Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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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

115 | 2023 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, 2023, and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2024 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.

116 | 2023 Annual Report
Long-lived Asset Impairments of Coal and Pet Coke-fired Generation Assets
Description of the MatterAt December 31, 2023, the Company's net property, plant and equipment was $29,958 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. As discussed in Note 22 to the consolidated financial statements, the Company recognized a total asset impairment expense of $471 million related to the Norgener, TEG, TEP, and Warrior Run asset groups, consisting of coal and pet coke generation plants included in the Energy Infrastructure SBU reportable segment in 2023. Auditing the Company's identification of impairment indicators 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, auditing the Company’s identification of impairment indicators 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 impairment analyses for Norgener, TEG, TEP, and Warrior Run asset groups was complex due to the judgmental nature of the significant assumptions used to determine the fair value of the asset groups (e.g., the Company’s projections of revenue growth, discount rates, and consideration of the industry outlook and market conditions).
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the identification of impairment indicators and the fair value analysis of the Norgener, TEG, TEP, and Warrior Run asset groups. 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, 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 also evaluated the Company’s useful life estimates, in particular for the coal and pet coke-fired generation assets with impairment indicators, 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.
117 | 2023 Annual Report
To test the impairment analyses for the Norgener, TEG, TEP, and Warrior Run 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 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, as necessary.
Accounting for the Bellefield and Rexford Renewable Acquisitions
Description of the MatterDuring 2023, the Company completed its acquisitions of the Bellefield solar and battery energy storage system (BESS) projects and the Rexford solar and BESS project for consideration of $358 million and $253 million, respectively, as disclosed in Note 25 to the consolidated financial statements. These transactions were accounted for as acquisitions of variable interest entities that did not meet the definition of a business. Auditing the Company's accounting for its significant renewables acquisitions was complex due to the significant judgment made by management to determine the fair values of significant assets acquired, including project development intangible assets and construction in progress assets. The significant assumptions used included the discount rates and revenue pricing curves used in the Company’s forecasted cash flows to determine the fair value of the acquired assets. In particular, the fair value estimate was sensitive to these significant assumptions, which are affected by expectations about future market conditions.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over the accounting for these acquisitions. For example, we tested controls over the recognition and measurement of the consideration transferred and valuation of assets acquired, including management’s review of the valuation models, the significant assumptions used to develop the estimates, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the project development intangible assets and construction in progress, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we compared the significant assumptions used by management to third-party industry and market data and to the Company’s budgets and forecasts. We also involved our internal valuation specialists to assist in our evaluation of the reasonableness of the Company’s valuation methodology, forecasted revenue assumptions, and the discount rates used in the valuations.
Allocation of Earnings to Noncontrolling Interests in Tax Equity Partnerships
Description of the MatterA significant number of renewable projects at AES Clean Energy have been financed with tax equity structures, where the tax equity investors receive a portion of the economic attributes of the facilities, including tax attributes, that vary over the life of the projects. When the allocation of earnings and losses, cash distributions, and tax benefits are not based on fixed ownership percentages, the Company uses the hypothetical liquidation at book value (HLBV) method to calculate the earnings attributable to noncontrolling interest for consolidated partnerships, when it is a reasonable approximation of the profit-sharing arrangement. As discussed in Note 17 to the consolidated financial statements, AES Clean Energy Development and AES Renewable Holdings sold noncontrolling interest to tax equity investors resulting in an increase of $1,163 million to noncontrolling interest in 2023.
118 | 2023 Annual Report
Auditing the allocation of earnings to noncontrolling interest holders for tax equity partnerships was complex due to the evaluation of whether a newly established HLBV model used to allocate earnings appropriately reflects the unique substantive profit-sharing terms and features within each arrangement. A greater extent of audit effort and specialized skill and knowledge was required to evaluate compliance with the contractual provisions in each partnership agreement as well as the appropriateness of the investors’ capital account balances used in the HLBV models.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s process for developing the HLBV model for new tax equity arrangements. For example, we tested management’s review of substantive profit-sharing terms and features to evaluate whether they are properly reflected in the HLBV model for new arrangements. To test the allocation of earnings to noncontrolling interest holders for new significant tax equity partnerships, we read the related partnership agreements to understand the substantive profit-sharing provisions. We evaluated the HLBV models for consistency with the contractual provisions in the related partnership agreements and tested the capital contributions made by the tax equity investors. We involved tax subject matter professionals to assist in evaluating the calculation of the investors’ capital accounts used in the HLBV models, including the proceeds attributable to the tax equity investor due to the recognition of investment tax credits and other adjustments as required by the U.S. Internal Revenue Code. Additionally, we tested the allocation of earnings by recalculating the hypothetical liquidation in the HLBV models based on the liquidation provisions of the related partnership agreements.

/s/ Ernst & Young LLP

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

Tysons, Virginia

February 26, 2024

Consolidated Balance Sheets

December 31, 2023 and 2022

20232022
(in millions, except share and per share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$1,426$1,374
Restricted cash370536
Short-term investments395730
Accounts receivable, net of allowance of $15 and $5, respectively1,4201,799
Inventory7121,055
Prepaid expenses17798
Other current assets, net of allowance of $14 and $2, respectively1,3871,533
Current held-for-sale assets762518
Total current assets6,6497,643
NONCURRENT ASSETS
Property, Plant and Equipment:
Land522470
Electric generation, distribution assets and other30,19026,599
Accumulated depreciation(8,602)(8,651)
Construction in progress7,8484,621
Property, plant and equipment, net29,95823,039
Other Assets:
Investments in and advances to affiliates941952
Debt service reserves and other deposits194177
Goodwill348362
Other intangible assets, net of accumulated amortization of $498 and $434, respectively2,2431,841
Deferred income taxes396319
Other noncurrent assets, net of allowance of $9 and $77, respectively3,2594,030
Noncurrent held-for-sale assets811—
Total other assets8,1927,681
TOTAL ASSETS$44,799$38,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable$2,199$1,730
Accrued interest315249
Accrued non-income taxes278249
Supplier financing arrangements974662
Accrued and other liabilities1,3341,489
Recourse debt200—
Non-recourse debt, including $1,080 and $416, respectively, related to variable interest entities3,9321,758
Current held-for-sale liabilities499354
Total current liabilities9,7316,491
NONCURRENT LIABILITIES
Recourse debt4,2643,894
Non-recourse debt, including $1,715 and $2,295, respectively, related to variable interest entities18,48217,846
Deferred income taxes1,2451,139
Other noncurrent liabilities3,1143,168
Noncurrent held-for-sale liabilities514—
Total noncurrent liabilities27,61926,047
Commitments and Contingencies (see Notes 12 and 13)
Redeemable stock of subsidiaries1,4641,321
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, 2023 and December 31, 2022)838838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 819,051,591 issued and 669,693,234 outstanding at December 31, 2023 and 818,790,001 issued and 668,743,464 outstanding at December 31, 2022)88
Additional paid-in capital6,3556,688
Accumulated deficit(1,386)(1,635)
Accumulated other comprehensive loss(1,514)(1,640)
Treasury stock, at cost (149,358,357 and 150,046,537 shares, respectively)(1,813)(1,822)
Total AES Corporation stockholders’ equity2,4882,437
NONCONTROLLING INTERESTS3,4972,067
Total equity5,9854,504
TOTAL LIABILITIES AND EQUITY$44,799$38,363

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Operations

Years ended December 31, 2023, 2022, and 2021

202320222021
(in millions, except per share amounts)
Revenue:
Non-Regulated$9,245$9,079$8,273
Regulated3,4233,5382,868
Total revenue12,66812,61711,141
Cost of Sales:
Non-Regulated(7,173)(6,907)(5,982)
Regulated(2,991)(3,162)(2,448)
Total cost of sales(10,164)(10,069)(8,430)
Operating margin2,5042,5482,711
General and administrative expenses(255)(207)(166)
Interest expense(1,319)(1,117)(911)
Interest income551389298
Loss on extinguishment of debt(63)(15)(78)
Other expense(99)(68)(60)
Other income89102410
Gain (loss) on disposal and sale of business interests134(9)(1,683)
Goodwill impairment expense(12)(777)—
Asset impairment expense(1,067)(763)(1,575)
Foreign currency transaction losses(359)(77)(10)
Other non-operating expense—(175)—
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES104(169)(1,064)
Income tax benefit (expense)(261)(265)133
Net equity in losses of affiliates(32)(71)(24)
LOSS FROM CONTINUING OPERATIONS(189)(505)(955)
Gain from disposal of discontinued businesses, net of income tax benefit (expense) of $7, $0, and $(1), respectively7—4
NET LOSS(182)(505)(951)
Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries431(41)542
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION$249$(546)$(409)
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:
Income (loss) from continuing operations, net of tax$242$(546)$(413)
Income from discontinued operations, net of tax7—4
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION$249$(546)$(409)
BASIC EARNINGS PER SHARE:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax$0.36$(0.82)$(0.62)
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax0.01—0.01
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS$0.37$(0.82)$(0.61)
DILUTED EARNINGS PER SHARE:
Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax$0.34$(0.82)$(0.62)
Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax0.01—0.01
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS$0.35$(0.82)$(0.61)

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Comprehensive Income (Loss)

Years ended December 31, 2023, 2022, and 2021

202320222021
(in millions)
NET LOSS$(182)$(505)$(951)
Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods146(36)(130)
Reclassification to earnings, net of $0 income tax for all periods——3
Total foreign currency translation adjustments146(36)(127)
Derivative activity:
Change in derivative fair value, net of income tax benefit (expense) of $3, $(191), and $1, respectively(1)7115
Reclassification to earnings, net of income tax expense of $9, $9, and $105, respectively(73)59387
Total change in fair value of derivatives(74)770392
Pension activity:
Change in pension adjustments due to prior service cost, net of $0 income tax for all periods1——
Change in pension adjustments due to net actuarial gain (loss) for the period, net of income tax expense of $0, $5, and $10, respectively(4)1326
Reclassification to earnings, net of income tax expense of $0, $1, and $3, respectively—11
Total pension adjustments(3)1427
OTHER COMPREHENSIVE INCOME69748292
COMPREHENSIVE INCOME (LOSS)(113)243(659)
Less: Comprehensive loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries498(127)438
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION$385$116$(221)

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Changes in Equity

Years ended December 31, 2023, 2022, and 2021

THE AES CORPORATION STOCKHOLDERS
Preferred StockCommon StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossNoncontrolling Interests (1)
(in millions)SharesAmountSharesAmountSharesAmount
Balance at December 31, 2020—$—818.4$8153.0$(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————————247126
Total pension adjustments, net of income tax————————243
Total other comprehensive income————————18885
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)1.0838————(29)———
Dividends declared on 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$838818.7$8152.0$(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————————68941
Total pension adjustments, net of income tax————————104
Total other comprehensive income————————66246
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)2310———
Balance at December 31, 20221.0$838818.8$8150.0$(1,822)$6,688$(1,635)$(1,640)$2,067
Net income (loss)———————249—(372)
Total foreign currency translation adjustment, net of income tax————————1369
Total change in derivative fair value, net of income tax————————3(77)
Total pension adjustments, net of income tax————————(3)—
Total other comprehensive income (loss)————————136(68)
Distributions to noncontrolling interests—————————(261)
Acquisitions of noncontrolling interests——————24——(44)
Sales to noncontrolling interests——————85—(10)1,754
Issuance of preferred shares in subsidiaries—————————421
Dividends declared on AES common stock ($0.6702/share)——————(449)———
Issuance and exercise of stock-based compensation benefit plans, net of income tax——0.3—(0.6)97———
Balance at December 31, 20231.0$838819.1$8149.4$(1,813)$6,355$(1,386)$(1,514)$3,497

(1) Excludes redeemable stock of subsidiaries. See Note 16—Redeemable Stock of Subsidiaries.

(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.

See Accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

Years ended December 31, 2023, 2022, and 2021

202320222021
OPERATING ACTIVITIES:(in millions)
Net loss$(182)$(505)$(951)
Adjustments to net loss:
Depreciation and amortization1,1281,0531,056
Emissions allowance expense264425337
Loss (gain) on realized/unrealized derivatives143127(1)
Gain on remeasurement to acquisition date fair value—(5)(254)
Loss (gain) on disposal and sale of business interests(134)91,683
Impairment expense1,0791,7151,575
Loss on realized/unrealized foreign currency3315823
Deferred income taxes(54)4(406)
Other149123202
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable161(532)(170)
(Increase) decrease in inventory306(417)(93)
(Increase) decrease in prepaid expenses and other current assets38(40)(168)
(Increase) decrease in other assets5433(285)
Increase (decrease) in accounts payable and other current liabilities(132)470(251)
Increase (decrease) in income tax payables, net and other tax payables(109)(51)(271)
Increase (decrease) in deferred income(2)33(314)
Increase (decrease) in other liabilities43(185)190
Net cash provided by operating activities3,0342,7151,902
INVESTING ACTIVITIES:
Capital expenditures(7,724)(4,551)(2,116)
Acquisitions of business interests, net of cash and restricted cash acquired(542)(243)(658)
Proceeds from the sale of business interests, net of cash and restricted cash sold254195
Sale of short-term investments1,3181,049616
Purchase of short-term investments(937)(1,492)(519)
Contributions and loans to equity affiliates(178)(232)(427)
Affiliate repayments and returns of capital5149320
Purchase of emissions allowances(268)(488)(265)
Other investing(116)(29)(97)
Net cash used in investing activities(8,188)(5,836)(3,051)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities7,1035,4242,802
Repayments under the revolving credit facilities(6,285)(4,687)(2,420)
Issuance of recourse debt1,4002007
Repayments of recourse debt(500)(29)(26)
Issuance of non-recourse debt4,5215,7881,644
Repayments of non-recourse debt(2,495)(3,144)(2,012)
Payments for financing fees(142)(120)(32)
Purchases under supplier financing arrangements1,8581,04291
Repayments of obligations under supplier financing arrangements(1,491)(432)(35)
Distributions to noncontrolling interests(323)(265)(284)
Acquisitions of noncontrolling interests(127)(602)(117)
Contributions from noncontrolling interests102233365
Sales to noncontrolling interests1,938742173
Issuance of preferred shares in subsidiaries42160153
Issuance of preferred stock——1,014
Dividends paid on AES common stock(444)(422)(401)
Payments for financed capital expenditures(10)(33)(24)
Other financing(121)3(101)
Net cash provided by financing activities5,4053,758797
Effect of exchange rate changes on cash, cash equivalents and restricted cash(270)(56)(46)
(Increase) decrease in cash, cash equivalents and restricted cash of held-for-sale businesses(78)2255
Total increase (decrease) in cash, cash equivalents and restricted cash(97)603(343)
Cash, cash equivalents and restricted cash, beginning2,0871,4841,827
Cash, cash equivalents and restricted cash, ending$1,990$2,087$1,484

Consolidated Statements of Cash Flows (continued)

Years ended December 31, 2023, 2022, and 2021

202320222021
(in millions)
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized$1,317$928$815
Cash payments for income taxes, net of refunds301271459
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Initial recognition of contingent consideration for acquisitions (see Note 25)239249
Noncash recognition of new operating and financing leases (see Note 14)22513456
Dividends declared but not yet paid116111105
Noncash contributions from noncontrolling interests60——
Noncash contributions to equity affiliates from transfers of tax credits52——
Notes payable issued for the acquisition of business interests (see Notes 17 and 25)——258
Noncash consideration transferred for AES Clean Energy acquisitions (see Note 25)——118

See Accompanying Notes to Consolidated Financial Statements.

