in an $81 million increase in the value of the temporary equity. The temporary equity will be adjusted for earnings or losses allocated to the noncontrolling interest under ASC 810. Any subsequent changes in the redemption value of the exit rights will be recognized against permanent equity in accordance with ASC 480-10-S99, as it is probable that the shares will become redeemable. See Note 25*—Acquisitions* for further information. AES Clean Energy Development is reported in the US and Utilities SBU reportable segment.

17. EQUITY

Equity Units

In March 2021, the Company issued 10,430,500 Equity Units with a total notional value of $1,043 million. Each Equity Unit has a stated amount of $100 and was initially issued as a Corporate Unit, consisting of a forward stock purchase contract (“2024 Purchase Contracts”) and a 10% undivided beneficial ownership interest in one share of 0% Series A Cumulative Perpetual Convertible Preferred Stock, issued without par and with a liquidation preference of $1,000 per share (“Series A Preferred Stock”).

Upon reconsideration of the nature of the Equity Units, the Company re-evaluated its accounting assessment and concluded that the Equity Units should be accounted for as one unit of account based on the economic linkage between the 2024 Purchase Contracts and the Series A Preferred Stock, as well as the Company's assessment of the applicable accounting guidance relating to combining freestanding instruments. The Equity Units represent mandatorily convertible preferred stock. Accordingly, the shares associated with the combined instrument are reflected in diluted earnings per share using the if-converted method.

In the fourth quarter of 2021, the Company also corrected the classification of certain amounts in the Consolidated Balance Sheet and Statement of Changes in Equity to reflect the 2024 Purchase Contracts and Series A Preferred Stock as one unit of account. The corrections have no impact on the Company's net earnings, total assets, cash flows, or segment information.

In conjunction with the issuance of the Equity Units, the Company received approximately $1 billion in proceeds, net of underwriting costs and commissions, before offering expenses. The proceeds for the issuance of 1,043,050 shares are attributed to the Series A Preferred Stock for $838 million and $205 million for the present value of the quarterly payments due to holders of the 2024 Purchase Contracts ("Contract Adjustment Payments"). The proceeds will be used for the development of the AES renewable businesses, U.S. utility businesses, LNG infrastructure, and for other developments determined by management.

173 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

The Series A Preferred Stock will initially not bear any dividends and the liquidation preference of the convertible preferred stock will not accrete. The Series A Preferred Stock has no maturity date and will remain outstanding unless converted by holders or redeemed by the Company. Holders of the shares of the convertible preferred stock will have limited voting rights.

The Series A Preferred Stock is pledged as collateral to support holders’ purchase obligations under the 2024 Purchase Contracts and can be remarketed. In connection with any successful remarketing, the Company may increase the dividend rate, increase the conversion rate, and modify the earliest redemption date for the convertible preferred stock. After any successful remarketing in connection with which the dividend rate on the convertible preferred stock is increased, the Company will pay cumulative dividends on the convertible preferred stock, if declared by the board of directors, quarterly in arrears from the applicable remarketing settlement date.

Holders of Corporate Units may create Treasury Units or Cash Settled Units from their Corporate Units as provided in the Purchase Contract Agreement by substituting Treasury securities or cash, respectively, for the Convertible Preferred Stock comprising a part of the Corporate Units.

The Company may not redeem the Series A Preferred Stock prior to March 22, 2024. At the election of the Company, on or after March 22, 2024, the Company may redeem for cash, all or any portion of the outstanding shares of the Series A Preferred Stock at a redemption price equal to 100% of the liquidation preference, plus any accumulated and unpaid dividends.

The 2024 Purchase Contracts obligate the holders to purchase, on February 15, 2024, for a price of $100 in cash, a maximum number of 57,292,650 shares of the Company’s common stock (subject to customary anti-dilution adjustments). The 2024 Purchase Contract holders may elect to settle their obligation early, in cash. The Series A Preferred Stock is pledged as collateral to guarantee the holders’ obligations to purchase common stock under the terms of the 2024 Purchase Contracts. The initial settlement rate determining the number of shares that each holder must purchase will not exceed the maximum settlement rate and is determined over a market value averaging period preceding February 15, 2024.

The initial maximum settlement rate of 3.864 was calculated using an initial reference price of $25.88, equal to the last reported sale price of the Company’s common stock on March 4, 2021. As of December 31, 2022, due to the customary anti-dilution provisions, the maximum settlement rate was 3.8691, equivalent to a reference price of $25.85. If the applicable market value of the Company’s common stock is less than or equal to the reference price, the settlement rate will be the maximum settlement rate; and if the applicable market value of common stock is greater than the reference price, the settlement rate will be a number of shares of the Company’s common stock equal to $100 divided by the applicable market value. Upon successful remarketing of the Series A Preferred Stock (“Remarketed Series A Preferred Stock”), the Company expects to receive additional cash proceeds of $1 billion and issue shares of Remarketed Series A Preferred Stock.

The Company pays Contract Adjustment Payments to the holders of the 2024 Purchase Contracts at a rate of 6.875% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15, commencing on May 15, 2021. The $205 million present value of the Contract Adjustment Payments at inception reduced the Series A Preferred Stock. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between the cash payment and the present value will accrete to interest expense, approximately $5 million over the three-year term. As of December 31, 2022, the present value of the Contract Adjustment Payments was $89 million.

The holders can settle the purchase contracts early, for cash, subject to certain exceptions and conditions in the prospectus supplement. Upon early settlement of any purchase contracts, the Company will deliver the number of shares of its common stock equal to 85% of the number of shares of common stock that would have otherwise been deliverable.

Equity Transactions with Noncontrolling Interests

AES Clean Energy Tax Equity Partnerships — The majority of solar projects under AES Clean Energy have been financed with tax equity structures, in which tax equity investors receive a portion of the economic attributes of the facilities, including tax attributes, that vary over the life of the projects.

174 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

In 2022, AES Clean Energy Development, through multiple transactions, sold noncontrolling interests in multiple project companies to tax equity partners, resulting in a $230 million increase to NCI. In 2022, 2021 and 2020, AES Renewable Holdings completed similar sales of noncontrolling interests to tax equity partners, resulting in an $88 million, $127 million, and $144 million increase to NCI, respectively. AES Clean Energy Development and AES Renewable Holdings are reported in the US and Utilities SBU reportable segment.

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 was 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.

In December 2022, the Company completed the sale of an additional 14.9% ownership interest for $157 million, which decreased the Company's economic interest to 50.1%. This transaction resulted in a $91 million increase in Parent Company Stockholder's Equity due to an increase in additional paid-in-capital of $94 million, net of tax and transaction costs, partially offset by the reclassification of accumulated other comprehensive income from AOCL to NCI of $3 million. As the Company maintained control after these transactions, Southland Energy continues to be consolidated by the Company within the US and Utilities 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 Stockholder's 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.

In addition, AHB committed to migrate AES Tietê to the Novo Mercado, which is a listing segment of the Brazilian stock exchange that requires equity capital to be composed only of common shares. On December 18, 2020, the AES Tietê board approved a proposal for the corporate reorganization and exchange of shares issued by AES Tietê with newly issued shares of AES Brasil, a formerly wholly-owned entity of AES Tietê, with the intent to list AES Brasil on Novo Mercado as the 100% shareholder of AES Tietê. The reorganization and the exchange of shares was completed on March 26, 2021, and the shares issued by AES Brasil started trading on Novo Mercado on March 29, 2021. The Company maintains majority representation on AES Brasil’s board of directors.

Through multiple transactions in 2021, AHB acquired an additional 1.6% ownership in AES Brasil for $17 million. These transactions increased the Company’s economic interest in AES Brasil to 45.7% and resulted in a $13 million decrease in Parent Company Stockholder’s Equity due to a decrease in additional paid-in-capital of $6 million and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $7 million.

In October 2021, AES Brasil concluded a follow-on offering for the issuance of 93 million newly issued shares, which further increased the Company's indirect beneficial interest in AES Brasil to 46.7% and resulted in a $7 million increase in Parent Company Stockholder's Equity due to an increase in additional paid-in capital.