125 | 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 Sheets. 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 the fair value and the carrying amount of each 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

126 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 acquisition, or an equity method investment. Any gains or losses upon the completion of disposals, which include reclassification of cumulative translation adjustments, are recognized in Gain (loss) on disposal and sale of business interests in the Consolidated Statements of Operations upon completion of the sale.

ALLOCATION OF EARNINGS — Certain of the Company's businesses are subject to profit-sharing arrangements where the allocation of earnings and losses, cash distributions, and 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 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 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: 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; temporary equity; 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 costs to sell. A loss is recognized if the carrying amount of the disposal group exceeds its estimated fair value less costs to sell. 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 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 settled or disposed of within twelve months and as noncurrent when they are not expected to be settled or disposed of within the next 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.

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

127 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 costs 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 assets, 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.

128 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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, 2023December 31, 2022
Cash and cash equivalents$1,426$1,374
Restricted cash370536
Debt service reserves and other deposits194177
Cash, Cash Equivalents and Restricted Cash$1,990$2,087

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 CREDIT LOSSES — 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 credit losses 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, refundable income tax credits that are accounted for as government grants, and liquidated damages recovered for construction delays 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.

129 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 transmission 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.

130 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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. 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.

SUPPLIER FINANCE PROGRAMS — With some purchases, the Company enters into supplier financing arrangements with the goal of securing improved payment terms. The Company confirms supplier invoices to an intermediary financial institution who will pay the supplier directly or reimburse the Company for payments made to the supplier. These arrangements are included in Supplier financing arrangements on the Consolidated Balance Sheets in Current liabilities as the amounts are all due in less than a year; the related interest expense is recorded on the Consolidated Statements of Operations within Interest expense. The company had 28 supplier financing arrangements with a total outstanding balance of $974 million as of December 31, 2023, and 46 supplier financing arrangements with a total outstanding balance of $662 million as of December 31, 2022. The agreements ranged from less than $1 million to $69 million with a weighted average interest rate of 7.51% as of December 31, 2023; as of December 31, 2022, the agreements ranged from less than $1 million to $88 million with a weighted average interest rate of 4.32%. Of the amounts outstanding under supplier financing arrangements, $814 million and $296 million were guaranteed by the Company as of December 31, 2023 and 2022, respectively.

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.

131 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Historically, the Company has financed renewables projects with investments from tax equity investors who are allocated certain tax benefits associated with renewable energy projects (e.g. investment tax credits) through partnership agreements. The Inflation Reduction Act allows the owners of renewable energy projects to transfer tax credits directly to third parties. This provides the Company with the flexibility to obtain financing on any particular project with (i) the transfer of tax credits or (ii) investments from tax equity investors who are allocated tax benefits. The Company may also elect to retain the tax credit and use it to reduce its tax liability.

The Company accounts for tax credits that it will retain or transfer as a reduction in income tax expense by either including the expected amount of the tax credit to be claimed or the cash to be received when transferred, respectively, in the calculation of its annual effective tax rate. The estimated tax credits are updated on a quarterly basis, with the year-end calculation including only the tax credits that are associated with projects placed in service, comprising credits claimed or transferred during the year. In assessing realizability for credits to be transferred, the Company includes cash it anticipates receiving in establishing any valuation allowance and establishes a valuation allowance equal to its best estimate of any discount on the transfer. The receipt of cash from the transfer of tax credits is treated as an operating cash inflow.

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

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

132 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 corporate clients. 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.

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 Other noncurrent assets line item on the Consolidated Balance Sheets. As payments are collected

133 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

from the customer over the term of the contract, consideration related to the construction performance obligation is bifurcated between the principal repayment of the long-term receivable and the related interest income, recognized in the Consolidated Statements of Operations.

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

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

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

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

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 in determining the present value of lease payments. 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

134 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 either meet the definition of a derivative or contain an embedded derivative requiring separate valuation and accounting. When available, the Company elects the normal purchase normal sale scope exception for these contracts.

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 derivative contracts are primarily used to reduce risks arising from variability in forecasted cash flows denominated in non-functional currencies. The objective of these contracts is to minimize the impact of foreign currency fluctuations on operating results. The Company also enters into commodity futures, swaps and options to hedge price variability inherent in forecasted purchases and sales of electricity, fuels, and other commodities. The objectives of the commodity contracts are to minimize the impact of variability in spot commodity prices and stabilize estimated revenue and expense streams. The Company does not use derivative instruments for speculative purposes.

For our cash flow 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 accounting 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. Cash payments and receipts to terminate interest rate derivatives prior to the end of their effective date are classified as an operating activity however they are excluded from the Cash payments for interest, net of amounts capitalized supplementary disclosure on the Consolidated Statements of Cash Flows. These cash receipts (payments) totaled $181 million, $239 million, and $(6) million for the years ended December 31, 2023, 2022, and 2021, respectively. 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 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.

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

135 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Twelve Months Ended December 31, 2023Accounts ReceivableMong Duong Loan ReceivableArgentina Receivables**(2)**Lease Receivable (3)OtherTotal
CECL reserve balance at beginning of period$3$28$30$20$2$83
Current period provision23———1740
Write-offs charged against allowance(15)——(20)—(35)
Recoveries collected2(3)———(1)
Foreign exchange2—(23)—(2)(23)
CECL reserve balance at end of period$15$25$7$—$17$64
Twelve Months Ended December 31, 2022Accounts Receivable (1)Mong Duong Loan ReceivableArgentina ReceivablesLease ReceivableOtherTotal
CECL reserve balance at beginning of period$9$30$23$—$1$63
Current period provision10—2220153
Write-offs charged against allowance(19)————(19)
Recoveries collected3(2)(1)———
Foreign exchange——(14)——(14)
CECL reserve balance at end of period$3$28$30$20$2$83

(1)Excludes operating lease receivable allowances and contractual dispute allowances of $1 million as of December 31, 2022. 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.

New Accounting Standards Adopted
ASU Number and NameDescriptionDate of AdoptionEffect on the financial statements upon adoption
2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with CustomersThis 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, and (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.January 1, 2023The Company adopted this standard on a prospective basis, which is being applied to any business combinations that occur in 2023 or after. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.
2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage DisclosuresASU 2022-02 amends ASC 326-20-50-6 to require public business entities to disclose gross write-offs recorded in the current period, on a year-to-date basis, by year of origination in the vintage disclosures. This disclosure should cover each of the previous five annual periods starting with the date of the financial statements and, for the annual periods before that, an aggregate total. However, upon adoption of the ASU, an entity would not provide the previous five annual periods of gross write-offs. The FASB decided that disclosure of gross write-offs would instead be applied on a prospective transition basis so that preparers can “build” the five-annual-period disclosure over time.January 1, 2023The Company adopted this standard on a prospective basis and it did not have a material impact on the Company’s consolidated financial statements.
136 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
2022-04,Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program ObligationsThis 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.January 1, 2023, except for the 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 adopted 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.
2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)This Accounting Standards Update amends various SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. The amendments in this Update are effective for all entities upon issuance of this Update.June 30, 2023The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
137 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 NameDescriptionDate of AdoptionEffect on the financial statements upon adoption
2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification InitiativeIn U.S. Securities and Exchange Commission (SEC) Release No. 33-10532, Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles (GAAP) to the FASB for potential incorporation into the Codification. The amendments in this Update are the result of the Board’s decision to incorporate into the Codification 14 of the 27 disclosures referred by the SEC. The amendments in this Update represent changes to clarify or improve disclosure and presentation requirements of a variety of Topics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations.The effective date for each amendment will be the date on which the SEC's removal of that related disclosure becomes effective, with early adoption prohibited. The amendments in this Update should be applied prospectively.The Company will provide the required disclosures on a prospective basis on the date each amendment becomes effective. The Company does not expect ASU 2023-06 will have any impact to our consolidated financial statements.
2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment DisclosuresThe amendments in this section are designed to improve the disclosures related to Segment reporting on an interim and annual basis. Public companies must disclose significant segment expenses and an amount for other segment items. This will also require that a company disclose its annual disclosures under Topic 280 in each interim period. Furthermore, companies will need to disclose the Chief Operating Decision Maker (CODM) and how the CODM assesses the performance of a segment. Lastly, public companies that have a single reportable segment must report the required disclosures under topic 280.The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2023-09 Income Taxes (Topic 740): Improvements to Income Tax DisclosuresThe amendments in this Update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. Furthermore, companies are required to disclose a disaggregated amount of income taxes paid at a federal, state, and foreign level as well as a break down of income taxes paid in an jurisdiction that comprises 5% of a company's total income taxes paid. Lastly, this ASU requires that companies disclose income (loss) from continuing operations before income tax at a domestic and foreign level and that companies disclose income tax expense from continuing operations on a federal, state, and foreign level.The amendments in this Update are effective for fiscal years beginning after December 15, 2024The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
  1. 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 31,20232022
Fuel and other raw materials$424$733
Spare parts and supplies288322
Total$712$1,055
  1. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes the components of the electric generation, distribution, 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.

138 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Estimated Useful LifeDecember 31,
(in years)20232022
Electric generation and distribution facilities5-40$27,517$24,135
Other buildings3-511,2391,197
Furniture, fixtures and equipment3-30397348
Other1-391,037919
Total electric generation, distribution assets and other30,19026,599
Accumulated depreciation(8,602)(8,651)
Net electric generation, distribution assets and other$21,588$17,948

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 31,202320222021
Depreciation expense$1,045$982$972
Interest capitalized during development and construction563224226

Property, plant and equipment, net of accumulated depreciation, of $9.5 billion and $8.9 billion was mortgaged, pledged or subject to liens as of December 31, 2023 and 2022, respectively, including assets classified as held-for-sale.

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

December 31,20232022
Non-regulated electric generation assets and other, gross$20,195$16,890
Non-regulated accumulated depreciation(4,777)(4,584)
Non-regulated electric generation assets and other, net15,41812,306
Regulated electric generation, distribution assets and other, gross9,9959,709
Regulated accumulated depreciation(3,825)(4,067)
Regulated electric generation, distribution assets and other, net6,1705,642
Net electric generation, distribution assets and other$21,588$17,948
  1. ASSET RETIREMENT OBLIGATIONS

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

20232022
Balance at January 1$757$606
Additional liabilities incurred4097
Liabilities assumed in acquisition—15
Liabilities settled(14)(29)
Accretion expense3130
Change in estimated cash flows(35)35
Other(1)3
Balance at December 31$778$757

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, 2023, the Company increased the asset retirement obligations and corresponding assets at AES Clean Energy and AES Indiana by $43 million and $34 million, respectively. This was offset by decreases at Southland Energy and AES Brasil of $51 million and $20 million, respectively. The increase at AES Clean Energy is mostly due to an upward revision of estimated cash flows as a result of a decommissioning study done in the fourth quarter of 2023, which mostly impacted the estimated cash flows related to solar assets.

139 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

The increase at AES Indiana is mostly due to additional liabilities incurred due to revised remediation plans for ash ponds at Eagle Valley and AES Indiana's solar projects. The decrease at Southland Energy is mostly due to a downward revision of estimated cash flows as a result of revised quotes from vendors for the demolition of the Southland legacy units. The decrease at AES Brasil is mostly due to a downward revision of estimated cash flows at the Mandacaru, Salinas, and Cubico II wind complexes and AES Brasil solar facilities.

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

  1. 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 spot and forward benchmark interest rates, foreign exchange rates, commodity prices, volatilities and credit data, 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. With respect to credit inputs, 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

140 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 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 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, 2023. The Company is not aware of any factors that would significantly affect the fair value amounts subsequent to December 31, 2023.

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

141 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

the value at which a liability is transferred or an asset is sold. Nonperformance risk includes, but may not be limited 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, 2023December 31, 2022
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
DEBT SECURITIES:
Available-for-sale:
Certificates of deposit$—$360$—$360$—$698$—$698
Government debt securities—————3—3
Total debt securities—360—360—701—701
EQUITY SECURITIES:
Mutual funds46——4638——38
Total equity securities46——4638——38
DERIVATIVES:
Interest rate derivatives—1822184—314—314
Foreign currency derivatives—155974—226486
Commodity derivatives—1271128—23213245
Total derivatives — assets—32462386—56877645
TOTAL ASSETS$46$684$62$792$38$1,269$77$1,384
Liabilities
Contingent consideration$—$—$165$165$—$—$48$48
DERIVATIVES:
Interest rate derivatives—1026108—6—6
Cross-currency derivatives—63—63—42—42
Foreign currency derivatives—19—19—20—20
Commodity derivatives—145111256—34660406
Total derivatives — liabilities—329117446—41460474
TOTAL LIABILITIES$—$329$282$611$—$414$108$522

As of December 31, 2023, all available-for-sale debt securities had stated maturities within one year. For the years ended December 31, 2023 and 2022, 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 31,202320222021
Gross proceeds from sale of available-for-sale securities$1,377$1,065$578

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, 2023 and 2022 (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.

142 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Derivative Assets and Liabilities
Year Ended December 31, 2023Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1$—$64$(47)$(48)$(31)
Total realized and unrealized gains (losses):
Included in earnings—16(10)1420
Included in other comprehensive income — derivative activity16(48)—(41)
Included in regulatory (assets) liabilities——(1)—(1)
Acquisitions———(239)(239)
Settlements(1)(27)(5)10875
Transfers of assets/(liabilities), net into Level 3(4)———(4)
Transfers of (assets)/liabilities, net out of Level 3——1—1
Balance at December 31$(4)$59$(110)$(165)$(220)
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$—$(4)$(13)$14$(3)
Derivative Assets and Liabilities
Year Ended December 31, 2022Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1$(6)$108$(1)$(67)$34
Total realized and unrealized gains (losses):
Included in earnings4(26)—3(19)
Included in other comprehensive income — derivative activity15(6)(54)—(45)
Included in other comprehensive income — foreign currency translation activity———(2)(2)
Included in regulatory (assets) liabilities——8—8
Acquisitions———(24)(24)
Settlements(2)(12)24230
Transfers of assets/(liabilities), net into Level 3(1)———(1)
Transfers of (assets)/liabilities, net out of Level 3(10)—(2)—(12)
Balance at December 31$—$64$(47)$(48)$(31)
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$3$(23)

The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of December 31, 2023 (in millions, except range amounts):

Type of DerivativeFair ValueUnobservable InputAmount or Range (Weighted Average)
Interest rate$(4)Subsidiary credit spread0.4% - 3.3% (1.9%)
Foreign currency:
Argentine peso59Argentine peso to USD currency exchange rate after one year1,421 - 2,226 (1,879)
Commodity:
CAISO Energy Swap(107)Forward energy prices per MWh after 2030$13.13 - $121.53 ($63.51)
Other(3)
Total$(55)

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.

Contingent consideration is primarily related to future milestone payments associated with acquisitions of renewable development projects. The estimated fair value of contingent consideration is determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. Changes in Level 3 inputs, particularly changes in the probability of achieving development milestones, could result in material changes to the fair value of the contingent consideration and could materially impact the amount of expense or income recorded each reporting period. Contingent consideration is updated quarterly with any prospective changes in fair value recorded through earnings.

143 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Nonrecurring Measurements —The Company measures fair value using the applicable fair value measurement guidance. Impairment expense, shown as pre-tax loss below, 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 asset groups measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):

Year Ended December 31, 2023Measurement DateCarrying Amount (1)Fair ValuePre-tax Loss
AssetsLevel 1Level 2Level 3
Long-lived asset groups held and used: (2)
Norgener (3)5/1/2023$196$—$—$24$137
GAF Projects (AES Renewable Holdings)5/31/202329——1118
TEG7/31/2023170——9377
TEP7/31/2023153——9459
New York Wind11/30/2023310——124186
Warrior Run (4)11/30/2023250——25198
Held-for-sale businesses: (5)
Jordan (6)3/31/2023$179$—$170$—$14
Jordan (6)6/30/2023179—170—15
Jordan (6)9/30/2023178—170—14
Jordan (6)12/31/2023180—170—16
Mong Duong (7)12/31/2023575—413—167
Goodwill: (8)
TEG TEP10/1/2023$12$—$—$—$12
Year Ended December 31, 2022Measurement DateCarrying Amount (1)Fair ValuePre-tax Loss
AssetsLevel 1Level 2Level 3
Long-lived asset groups held and used: (2)
Maritza4/30/2022$920$—$—$452$468
TEG10/1/2022268——164104
TEP10/1/2022236——14789
Held-for-sale businesses: (5)
Jordan (6)9/30/2022$216$—$170$—$51
Jordan (6)12/31/202219017025
Goodwill: (8)
AES Andes10/1/2022$644$—$—$—$644
AES El Salvador10/1/2022133———133
Equity method investments: (9)
sPower12/31/2022$607$—$—$432$175

(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. Per ASC 360-10, the pre-tax impairment expense for long-lived asset groups held and used is limited to the carrying amount of the long-lived assets.

(3)The Norgener asset group includes long-lived assets, inventory, land, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and determined that the carrying value of the other assets should not be reduced.

(4)The Warrior Run asset group includes long-lived assets, inventory, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and recognized an inventory impairment of $6 million in Other expense. See Note 21—Other Income and Expense for further information.

(5)See Note 24*—Held-for-Sale and Dispositions* for further information.

(6)The pre-tax loss recognized was calculated using the $170 million fair value of the Jordan disposal group less costs to sell of $5 million for the September 30, 2022, December 31, 2022, and March 31, 2023 measurement dates and $6 million for the June 30, 2023, September 30, 2023 and December 31, 2023 measurement dates.

(7)The pre-tax loss recognized was calculated using the $413 million fair value of the Mong Duong disposal group less costs to sell of $5 million.

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

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

AES Clean Energy Development Projects — On a quarterly basis, the Company reviews the status of development projects to identify projects that are no longer viable and will be abandoned. The fair value of each abandoned project with no salvage value is presumed to be zero as there are no future projected cash flows, resulting in a full write-off of the carrying value of project development intangibles and capitalized development costs incurred.

The Company recognized $151 million of pre-tax asset impairment expense in 2023, including $137 million during the fourth quarter, primarily related to the write-off of project development intangibles which were recognized at fair value when the Company acquired sPower's development platform as part of the formation of AES Clean Energy Development. See Note 22—Asset Impairment Expense for further information.

144 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived asset groups held and used measured on a nonrecurring basis during the year ended December 31, 2023 (in millions, except range amounts):

December 31, 2023Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
Long-lived asset groups held and used:
New York Wind$124Discounted cash flowAnnual revenue growth(1)% to 5% (2%)
Annual variable margin2% to 17% (9%)
TEP94Discounted cash flowAnnual revenue growth(31)% to 6% (-2%)
Annual variable margin22% to 37% (26%)
Discount rate14% to 25% (14%)
TEG93Discounted cash flowAnnual revenue growth(7)% to 9% (0%)
Annual variable margin14% to 33% (20%)
Discount rate14% to 25% (14%)
Warrior Run (1)25Discounted cash flowAnnual variable margin(931)% to 74% (-506%)
Norgener (2)24Discounted cash flowAnnual revenue growth(90)% to 994% (85%)
Annual variable margin(75)% to 276% (16%)
GAF Projects (AES Renewable Holdings)11Discounted cash flowAnnual revenue growth(42)% to 44% (1%)
Discount rate9%
Total$371

(1)The fair value of the Warrior Run asset group is mainly related to cash on hand and existing coal inventory not subject to impairment under ASC 360-10, and is partially reduced by expected decommissioning and demolition costs.

(2)The fair value of the Norgener asset group subsequent to the impairment analysis performed on May 1, 2023 was mainly related to existing coal inventory not subject to impairment under ASC 360-10. In December 2023, the Company recognized an inventory impairment of $23 million in Other expense. See Note 21—Other Income and Expense for further information.

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, 2023
Carrying AmountFair Value
TotalLevel 1Level 2Level 3
Assets:Accounts receivable — noncurrent$193$239$—$—$239
Liabilities:Non-recourse debt22,14422,174—20,6761,498
Recourse debt4,4644,210—4,210—
December 31, 2022
Carrying AmountFair Value
TotalLevel 1Level 2Level 3
Assets:Accounts receivable — noncurrent (1)$301$340$—$—$340
Liabilities:Non-recourse debt19,42918,527—17,0891,438
Recourse debt3,8943,505—3,505—

(1)These amounts primarily relate to amounts impacted by the Stabilization Fund enacted by the Chilean government. These amounts are included in Other noncurrent assets in the accompanying Consolidated Balance Sheets. See Note 7—Financing Receivables for further information.

145 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. 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, 2023, and the dates through which the maturities for each type of derivative range:

Interest Rate and Foreign Currency DerivativesMaximum Notional Translated to USDLatest Maturity
Interest rate$7,7382059
Cross-currency swaps (Brazilian Reais)4042026
Foreign currency:
Chilean peso2162026
Euro1102026
Mexican peso752024
Brazilian real322026
Colombian peso252025
Argentine peso12026
Commodity DerivativesMaximum NotionalLatest Maturity
Natural Gas (in MMBtu)1772029
Power (in MWhs)232040
Coal (in Metric Tonnes)42027

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

Fair ValueDecember 31, 2023December 31, 2022
AssetsDesignatedNot DesignatedTotalDesignatedNot DesignatedTotal
Interest rate derivatives$184$—$184$313$1$314
Foreign currency derivatives235174275986
Commodity derivatives—128128—245245
Total assets$207$179$386$340$305$645
Liabilities
Interest rate derivatives$108$—$108$6$—$6
Cross-currency derivatives63—6342—42
Foreign currency derivatives5141991120
Commodity derivatives10714925659347406
Total liabilities$283$163$446$116$358$474
December 31, 2023December 31, 2022
Fair ValueAssetsLiabilitiesAssetsLiabilities
Current$216$152$271$168
Noncurrent170294374306
Total$386$446$645$474
Credit Risk-Related Contingent FeaturesDecember 31, 2023December 31, 2022
Net position of derivatives subject to collateralization$(4)$104
Cash collateral held by third parties or in escrow10442
146 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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,
202320222021
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives$42$869$51
Cross-currency derivatives——(11)
Foreign currency derivatives217(34)
Commodity derivatives(48)16(1)
Total$(4)$902$5
Gains (losses) reclassified from AOCL to earnings
Interest rate derivatives$51$(72)$(419)
Cross-currency derivatives——(15)
Foreign currency derivatives(4)2(62)
Commodity derivatives1724
Total$64$(68)$(492)
Gains (losses) on fair value hedging relationships
Cross-currency derivatives
Derivatives designated as hedging instruments$(72)$(35)$(6)
Hedged items58264
Total$(14)$(9)$(2)
Loss reclassified from AOCL to earnings due to impairment of assets$—$(16)$—
Gains reclassified from AOCL to earnings due to change in forecast$14$26$—
Gain (losses) recognized in earnings related to
Not designated as hedging instruments:
Interest rate derivatives$(7)$4$105
Foreign currency derivatives192129
Commodity derivatives and other261(43)(28)
Total$273$(18)$106

Reclassifications from AOCL to earnings are forecasted to increase pre-tax income from continuing operations by $36 million for the twelve months ended December 31, 2024, primarily related to interest rate derivatives.

  1. 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, 2023December 31, 2022
Gross ReceivableAllowanceNet ReceivableGross ReceivableAllowanceNet Receivable
U.S.$149$—$149$46$—$46
Chile33—33239—239
Other11—1118—18
Total$193$—$193$303$—$303

U.S. — During this period, AES has recorded non-current receivables pertaining to the sale of the Redondo Beach land and the Warrior Run PPA termination agreement. The anticipated collection period extends beyond December 31, 2024. See Note 20—Revenue for further details regarding the Warrior Run PPA termination agreement.

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, 2023.

147 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

On August 14, 2023, AES Andes executed an agreement aiming for the sale of up to $227 million of receivables pursuant to the Stabilization Funds, of which $131 million was sold and collected as of December 31, 2023. Through different agreements and programs, as of December 31, 2023, $17 million of current receivables and $8 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets, respectively. Additionally, $25 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, 2023.

  1. 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 31,2023202220232022
AffiliateCountryCarrying Value (in millions)Ownership Interest %
sPower (1)United States$423$43250%50%
FluenceUnited States14820529%34%
Grupo Energía Gas Panamá (2)Panama1148224%49%
Uplight (3)United States868129%29%
Energía Natural Dominicana Enadom (4)Dominican Republic776433%43%
Mesa La PazMexico423250%50%
Other affiliates (5)Various5156
Total$941$952

(1)The Company owns 50% of sPower, LLC and accounts for its investment as an equity method investment. Furthermore, there are two specific portfolios of operating solar and wind assets, OpCo A and OpCo B, in which sPower, LLC owns 51%, resulting in an AES effective ownership of approximately 26% in these portfolios.

(2)The Company's ownership in Grupo Energía Gas Panamá is held through AES Panama, a 49%-owned consolidated subsidiary. AES Panama owns 49% of Grupo Energía Gas Panamá, resulting in an AES effective ownership of 24%.

(3)On February 9, 2024, the Company's equity interest was diluted to approximately 25% as a result of Uplight's acquisition of AutoGrid, a market leader in the fast-growing Virtual Power Plant ("VPP") space.

(4)The Company's ownership in Energía Natural Dominicana Enadom is held through Andres, a 65%-owned consolidated subsidiary. Andres owns 50% of Energía Natural Dominicana Enadom, resulting in an AES effective ownership of 33%. See Note 17—Equity for further information regarding the selldown of AES Dominicana in December 2023.

(5)Includes Bosforo, Tucano, Barry, Alto Maipo, and various other equity method investments. Barry and Alto Maipo represent VIEs in which the Company holds a variable interest but is not the primary beneficiary.

Fluence — In December 2023, the Company redeemed 7,087,500 common units of Fluence Energy, LLC. Fluence Energy, Inc. settled this redemption through the issuance of an equivalent number of shares of its Class A common stock. In conjunction with this redemption, the Company executed a public sale of the Class A shares, resulting in proceeds received of $156 million, after expenses, and a pre-tax gain on sale of $136 million, recorded in Gain (loss) on disposal and sale of business interests. As a result of this transaction, AES' ownership interest decreased from 33% to 29%. As the Company still does not control but has significant influence over Fluence after the transaction, it continues to be accounted for as an equity method investment. Fluence is reported in the New Energy Technologies SBU reportable segment.

Grupo Energía Gas Panamá — In September 2023, AES Latin America completed the sale of its interest in Grupo Energía Gas Panamá, a joint venture formed for the Gatun combined cycle natural gas development project, to AES Panama, a 49%-owned consolidated subsidiary. As a result of the transaction, the Company’s effective ownership in Grupo Energía Gas Panamá decreased from 49% to approximately 24%. As the Company still does not control the investment after this transaction, it continues to be accounted for as an equity method investment and is reported in the Energy Infrastructure SBU reportable segment.

sPower — 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. 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 investors. 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

148 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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.

On February 28, 2023, sPower closed on the sale for $196 million. As a result of the transaction, the Company received $98 million in sales proceeds and recorded a pre-tax gain on sale of $5 million, recorded in Gain (loss) on disposal and sale of business interests. After the sale, the Company's ownership interest in OpCo B decreased from 50% to approximately 26%. As the Company still does not control but has significant influence over sPower after the transaction, it continues to be accounted for as an equity method investment. sPower is reported in the Renewables 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, 2023, the fair value is insignificant. Alto Maipo is reported in the Energy Infrastructure 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, 2023 and 2022, other long-term liabilities included $41 million and $39 million, respectively, related to this debt agreement. Barry is reported in the Energy Infrastructure SBU reportable segment.

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 AffiliatesMajority-Owned Unconsolidated Subsidiaries**(1)**
Years ended December 31,202320222021202320222021
Revenue$2,905$1,780$1,316$1$1$1
Operating loss(28)(361)(53)(1)(1)(1)
Net loss(182)(527)(242)(1)—(3)
Net loss attributable to affiliates(157)(405)(40)(1)—(3)
December 31,2023202220232022
Current assets$1,759$2,223$117$125
Noncurrent assets7,5697,522533643
Current liabilities1,6381,931114118
Noncurrent liabilities4,0854,040572677
Stockholders' equity2,3182,978(30)(26)
Noncontrolling interests1,287796(6)(1)

(1)The summarized financial information of Alto Maipo is not included in the table above as the Company is not the primary beneficiary, the fair value of the investment is insignificant, and the investment in Alto Maipo is not material to the financial results of the Company.

At December 31, 2023, retained earnings included $325 million related to the undistributed losses of the Company's 50%-or-less owned affiliates. Dividends received from these affiliates were $5 million, $47 million, and $25 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, the aggregate carrying amount of our investments in equity affiliates exceeded the underlying equity in the net assets of our equity affiliates by $118 million.

149 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill — The following table summarizes the carrying amount of goodwill by reportable segment for the years ended December 31, 2023 and 2022 (in millions):

Renewables SBUUtilities SBUEnergy Infrastructure SBUNew Energy Technologies SBUTotal
Balance as of December 31, 2022
Goodwill$355$2,709$683$3$3,750
Accumulated impairment losses(35)(2,709)(644)—(3,388)
Net balance320—393362
Impairment losses——(12)—(12)
Goodwill derecognized during the year(2)———(2)
Balance as of December 31, 2023
Goodwill3532,70968333,748
Accumulated impairment losses(35)(2,709)(656)—(3,400)
Net balance$318$—$27$3$348

TEG TEP — During the fourth quarter of 2023, the Company performed the goodwill impairment test for the TEG TEP 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 $12 million, reducing the goodwill balance of TEG TEP to zero. The decrease in fair value since the date of our last impairment test on July 31, 2023 was primarily driven by an increase in the discount rate due to increasing risk of non-renewal of operating permits required to operate after March 31, 2024. In February 2024, the Mexican Comision Reguladora de Energia (“CRE”) rejected TEG's request to transition to the new energy regime and renew its operating permits. This request was denied on the basis of a lawsuit concerning the electricity law that has been withdrawn. TEG has subsequently reiterated with the agency the lawsuit has been withdrawn and has formally requested that CRE issue a new permit. TEG and TEP are reported in the Energy Infrastructure SBU reportable segment.