In September 2022, AES Brasil commenced a private placement offering for its existing shareholders to subscribe for up to 116 million newly issued shares, of which 107 million were subscribed. AES Holdings Brasil Ltda. and noncontrolling interest holders subscribed for 54 million and 53 million shares, respectively, thereby increasing AES’ indirect beneficial interest in AES Brasil to 47.4%% and resulting in additional capital contributions from noncontrolling interest holders of $98 million, an increase in additional paid-in capital of $10 million, and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $3 million. AES Brasil is reported in the South America SBU reportable segment.

Chile Renovables — In July 2021, AES Andes completed the sale of a 49% ownership interest in Chile Renovables SpA (“Chile Renovables”), a subsidiary which owns the Los Cururos wind facility, to Global Infrastructure Management, LLC (“GIP”) for $53 million. AES Andes retained a 51% ownership interest in Chile Renovables and the transaction decreased the Company’s indirect ownership in the subsidiary to 34%. As part of the transaction, AES Andes will contribute a specified pipeline of renewable development projects to Chile Renovables as the projects reach commercial operations, and GIP will make additional contributions to maintain its 49% ownership interest.

175 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

In January 2022, AES Andes completed the sale of Andes Solar 2a to Chile Renovables for $37 million, resulting in an increase to NCI of $28 million and an increase to additional paid-in capital of $9 million. In June 2022, the sale of Los Olmos was completed for $80 million, resulting in an increase to NCI of $68 million and an increase to additional paid-in capital of $12 million. As the Company maintained control after these transactions, Chile Renovables continues to be consolidated by the Company within the South America SBU reportable segment.

Guaimbê Holding — In April 2021, Guaimbê Solar Holding S.A (“Guaimbê Holding”), a subsidiary of AES Brasil which wholly owned the Guaimbê solar complex and the Alto Sertão II wind facility, issued preferred shares representing 19.9% ownership in the subsidiary for total proceeds of $158 million. The transaction decreased the Company’s indirect ownership interest in the operational entities from 45.3% to 36.3%.

In January 2022, the Ventus wind complex and AGV solar complex were incorporated by Guaimbê Holding. Guaimbê Holding issued additional preferred shares representing 3.5% ownership in the subsidiary for total proceeds of $63 million. The transaction further decreased the Company’s indirect ownership interest to 35.8%. As the Company maintained control after these transactions, Guaimbê Holding continues to be consolidated by the Company within the South America SBU reportable segment.

AES Andes — On December 29, 2020, AES Andes commenced a preemptive rights offering for its existing shareholders to subscribe for up to 1.98 billion 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 1.35 billion shares at a cost of $205 million, increasing AES’ indirect beneficial interest in AES Andes from 67% to 67.1%. The noncontrolling interest holders subscribed for 629 million shares, resulting in additional capital contributions of $94 million.

In December 2021, AES Andes sold shares acquired in the 2020 share buyback program as required by the holding period terms of the program, resulting in a decline in the Company's indirect beneficial interest in AES Andes from 67.1% to 67%. This transaction resulted in a $3 million decrease in Parent Company Stockholder's Equity due to a decrease in additional paid-in-capital.

In January 2022, Cachagua completed a tender offer for the shares of AES Andes held by minority shareholders for $522 million, net of transaction costs. Upon completion, AES' indirect beneficial interest in AES Andes increased from 67.1% to 98%. Through multiple transactions in 2022 following the tender offer, Cachagua acquired an additional 1% ownership in AES Andes for $22 million, further increasing AES’ indirect beneficial interest to 99%. The tender offer and these follow-on transactions resulted in a $172 million decrease to Parent Company Stockholder’s Equity due to a decrease in additional paid-in capital of $96 million and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $76 million. AES Andes is reported in the South America SBU reportable segment.

Colon — In September 2021, the Company acquired the remaining 49.9% minority ownership interest in Colon, becoming its sole owner. In conjunction with the acquisition, a note payable was recorded that is expected to be satisfied over two installments by the end of 2023. This transaction resulted in a $12 million decrease in Parent Company Stockholders’ Equity due to a decrease in additional paid-in-capital of $8 million and the reclassification of accumulated other comprehensive losses from Redeemable stock of subsidiaries to AOCL of $4 million. Colon is reported in the MCAC SBU reportable segment.

Cochrane — In September 2020, AES Andes 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. As the Company maintained control after the sale, Cochrane continues to be consolidated by the Company within the South America SBU reportable segment.

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

176 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

						December 31,
						2022						2021						2020
Net income (loss) attributable to The AES Corporation						$	(546)					$	(409)					$	46
Transfers from noncontrolling interest:
Increase (decrease) in The AES Corporation's paid-in capital for sale of subsidiary shares						78						(7)						260
Increase (decrease) in The AES Corporation's paid-in-capital for purchase of subsidiary shares						(78)						(9)						(89)
Net transfers (to) from noncontrolling interest						—						(16)						171
Change from net income (loss) attributable to The AES Corporation and transfers (to) from noncontrolling interests						$	(546)					$	(425)					$	217

Deconsolidations

Alto Maipo — In November 2021, Alto Maipo SpA filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The Company determined it no longer had control over Alto Maipo and deconsolidated the business, which increased Parent Company Stockholder's Equity by $182 million due to the disposition of $177 million of accumulated other comprehensive loss and $5 million of accumulated deficit. See Note 24*—Held-for-Sale and Dispositions* for further information.

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, 2020			$	(1,644)					$	(699)					$	(54)					$	(2,397)
Other comprehensive income (loss) before reclassifications			(86)						(7)						23						(70)
Amount reclassified to earnings			3						254						1						258
Other comprehensive income (loss)			(83)						247						24						188
Reclassification from NCI due to share sales and repurchases			(7)						(4)						—						(11)
Balance at December 31, 2021			$	(1,734)					$	(456)					$	(30)					$	(2,220)
Other comprehensive income (loss) before reclassifications			(37)						645						10						618
Amount reclassified to earnings			—						44						—						44
Other comprehensive income (loss)			(37)						689						10						662
Reclassification from NCI due to share sales and repurchases			(57)						(22)						(3)						(82)
Balance at December 31, 2022			$	(1,828)					$	211					$	(23)					$	(1,640)

177 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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						2022						2021						2020
Foreign currency translation adjustments, net
						Gain on disposal and sale of business interests						$	—					$	(3)					$	(192)
						Net income attributable to The AES Corporation						$	—					$	(3)					$	(192)
Derivative gains (losses), net
						Non-regulated revenue						$	(1)					$	(1)					$	(1)
						Non-regulated cost of sales						(1)						1						(3)
						Interest expense						(58)						(85)						(60)
						Gain on disposal and sale of business interests						—						(362)						—
						Asset impairment expense						(16)						(13)						(10)
						Foreign currency transaction gains (losses)						2						(15)						(7)
						Income from continuing operations before taxes and equity in earnings of affiliates						(74)						(475)						(81)
						Income tax benefit (expense)						9						105						17
						Net equity in losses of affiliates						6						(17)						(10)
						Income from continuing operations						(59)						(387)						(74)
						Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries						15						133						2
						Net income attributable to The AES Corporation						$	(44)					$	(254)					$	(72)
Amortization of defined benefit pension actuarial losses, net
						Regulated cost of sales						$	—					$	—					$	(1)
						Non-regulated cost of sales						(1)						(1)						1
						Other expense						(1)						(3)						—
						Income from continuing operations before taxes and equity in earnings of affiliates						(2)						(4)						—
						Income tax expense						1						3						—
						Income from continuing operations						(1)						(1)						—
						Less: Income from continuing operations attributable to noncontrolling interests and redeemable stock of subsidiaries						1						—						—
						Net income attributable to The AES Corporation						$	—					$	(1)					$	—
Total reclassifications for the period, net of income tax and noncontrolling interests												$	(44)					$	(258)					$	(264)

Common Stock Dividends — The Parent Company paid dividends of $0.1580 per outstanding share to its common stockholders during the first, second, third and fourth quarters of 2022 for dividends declared in December 2021, February 2022, July 2022, and October 2022, respectively.