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 Andes is reported in the Energy Infrastructure SBU reportable segment.

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. AES El Salvador is reported in the Utilities SBU reportable segment.

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:

150 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
December 31, 2023December 31, 2022
Gross BalanceAccumulated AmortizationNet BalanceGross BalanceAccumulated AmortizationNet Balance
Subject to Amortization
Internal-use software$696$(324)$372$582$(307)$275
Contracts337(37)300342(40)302
Project development rights (1)1,222(43)1,179991(17)974
Emissions allowances (2)50—5037—37
Concession rights222(71)151207(50)157
Land use rights119(3)11620(1)19
Other (3)45(20)2537(19)18
Subtotal2,691(498)2,1932,216(434)1,782
Indefinite-Lived Intangible Assets
Land use rights22—2242—42
Transmission rights20—2016—16
Other8—81—1
Subtotal50—5059—59
Total$2,741$(498)$2,243$2,275$(434)$1,841

(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, 2023AmountSubject to Amortization/Indefinite-LivedWeighted Average Amortization Period (in years)Amortization Method
Internal-use software$159Subject to Amortization15Straight-line
Contracts12Subject to Amortization21Straight-line
Project development rights242Subject to Amortization39Straight-line
Emissions allowances23Subject to AmortizationVariousAs utilized
Land use rights91VariousN/AVarious
Other9VariousN/AN/A
Total$536
December 31, 2022AmountSubject to Amortization/Indefinite-LivedWeighted Average Amortization Period (in years)Amortization Method
Internal-use software$136Subject to Amortization14Straight-line
Contracts196Subject to Amortization23Straight-line
Project development rights67Subject to Amortization4Straight-line
Emissions allowances35Subject to AmortizationVariousAs utilized
Land use rights13Indefinite-LivedN/AN/A
Other1Subject to AmortizationN/AN/A
Total$448

The following table summarizes the estimated amortization expense by intangible asset category for 2024 through 2028:

(in millions)20242025202620272028
Internal-use software$42$39$37$34$34
Contracts2117171717
Concession rights1717171717
Project development rights1010121212
Other26645
Total$92$89$89$84$85

Intangible asset amortization expense was $82 million, $71 million and $69 million for the years ended December 31, 2023, 2022 and 2021, respectively.

151 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. 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 31,20232022Recovery/Refund Period
Regulatory assets
Current regulatory assets:
Undercollection of rate riders$127$651 year
El Salvador energy pass through costs recovery11978Quarterly
AES Indiana deferred fuel and purchased power costs—801 year
Other19141 year
Total current regulatory assets265237
Noncurrent regulatory assets:
AES Indiana Petersburg Units 1 and 2 retirement costs26028710 years
AES Indiana and AES Ohio defined benefit pension obligations (1)179194Various
AES Indiana environmental costs7073Various
AES Ohio regulatory compliance costs4565 years
AES Indiana deferred Midcontinent ISO costs21343 years
Other123130Various
Total noncurrent regulatory assets698724
Total regulatory assets$963$961
Regulatory liabilities
Current regulatory liabilities:
Overcollection of costs to be passed back to customers$34$461 year
Other7181 year
Total current regulatory liabilities4164
Noncurrent regulatory liabilities:
AES Indiana and AES Ohio accrued costs of removal and AROs586657Over life of assets
AES Indiana and AES Ohio income taxes payable to customers through rates117134Various
Other622Various
Total noncurrent regulatory liabilities709813
Total regulatory liabilities$750$877

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

Our regulatory assets and current regulatory liabilities primarily consist of under or overcollection of costs that are generally non-controllable, such as purchased electricity, energy transmission, fuel costs, and other sector costs. These costs are recoverable or refundable as defined by the laws and regulations in our markets. Our regulatory assets also include defined pension and postretirement benefit obligations equal to the previously unrecognized actuarial gains and losses and prior service costs that are expected to be recovered through future rates. Additionally, our regulatory assets include the carrying value of AES Indiana's Petersburg Unit 1 and Petersburg Unit 2 at their retirement dates, which are amortized over the life of the assets beginning on the dates of retirement. Other current and noncurrent regulatory assets primarily consist of:

  • Deferred Midcontinent ISO costs at AES Indiana;

  • 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 and proactive reliability optimization 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, 2023 and December 31, 2022 are related to the Utilities SBU reportable segment.

152 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. 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 DEBTWeighted Average Interest RateMaturityDecember 31,
20232022
Variable Rate:
Bank loans7.39%2024 - 2045$5,568$3,306
Notes and bonds4.62%2024 - 20471,7682,137
Revolver borrowings7.18%2024 - 20272,3561,832
Other11.85%2024 - 20303171
Fixed Rate:
Bank loans7.20%2024 - 20641,473461
Notes and bonds5.09%2024 - 207911,22811,130
Other (1)5.90%2024 - 206153801
Unamortized (discount) premium & debt issuance (costs), net(333)(309)
Subtotal$22,144$19,429
Less: Current maturities (2)(3,924)(1,752)
Noncurrent maturities (2)$18,220$17,677

(1) Other fixed rate debt as of December 31, 2022 includes $756 million at Mong Duong, which was classified as held and used as of December 31, 2022, but is classified as held-for-sale as of December 31, 2023. See Note 24—Held-for-Sale and Dispositions for further information.

(2) Excludes $8 million and $6 million (current) and $262 million and $169 million (noncurrent) finance lease liabilities included in the respective non-recourse debt line items on the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively. See Note 14—Leases for further information.

The interest rate on variable rate debt represents the total of a variable component that is based on changes in an interest rate index and a fixed component. The Company has interest rate swap agreements that economically fix the variable component of the interest rates on the portion of the variable rate debt being hedged in an aggregate notional principal amount of approximately $2.7 billion on non-recourse debt outstanding at December 31, 2023.

The following table summarizes the amounts due under our non-recourse debt agreements for the next five years and thereafter, as of December 31, 2023 (in millions):

December 31,Annual Maturities
2024$3,935
20252,232
20263,515
20272,566
2028932
Thereafter9,297
Unamortized (discount) premium & debt issuance (costs), net(333)
Total$22,144

As of December 31, 2023, AES subsidiaries with facilities under construction had a total of approximately $1.3 billion of committed but unused credit facilities available to fund construction and other related costs. Excluding these facilities under construction, AES subsidiaries had approximately $1.7 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.

Significant transactions — During the year ended December 31, 2023, the Company’s following subsidiaries had significant debt issuances (in millions):

SubsidiaryIssuances (1)
AES Clean Energy$2,654
Netherlands and Colon350
AES Indiana300
AES Ohio300

(1)These amounts do not include revolving credit facility activity at the Company's subsidiaries.

153 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

AES Ohio — The $300 million of debt issued at AES Ohio is primarily related to $200 million of First Mortgage Bonds issued in December 2023 in a private placement offering, in which AES Ohio issued $92 million aggregate principal of 5.49% bonds and $108 million aggregate principal of 5.70% bonds due in 2028 and 2033, respectively. The net proceeds from the issuances were used primarily to repay existing indebtedness and for general corporate purposes.

AES Indiana — In November 2023, AES Indiana executed a $300 million term loan due in 2024. The net proceeds from this issuance were used for general corporate purposes.

Netherlands and Colon — 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.

In January 2023, AES Hispanola Holdings BV and Colon, as co-borrowers, executed a $350 million credit agreement at 8.85%, due in 2028. The Company allocated $300 million and $50 million of the proceeds from the agreement to AES Hispanola Holdings BV and Colon, respectively. The net proceeds from the agreement were used to partially repay the $500 million bridge loan executed in 2022. The remaining principal outstanding of the bridge loan was repaid with proceeds from operating cash flows as well as cash from the Parent Company. As a result of these transactions, the Company recognized a loss on extinguishment of debt of $1 million.

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.

AES Clean Energy — In December 2023, Bellefield Portfolio Seller, LLC and Bellefield 1 Finco, LLC, subsidiaries of AES Clean Energy Development, executed a construction, tax equity bridge, and letter of credit financing agreement for commitments of up to $2.4 billion due in 2026. As of December 31, 2023, there was $998 million in outstanding borrowings under the facilities, and the net proceeds were used primarily to repay existing indebtedness and to fund development of renewables projects.

In October 2023, Rexford I Holdings, LLC, a subsidiary of AES Renewable Holdings, executed a $300 million bridge loan due in 2024. The net proceeds from this issuance were used primarily to fund development of renewables projects.

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.

In December 2022, AES Clean Energy Development, AES Renewable Holdings, and sPower, an equity method investment, collectively referred to as the Issuers, entered into a Master Indenture 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. In 2023, the Issuers sold an additional $246 million in 6.37% notes. As a result of the additional issuance and repayments, the aggregate principal amount of Notes outstanding was $884 million as of December 31, 2023. 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 2023 issuance, AES Clean Energy Development recorded an increase in liabilities of $215 million, resulting in an aggregate carrying amount of the Notes attributable to AES Clean Energy Development and AES Renewable Holdings of $252 million as of December 31, 2023.

154 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 have resulted in an aggregate increase in the commitments of $2.6 billion, bringing the total commitments under the new agreements to $3.8 billion. Under a 2023 amendment, the maturity date of one of the Credit Agreements was extended from December 2024 to May 2026. 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 increases in commitments used, AES Clean Energy Development and AES Renewable Holdings recorded, in aggregate, an increase in liabilities of $1 billion in 2023, resulting in total commitments used under the revolving credit facilities, as of December 31, 2023, of $2.3 billion. As of December 31, 2023, the aggregate commitments used under the revolving credit facilities for the Co-Borrowers was $2.8 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 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, 2023 and 2022, approximately $341 million and $424 million, respectively, of restricted cash was maintained in accordance with certain covenants of the non-recourse debt agreements. Of these amounts, $158 million and $285 million, respectively, were included within Restricted cash and $183 million and $139 million, respectively, were included within Debt service reserves and other deposits in the accompanying Consolidated Balance Sheets. As of December 31, 2023 and 2022, approximately $90 million and $56 million, respectively, of the restricted cash balances were for collateral held to cover potential liability for current and future insurance claims being assumed by AGIC, AES' captive insurance company.

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 $901 million at December 31, 2023.

The following table summarizes the Company's subsidiary non-recourse debt in default (in millions) as of December 31, 2023. Due to the defaults, these amounts are included in the current portion of non-recourse debt:

Primary Nature of DefaultDecember 31, 2023
SubsidiaryDebt in DefaultNet Assets
AES Mexico Generation Holdings (TEG and TEP)Covenant$150$24
AES Puerto RicoCovenant/Payment143(170)
AES Ilumina (Puerto Rico)Covenant2529
AES Jordan SolarCovenant711
Total$325

The amounts in default related to AES Puerto Rico are covenant and payment defaults. In July 2023, AES Puerto Rico signed forbearance and standstill agreements with its noteholders because of the insufficiency of funds to meet the principal and interest obligations on its Series A Bond Loans due and payable on June 1, 2023, and going forward. These agreements expired on December 31, 2023 and were extended until January 17, 2024. Although there is no forbearance in place after January 17, 2024, AES Puerto Rico continues to work with PREPA and its noteholders on these liquidity challenges.

All other defaults listed are not payment defaults. All other subsidiary non-recourse defaults were triggered by failure to comply with covenants or other requirements contained in the non-recourse debt documents of the applicable subsidiary.

The AES Corporation's recourse debt agreements include cross-default clauses that will trigger if a subsidiary provides 20% or more of the Parent Company's total cash distributions from businesses for the four most recently completed fiscal quarters and has an outstanding principal in excess of $200 million in default. As of December 31, 2023, the Company's subsidiaries had no defaults which resulted in 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.

155 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 RateFinal MaturityDecember 31, 2023December 31, 2022
Senior Variable Rate Term LoanSOFR + 1.125%2024$200$200
Senior Unsecured Note3.30%2025900900
Senior Unsecured Note1.375%2026800800
Drawings on revolving credit facilitySOFR + 1.75%2027—325
Senior Unsecured Note5.45%2028900—
Senior Unsecured Note3.95%2030700700
Senior Unsecured Note2.45%20311,0001,000
Unamortized (discount) premium & debt issuance (costs), net(36)(31)
Subtotal$4,464$3,894
Less: Current maturities(200)—
Noncurrent maturities$4,264$3,894

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

December 31,Annual Maturities
2024$200
2025900
2026800
2027—
2028900
Thereafter1,700
Unamortized (discount) premium & debt issuance (costs), net(36)
Total recourse debt$4,464

Senior Notes due 2028 — In May 2023, the Company issued $900 million aggregate principal of 5.45% senior notes due in 2028. The Company used the proceeds from this issuance for general corporate purposes and to fund investments in the Company’s Renewables and Utilities SBUs.

AES Clean Energy Development — In March 2023, AES Clean Energy Development Holdings, LLC executed a $500 million bridge loan due in December 2023 and used the proceeds for general corporate purposes. The obligations under the bridge loan were unsecured and fully guaranteed by the Parent Company. The bridge loan was repaid in December 2023.

Commercial Paper Program — In March 2023, the Company established a commercial paper program under which the Company may issue unsecured commercial paper notes (the “Notes”) up to a maximum aggregate face amount of $750 million outstanding at any time. The maturities of the Notes may vary but will not exceed 397 days from the date of issuance. The proceeds of the Notes will be used for general corporate purposes. The Notes will be sold on customary terms in the U.S. commercial paper market on a private placement basis. The commercial paper program is backed by the Company's $1.5 billion revolving credit facility, and the Company cannot issue commercial paper in an aggregate amount exceeding the then available capacity under its revolving credit facilities. During 2023, the Company borrowed and repaid approximately $45.8 billion under the commercial paper program, with average daily outstanding borrowings of $449 million. As of December 31, 2023, the Company had no outstanding borrowings under the commercial paper program.

Revolving Credit Facility — 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. The existing credit agreement had an aggregate commitment of $1.25 billion and matured in September 2026. As of December 31, 2023, AES had no outstanding drawings under its revolving credit facility.

Term Loan due 2024 — 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.

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

156 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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.

  1. 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, 2023 for 2024 through 2028 and thereafter as well as actual purchases under these contracts for the years ended December 31, 2023, 2022, and 2021 (in millions):

Actual purchases during the year ended December 31,Electricity Purchase ContractsFuel Purchase ContractsOther Purchase Contracts
2021$709$2,070$1,261
20221,1563,3753,602
20231,1341,9823,181
Future commitments for the year ending December 31,
2024$1,222$2,069$4,698
20259621,6781,047
20267001,166737
20276861,222718
20286561,056629
Thereafter5,8733,8741,720
Total$10,099$11,065$9,549
  1. CONTINGENCIES

Parent Guarantees and Letters of Credit — In connection with certain project financings (including tax equity transactions), acquisitions and dispositions, power purchases, EPC contracts, 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 33 years.