On December 2, 2022, the Board of Directors declared a quarterly common stock dividend of $0.1659 per share payable on February 15, 2023 to shareholders of record at the close of business on February 1, 2023.

Stock Repurchase Program — No shares were repurchased in 2022. The cumulative repurchases from the commencement of the Stock Repurchase Program in July 2010 through December 31, 2022 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 commissions). As of December 31, 2022, $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 150,046,537 and 151,923,418 shares were held as treasury stock at December 31, 2022 and December 31, 2021, 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

178 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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; and (f) 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,			2022						2021						2020
US and Utilities SBU			$	5,013					$	4,335					$	3,918
South America SBU			3,539						3,541						3,159
MCAC SBU			2,868						2,157						1,766
Eurasia SBU			1,217						1,123						828
Corporate and Other			119						116						231
Eliminations			(139)						(131)						(242)
Total Revenue			$	12,617					$	11,141					$	9,660

Reconciliation from Income (Loss) from Continuing Operations before Taxes and Equity in Earnings of Affiliates:			Total Adjusted PTC
Year Ended December 31,			2022						2021						2020
Loss from continuing operations before taxes and equity in earnings of affiliates			$	(169)					$	(1,064)					$	488
Add: Net equity in losses of affiliates			(71)						(24)						(123)
Less: Income from continuing operations before taxes, attributable to noncontrolling interests and redeemable stock of subsidiaries			(96)						644						(192)
Pre-tax contribution			(336)						(444)						173
Unrealized derivative and equity securities losses (gains)			128						(1)						3
Unrealized foreign currency losses (gains)			42						14						(10)
Disposition/acquisition losses			40						861						112
Impairment losses			1,658						1,153						928
Loss on extinguishment of debt			35						91						223
Net gains from early contract terminations at Angamos			—						(256)						(182)
Total Adjusted PTC			$	1,567					$	1,418					$	1,247

			Total Adjusted PTC
Year Ended December 31,			2022						2021						2020
US and Utilities SBU			$	570					$	660					$	505
South America SBU			573						423						534
MCAC SBU			559						314						287
Eurasia SBU			192						196						177
Corporate and Other			(326)						(182)						(256)
Eliminations			(1)						7						—
Total Adjusted PTC			$	1,567					$	1,418					$	1,247

179 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

			Total Assets																		Depreciation and Amortization																		Capital Expenditures
Year Ended December 31,			2022						2021						2020						2022						2021						2020						2022						2021						2020
US and Utilities SBU			$	20,531					$	16,512					$	14,464					$	574					$	549					$	534					$	3,352					$	1,115					$	1,099
South America SBU			9,423						7,728						11,329						267						273						294						1,071						833						650
MCAC SBU			4,760						4,545						4,847						155						155						164						127						143						183
Eurasia SBU			2,870						3,466						3,621						44						66						63						23						20						9
Corporate and Other			779						712						342						13						13						13						11						29						19
Total			$	38,363					$	32,963					$	34,603					$	1,053					$	1,056					$	1,068					$	4,584					$	2,140					$	1,960

			Interest Income																		Interest Expense
Year Ended December 31,			2022						2021						2020						2022						2021						2020
US and Utilities SBU			$	50					$	28					$	17					$	359					$	362					$	371
South America SBU			177						100						64						342						239						237
MCAC SBU			8						7						14						150						139						157
Eurasia SBU			151						161						171						107						98						113
Corporate and Other			3						2						2						159						73						160
Total			$	389					$	298					$	268					$	1,117					$	911					$	1,038

			Investments in and Advances to Affiliates																		Net Equity in Earnings (Losses) of Affiliates
Year Ended December 31,			2022						2021						2020						2022						2021						2020
US and Utilities SBU			$	453					$	510					$	568					$	54					$	83					$	(8)
South America SBU			22						19						13						2						—						(80)
MCAC SBU			180						144						168						(14)						(23)						(11)
Eurasia SBU			11						—						1						—						2						4
Corporate and Other			286						407						85						(113)						(86)						(28)
Total			$	952					$	1,080					$	835					$	(71)					$	(24)					$	(123)

The following table presents information, by country, about the Company's consolidated operations for each of the three years ended December 31, 2022, 2021, and 2020, and as of December 31, 2022 and 2021 (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,			2022						2021						2020						2022						2021
United States (2)			$	4,093					$	3,531					$	3,243					$	13,833					$	11,034
Non-U.S.:
Chile			2,064						2,297						2,092						2,730						2,241
Dominican Republic			1,591						1,087						896						1,013						892
El Salvador			902						792						666						395						371
Bulgaria			790						700						444						487						1,020
Panama			678						595						519						1,880						1,907
Mexico			595						471						349						409						614
Brazil			560						471						401						1,811						1,215
Argentina			501						390						308						461						470
Colombia			417						383						358						308						349
Vietnam (3)			323						320						285						1						—
Jordan			102						98						96						41						42
Other Non-U.S.			1						6						3						26						28
Total Non-U.S.			8,524						7,610						6,417						9,562						9,149
Total			$	12,617					$	11,141					$	9,660					$	23,395					$	20,183

---

(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 $293 million, $311 million, and $298 million for the years ended December 31, 2022, 2021, and 2020, respectively, and long-lived assets of $96 million and $79 million as of December 31, 2022 and 2021, respectively.

(3) The Mong Duong II 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. See Note 20—Revenue 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. Most RSUs have a three-year vesting period and vest evenly in annual increments over that 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.

180 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

For the years ended December 31, 2022, 2021, and 2020, 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, 2022, 2021, and 2020 had grant date weighted average fair values per RSU of $20.92, $26.46, and $20.75, respectively.

The 2021 and 2022 RSUs awarded to certain executives have a performance condition related to the achievement of environmental, social and governance goals for the three-year periods ending December 31, 2023 and December 31, 2024, respectively. This performance condition can adjust the final number of units that vest to increase or decrease by up to 15% of the total units for all three years. The adjustment will be reflected in the number of units that vest at the end of the three-year performance period.

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,						2022						2021						2020
RSU expense before income tax						$	16					$	12					$	10
Tax benefit						(2)						(2)						(2)
RSU expense, net of tax						$	14					$	10					$	8
Total value of RSUs converted (1)						$	8					$	13					$	11
Total fair value of RSUs vested						$	13					$	10					$	10

---

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

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, 2022, 2021, and 2020. As of December 31, 2022, total unrecognized compensation cost related to RSUs of $25 million is expected to be recognized over a weighted average period of approximately 2.16 years. There were no modifications to RSU awards during the year ended December 31, 2022.

A summary of the activity of RSUs for the year ended December 31, 2022 follows (RSUs in thousands):

						RSUs						Weighted Average Grant Date Fair Values						Weighted Average Remaining Vesting Term
Nonvested at December 31, 2021						1,558						$	24.14
Vested						(576)						22.33
Forfeited and expired						(102)						23.72
Granted						821						20.92
Nonvested at December 31, 2022						1,701						$	23.22					1.97
Expected to vest at December 31, 2022						1,572						$	23.25

The Company initially recognizes compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. In 2022, AES has estimated a weighted average forfeiture rate of 5.27% for RSUs granted in 2022. 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 $16 million on a straight-line basis over a weighted average period of three years years.

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

Year Ended December 31,						2022						2021						2020
RSUs vested during the year						576						634						806
RSUs converted during the year, net of shares withheld for taxes						380						452						547
Shares withheld for taxes						196						182						259

OTHER SHARE BASED COMPENSATION

The Company has three other share-based award programs. The Company has recorded expense of $23 million, $14 million, and $21 million for 2022, 2021, and 2020, 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 2020, 2021, and 2022 have a three-year vesting schedule and vest in one-third increments over

181 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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 2020, 2021, and 2022, the Company issued PSUs to officers under its long-term compensation plan. PSUs are stock units which include performance conditions. For 2020, 2021, and 2022, 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 2020, 2021, and 2022, the Company issued PCUs to its officers under its long-term compensation plan. The value for the 2020, 2021, and 2022 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.

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, 2022
			US and Utilities SBU						South America SBU						MCAC SBU						Eurasia SBU						Corporate, Other and Eliminations						Total
Regulated Revenue
Revenue from contracts with customers			$	3,507					$	—					$	—					$	—					$	—					$	3,507
Other regulated revenue			31						—						—						—						—						31
Total regulated revenue			3,538						—						—						—						—						3,538
Non-Regulated Revenue
Revenue from contracts with customers			1,374						3,514						2,770						1,002						(21)						8,639
Other non-regulated revenue (1)			101						25						98						215						1						440
Total non-regulated revenue			1,475						3,539						2,868						1,217						(20)						9,079
Total revenue			$	5,013					$	3,539					$	2,868					$	1,217					$	(20)					$	12,617

			Year Ended December 31, 2021
			US and Utilities SBU						South America SBU						MCAC SBU						Eurasia SBU						Corporate, Other and Eliminations						Total
Regulated Revenue
Revenue from contracts with customers			$	2,831					$	—					$	—					$	—					$	—					$	2,831
Other regulated revenue			37						—						—						—						—						37
Total regulated revenue			2,868						—						$	—					—						—						2,868
Non-Regulated Revenue
Revenue from contracts with customers			1,132						3,531						2,057						881						(15)						7,586
Other non-regulated revenue (1)			335						10						100						242						—						687
Total non-regulated revenue			1,467						3,541						2,157						1,123						(15)						8,273
Total revenue			$	4,335					$	3,541					$	2,157					$	1,123					$	(15)					$	11,141

182 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

			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

---

(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 $337 million and $216 million as of December 31, 2022 and December 31, 2021, respectively.

During the years ended December 31, 2022 and 2021, we recognized revenue of $36 million and $410 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

In August 2020, AES Andes 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 Andes' decarbonization strategy. As a result of the termination payment, Angamos recognized a contract liability of $655 million, of which $55 million was derecognized each month through the end of the remaining performance obligation in August 2021.

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. Contract consideration related to the construction, but not yet collected through the 25 year PPA, was reflected on the Consolidated Balance Sheet. As of December 31, 2021, Mong Duong met the held-for-sale criteria and the loan receivable balance of $1.2 billion, net of CECL reserve of $30 million, was classified as held-for-sale assets. Of the loan receivable balance, $91 million was classified as Current held-for-sale assets, and $1.1 billion was classified as Noncurrent held-for-sale assets. As of December 31, 2022, Mong Duong no longer met the held-for-sale criteria, as such, the loan receivable balance of $1.1 billion, net of CECL reserve of $28 million, was classified as a Loan receivable on the Consolidated Balance Sheet*.* See Note 24*—Held-for-Sale and Dispositions* for further information.

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, 2022, the aggregate amount of transaction price allocated to remaining performance obligations was $9 million, primarily consisting of fixed consideration for the sale of renewable energy credits ("RECs") in long-term contracts in the U.S. We expect to recognize revenue on approximately one-fifth of the remaining performance obligations in 2023 and 2024, 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

183 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

sales and dispositions, losses on legal contingencies, and losses from other miscellaneous transactions. The components are summarized as follows (in millions):

			Year Ended December 31,			2022						2021						2020
Other Income			Gain on remeasurement of investment (1)			$	22					$	—					$	—
			Insurance proceeds (2)			12						—						—
			AFUDC (US Utilities)			10						8						5
			Liquidated damages under a power sales agreement			10						—						—
			Legal settlements (3)			6						53						—
			Gain on remeasurement to acquisition-date fair value (4)			5						254						—
			Non-service pension income			5						10						—
			Gain on acquired customer contracts			5						—						—
			Gain on remeasurement of contingent consideration (5)			3						28						—
			Gain on sale of assets (6)			—						24						46
			Gain on pension curtailment			—						11						—
			Other			24						22						24
			Total other income			$	102					$	410					$	75
Other Expense			Cost of disposition of business interests (7)			$	15					$	—					$	—
			Loss on sale and disposal of assets			13						14						7
			Legal contingencies and settlements			8						2						15
			Loss on commencement of sales-type leases (8)			5						13						—
			Loss on sale of receivables (9)			—						9						20
			Other			27						22						11
			Total other expense			$	68					$	60					$	53

---

(1)Related to the remeasurement of our existing investment in 5B, accounted for using the measurement alternative.

(2)Primarily related to insurance recoveries associated with property damage at TermoAndes.

(3)For the year ended December 31, 2021, primarily related to settlement of legal arbitration at Alto Maipo.

(4)For the year ended December 31, 2021, related to the remeasurement of our existing equity interest in sPower’s development platform as part of the step acquisition to form AES Clean Energy Development. See Note 25—Acquisitions for further information.

(5)For the year ended December 31, 2021, primarily related to the remeasurement of contingent consideration on the Great Cove Solar acquisition at AES Clean Energy. See Note 25—Acquisitions for further information.

(6)For the year ended December 31, 2020, primarily associated with the gain on sale of Redondo Beach land at Southland. See Note 24—Held-for-Sale and Dispositions for further information.

(7)Cost of disposition of a business interest at AES Gilbert due to a fire incident in April 2022, including the recognition of an allowance on the sales-type lease receivable.

(8)Related to losses recognized at commencement of sales-type leases at AES Renewable Holdings. See Note 14—Leases for further information.

(9)Associated with loss on sale of Stabilization Fund receivables at AES Andes. See Note 7—Financing Receivables for further information.

22. ASSET IMPAIRMENT EXPENSE

Year ended December 31, (in millions)						2022						2021						2020
Maritza						$	468					$	—					$	—
TEG TEP						193						—						—
Jordan						76						—						—
Ventanas 3 & 4						—						649						—
Puerto Rico						—						475						—
Angamos						—						155						564
Buffalo Gap III						—						91						—
Buffalo Gap II						—						73						—
Mountain View I & II						—						67						—
Buffalo Gap I						—						29						—
Estrella del Mar I						—						11						30
Ventanas 1 & 2						—						—						213
Hawaii						—						—						38
Other						26						25						19
Total						$	763					$	1,575					$	864

TEG TEP — On October 1, 2022, the Company performed the annual goodwill impairment test for the TEG TEP reporting unit. The quantitative impairment test resulted in an estimated fair value of the reporting unit which was less than its carrying amount. The failure of the goodwill impairment test was identified as an impairment indicator for the long-lived assets of the TEG TEP reporting unit. The Company performed an impairment analysis as of October 1, 2022, in which it was determined that the carrying amount of the asset group was not recoverable. The TEG TEP asset group was determined to have a fair value of $311 million using the income approach. As a

184 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

result, the Company recognized pre-tax asset impairment expense of $193 million. Subsequent to the asset impairment being recorded, the Company re-performed the goodwill test and no impairment was noted. TEG TEP is reported in the MCAC SBU reportable segment.

Jordan — In November 2020, the Company signed an agreement to sell 26% ownership interest in Amman East and IPP4 for $58 million and as of December 31, 2022, the generation plants were classified as held-for-sale. Due to the delay in closing the transaction, the carrying amount of the asset group in subsequent periods exceeded the agreed-upon sales price and total pre-tax impairment expense of $76 million was recorded during 2022. See Note 24*—Held-for-Sale and Dispositions* for further information. Jordan is reported in the Eurasia SBU reportable segment.

Maritza — In May 2022, the Council for the European Union approved Bulgaria’s National Recovery and Resilience plan which commits the country to cease generating electricity from coal beyond 2038. As this plan is expected to prohibit the Company from operating the Maritza coal-fired plant through its estimated useful life, it was determined that an indicator of impairment had occurred. The Company reassessed the useful life of the facility and performed an impairment analysis as of April 30, 2022, in which it was determined that the carrying amount of the asset group was not recoverable. The Maritza asset group was determined to have a fair value of $452 million using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $468 million. Maritza is reported in the Eurasia SBU reportable segment.

Buffalo Gap — During the fourth quarter of 2021, due to an expired PPA and volatile spot prices in the ERCOT market, management concluded that the carrying value of the long-lived assets of Buffalo Gap I, II, and III wind generation facilities may not be recoverable. As such, the Company performed an impairment analysis and determined that the fair value of each asset group, using the income approach, was zero for Buffalo Gap I, II and III. As a result, the Company recognized pre-tax asset impairment expense of $29 million, $73 million, and $91 million at Buffalo Gap I, II, and III, respectively. Buffalo Gap is reported in the US and Utilities SBU reportable segment.