The following table summarizes the Parent Company's contingent contractual obligations as of December 31, 2023. Amounts presented in the following table represent the Parent Company's current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure per individual agreement. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees.

157 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Contingent Contractual ObligationsMaximum Exposure (in millions)Number of AgreementsMaximum Exposure Range for Each Agreement (in millions)
Guarantees and commitments$3,97890< $1 — 970
Letters of credit under bilateral agreements2354$54 — 64
Letters of credit under the unsecured credit facilities18831< $1 — 70
Letters of credit under the revolving credit facility12417< $1 — 40
Surety bonds22< $1 — 1
Total$4,527144

During the year ended December 31, 2023, the Parent Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts of letters of credit.

Subsidiary Guarantees and Letters of Credit — In connection with certain project financings (including tax equity transactions), acquisitions and dispositions, power purchases, EPC contracts, and other agreements, certain of the Company's subsidiaries have expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events, or are customary payment guarantees for amounts due under existing contracts in the normal course of business. These contingent contractual obligations are issued at the subsidiary level and are non-recourse to the Parent Company. As of December 31, 2023, the maximum undiscounted potential exposure to guarantees issued by our subsidiaries was $2.8 billion, including $1.8 billion of customary payment guarantees under EPC contracts and other agreements, and $1 billion of tax equity financing related guarantees. In addition, as of December 31, 2023, our subsidiaries had $359 million of letters of credit outstanding.

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, 2023 and 2022, the Company recognized liabilities of $9 million and $10 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, 2023. In aggregate, the Company estimates the range of potential losses related to environmental matters, where estimable, to be up to $13 million. The amounts considered reasonably possible do not include amounts accrued as discussed above.

Litigation — The Company is involved in certain claims, suits and legal proceedings in the normal course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has recognized aggregate liabilities for all claims of approximately $17 million and $22 million as of December 31, 2023 and 2022, 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, 2023. 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 $146 million and $185 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 for further information.

  1. 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):

158 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Consolidated Balance Sheet ClassificationDecember 31, 2023December 31, 2022
Assets
Right-of-use assets — finance leasesElectric generation, distribution assets and other$250$160
Right-of-use assets — operating leasesOther noncurrent assets380356
Total right-of-use assets$630$516
Liabilities
Finance lease liabilities (current)Non-recourse debt (current liabilities)$8$6
Finance lease liabilities (noncurrent)Non-recourse debt (noncurrent liabilities)262169
Total finance lease liabilities270175
Operating lease liabilities (current)Accrued and other liabilities3726
Operating lease liabilities (noncurrent)Other noncurrent liabilities387374
Total operating lease liabilities424400
Total lease liabilities$694$575

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

Lease Term and Discount RateDecember 31, 2023December 31, 2022
Weighted-average remaining lease term — finance leases34 years33 years
Weighted-average remaining lease term — operating leases27 years25 years
Weighted-average discount rate — finance leases5.36%4.59%
Weighted-average discount rate — operating leases7.70%6.22%

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

Years Ended December 31,
Components of Lease Cost20232022
Operating lease cost$52$46
Finance lease cost:
Amortization of right-of-use assets78
Interest on lease liabilities108
Short-term lease costs1628
Variable lease cost—1
Total lease cost$85$91

Operating cash outflows from operating leases included in the measurement of lease liabilities were $54 million and $54 million for the years ended December 31, 2023 and 2022, respectively, and operating cash outflows from finance leases were $5 million and $22 million for the years ended December 31, 2023 and 2022, respectively. Right-of-use assets obtained in exchange for new operating and finance lease liabilities were $129 million and $96 million, respectively, for the years ended December 31, 2023.

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, 2023 for 2024 through 2028 and thereafter (in millions):

Maturity of Lease Liabilities
Finance LeasesOperating Leases
2024$14$56
20251445
20261543
20271541
20281538
Thereafter545986
Total6181,209
Less: Imputed interest(348)(785)
Present value of lease payments$270$424

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.

159 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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):

Years Ended December 31,
Lease Income20232022
Total lease revenue$490$527
Less: Variable lease revenue(65)(49)
Total non-variable lease revenue$425$478

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 AssetsDecember 31, 2023December 31, 2022
Gross assets$1,227$1,319
Less: Accumulated depreciation(182)(139)
Net assets$1,045$1,180

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, 2023. 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, 2023 for 2024 through 2028 and thereafter (in millions):

Future Cash Receipts for
Sales-Type LeasesOperating Leases
2024$34$393
202532394
202632280
202732183
20283260
Thereafter441484
Total603$1,794
Less: Imputed interest(296)
Present value of total lease receipts$307

Battery Storage Lease Arrangements — The Company constructs and operates projects consisting only of a stand-alone 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 revenue on sales-type leases through variable payments of $3 million and $2 million and interest income of $13 million and $23 million for the years ended December 31, 2023 and 2022, 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. During the second quarter of 2023, the sales-type lease receivable and the associated allowance were written-off.

The Company recorded a loss at commencement of sales-type leases of $20 million and $5 million for the years ended December 31, 2023 and 2022, respectively. These amounts are recognized in Other expense in the 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.

  1. 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 U.S. 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

160 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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, 2023, 2022 and 2021, costs for defined contribution plans were approximately $40 million, $31 million and $26 million, respectively.

Defined Benefit Plans — Certain of the Company's subsidiaries have defined benefit pension plans covering substantially all of their respective employees ("the DB Plans"). Pension benefits are based on years of credited service, age of the participant, and average earnings. Of the 27 active DB Plans as of December 31, 2023, 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):

20232022
U.S.ForeignU.S.Foreign
Change in projected benefit obligation:
Benefit obligation as of January 1$914$177$1,225$173
Service cost84144
Interest cost47212817
Plan amendments2———
Plan settlements—(1)——
Benefits paid(115)(15)(65)(13)
Divestitures———(1)
Actuarial loss (gain)19(2)(288)(11)
Effect of foreign currency exchange rate changes—6—8
Benefit obligation as of December 31$875$190$914$177
Change in plan assets:
Fair value of plan assets as of January 1$911$114$1,218$106
Actual return on plan assets8010(250)7
Employer contributions8985
Plan settlements—(1)——
Benefits paid(116)(15)(65)(13)
Effect of foreign currency exchange rate changes—10—9
Fair value of plan assets as of December 31$883$127$911$114
Reconciliation of funded status:
Funded status as of December 31$8$(63)$(3)$(63)

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 31,20232022
Amounts Recognized on the Consolidated Balance SheetsU.S.ForeignU.S.Foreign
Noncurrent assets$41$10$34$7
Accrued benefit liability—current—(9)—(8)
Accrued benefit liability—noncurrent(33)(64)(37)(62)
Net amount recognized at end of year$8$(63)$(3)$(63)

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

December 31,20232022
U.S.ForeignU.S.Foreign
Accumulated benefit obligation$860$182$900$170
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation$325$180$340$169
Accumulated benefit obligation316174333163
Fair value of plan assets29210730498
Information for pension plans with a projected benefit obligation in excess of plan assets:
Projected benefit obligation$325$180$340$169
Fair value of plan assets29210730498
161 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 31,20232022
U.S.ForeignU.S.Foreign
Benefit Obligation:Discount rate5.17%11.14%5.41%13.23%
Rate of compensation increase2.75%8.01%2.75%11.06%
Periodic Benefit Cost:Discount rate5.41%13.23%(1)2.82%10.45%(1)
Expected long-term rate of return on plan assets5.55%9.44%4.50%6.36%
Rate of compensation increase2.75%11.06%2.75%7.76%

(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 2023. 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, 2023 is affected by the assumptions as of that date. Pension expense for 2023 is affected by the December 31, 2022 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$(7)
Decrease of 1% in the discount rate8
Increase of 1% in the long-term rate of return on plan assets(11)
Decrease of 1% in the long-term rate of return on plan assets11

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

December 31,202320222021
Components of Net Periodic Benefit Cost:U.S.ForeignU.S.ForeignU.S.Foreign
Service cost$8$4$14$4$14$6
Interest cost472128172415
Expected return on plan assets(52)(11)(53)(7)(59)(8)
Amortization of prior service cost3—4—4—
Amortization of net loss7—81153
Curtailment gain recognized—————(17)
Total Net Periodic Benefit Cost$13$14$1$15$(2)$(1)

The following table summarizes the amounts reflected in AOCL, including AOCL attributable to noncontrolling interests, on the Consolidated Balance Sheet as of December 31, 2023, that have not yet been recognized as components of net periodic benefit cost (in millions):

December 31, 2023Accumulated Other Comprehensive Income (Loss)
U.S.Foreign
Prior service cost$(3)$1
Unrecognized net actuarial loss(21)(14)
Total$(24)$(13)
162 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

The following table summarizes the Company's target allocation for 2023 and pension plan asset allocation, both domestic and foreign, as of the periods indicated:

Percentage of Plan Assets as of December 31,
Target Allocations20232022
Asset CategoryU.S.ForeignU.S.ForeignU.S.Foreign
Mutual Funds
Equity securities22%6%21.80%5.30%22.17%3.53%
Debt securities78%88%77.60%89.30%77.28%92.14%
Real estate—%1%—%0.80%—%1.09%
Other—%5%0.60%4.60%0.55%3.24%
Total pension assets100.00%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, 2023December 31, 2022
U.S. PlansLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Mutual FundsEquity securities: (1)$—$193$—$193$—$202$—$202
Debt securities: (1)—685—685—704—704
Cash and cash equivalents5——55——5
Total plan assets$5$878$—$883$5$906$—$911

(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, 2023December 31, 2022
Foreign PlansLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Equity SecuritiesPrivate equity$—$—$2$2$—$—$1$1
Mutual FundsEquity securities: (1)—5—5—3—3
Debt securities: (1)4073—1133570—105
Real estateReal estate——11——11
OtherOther assets13261214
Total plan assets$41$81$5$127$36$75$3$114

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

163 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 2024$8$11
Expected benefit payments for fiscal year ending:
20246319
20256317
20266418
20276420
20286621
2029 - 2033318125
  1. REDEEMABLE STOCK OF SUBSIDIARIES

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

December 31,20232022
Balance at the beginning of the period$1,321$1,257
Net loss(59)(87)
Other comprehensive income140
Distributions to holders of redeemable stock of subsidiaries(62)(64)
Acquisitions of redeemable stock of subsidiaries—(60)
Contributions from holders of redeemable stock of subsidiaries16367
Sales of redeemable stock of subsidiaries100168
Balance at the end of the period$1,464$1,321

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

December 31,20232022
IPALCO common stock$773$782
AES Clean Energy Development common stock544436
AES Clean Energy Development tax equity partnerships12986
Potengi common and preferred stock1817
Total redeemable stock of subsidiaries$1,464$1,321

AES Clean Energy Development Tax Equity Partnerships — The majority of solar projects in the U.S. 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 noncontrolling ownership interest is considered temporary equity. The redemption features of these tax equity partnership agreements are typically contingent upon the underlying assets being placed in service by a guaranteed date. The Company has concluded it is probable that these projects will be placed in service by the guaranteed dates. Therefore, the noncontrolling ownership interests are not probable of becoming redeemable and subsequent adjustments to the carrying value were not required.

In 2023 and 2022, AES Clean Energy Development, through multiple transactions, sold noncontrolling interests in project companies to tax equity investors, resulting in increases to Redeemable stock of subsidiaries of $100 million and $157 million, respectively. AES Clean Energy Development is reported in the Renewables SBU reportable segment.

IPALCO — In December 2022, CDPQ made equity capital contributions of $77 million as part of a capital call to raise proceeds for AES Indiana's TDSIC and replacement generation project. The Company and CDPQ made capital contributions on a proportional share basis; therefore, the capital calls did not change either party's ownership interests in IPALCO. The Company has concluded that the likelihood of an event that would allow CDPQ to redeem its interest under the terms of the shareholder agreement is remote. Therefore, the noncontrolling ownership interest is not probable of becoming redeemable and subsequent adjustments to the carrying value were not required. IPALCO is reported in the Utilities SBU reportable segment.

AES Indiana — 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 Utilities SBU reportable segment.

164 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 and therefore the noncontrolling ownership interest is considered temporary equity. 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 Renewables SBU reportable segment.

  1. 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”).

The Company 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 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 were 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 were used for the development of the AES renewable businesses, U.S. utility businesses, LNG infrastructure, and for other developments determined by management.

The Series A Preferred Stock does not bear any dividends and the liquidation preference of the convertible preferred stock does 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 preferred shares have limited voting rights. The Series A Preferred Stock was pledged as collateral to support holders’ purchase obligations under the 2024 Purchase Contracts. The 2024 Purchase Contracts obligated the holders to purchase, on February 15, 2024, for a price of $100 in cash, a maximum number of 57,467,883 shares of the Company’s common stock (subject to customary anti-dilution adjustments). The initial settlement rate determining the number of shares that each holder must purchase cannot exceed the maximum settlement rate and was determined over a market value averaging period preceding February 15, 2024. If the applicable market value of the Company’s common stock was less than or equal to the reference price, the settlement rate would be the maximum settlement rate; and if the applicable market value of common stock was greater than the reference price, the settlement rate would be a number of shares of the Company’s common stock equal to $100 divided by the applicable market value.

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, 2023, due to the customary anti-dilution provisions, the maximum settlement rate was 3.8809, equivalent to a reference price of $25.77. On February 15, 2024, the Series A Preferred Stock was tendered to satisfy the Purchase Contract's settlement price and the Corporate Units were converted into shares of the Company's common stock at a settlement rate of 3.8859, equivalent to a reference price of $25.73. The Series A Preferred Stock was cancelled upon conversion.

165 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

The Company paid 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 was made, the related liability was reduced and the difference between the cash payment and the present value accreted to interest expense, approximately $5 million over the three-year term. As of December 31, 2023, the present value of the Contract Adjustment Payments was $18 million. The final Contract Adjustment Payments were made on February 15, 2024.

Equity Transactions with Noncontrolling Interests

U.S. Renewable Energy Tax Equity Partnerships — The majority of solar projects in the U.S. 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 2023, 2022, and 2021, AES Clean Energy Development and AES Renewable Holdings, through multiple transactions, sold noncontrolling interests in project companies to tax equity investors, resulting in the following increases to NCI (in millions):

Business202320222021
AES Clean Energy Development$1,039$230$—
AES Renewable Holdings12488127

In the third quarter of 2023, AES Renewable Holdings completed buyouts of tax equity partners at Buffalo Gap I, Buffalo Gap II and six other project companies, resulting in a decrease to NCI of $45 million and an increase to additional paid-in capital of $34 million. AES Clean Energy Development and AES Renewable Holdings are reported in the Renewables SBU reportable segment.

In December 2023, AES Indiana sold a noncontrolling interest in the Hardy Hills solar project to a tax equity investor, resulting in a $79 million increase to NCI. AES Indiana is reported in the Utilities 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%.