Ventanas and Angamos — In August 2020, AES Andes 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 Andes’ decarbonization strategy. AES Andes 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 not recoverable. The Angamos asset group was determined to have a fair value of $306 million, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $564 million and $213 million at Angamos and Ventanas 1 & 2, respectively.

In July 2021, AES Andes entered into an agreement committing to accelerate the retirement of the Ventanas 3, Ventanas 4, Angamos 1, and Angamos 2 coal-fired plants in Chile. Due to these strategic developments, the Company performed impairment analyses as of June 30, 2021, and determined that the carrying amounts of the asset groups were not recoverable. The Ventanas 3 & 4 and Angamos asset groups were determined to have fair values of $12 million and $86 million, respectively, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $649 million and $155 million, respectively. Ventanas and Angamos are reported in the South America SBU reportable segment.

Mountain View I & II — In April 2021, the Company approved plans to execute a repowering project for the Mountain View I & II wind facility and signed two new PPAs for the energy and capacity related to the repowered asset. As the repowering will result in decommissioning the majority of the existing wind turbines in advance of their depreciable lives, the execution of the new PPAs was identified as an impairment indicator. The asset group was determined to have a fair value of $11 million using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $67 million. Mountain View I & II is reported in the US and Utilities SBU reportable segment.

Puerto Rico — New factors arose in the first quarter of 2021 associated with the economic costs and operational and reputational risks of disposal of coal combustion residuals off island. In addition, new legislative initiatives surrounding the prohibition of coal generation assets in Puerto Rico were introduced. Collectively, these factors along with management’s decision on how to best achieve our stated decarbonization goals resulted in an indicator of impairment at our asset group in Puerto Rico. As such, management performed a recoverability test in accordance with ASC 360 and concluded that Puerto Rico’s undiscounted cash flows did not exceed the carrying

185 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

value of the asset group. The fair value of the asset group was determined to be $73 million, resulting in pre-tax impairment expense of $475 million. Puerto Rico 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. 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. In September 2021, the Company recognized additional asset impairment expense of $11 million due to a change in the estimated market value of the power barge. See Note 24*—Held-for-Sale and Dispositions* for further information. Estrella del Mar I is reported in the MCAC SBU reportable segment.

Hawaii — 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 asset impairment expense of $38 million during the third quarter of 2020. The Company retired the generation facility in August 2022. Hawaii is reported in the US and Utilities SBU reportable segment.

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,						2022						2021						2020
Federal:			Current			$	3					$	(2)					$	(8)
			Deferred			(18)						42						(17)
State:			Current			2						1						—
			Deferred			1						18						2
Foreign:			Current			256						273						458
			Deferred			21						(465)						(219)
Total						$	265					$	(133)					$	216

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,						2022						2021						2020
Statutory Federal tax rate						21		%				21		%				21		%
State taxes, net of Federal tax benefit						(1)		%				(6)		%				(6)		%
Taxes on foreign earnings						(42)		%				(2)		%				15		%
Valuation allowance						(10)		%				7		%				16		%
Uncertain tax positions						7		%				16		%				—		%
Change in tax law						—		%				(1)		%				3		%
U.S. Investment Tax Credit						—		%				—		%				(8)		%
Alto Maipo deconsolidation						—		%				(17)		%				—		%
Noncontrolling interest on Buffalo Gap impairments						—		%				(3)		%				—		%
Nondeductible goodwill impairments						(127)		%				—		%				—		%
Other—net						(5)		%				(2)		%				3		%
Effective tax rate						(157)		%				13		%				44		%

For 2022, included in the (42)% taxes on foreign earnings is the impact of favorable LNG sales at certain MCAC businesses and inflation and foreign currency impacts at certain Argentine businesses. The (127)% nondeductible goodwill impairments relates to the impairments at AES Andes and AES El Salvador. Not included in the 2022 effective tax rate is $27 million of income tax expense recorded to additional paid-in capital related to the Company's sale of 14.9% of its ownership interest in the Southland Energy assets. See Note 17—Equity for details of the sale.

For 2021, included in the 7% for valuation allowance is approximately $93 million related to the release of valuation allowance at one of our Brazilian subsidiaries. Included in the 16% uncertain tax positions is approximately $176 million of income tax benefit related to effective settlement resulting from the exam closure of the Company’s U.S. 2017 tax return, the focus of which was on the TCJA one-time transition tax. The (17)% included in the Alto Maipo deconsolidation item above primarily reflects the lack of tax benefit for approximately

186 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

$775 million of the $2,074 million pretax Alto Maipo deconsolidation loss. Also included in this item is approximately $41 million of tax benefit related to resulting tax over book outside basis difference in Alto Maipo, which is offset by $41 million of tax expense in the valuation allowance line item. The (3)% Buffalo Gap impairments item relates to the amounts of impairment allocated to tax equity noncontrolling interest which are nondeductible.

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.

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,						2022						2021
Income taxes receivable—current						$	107					$	184
Income taxes receivable—noncurrent						69						2
Total income taxes receivable						$	176					$	186
Income taxes payable—current						$	104					$	133
Income taxes payable—noncurrent						—						—
Total income taxes payable						$	104					$	133

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 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, 2022, the Company had federal net operating loss carryforwards for tax return purposes of approximately $1.4 billion, of which approximately $30 million expire in 2036 and $1.37 billion carry forward indefinitely. The Company also had federal general business tax credit carryforwards of approximately $70 million, of which $14 million expire in years 2023 to 2032 and $56 million expire in years 2035 to 2042. Additionally, the Company had state net operating loss carryforwards as of December 31, 2022 of approximately $6.1 billion expiring primarily in years 2023 to 2042. As of December 31, 2022, the Company had foreign net operating loss carryforwards of approximately $2.1 billion that expire at various times beginning in 2023 and some of which carry forward without expiration.

Valuation allowances increased $49 million during 2022 to $577 million at December 31, 2022. This net increase was primarily the result of valuation allowance established at acquisition of a Brazilian subsidiary.

Valuation allowances decreased $106 million during 2021 to $528 million at December 31, 2021. This net decrease was primarily due to the release of valuation allowance at one of our Brazilian subsidiaries.

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.

187 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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

December 31,						2022						2021
Differences between book and tax basis of property						$	(903)					$	(961)
Investment in U.S. tax partnerships						(582)						(629)
Other taxable temporary differences						(350)						(418)
Total deferred tax liability						(1,835)						(2,008)
Operating loss carryforwards						1,129						979
Capital loss carryforwards						62						77
Bad debt and other book provisions						57						380
Tax credit carryforwards						62						68
Other deductible temporary differences						282						464
Total gross deferred tax asset						1,592						1,968
Less: Valuation allowance						(577)						(528)
Total net deferred tax asset						1,015						1,440
Net deferred tax liability						$	(820)					$	(568)

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, 2022, the cumulative amount of U.S. GAAP foreign un-remitted earnings upon which additional income taxes have not been provided is approximately $3 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 $27 million, $27 million and $33 million for the years ended December 31, 2022, 2021 and 2020, respectively. The per share effect of these benefits after noncontrolling interests was $0.02, $0.02 and $0.03 for the years ended December 31, 2022, 2021 and 2020, respectively. Included in the Company's income tax benefits is the benefit related to our operations in Vietnam, which is estimated to be $18 million, $16 million and $16 million for the years ended December 31, 2022, 2021 and 2020, respectively. The per share effect of these benefits related to our operations in Vietnam after noncontrolling interest was $0.01 for each of the years ended December 31, 2022, 2021 and 2020.