Under its renewable partnership agreement with GIP, AES Andes will contribute a specified pipeline of renewable development projects to Chile Renovables as the projects reach commercial operations, and GIP may make additional contributions to maintain its 49% ownership interest. During 2022 and 2023, AES Andes completed sales of the following projects to Chile Renovables (in millions):

BusinessTransaction PeriodSale PriceIncrease to Noncontrolling InterestsIncrease (Decrease) to Additional Paid-In Capital
Andes Solar 2aJanuary 2022$37$28$9
Los OlmosJune 2022806812
Campo LindoSeptember 20235059(9)
BoleroNovember 202358571
Andes Solar 2bDecember 202315614511

In December 2023, Chile Renovables issued $275 million of preferred shares to GIP, the proceeds of which will be used to fund the development of a additional pipeline of renewables projects. As each project reaches commercial operations, the preferred shares will convert to common stock and GIP may make additional contributions to maintain its 49% ownership interest.

As the Company maintained control after these transactions, Chile Renovables continues to be consolidated by the Company within the Energy Infrastructure SBU reportable segment.

166 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

AES Dominicana — In December 2023, the Company completed the sale of a 20% ownership interest in AES Dominicana for $192 million. AES Dominicana consists of five operating subsidiaries: Andres, Los Mina, Bayasol, Santanasol, and Agua Clara. This transaction decreased the Company's economic interest to 65% and resulted in a $74 million increase in Parent Company Stockholder's Equity due to an increase in additional paid-in-capital of $73 million and the reclassification of accumulated other comprehensive losses from AOCL to NCI of $1 million. As the Company maintained control after the sale, AES Dominicana continues to be consolidated by the Company. Andres and Los Mina are included within the Energy Infrastructure SBU reportable segment and Bayasol, Santanasol, and Aqua Clara are included within the Renewables SBU reportable segment.

Colon — In September 2021, the Company acquired the remaining 49.9% minority ownership interest in Colon to become its sole owner. The purchase price was paid over two installments in November 2021 and December 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.

In December 2023, the Company completed the sale a 35% ownership interest in Colon for $146 million, which decreased the Company's economic interest to 65%. This transaction resulted in a $43 million increase in Parent Company Stockholder's Equity due to an increase in additional paid-in-capital of $31 million and the reclassification of accumulated other comprehensive losses from AOCL to NCI of $12 million. As the Company maintained control after the sale, Colon continues to be consolidated by the Company within the Energy Infrastructure SBU reportable segment.

AES Renewable Holdings — In December 2023, AES Renewable Holdings issued preferred shares in a portfolio of operating assets ("OpCo 1") to HASI for total proceeds of $143 million. As the Company maintained control after the transaction, AES Renewable Holdings continues to be consolidated by the Company within the Renewables SBU reportable segment.

AES Panama — In September 2023, AES Latin America completed the sale of its interest in the Grupo Energía Gas Panamá joint venture to AES Panama, a 49%-owned consolidated subsidiary. See Note 8—Investments in and Advances to Affiliates for further information. As a result of the transaction, AES Panama received $42 million from noncontrolling interest holders and the Company reclassified accumulated other comprehensive income from AOCL to NCI of $23 million. AES Panama is reported in the Renewables SBU reportable segment however the investment in Grupo Energía Gas Panamá is reported in the Energy Infrastructure SBU reportable segment.

Southland Energy — In December 2022, the Company completed the sale of a 14.9% ownership interest in the Southland Energy assets 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 the sale, Southland Energy continues to be consolidated by the Company. The CCGT units and interconnected battery-based energy storage facilities are included within the Energy Infrastructure SBU and Renewables SBU reportable segments, respectively.

AES Brasil — In August 2020, AES Holdings Brasil Ltda. ("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.

167 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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. AHB 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 Renewables 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 Renewables 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 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 98.1%. Through multiple transactions in 2022 following the tender offer, Cachagua acquired an additional 1.3% ownership in AES Andes for $22 million, further increasing AES’ indirect beneficial interest to 99.4% 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 Energy Infrastructure 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):

December 31,202320222021
Net income (loss) attributable to The AES Corporation$249$(546)$(409)
Transfers from noncontrolling interest:
Increase (decrease) in The AES Corporation's paid-in capital for sale of subsidiary shares8578(7)
Increase (decrease) in The AES Corporation's paid-in-capital for purchase of subsidiary shares24(78)(9)
Net transfers (to) from noncontrolling interest109—(16)
Change from net income (loss) attributable to The AES Corporation and transfers (to) from noncontrolling interests$358$(546)$(425)
168 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 losses 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, netDerivative gains (losses), netUnfunded pension obligations, netTotal
Balance at December 31, 2021$(1,734)$(456)$(30)$(2,220)
Other comprehensive income (loss) before reclassifications(37)64510618
Amount reclassified to earnings—44—44
Other comprehensive income (loss)(37)68910662
Reclassification from NCI due to share sales and repurchases(57)(22)(3)(82)
Balance at December 31, 2022$(1,828)$211$(23)$(1,640)
Other comprehensive income (loss) before reclassifications13655(3)188
Amount reclassified to earnings—(52)—(52)
Other comprehensive income (loss)1363(3)136
Reclassification from NCI due to share sales—(10)—(10)
Balance at December 31, 2023$(1,692)$204$(26)$(1,514)

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 AboutDecember 31,
AOCL ComponentsAffected Line Item in the Consolidated Statements of Operations202320222021
Foreign currency translation adjustments, net
Gain on disposal and sale of business interests$—$—$(3)
Net income attributable to The AES Corporation$—$—$(3)
Derivative gains (losses), net
Non-regulated revenue$(8)$(1)$(1)
Non-regulated cost of sales(3)(1)1
Interest expense17(58)(85)
Gain (loss) on disposal and sale of business interests33—(362)
Asset impairment expense—(16)(13)
Foreign currency transaction losses(3)2(15)
Income from continuing operations before taxes and equity in earnings of affiliates36(74)(475)
Income tax benefit (expense)99105
Net equity in losses of affiliates286(17)
Net income (loss)73(59)(387)
Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries(21)15133
Net income (loss) attributable to The AES Corporation$52$(44)$(254)
Amortization of defined benefit pension actuarial losses, net
Non-regulated cost of sales$—$(1)$(1)
Other expense—(1)(3)
Income from continuing operations before taxes and equity in earnings of affiliates—(2)(4)
Income tax benefit (expense)—13
Net income (loss)—(1)(1)
Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries—1—
Net income (loss) attributable to The AES Corporation$—$—$(1)
Total reclassifications for the period, net of income tax and noncontrolling interests$52$(44)$(258)

Common Stock Dividends — The Parent Company paid dividends of $0.1659 per outstanding share to its common stockholders during the first, second, third, and fourth quarters of 2023 for dividends declared in December 2022, February 2023, July 2023, and October 2023, respectively.

On December 8, 2023, the Board of Directors declared a quarterly common stock dividend of $0.1725 per share payable on February 15, 2024 to shareholders of record at the close of business on February 1, 2024.

169 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Stock Repurchase Program — No shares were repurchased in 2023. The cumulative repurchases from the commencement of the Stock Repurchase Program in July 2010 through December 31, 2023 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, 2023, $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 149,358,357 and 150,046,537 shares were held as treasury stock at December 31, 2023 and December 31, 2022, 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.

  1. 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. In our 2022 Form 10-K, the management reporting structure and the Company’s reportable segments were mainly organized by geographic regions. In March 2023, we announced internal management changes as a part of our ongoing strategy to align our business to meet our customers’ needs and deliver on our major strategic objectives. The management reporting structure is now composed of four SBUs, mainly organized by technology, led by our President and Chief Executive Officer. 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. All prior period results have been retrospectively revised to reflect the new segment reporting structure.

*•*Renewables — Solar, wind, energy storage, and hydro generation facilities;

*•*Utilities — AES Indiana, AES Ohio and AES El Salvador regulated utilities and their generation facilities;

*•*Energy Infrastructure — Natural gas, LNG, coal, pet coke, diesel and oil generation facilities, and our businesses in Chile, which have a mix of generation sources, including renewables, that are pooled to service our existing PPAs; and

*•*New Energy Technologies — Green hydrogen initiatives and investments in Fluence, Uplight, 5B, and other new and innovative energy technology businesses.

Our Renewables, Utilities, and Energy Infrastructure SBUs participate in our generation business line, in which we own and/or operate power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries. Our Utilities SBU participates in our utilities business line, in which we own and/or operate utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors within a defined service area. In certain circumstances, our utilities also generate and sell electricity on the wholesale market. Our New Energy Technologies SBU includes investments in new and innovative technologies to support leading-edge greener energy solutions.

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

During the first quarter of 2023, management began assessing operational performance and making resource allocation decisions using Adjusted EBITDA. Therefore, the Company uses Adjusted EBITDA as its primary segment performance measure. Adjusted EBITDA, a non-GAAP measure, is defined by the Company as earnings before interest income and expense, taxes, depreciation and amortization, adjusted for the impact of NCI and interest, taxes, depreciation and amortization of our equity affiliates, and adding back interest income recognized under service concession arrangements; excluding gains or losses of both consolidated entities and entities accounted for under the equity method 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 Energy Infrastructure SBU, associated with the early contract terminations with Minera Escondida and Minera Spence.

The Company has concluded Adjusted EBITDA 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

170 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

performance of its segments. Additionally, given its large number of businesses and overall complexity, the Company concluded that Adjusted EBITDA 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 EBITDA are presented before inter-segment eliminations, which includes the effect of intercompany transactions with other segments except for 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 31,202320222021
Renewables SBU$2,339$1,893$1,562
Utilities SBU3,4953,6172,944
Energy Infrastructure SBU6,8367,2046,702
New Energy Technologies SBU7637
Corporate and Other138116108
Eliminations(216)(216)(182)
Total Revenue$12,668$12,617$11,141
Reconciliation from Net Income (Loss):Adjusted EBITDA
Year Ended December 31,202320222021
Net loss$(182)$(505)$(951)
Income tax expense (benefit)261265(133)
Interest expense1,3191,117911
Interest income(551)(389)(298)
Depreciation and amortization1,1281,0531,056
EBITDA$1,975$1,541$585
Less: Income from discontinued operations(7)—(4)
Less: Adjustment for noncontrolling interests and redeemable stock of subsidiaries (1)(552)(704)(47)
Less: Income tax expense (benefit), interest expense (income) and depreciation and amortization from equity affiliates130126123
Interest income recognized under service concession arrangements717782
Unrealized derivative and equity securities losses (gains)34131(4)
Unrealized foreign currency losses3014214
Disposition/acquisition losses (gains)(79)40863
Impairment losses8771,6581,153
Loss on extinguishment of debt622071
Net gains from early contract terminations at Angamos——(256)
Adjusted EBITDA$2,812$2,931$2,580

(1)The allocation of earnings and losses to tax equity investors from both consolidated entities and equity affiliates is removed from Adjusted EBITDA.

Adjusted EBITDA
Year Ended December 31,202320222021
Renewables SBU$645$605$545
Utilities SBU678612633
Energy Infrastructure SBU1,5311,8361,494
New Energy Technologies SBU(62)(116)(77)
Corporate and Other22(19)(20)
Eliminations(2)135
Total Adjusted EBITDA$2,812$2,931$2,580

The Company uses long-lived assets as its measure of segment assets. Long-lived assets includes 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.

171 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Long-Lived Assets
Year Ended December 31,202320222021
Renewables SBU$15,735$9,533$6,353
Utilities SBU7,1666,3116,027
Energy Infrastructure SBU7,4147,5327,778
New Energy Technologies SBU1424
Corporate and Other91721
Long-Lived Assets30,33823,39520,183
Current assets6,6497,6435,356
Investments in and advances to affiliates9419521,080
Debt service reserves and other deposits194177237
Goodwill3483621,177
Other intangible assets2,2431,8411,450
Deferred income taxes396319409
Other noncurrent assets, excluding right-of-use assets for operating leases2,8793,6741,911
Noncurrent held-for-sale assets811—1,160
Total Assets$44,799$38,363$32,963
Depreciation and AmortizationCapital Expenditures
Year Ended December 31,202320222021202320222021
Renewables SBU$338$260$222$5,759$2,972$721
Utilities SBU4003763611,374859544
Energy Infrastructure SBU381404458585742847
New Energy Technologies SBU1215——
Corporate and Other81114101128
Total$1,128$1,053$1,056$7,733$4,584$2,140
Interest IncomeInterest ExpenseNet Equity in Earnings (Losses) of Affiliates
Year Ended December 31,202320222021202320222021202320222021
Renewables SBU$181$131$55$326$236$200$41$28$63
Utilities SBU1285243234218563
Energy Infrastructure SBU33724623653448842269(4)
New Energy Technologies SBU2—————(84)(114)(86)
Corporate and Other194221615971———
Total$551$389$298$1,319$1,117$911$(32)$(71)$(24)

The following table presents information, by country, about the Company's consolidated operations for each of the three years ended December 31, 2023, 2022, and 2021, and as of December 31, 2023 and 2022 (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 RevenueLong-Lived Assets
Year Ended December 31,20232022202120232022
United States (1)$4,439$4,093$3,531$19,750$13,833
Non-U.S.:
Chile1,9322,0642,2973,0182,730
Dominican Republic1,4001,5911,0871,0981,013
El Salvador935902792442395
Colombia706417383390308
Brazil6975604712,4821,811
Panama6446785951,9101,880
Mexico536595471271409
Bulgaria528790700483487
Argentina407501390431461
Vietnam (2)344323320—1
Jordan97102983941
Other Non-U.S.3162426
Total Non-U.S.8,2298,5247,61010,5889,562
Total$12,668$12,617$11,141$30,338$23,395

(1) Includes Puerto Rico revenues of $269 million, $293 million, and $311 million for the years ended December 31, 2023, 2022, and 2021, respectively, and long-lived assets of $145 million and $96 million as of December 31, 2023 and 2022, respectively.

(2) The Mong Duong 2 power project is operated under a BOT contract. Future expected payments for the construction performance obligation were recognized in Other noncurrent assets on the Consolidated Balance Sheets as of December 31, 2022. The Mong Duong assets were classified as held-for-sale as of December 31, 2023. See Note 20—Revenue and Note 24—Held-for-Sale and Dispositions for further information.

172 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. 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.

For the years ended December 31, 2023, 2022, and 2021, 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, 2023, 2022, and 2021 had grant date weighted average fair values per RSU of $22.33, $20.92, and $26.46, respectively.

The 2021, 2022, and 2023 RSUs awarded to certain executives have a performance condition related to the achievement of environmental and social goals for the three-year periods ending December 31, 2023, December 31, 2024, and December 31, 2025, 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 31,202320222021
RSU expense before income tax$16$16$12
Tax benefit(3)(2)(2)
RSU expense, net of tax$13$14$10
Total value of RSUs converted (1)$10$8$13
Total fair value of RSUs vested$15$13$10

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

Cash was not used to settle RSUs for the years ended December 31, 2023, 2022, and 2021. In the year ended December 31, 2023, $1 million of compensation cost was capitalized as part of the cost of an asset. In the years ended December 31, 2022 and 2021, no compensation cost was capitalized as part of the cost of an asset. As of December 31, 2023, total unrecognized compensation cost related to RSUs of $29 million is expected to be recognized over a weighted average period of approximately 1.9 years. There were no modifications to RSU awards during the year ended December 31, 2023.