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,						2022						2021						2020
U.S.						$	22					$	622					$	(135)
Non-U.S.						(191)						(1,686)						623
Total						$	(169)					$	(1,064)					$	488

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,						2022						2021
Interest related						$	2					$	2
Penalties related						—						1

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

December 31,						2022						2021						2020
Total benefit for interest related to unrecognized tax benefits						$	—					$	1					$	—
Total expense for penalties related to unrecognized tax benefits						—						1						—

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

188 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

business jurisdictions in which we operate:

Jurisdiction						Tax Years Subject to Examination
Argentina						2016-2022
Brazil						2016-2022
Chile						2019-2022
Colombia						2016-2022
Dominican Republic						2019-2022
El Salvador						2019-2022
Netherlands						2016-2022
Panama						2019-2022
United Kingdom						2019-2022
United States (Federal)						2017-2022

As of December 31, 2022, 2021 and 2020, the total amount of unrecognized tax benefits was $107 million, $122 million and $458 million, respectively. The total amount of unrecognized tax benefits that would benefit the effective tax rate as of December 31, 2022, 2021 and 2020 is $107 million, $122 million and $439 million, respectively, of which $2 million, $4 million, and $33 million, respectively, 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 2022 would be reduced by approximately $34 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, 2022 is estimated to be between zero 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):

						2022						2021						2020
Balance at January 1						$	122					$	458					$	465
Additions for current year tax positions						4						28						—
Additions for tax positions of prior years						—						14						3
Reductions for tax positions of prior years						(16)						—						(6)
Settlements						(3)						(377)						—
Lapse of statute of limitations						—						(1)						(4)
Balance at December 31						$	107					$	122					$	458

The 2021 settlement amount of $377 million above primarily relates to effective settlement of historic unrecognized tax benefits as a result of the exam closure of the Company’s U.S. 2017 tax return, the focus of which was on the TCJA one-time transition tax assessed on cumulative foreign earnings and profits. This amount is based on the pre-TCJA income tax rate of 35% though the actual impact to the Company’s income tax expense is an income tax benefit computed at 21%.

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, 2022. Our effective tax rate and net income in any given future period could therefore be materially impacted.

189 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

24. 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. As a result, the Mong Duong plant and SPV were classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. The transaction was not closed by December 31, 2022 and the agreement was terminated by the parties. As of December 31, 2022, the Mong Duong plant and SPV no longer met the held-for-sale criteria and were reclassified to held and used. Mong Duong is reported in the Eurasia SBU reportable segment.

Jordan — 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 2023. 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, 2022, 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, 2022 was $164 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, 2022 was as follows (in millions):

Year Ended December 31,			2022						2021						2020
Jordan			(6)						21						20

Dispositions

Colon transmission line — In December 2021, Gas Natural Atlántico II S. de. R.L., completed the sale of its transmission line to Empresa de Transmision Electrica, S.A., a government entity in charge of transmission of energy in Panama, for $51 million, resulting in a pre-tax gain on sale of $6 million, reported in Other income on the Consolidated Statement of Operations. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, the Colon transmission line was reported in the MCAC SBU reportable segment.

Alto Maipo — In November 2021, Alto Maipo SpA filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. Therefore, the Company determined it no longer had control over Alto Maipo, resulting in its deconsolidation. The Company recorded a pre-tax loss on deconsolidation of $2,074 million in Loss on disposal and sale of business interests on the Consolidated Statement of Operations. As Alto Maipo represents a component of AES Andes’ single reporting unit, the carrying value of the net assets of Alto Maipo included an allocation of $224 million of AES Andes’ consolidated goodwill balance of $868 million prior to deconsolidation. The Company allocated AES Andes’ goodwill based on the relative fair value of the component, which was determined based on the relative fair values of the business to be disposed and the portion of the reporting unit to be retained. Subsequent to the deconsolidation of Alto Maipo, the company evaluated the remaining Andes Reporting Unit goodwill and determined the goodwill was not at-risk.

The deconsolidation did not meet the criteria to be reported as discontinued operations. After deconsolidation, the Company's retained investment in Alto Maipo was recognized as a financial asset with zero fair value, utilizing a restructuring model of cash flows and a cost of equity of 21%. Prior to deconsolidation, Alto Maipo was reported in the South America SBU reportable segment. See Note 5*—Fair Value,* Note 8—Investments In and Advances to Affiliates, Note 9*—Goodwill and Other Intangible Assets,* and Note 17*—Equity* for further information.

Estrella del Mar I — In November 2021, the Company completed the sale of the Estrella del Mar I power barge for $6 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Estrella del Mar I was reported in the MCAC SBU reportable segment. See Note 22—Asset Impairment Expense for further information.

AES Tietê Inova Soluções — In June 2021, the Company completed the sale of its ownership in AES Inova Soluções, an investment platform in distributed solar generation, for $20 million, resulting in a pre-tax loss on sale of $1 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, AES Tietê Inova Soluções was reported in the South America SBU reportable segment.

190 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Itabo — In April 2021, the Company completed the sale of its 43% ownership interest in Itabo, a coal-fired plant and gas turbine in Dominican Republic, for $88 million, resulting in a pre-tax gain on sale of $4 million. The sale did not meet the criteria to be reported as discontinued operations. Prior to its sale, Itabo was reported in the MCAC SBU reportable segment.

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 $95 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 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.

The following table summarizes, excluding any impairment charge or gain/loss on sale, the pre-tax income attributable to AES of disposed businesses for the periods indicated (in millions):

Year Ended December 31,									2021						2020
Alto Maipo									$	35					$	11
Itabo									5						41
Estrella de Mar I									—						5
Total									$	40					$	57

25. ACQUISITIONS

Cubico II — On November 30,2022, the Company, through its subsidiary AES Brasil Energia S.A ("AES Brasil") acquired 100% of shares of an operational wind complex comprised of (i) Ventos de São Tomé Holding S.A., (ii) Ventos de São Tito Holdings S.A., and (iii) REB Empreendimentos e Administradora de Bens S.A. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their relative fair values. The total purchase price for the acquisition was $185 million. The Cubico II wind complex is recorded in the South America SBU reportable segment.

Agua Clara — On June 17, 2022, the Company, through its subsidiaries AES Dominicana Renewable Energy and AES Andres DR, S.A., acquired 85% of the equity interests in Agua Clara, S.A.S., a wind project, for consideration of $98 million. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. As Agua Clara is not a VIE, any difference between the fair value of the assets and consideration transferred was allocated to PP&E on a relative fair value basis. Agua Clara is reported in the MCAC SBU reportable segment.

191 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Tunica Windpower, LLC — On June 17, 2022, the Company entered into an agreement for the purchase of 100% of the membership interests in Tunica Windpower, LLC. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $22 million, including contingent consideration of $7 million. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Tunica Windpower is reported in the US and Utilities SBU reportable segment.

Windsor PV1, LLC — On May 27, 2022, the Company entered into an agreement for the purchase of 100% of the membership interests in Windsor PV1, LLC, an early development-stage solar project. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $17 million, including contingent consideration of $5 million. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Windsor is reported in the US and Utilities SBU reportable segment.

New York Wind — In November 2021, AES Clean Energy Development, LLC completed the acquisition of Cogentrix Valcour Intermediate Holdings, LLC for $352 million cash consideration, including customary purchase price adjustments, plus the assumption of $126 million of non-recourse debt. The transaction includes operating wind assets spread across six sites and will complement AES Clean Energy’s existing operating and development solar and energy storage assets in the state of New York. The transaction was accounted for as a business combination, therefore, the assets acquired and liabilities assumed at acquisition date were recorded at their fair values, which resulted in the recognition of $199 million of goodwill. This goodwill represents the opportunity to repower the acquired assets and thus obtain additional cash flows from the asset group. The Company has

recorded preliminary amounts for the purchase price allocation in 2021. New York Wind is reported in the US and Utilities SBU reportable segment.

In the first quarter of 2022, the Company finalized the purchase price allocation related to the acquisition of Cogentrix Valcour Intermediate Holdings, LLC. There were no significant adjustments made to the preliminary purchase price allocation recorded in the fourth quarter of 2021 when the acquisition was completed. New York Wind is reported in the US and Utilities SBU reportable segment.

Hardy Hills Solar — In December 2021, AES Indiana completed the acquisition of Hardy Hills solar project, which included assets of $52 million primarily consisting of a development project intangible asset. The transaction was accounted for as an asset acquisition of a variable interest entity that did not meet the definition of a business; therefore, the individual assets and liabilities were recorded at their fair values. A $6 million gain was recorded in Other income on the Consolidated Statement of Operations for the difference between the consideration transferred and the assets and liabilities recognized. The total consideration included $3 million of contingent consideration dependent on the amount of certain future costs incurred by the project. Hardy Hills Solar is reported in the US and Utilities SBU reportable segment.