A summary of the activity of RSUs for the year ended December 31, 2023 follows (RSUs in thousands):

RSUsWeighted Average Grant Date Fair ValuesWeighted Average Remaining Vesting Term
Nonvested at December 31, 20221,701$23.22
Vested(632)23.04
Forfeited and expired(255)24.32
Granted1,22922.33
Nonvested at December 31, 20232,043$22.601.75
Expected to vest at December 31, 20231,894$22.68

The Company initially recognizes compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. In 2023, AES has estimated a weighted average forfeiture rate of 6.14% for RSUs granted in 2023. 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 $26 million on a straight-line basis over a weighted average period of three years.

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

173 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Year Ended December 31,202320222021
RSUs vested during the year632576634
RSUs converted during the year, net of shares withheld for taxes407380452
Shares withheld for taxes225196182

OTHER SHARE BASED COMPENSATION

The Company has three other share-based award programs. The Company has recorded expense of $2 million, $23 million, and $14 million for 2023, 2022, and 2021, respectively, related to these programs.

Performance Stock Units — In 2021, 2022, and 2023, the Company issued PSUs to officers under its long-term compensation plan. PSUs are stock units which include performance conditions. For 2021, 2022, and 2023, 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 2021, 2022, and 2023, the Company issued PCUs to its officers under its long-term compensation plan. The value for the 2021, 2022, and 2023 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.

Stock options — In the past, AES granted options to non-employee directors to purchase shares of common stock at a price equal to 100% of the market price at the date the option was granted. AES has not granted options since 2021. All stock options are fully vested and have a contractual term of 10 years. In all circumstances, stock options granted by AES do not entitle the holder the right, or oblige AES, to settle the stock options in cash or other assets of AES.

  1. REVENUE

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

Year Ended December 31, 2023
Renewables SBUUtilities SBUEnergy Infrastructure SBUNew Energy Technologies SBUCorporate, Other and EliminationsTotal
Non-Regulated Revenue
Revenue from contracts with customers$2,198$68$6,181$75$(77)$8,445
Other non-regulated revenue (1)14146551(1)800
Total non-regulated revenue2,339726,83676(78)9,245
Regulated Revenue
Revenue from contracts with customers—3,391———3,391
Other regulated revenue—32———32
Total regulated revenue—3,423———3,423
Total revenue$2,339$3,495$6,836$76$(78)$12,668
Year Ended December 31, 2022
Renewables SBUUtilities SBUEnergy Infrastructure SBUNew Energy Technologies SBUCorporate, Other and EliminationsTotal
Non-Regulated Revenue
Revenue from contracts with customers$1,791$75$6,871$1$(100)$8,638
Other non-regulated revenue (1)10243332—441
Total non-regulated revenue1,893797,2043(100)9,079
Regulated Revenue
Revenue from contracts with customers—3,507———3,507
Other regulated revenue—31———31
Total regulated revenue—3,538———3,538
Total revenue$1,893$3,617$7,204$3$(100)$12,617
174 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
Year Ended December 31, 2021
Renewables SBUUtilities SBUEnergy Infrastructure SBUNew Energy Technologies SBUCorporate, Other and EliminationsTotal
Non-Regulated Revenue
Revenue from contracts with customers$1,438$73$6,143$6$(74)$7,586
Other non-regulated revenue (1)12435591—687
Total non-regulated revenue1,562766,7027(74)8,273
Regulated Revenue
Revenue from contracts with customers—2,831———2,831
Other regulated revenue—37———37
Total regulated revenue—2,868———2,868
Total revenue$1,562$2,944$6,702$7$(74)$11,141

(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 $328 million and $337 million as of December 31, 2023 and December 31, 2022, respectively.

During the years ended December 31, 2023 and 2022, we recognized revenue of $70 million and $36 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

In June 2023, the Company closed on an agreement to terminate the PPA for the Warrior Run coal-fired power plant for total consideration of $357 million, to be paid by the offtaker through the end of the previous contract term in January 2030. Under the termination agreement, the plant will continue providing capacity through May 2024. The termination represents a contract modification under which the discounted termination payments, as well as a pre-existing contract liability, will be recognized as revenue on a straight-line basis over the remaining performance obligation period for approximately $32 million per month. As of December 31, 2023, the corresponding receivable balance was $148 million, of which $40 million and $108 million was recorded in Other current assets and Other noncurrent assets, respectively*,* on the Consolidated Balance Sheet. A significant financing component of $57 million is being recognized over the life of the payment term as interest income using the effective interest method.

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, 2022, the Mong Duong loan receivable balance was $1.1 billion, net of CECL reserve of $28 million. Of the loan receivable balance, $97 million was classified as Other current assets, and $1 billion as Other noncurrent assets on the Consolidated Balance Sheet as of December 31, 2022. As of December 31, 2023, Mong Duong met the held-for-sale criteria and the loan receivable balance of $1.1 billion, net of CECL reserve of $26 million was classified as held-for-sale assets. Of the loan receivable balance, $108 million was classified as Current held-for-sale assets, and $962 million was classified as Noncurrent held-for-sale assets, respectively. 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, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $7 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 of approximately $1 million per year between 2024 and 2028, and the remainder thereafter.

  1. 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

175 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

construction, and other income from miscellaneous transactions. Other expense generally includes losses on asset sales and dispositions, losses on legal contingencies, and losses from other miscellaneous transactions. The components are summarized as follows (in millions):

Year Ended December 31,202320222021
Other IncomeGain on sale and disposal of assets$19$—$24
Gain on remeasurement of contingent consideration (1)16328
AFUDC (US Utilities)14108
Insurance proceeds (2)612—
Dividend income on investments631
Legal settlements (3)4653
Gain on remeasurement of investment (4)—22—
Liquidated damages under a power sales agreement—10—
Gain on remeasurement to acquisition-date fair value (5)—5254
Non-service pension income—510
Gain on acquired customer contracts—5—
Gain on pension curtailment——11
Other242121
Total other income$89$102$410
Other ExpenseLoss on sale and disposal of assets (6)$49$13$14
Loss on commencement of sales-type leases (7)20513
Non-service pension and other postretirement costs12——
Legal contingencies and settlements282
Cost of disposition of business interests (8)—15—
Loss on sale of receivables (9)——9
Other162722
Total other expense$99$68$60

(1)Related to certain remeasurements of contingent consideration on projects acquired at AES Clean Energy. See Note 25—Acquisitions for further information.

(2)For the year ended December 31, 2022, 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, 2022, related to the remeasurement of our existing investment in 5B, accounted for using the measurement alternative.

(5)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.

(6)For the year ended December 31, 2023, primarily related to impairments of inventory due to planned early plant closures at Ventanas 2, Norgener, and Warrior Run.

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

(8)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.

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

  1. ASSET IMPAIRMENT EXPENSE
Year ended December 31, (in millions)202320222021
Warrior Run$198$—$—
New York Wind186——
Mong Duong167——
AES Clean Energy Development Projects1511818
Norgener137——
TEG77104—
TEP5989—
Jordan5976—
GAF Projects (AES Renewable Holdings)18——
Buffalo Gap III6—91
Buffalo Gap I4—29
Maritza—468—
Ventanas 3 & 4——649
Puerto Rico——475
Angamos——155
Buffalo Gap II——73
Mountain View I & II——67
Estrella del Mar I——11
Other587
Total$1,067$763$1,575
176 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Warrior Run — On September 30, 2023, the Company filed a Generator Deactivation Notice with PJM stating its intention to either retire or mothball the Warrior Run coal-fired facility on June 1, 2024. On November 30, 2023, PJM approved the potential deactivation, therefore management reassessed the economic useful life of the generation facility. Due to the approval from PJM and the absence of other economically viable options, an impairment indicator was identified. The Company performed an impairment analysis as of November 30, 2023, and determined that the fair value of the asset group was $25 million, using the income approach. As a result, and since pre-tax losses are limited to the carrying value of the long-lived assets, the Company recognized pre-tax asset impairment expense of $198 million. Warrior Run is reported in the Energy Infrastructure SBU reportable segment.

New York Wind — In November 2023, AES Clean Energy Development, LLC ("ACED") was awarded ten projects from NYSERDA, six of which were related to the repowering of existing wind assets in New York that were acquired in November 2021. On November 28, 2023, the Company approved plans to execute the repowering project and sign a PPA with NYSERDA for the energy and capacity related to the repowered assets. As the repowering will result in decommissioning the existing turbines and reducing their depreciable lives, the approval to move forward with the repowering project was identified as an impairment indicator. The Company performed an impairment analysis as of November 30, 2023, and determined that the fair value of the asset group was $124 million, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $186 million. New York Wind is reported in the Renewables SBU reportable segment.

Mong Duong — In November 2023, the Company entered into an agreement to sell its entire 51% ownership interest in Mong Duong 2, 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 (collectively "Mong Duong"). As of December 31, 2023, Mong Duong was classified as held-for-sale. The carrying amount of Mong Duong exceeded the agreed-upon sales price and as a result, the Company recognized pre-tax impairment expense of $167 million. See Note 24*—Held-for-Sale and Dispositions* for further information. Mong Duong is reported in the Energy Infrastructure SBU reportable segment.

AES Clean Energy Development Projects — AES Clean Energy Development has a pipeline of U.S. renewable projects that are in various stages of development and construction. In some cases, if development efforts are not successful, the Company may abandon a particular project, writing off all the intangible assets and capitalized development costs incurred. The fair value of each abandoned project with no salvage value is presumed to be zero as there are no future projected cash flows.

In 2023, 2022, and 2021, the Company recognized pre-tax asset impairment expense related to the write-off of projects that were determined to be no longer viable totaling $151 million, $18 million, and $18 million, respectively. The impairment expense recognized in 2023 primarily relates to the write-off of project development intangibles which were recognized at fair value when the Company acquired sPower's development platform as part of the formation of AES Clean Energy Development. See Note 25*—Acquisitions* for further information. The write-off of capitalized development costs incurred remained consistent with prior years. AES Clean Energy Development is reported in the Renewables SBU reportable segment.

TEG and 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 and TEP asset groups. The Company performed an impairment analysis as of October 1, 2022, and determined that the carrying amounts of the asset groups were not recoverable. The TEG and TEP asset groups were determined to have fair values of $164 million and $147 million, respectively, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $104 million and $89 million, respectively. Subsequent to the asset impairment being recorded, the Company re-performed the goodwill test and no impairment was noted.

During the third quarter of 2023, management identified an impairment indicator at the TEG and TEP asset groups due to a reduction in expected capacity cash flows after expiration of the current PPA. The Company performed an impairment analysis as of July 31, 2023, and determined that the carrying amounts of the asset groups were not recoverable. The TEG and TEP asset groups were determined to have fair values of $93 million and $94 million, respectively, using the income approach. As a result, the Company recognized pre-tax asset

177 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

impairment expense of $77 million and $59 million, respectively. TEG and TEP are reported in the Energy Infrastructure SBU reportable segment.

Norgener — In May 2023, AES Andes announced its intention to accelerate the retirement of the Norgener coal-fired plant in Chile in order to further advance its decarbonization strategy. Due to this strategic development and the resulting decrease in useful life of the generation facility, the Company performed an impairment analysis as of May 1, 2023, and determined that the carrying amount of the asset group was not recoverable. The Norgener asset group was determined to have a fair value of $24 million, using the income approach. As a result, and since pre-tax losses are limited to the carrying amount of the long-lived assets, the Company recognized pre-tax asset impairment expense of $137 million. Norgener is reported in the Energy Infrastructure 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, 2023, the generation plants continued to be 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 $59 million and $76 million was recorded during 2023 and 2022, respectively. See Note 24*—Held-for-Sale and Dispositions* for further information. Amman East and IPP4 are reported in the Energy Infrastructure SBU reportable segment.

GAF Projects — During the second quarter of 2023, management concluded that the carrying value of six project companies at AES Renewable Holdings (the “GAF Projects”) may not be recoverable as the expected purchase price on the buyout of tax equity investors implied a loss on the transaction. The buyout was completed in July 2023. Management performed a recoverability test as of May 31, 2023 and concluded that the undiscounted cash flows of the GAF Projects did not exceed the carrying values of the asset groups for five of the six projects. The asset groups for the GAF Projects were 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 $18 million. AES Renewable Holdings is reported in the Renewables 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 Energy Infrastructure 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. 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. During the fourth quarter of 2023, the Company recorded and subsequently impaired asset retirement costs of $4 million and $6 million related to Buffalo Gap I and III, respectively. The Buffalo Gap wind generation facilities are reported in the Renewables SBU reportable segment.

Ventanas and Angamos — 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 Energy Infrastructure 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-

178 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

tax asset impairment expense of $67 million. Mountain View I & II is reported in the Renewables 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 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 Energy Infrastructure SBU reportable segment.

Estrella del Mar I — In September 2021, the Company recognized asset impairment expense of $11 million due to a change in the estimated market value of the Estrella del Mar I power barge. The Company completed the sale of the power barge in November 2021. See Note 24*—Held-for-Sale and Dispositions* for further information. Prior to its sale, Estrella del Mar I was reported in the Renewables SBU reportable segment.

  1. INCOME TAXES

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

December 31,202320222021
Federal:Current$9$3$(2)
Deferred15(18)42
State:Current1621
Deferred30118
Foreign:Current289256273
Deferred(98)21(465)
Total$261$265$(133)

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 31,202320222021
Statutory Federal tax rate21%21%21%
State taxes, net of Federal tax benefit87%(1)%(6)%
Taxes on foreign earnings14%(42)%(2)%
Valuation allowance83%(10)%7%
Uncertain tax positions—%7%16%
Change in tax law—%—%(1)%
U.S. Investment Tax Credit(70)%—%—%
Noncontrolling interest in U.S. subsidiaries115%—%—%
Alto Maipo deconsolidation—%—%(17)%
Noncontrolling interest on Buffalo Gap impairments—%—%(3)%
Nondeductible goodwill impairments3%(127)%—%
Other—net(2)%(5)%(2)%
Effective tax rate251%(157)%13%

For 2023, included in the 14% taxes on foreign earnings are inflationary and foreign currency benefits at our Argentine businesses. Further, the Company recorded tax expense associated with the change in realizability of deferred tax assets at certain of those Argentine businesses, which is included in the 83% valuation allowance item. The (70)% U.S. Investment Tax Credit relates to investment tax credits for renewables projects placed in service this year. Not included in the 2023 effective tax rate is $28 million of income tax expense recorded to additional paid-in capital resulting from the Company's sales of a 20% ownership interest in AES Dominicana and a 35% ownership interest in Colon. See Note 17—Equity for details of the sales.

For 2022, included in the (42)% taxes on foreign earnings is the impact of favorable LNG transactions at the Energy Infrastructure SBU 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

179 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Company's sale of a 14.9% 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 $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.