Community Energy — In December 2021, AES Clean Energy Development, LLC completed the acquisition of Community Energy, LLC for $217 million cash consideration, including customary purchase price adjustments, plus the assumption of $38 million of non-recourse debt. At closing, the Company made a cash payment of $232 million, which included $15 million of the assumed non-recourse debt. The transaction was accounted for as a business combination; therefore, the assets acquired and liabilities assumed at the acquisition date were recorded at their fair values, which resulted in the recognition of $90 million of goodwill. Community Energy is reported in the US and Utilities SBU reportable segment.

In the first quarter of 2022, the Company finalized the purchase price allocation related to the acquisition of Community Energy, LLC. There were no significant adjustments made to the preliminary purchase price allocation recorded in the fourth quarter of 2021 when the acquisition was completed. Community Energy is reported in the US and Utilities SBU reportable segment.

sPower Projects — In December 2021, AES Clean Energy Development Holdings, LLC entered into an agreement with AIMCo, our minority partner in AES Clean Energy Development, LLC and our partner in the sPower equity method investment. As part of this transaction, AES acquired an additional 25% ownership interest in specifically identified projects of sPower from AIMCo, in exchange for a 25% ownership interest in the Mountain View and Laurel Mountain wind operating projects, plus $28 million cash.

192 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

The transaction was accounted for as an asset acquisition. The sPower projects received were remeasured at their acquisition-date fair values, resulting in the recognition of a $35 million gain, recorded in Other Income on the Consolidated Statement of Operations. See Note 8—Investments in and Advances to Affiliates for further information. The Company recorded $3 million in additional paid-in-capital, representing the difference between the fair value of the consideration transferred and the recognition of the noncontrolling interest.

Subsequent to the closing of the transaction, AES holds a 75% ownership interest in the Mountain View and Laurel Mountain wind operating projects and a 75% ownership interest in specifically identified projects of sPower through its ownership of AES Clean Energy Development, LLC, and 50% ownership interest in the sPower equity method investment. AIMCo holds the remaining 25% minority interest in AES Clean Energy Development, LLC and 50% ownership interest in sPower. sPower projects are reported in the US and Utilities SBU reportable segment.

Serra Verde Wind Complex — In July 2021, AES Brasil completed the acquisition of the Serra Verde Wind Complex for $18 million, subject to customary working capital adjustments, of which $6 million was paid in cash and the remaining $12 million will be paid in two annual installments ending on July 19, 2023. The transaction was accounted for as an asset acquisition of variable interest entities 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. Serra Verde is reported in the South America SBU reportable segment.

Cajuína Wind Complex — In May 2021, AES Brasil completed the acquisition of the Cajuína Wind Complex phase I for $22 million, subject to customary working capital adjustments. On July 29, 2021, AES Brasil completed the acquisition of the Cajuína Wind Complex phase II for $24 million, subject to customary working capital adjustments, including $3 million of contingent consideration. The Company made initial cash payments of $6 million for each acquisition and the remaining balances will be paid in three annual installments ending on March 31, 2024 and on July 29, 2024, respectively. These transactions were accounted for as asset acquisitions of variable interest entities 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. Cajuína is reported in the South America SBU reportable segment.

Cubico I — In April 2021, AES Brasil completed the acquisition of the Cubico I wind complex for $109 million, subject to customary working capital adjustments. The transaction was accounted for as an asset acquisition, therefore the consideration transferred, plus transaction costs, were allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Cubico I is reported in the South America SBU reportable segment.

AES Clean Energy Development — In February 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, which will serve as the development vehicle for all future renewable projects in the U.S. As part of the transaction, AES acquired an additional 25% ownership interest in the sPower development platform from AIMCo, our existing partner in the sPower equity method investment, in exchange for a 25% ownership interest in specifically identified development entities of AES Renewable Holdings, certain future exit rights in the new partnership, and $7 million of cash.

The sPower development platform was carved-out of AES’ existing equity method investment. AES’ basis in the portion of assets transferred was $102 million, and the contribution to AES Clean Energy Development resulted in a corresponding decrease in the carrying value of the sPower investment. See Note 8*—Investments in and Advances to Affiliates* for further information.

During the first quarter of 2021, the sPower development assets transferred were remeasured at their acquisition-date preliminary fair values, resulting in the recognition of a $36 million gain, recorded in Other income on the Consolidated Statement of Operations. The Company recorded $81 million in Goodwill as of the acquisition date, representing the difference between the fair value of the consideration transferred, the noncontrolling interest in the sPower development platform, and the acquisition-date fair value of the Company’s previously held equity interest and the fair value of the identifiable assets acquired and liabilities assumed.

193 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

During the second quarter of 2021, the Company recorded measurement period adjustments as result of additional facts and circumstances that existed as of the date of the acquisition but were not yet known as of the time of the valuation performed in the first quarter of 2021. As a result, the estimated acquisition-date carrying value and fair values of the sPower development assets transferred were increased, which resulted in the recognition of an additional $178 million gain, for an updated gain of $214 million. Furthermore, the estimated goodwill as of the acquisition date was reduced to $45 million, as a result of adjustments to the fair value of the consideration paid and updates to the fair values of separately identifiable intangible assets. The Company finalized the purchase price allocation in the third quarter of 2021, which did not result in any material measurement period adjustments.

Subsequent to the closing of the transaction, AES holds a 75% ownership interest in AES Clean Energy Development. AIMCo holds the remaining 25% minority interest along with certain partnership rights, though currently not in effect, that would enable AIMCo to exit in the future. AIMCo’s minority interest is recorded as temporary equity in Redeemable stock of subsidiaries on the Consolidated Balance Sheet. See Note 16*—Redeemable Stock of Subsidiaries* for further information. AES Clean Energy Development is reported in the US and Utilities SBU reportable segment.

Great Cove Solar— In January 2021 and May 2021, AES Clean Energy Development, LLC completed the acquisitions of Great Cove I and II, respectively. The fair value of the initial consideration paid to acquire Great Cove I and Great Cove II was $13 million and $24 million, which included contingent consideration liabilities of $6 million and $22 million, respectively. These acquisitions were accounted for as asset acquisitions of variable interest entities 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. During the third quarter of 2021, the contingent liabilities which related primarily to certain price adjustment features were remeasured, resulting in contingent consideration assets of $2 million and $12 million for Great Cove I and Great Cove II, respectively. This remeasurement resulted in a gain of $32 million recorded in Other income in the Consolidated Statement of Operations during the third quarter of 2021. In October 2021, the Company amended the agreement, resulting in the reclassification of the previously contingent consideration assets to Prepaid Expenses. In December 2021, the Company acquired Community Energy, LLC (as further described above), and such remaining prepaid amounts were written off to Other income in the Consolidated Statement of Operations. Great Cove Solar is reported in the US and Utilities SBU reportable segment.

Ventus Wind Complex — In December 2020, AES Brasil completed the acquisition of the Ventus Wind Complex ("Ventus") for $90 million, including $3 million of working capital adjustments. At closing, the Company made an initial cash payment of $44 million. The remainder was paid in the second and third 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. 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. Penonome I is reported in the MCAC SBU reportable segment.

26. 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, stock options, and equity units. The effect of such potential common stock is computed using the treasury stock method for RSUs and stock options, and is computed using the if-converted method for equity units.

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, 2022, 2021 and 2020, where income represents the numerator and weighted-average shares represent the denominator.

194 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Year Ended December 31,			2022																		2021																		2020
(in millions, except per share data)			Loss						Shares						$ per Share						Loss						Shares						$ per Share						Income						Shares						$ per Share
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations attributable to The AES Corporation common stockholders			$	(546)					668						$	(0.82)					$	(413)					666						$	(0.62)					$	43					665						$	0.06
EFFECT OF DILUTIVE SECURITIES
Stock options			—						—						—						—						—						—						—						1						—
Restricted stock units			—						—						—						—						—						—						—						2						—
Equity units			—						—						—						—						—						—						—						—						—
DILUTED EARNINGS (LOSS) PER SHARE			$	(546)					668						$	(0.82)					$	(413)					666						$	(0.62)					$	43					668						$	0.06

For the years ended December 31, 2022 and December 31, 2021, the calculation of diluted earnings per share excluded 5 million outstanding stock awards and 40 million shares underlying our March 2021 Equity Units because their impact would be anti-dilutive given the loss from continuing operations. These shares could potentially dilute basic earnings per share in the future. Had the Company generated income, potential shares of common stock of 3 million and 4 million related to the stock awards and 40 million and 33 million related to the Equity Units, would have been included in diluted weighted-average shares outstanding for the years ended December 31, 2022 and December 31, 2021, respectively.

As described in Note 17*—Equity*, the Company issued 10,430,500 Equity Units in March 2021 with a total notional value of $1,043 million. Each Equity Unit has a stated amount of $100 and was initially issued as a Corporate Unit, consisting of a 2024 Purchase Contract and a 10% undivided beneficial ownership interest in one share of Series A Preferred Stock. Prior to February 15, 2024, the Series A Preferred Stock may be converted at the option of the holder only in connection with a fundamental change. On and after February 15, 2024, the Series A Preferred Stock may be converted freely at the option of the holder. Upon conversion, the Company will deliver to the holder with respect to each share of Series A Preferred Stock being converted (i) a share of our Series B Preferred Stock, or, solely with respect to conversions in connection with a redemption, cash and (ii) shares of our common stock, if any, in respect of any conversion value in excess of the liquidation preference of the preferred stock being converted. The conversion rate is initially 31.5428 shares of common stock per one share of Series A Preferred Stock, which is equivalent to an initial conversion price of approximately $31.70 per share of common stock. As of December 31, 2022, due to customary anti-dilution provisions, the conversion rate was 31.5846, equivalent to a conversion price of approximately $31.66 per share of common stock. The Series A Preferred Stock and the 2024 Purchase Contracts are being accounted for as one unit of account. In calculating diluted EPS, the Company has applied the if-converted method to determine the impact of the forward purchase feature and considered if there are incremental shares that should be included related to the Series A Preferred conversion value.

27. 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 an investment grade rating from Moody's of Baa3. 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, 2022, the Company had $1.4 billion of unrestricted cash and cash equivalents.

195 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

During 2022, 68% 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 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.

196 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

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.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.

Alto Maipo — On August 27, 2021, Alto Maipo updated its creditors with respect to the construction budget and long-term business plan for the project, which considers different scenarios for spot prices, decarbonization initiatives, and hydrological conditions, among other significant variables. Under some of these scenarios, Alto Maipo may experience reduced future cash flows, which would limit its ability to repay debt. Alto Maipo’s management initiated negotiations with its creditors to restructure its obligations and achieve a sustainable long-term capital structure for Alto Maipo. On November 17, 2021, Alto Maipo SpA commenced a reorganization proceeding in accordance with Chapter 11 of the U.S. Bankruptcy Code, through a voluntary petition. Consequently, after the Chapter 11 filing, the Company is no longer considered to have control over Alto Maipo, which resulted in its deconsolidation. The Company recognized an after-tax loss of approximately $1.2 billion, net of noncontrolling interests, in the Consolidated Statement of Operations in the fourth quarter of 2021, associated with the loss of control attributable to the former controlling interest.

On May 26, 2022, Alto Maipo emerged from bankruptcy in accordance with Chapter 11 of the U.S. Bankruptcy Code. Alto Maipo, as restructured, is considered a VIE. As the Company lacks the power to make significant decisions, it does not meet the criteria to be considered the primary beneficiary of Alto Maipo and therefore will not consolidate this entity. The Company has elected the fair value option to account for its investment in Alto Maipo. If Alto Maipo is unable to meet its obligations under the restructured arrangements as they come due, the creditors may enforce their rights under the credit agreements. These finance agreements are non-recourse with respect to The AES Corporation.

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 peso, the Euro, the Indian rupee, and the Mexican peso.

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 2022, 2021 or 2020.

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.

28. 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. Furthermore, in 2021, the Company began construction projects with Fluence relating to energy storage. These related party transactions primarily present themselves as construction in progress as seen below. 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):

197 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

Years Ended December 31,			2022						2021						2020
Revenue—Non-Regulated			$	1,093					$	1,159					$	1,506
Cost of Sales—Non-Regulated			352						324						504
Interest income			10						12						20
Interest expense			95						88						131

The following table summarizes the balance sheet accounts with related parties included in the Company's Consolidated Balance Sheets as of the periods indicated (in millions):

December 31,			2022						2021
Receivables from related parties			$	484					$	131
Accounts and notes payable to related parties (1)			1,264						1,421
Construction in progress			714						134

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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, 2022 (see Note 11—Debt). For the December 31, 2021 balance, the debt balance at the SPV was classified to held-for-sale liabilities on the Consolidated Balance Sheet.

29. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly Financial Data — The following tables summarize the unaudited quarterly Condensed Consolidated Statements of Operations for the Company for 2022 and 2021 (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 2022			Mar 31						Jun 30						Sep 30						Dec 31
Revenue			$	2,852					$	3,078					$	3,627					$	3,060
Operating margin			530						563						892						563
Income (loss) from continuing operations, net of tax (1)			171						(136)						446						(986)
Net income (loss) attributable to The AES Corporation			$	115					$	(179)					$	421					$	(903)
Basic earnings (loss) per share:
Net income (loss) attributable to The AES Corporation common stockholders			$	0.17					$	(0.27)					$	0.63					$	(1.35)
Diluted earnings (loss) per share:
Net income (loss) attributable to The AES Corporation common stockholders			$	0.16					$	(0.27)					$	0.59					$	(1.35)
Dividends declared per common share			$	0.16					$	—					$	0.16					$	0.32

Quarter Ended 2021			Mar 31						Jun 30						Sep 30						Dec 31
Revenue			$	2,635					$	2,700					$	3,036					$	2,770
Operating margin			664						728						760						559
Income (loss) from continuing operations, net of tax (2)			(29)						(81)						485						(1,330)
Income from discontinued operations, net of tax			—						4						—						—
Net income (loss)			$	(29)					$	(77)					$	485					$	(1,330)
Net income (loss) attributable to The AES Corporation			$	(148)					$	28					$	343					$	(632)
Basic earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	(0.22)					$	0.03					$	0.52					$	(0.95)
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)					$	0.04					$	0.52					$	(0.95)
Diluted earnings (loss) per share:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax			$	(0.22)					$	0.03					$	0.48					$	(0.95)
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)					$	0.04					$	0.48					$	(0.95)
Dividends declared per common share			$	0.15					$	—					$	0.15					$	0.31

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(1)Includes pre-tax impairment expense of $482 million, $50 million, and $230 million in the second, third, and fourth quarters of 2022, respectively (See Note 22—Asset Impairment Expense), pre-tax goodwill impairment expense of $777 million in the fourth quarter of 2022 (See Note 9—Goodwill and Other Intangible Assets), and other non-operating expense of $175 million in the fourth quarter of 2022 (See Note 8—Investments in and Advances to Equity Affiliates).

(2)Includes pre-tax impairment expense of $473 million, $872 million, and $201 million in the first, second, and fourth quarters of 2021, respectively (See Note 22—Asset Impairment Expense), and pre-tax loss on sale of business interests of $1.8 billion, primarily due to the deconsolidation of Alto Maipo, in the fourth quarter of 2021 (See Note 24—Held-for-Sale and Dispositions).

198 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2022, 2021 and 2020

30. SUBSEQUENT EVENTS

sPower — On February 28, 2023, sPower closed the sell-down of a portfolio of operating assets ("OpCo B") for $196 million. After the sale, the Company's ownership interest in OpCo B decreased from 50% to approximately 26%. See Note 8—Investments in and Advances to Affiliates for further information. The sPower equity method investment is reported in the US and Utilities SBU reportable segment.

199 | 2022 Annual Report