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 31,20232022
Income taxes receivable—current$95$107
Income taxes receivable—noncurrent4169
Total income taxes receivable$136$176
Income taxes payable—current$103$104
Income taxes payable—noncurrent——
Total income taxes payable$103$104

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, 2023, the Company had federal net operating loss carryforwards for tax return purposes of approximately $769 million, which carry forward indefinitely. The Company also had federal general business tax credit carryforwards of approximately $79 million, which expire in 2040 and beyond. Additionally, the Company had state net operating loss carryforwards as of December 31, 2023 of approximately $4.8 billion expiring primarily in years 2024 to 2042. As of December 31, 2023, the Company had foreign net operating loss carryforwards of approximately $2.9 billion that expire at various times beginning in 2024 and some of which carry forward without expiration.

Valuation allowances increased $95 million during 2023 to $672 million at December 31, 2023. This net increase was primarily due to valuation allowance established at acquisition of a Chilean subsidiary, as well as changes in realizability of deferred tax assets at certain Argentine subsidiaries.

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.

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.

180 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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

December 31,20232022
Differences between book and tax basis of property$(966)$(903)
Investment in U.S. tax partnerships(578)(582)
Other taxable temporary differences(403)(350)
Total deferred tax liability(1,947)(1,835)
Operating loss carryforwards1,1321,129
Capital loss carryforwards6562
Bad debt and other book provisions9257
Tax credit carryforwards7262
Other deductible temporary differences409282
Total gross deferred tax asset1,7701,592
Less: Valuation allowance(672)(577)
Total net deferred tax asset1,0981,015
Net deferred tax liability$(849)$(820)

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, 2023, the cumulative amount of U.S. GAAP foreign un-remitted earnings upon which additional income taxes have not been provided is approximately $4 billion. It is not practicable to estimate the amount of any additional taxes which may be payable on the undistributed earnings.

Income from operations in certain countries is subject to reduced tax rates as a result of satisfying specific commitments regarding employment and capital investment. The Company's income tax benefits related to the tax status of these operations are estimated to be $19 million, $27 million and $27 million for the years ended December 31, 2023, 2022 and 2021, respectively. The per share effect of these benefits after noncontrolling interests was $0.02 for each of the years ended December 31, 2023, 2022 and 2021. Included in the Company's income tax benefits is the benefit related to our operations in Vietnam, which is estimated to be $16 million, $18 million and $16 million for the years ended December 31, 2023, 2022 and 2021, 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, 2023, 2022 and 2021.

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 31,202320222021
U.S.$(238)$22$622
Non-U.S.342(191)(1,686)
Total$104$(169)$(1,064)

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 31,20232022
Interest related$2$2
Penalties related——

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

December 31,202320222021
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

181 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

business jurisdictions in which we operate:

JurisdictionTax Years Subject to Examination
Argentina2017-2023
Brazil2017-2023
Chile2020-2023
Colombia2017-2023
Dominican Republic2020-2023
El Salvador2020-2023
Netherlands2017-2023
Panama2020-2023
United Kingdom2020-2023
United States (Federal)2017-2023

As of December 31, 2023, 2022 and 2021, the total amount of unrecognized tax benefits was $107 million, $107 million and $122 million, respectively. The total amount of unrecognized tax benefits that would benefit the effective tax rate as of December 31, 2023, 2022 and 2021 is $107 million, $107 million and $122 million, respectively, of which $1 million, $2 million, and $4 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 2023 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 increase to unrecognized tax benefits within 12 months of December 31, 2023 is estimated to be between zero and $10 million, primarily as a result of ongoing audits, including potential tax exam resolutions.

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

202320222021
Balance at January 1$107$122$458
Additions for current year tax positions1428
Additions for tax positions of prior years——14
Reductions for tax positions of prior years(1)(16)—
Settlements—(3)(377)
Lapse of statute of limitations——(1)
Balance at December 31$107$107$122

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, 2023. Our effective tax rate and net income in any given future period could therefore be materially impacted.

182 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021
  1. HELD-FOR-SALE AND DISPOSITIONS

Held-for-Sale

Jordan — In November 2020, the Company signed an agreement to sell 26% ownership interest in Amman East and IPP4 for $58 million. The sale is expected to close in the first quarter of 2024. After completion of the sale, the Company will retain a 10% ownership interest in Amman East and IPP4, which will be accounted for as an equity method investment. As of December 31, 2023, the generation plants continued to be 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 net assets after impairment of the plants held-for-sale as of December 31, 2023 was $164 million. Amman East and IPP4 are reported in the Energy Infrastructure SBU reportable segment.

Mong Duong — In November 2023, the Company entered into an agreement to sell its entire 51% ownership interest in Mong Duong 2, 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 (collectively "Mong Duong"). The sale is subject to regulatory approval and is expected to close in mid-2025. As a result, Mong Duong was classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of net assets after impairment of the plant held-for-sale as of December 31, 2023 was $396 million. Mong Duong is reported in the Energy Infrastructure SBU reportable segment.

Excluding any impairment charges, pre-tax income (loss) attributable to AES of businesses held-for-sale as of December 31, 2023 was as follows (in millions):

Year Ended December 31,202320222021
Mong Duong$40$50$56
Jordan21(6)21
Total$61$44$77

Management has recorded pre-tax asset impairment expense of $167 million at Mong Duong. See Note 22*—Asset Impairment Expense* for further information. As of December 31, 2023, the significant assets and liabilities of Mong Duong are a long term financing receivable of $1.1 billion and debt of $639 million, respectively. As of December 31, 2023, the significant assets and liabilities of Jordan are property, plant and equipment and debt of $300 million and $176 million, respectively.

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 Energy Infrastructure 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 $2.1 billion 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 Energy Infrastructure 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.

183 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 Renewables 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 Renewables SBU reportable segment.

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 Energy Infrastructure 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 31,202320222021
Alto Maipo$—$—$35
Itabo——5
Total$—$—$40
  1. ACQUISITIONS

Rexford — On October 2, 2023, the Company, through its subsidiary Rexford 1 Holdings, LLC., entered into an agreement for the purchase of 100% of the membership interests in 20SD 8me LLC., a 300 MW solar and 240 MW BESS 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 $253 million, including contingent consideration of $4 million. The nature of the assets acquired is largely tangible as they relate to construction in progress, along with typical working capital items and certain equipment.

We estimated the fair value of the construction in progress at approximately $282 million, using a discounted cash flow valuation methodology. The cash flow assumptions align with executed contracts, and incorporate forward energy pricing curves after the expiration date of such contracts. The cash flow and discount rates assumptions are considered Level 3 inputs. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Rexford is reported in the Renewables SBU reportable segment.

Petersburg Solar Project — On August 31, 2023, the Company entered into agreements for project development and for the purchase of 100% of the membership in Petersburg Energy Center, LLC, a 250 MW solar and BESS 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 $49 million. Petersburg Solar Project is reported in the Utilities SBU reportable segment.

Calhoun — On July 18, 2023, the Company entered into an agreement for the purchase of 100% of the membership interests in Calhoun County Solar Project, LLC., which holds a late development-stage 125 MW 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 $64 million, including contingent consideration of $42 million. The estimated fair value of the contingent consideration for Calhoun was determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. The probability of achieving the milestone payment used to calculate the acquisition date fair value of the contingent consideration was 99%. Payments under the contingent consideration arrangement are largely binary and thus, a single probability of achieving the milestone was applied in the calculation of fair value. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Calhoun is reported in the Renewables SBU reportable segment.

184 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

Bellefield — On June 5, 2023, the Company entered into an agreement for the purchase of 100% of the membership interests in the Bellefield projects, consisting of two late development-stage solar and BESS projects of 1 GW each. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The Company agreed to make total cash payments including reimbursement of development and equipment costs of up to approximately $449 million, a portion of which is contingent upon future milestones and price adjustments. This contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings.

The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration to be paid of approximately $358 million, including cash paid of $165 million, contingent consideration of $165 million, and deferred payments of $28 million. The significant assets acquired include project development intangibles, land option intangibles, deposits made towards integral equipment purchases, and typical working capital items.

We estimated the fair value of the project development intangibles at approximately $200 million, using a discounted cash flow valuation methodology. The cash flow assumptions align with executed contracts, and incorporate forward energy pricing curves after the expiration date of such contracts. The cash flow assumptions and discount rates are considered Level 3 inputs.

We estimated the fair value of the land option intangibles at approximately $82 million, by comparing the intrinsic value (estimated using a sales comparison approach for purchase options and an income capitalization method for lease options) and the strike price of each option.

The estimated fair value of the contingent consideration of Bellefield was determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. The weighted average probability of achieving the development milestones used to calculate the acquisition date fair value of the contingent consideration was 91.9%. Payments under the contingent consideration arrangements are largely binary and thus, a single probability of achieving the milestone was applied in the calculation of fair value. The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Bellefield is reported in the Renewables SBU reportable segment.

Bolero Solar Park — On June 9, 2023, the Company, through its subsidiary AES Andes S.A., acquired 100% of the equity interests in Helio Atacama Tres SpA, owner of the Bolero photovoltaic power plant for consideration of $114 million. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. As Helio Atacama Tres is not a VIE, any difference between the fair value of the assets and consideration transferred will be allocated to PP&E on a relative fair value basis. Helio Atacama Tres is reported in the Energy Infrastructure SBU reportable segment.

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 Renewables 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 100% 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 Renewables SBU reportable segment.

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 Renewables SBU reportable segment.

185 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 Renewables 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 potential opportunity to repower the acquired assets and thus obtain additional cash flows upon repowering. The Company recorded preliminary amounts for the purchase price allocation in 2021.

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 Renewables 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 project development intangibles. 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 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.

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 Renewables 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.

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.

186 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 is reported in the Renewables SBU reportable segment.

Serra Verde Wind Project — In July 2021, AES Brasil completed the acquisition of the Serra Verde Wind Project for $18 million, including contingent consideration and working capital adjustment, with the last annual installment ended 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 consideration transferred, plus transaction costs were allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Serra Verde is reported in the Renewables SBU reportable segment.

Cajuína Wind Project — In May 2021, AES Brasil completed the acquisition of the Cajuína Wind Project phase I for $22 million, and in July 2021, AES Brasil completed the acquisition of the Cajuína Wind Project phase II for $24 million plus $3 million of contingent consideration paid in October, 2022. The cash payments were negotiated in four annual installments and the last payments will occur 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 consideration transferred, plus transaction costs were allocated to the individual assets acquired and liabilities assumed based on their relative fair values. Cajuína is reported in the Renewables SBU reportable segment.

Cubico I — In April 2021, AES Brasil completed the acquisition of the Cubico I wind complex, which includes the Mandacaru and Salinas facilities, 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 Renewables 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 renewables 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.

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.

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.

187 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 Sheets. See Note 16*—Redeemable Stock of Subsidiaries* for further information. AES Clean Energy Development is reported in the Renewables 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 Renewables SBU reportable segment.

  1. 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, 2023, 2022 and 2021, where income represents the numerator and weighted-average shares represent the denominator.

Year Ended December 31,202320222021
(in millions, except per share data)IncomeShares$ per ShareLossShares$ per ShareLossShares$ per Share
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations attributable to The AES Corporation common stockholders$242669$0.36$(546)668$(0.82)$(413)666$(0.62)
EFFECT OF DILUTIVE SECURITIES
Stock options—1———————
Restricted stock units—2———————
Equity units140(0.02)——————
DILUTED EARNINGS (LOSS) PER SHARE$243712$0.34$(546)668$(0.82)$(413)666$(0.62)

The calculation of diluted earnings per share excluded 2 million outstanding stock awards for the year ended December 31, 2023, which would be anti-dilutive. These stock awards could potentially dilute basic earnings per share in the future.

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.

188 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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. The conversion rate was initially 31.5428 shares of common stock per one share of Series A Preferred Stock, which was equivalent to an initial conversion price of approximately $31.70 per share of common stock. As of December 31, 2023, due to customary anti-dilution provisions, the conversion rate was 31.6795, equivalent to a conversion price of approximately $31.57 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. On February 15, 2024, the Series A Preferred Stock was tendered to satisfy the Purchase Contract's settlement price and the Corporate Units were converted into shares of the Company's common stock at a settlement rate of 3.8859, equivalent to a reference price of $25.73. The Series A Preferred Stock was cancelled upon conversion.

  1. RISKS AND UNCERTAINTIES

AES is a diversified power generation and utility company organized into four technology-based 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, 2023, the Company had $1.4 billion of unrestricted cash and cash equivalents.

During 2023, 65% 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

189 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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

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

  • adverse changes in government tax policy;

  • potentially adverse tax consequences of operating in multiple jurisdictions;

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

  • inability to obtain financing on expected terms.

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

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

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

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

  • adverse changes in tax law;

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

  • changes in the timing of tariff increases;

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

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

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

Puerto Rico — Earlier this year, AES Puerto Rico took certain measures to address identified liquidity challenges. On July 6, 2023, PREPA agreed to the release of funds in the escrow account guaranteeing AES Puerto Rico’s obligations under the Power Purchase and Operating Agreement (“PPOA”) in order to provide additional liquidity for the business. AES Puerto Rico continues to work with PREPA and its noteholders on these liquidity challenges. During Q4 2023, a restructuring support agreement was executed by AES Puerto Rico and its noteholders and a PPOA amendment was approved by PREPA. These agreements require Puerto Rico Energy Bureau ("PREB") approval to become effective. On February 2, 2024 a resolution was issued by PREB approving the PPOA amendment subject to the incorporation of certain additional terms and conditions. The Company expects the PPOA amendment and restructuring support agreement to become effective during the first quarter of 2024.

Despite these challenges and considering the information available as of the filing date, management believes the carrying amount of our long-lived assets at AES Puerto Rico of $76 million is recoverable as of December 31, 2023. However, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term resulting in the need to write down our long-lived assets in Puerto Rico to fair value.

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.

190 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2023, 2022 and 2021

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 2023, 2022 or 2021.

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.

  1. 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):

Years Ended December 31,202320222021
Revenue—Non-Regulated$1,055$1,093$1,159
Cost of Sales—Non-Regulated576352324
Interest income91012
Interest expense369588

The following table summarizes the balances that relate to related party transactions for balance sheet accounts included in the Company's Consolidated Balance Sheets as of the periods indicated (in millions):

December 31,20232022
Receivables from related parties$584$484
Accounts and notes payable to related parties (1)1,4111,264
Construction in progress464714

(1)Includes $639 million and $756 million of debt to Mong Duong Finance Holdings B.V., as of December 31, 2023 and 2022, respectively. Mong Duong was classified as held-for-sale in December 2023 (see Note 11—Debt).

  1. SUBSEQUENT EVENTS

Warrior Run — On February 1, 2024, Warrior Run closed on a Sale and Assignment Agreement, in which the remaining future cash flows from the Warrior Run PPA termination agreement (see Note 20—Revenue) were assigned to a third party. In return, Warrior Run received approximately $273 million in proceeds, which were used primarily to repay existing indebtedness and for general corporate purposes. The net proceeds from this transaction will be included in Non-recourse debt on the Consolidated Balance Sheets until June 2024.

191 | 2023 Annual Report

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