Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)


	March 31, 2022		December 31, 2021

	(in millions, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,056	$	943
Restricted cash	334		304
Short-term investments	440		232
Accounts receivable, net of allowance for doubtful accounts of $5 and $5, respectively	1,523		1,418
Inventory	688		604
Prepaid expenses	91		142
Other current assets	1,110		897
Current held-for-sale assets	900		816
Total current assets	6,142		5,356
NONCURRENT ASSETS
Property, Plant and Equipment:
Land	443		426
Electric generation, distribution assets and other	26,112		25,552
Accumulated depreciation	(8,734)		(8,486)
Construction in progress	2,632		2,414
Property, plant and equipment, net	20,453		19,906
Other Assets:
Investments in and advances to affiliates	1,081		1,080
Debt service reserves and other deposits	172		237
Goodwill	1,182		1,177
Other intangible assets, net of accumulated amortization of $411 and $385, respectively	1,585		1,450
Deferred income taxes	385		409


Other noncurrent assets, net of allowance of $23 and $23, respectively	2,489		2,188
Noncurrent held-for-sale assets	1,159		1,160
Total other assets	8,053		7,701
TOTAL ASSETS	$	34,648	$	32,963
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,288	$	1,153
Accrued interest	199		182
Accrued non-income taxes	294		266
Accrued and other liabilities	1,140		1,205

Non-recourse debt, including $657 and $302, respectively, related to variable interest entities	2,254		1,367

Current held-for-sale liabilities	578		559
Total current liabilities	5,753		4,732
NONCURRENT LIABILITIES
Recourse debt	3,982		3,729
Non-recourse debt, including $1,909 and $2,223, respectively, related to variable interest entities	14,016		13,603

Deferred income taxes	1,035		977

Other noncurrent liabilities	3,275		3,358
Noncurrent held-for-sale liabilities	739		740
Total noncurrent liabilities	23,047		22,407
Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries	1,134		1,257
EQUITY
THE AES CORPORATION STOCKHOLDERS’ EQUITY
Preferred stock (without par value, 50,000,000 shares authorized; 1,043,050 issued and outstanding at March 31, 2022 and December 31, 2021, respectively)	838		838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,735,314 issued and 667,859,645 outstanding at March 31, 2022 and 818,717,043 issued and 666,793,625 outstanding at December 31, 2021)	8		8
Additional paid-in capital	6,903		7,106
Accumulated deficit	(974)		(1,089)
Accumulated other comprehensive loss	(1,899)		(2,220)
Treasury stock, at cost (150,875,669 and 151,923,418 shares at March 31, 2022 and December 31, 2021, respectively)	(1,832)		(1,845)
Total AES Corporation stockholders’ equity	3,044		2,798
NONCONTROLLING INTERESTS	1,670		1,769
Total equity	4,714		4,567
TOTAL LIABILITIES AND EQUITY	$	34,648	$	32,963

See Notes to Condensed Consolidated Financial Statements.

3 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
		2022		2021

		(in millions, except share and per share amounts)
Revenue:
Regulated		$	835	$	707
Non-Regulated		2,017		1,928
Total revenue		2,852		2,635
Cost of Sales:
Regulated		(705)		(582)
Non-Regulated		(1,617)		(1,389)
Total cost of sales		(2,322)		(1,971)
Operating margin		530		664
General and administrative expenses		(52)		(46)
Interest expense		(258)		(190)
Interest income		75		68
Loss on extinguishment of debt		(6)		(1)
Other expense		(12)		(16)
Other income		6		43
Gain (loss) on disposal and sale of business interests		1		(5)

Asset impairment expense		(1)		(473)
Foreign currency transaction losses		(19)		(35)

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES		264		9
Income tax expense		(60)		(8)
Net equity in losses of affiliates		(33)		(30)



NET INCOME (LOSS)		171		(29)



Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries		(56)		(119)




NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION		$	115	$	(148)
BASIC EARNINGS PER SHARE:


NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS		$	0.17	$	(0.22)
DILUTED EARNINGS PER SHARE:


NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS		$	0.16	$	(0.22)
DILUTED SHARES OUTSTANDING		711		666

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
		2022		2021

		(in millions)
NET INCOME (LOSS)		$	171	$	(29)




Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods		132		(69)

Total foreign currency translation adjustments		132		(69)
Derivative activity:
Change in derivative fair value, net of income tax expense of $73, and $67, respectively		272		243
Reclassification to earnings, net of income tax expense of $10, and $7, respectively		18		23
Total change in fair value of derivatives		290		266
Pension activity:

Change in pension adjustments due to net actuarial gain (loss) for the period, net of income tax benefit of $0, and $1, respectively		—		1
Reclassification to earnings, net of $0 income tax for all periods		1		—
Total pension adjustments		1		1
OTHER COMPREHENSIVE INCOME		423		198
COMPREHENSIVE INCOME		594		169
Less: Comprehensive income attributable to noncontrolling interests and redeemable stock of subsidiaries		(82)		(151)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE AES CORPORATION		$	512	$	18

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


	Three Months Ended March 31, 2022
	Preferred Stock			Common Stock			Treasury Stock			Additional Paid-In Capital (1)		Accumulated Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interests
	Shares	Amount(1)		Shares	Amount		Shares	Amount
	(in millions)
Balance at January 1, 2022	1.0	$	838	818.7	$	8	152.0	$	(1,845)	$	7,106	$	(1,089)	$	(2,220)	$	1,769
Net income	—	—		—	—		—	—		—		115		—		94
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		131		1
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		265		22
Total pension adjustments, net of income tax	—	—		—	—		—	—		—		—		1		—
Total other comprehensive loss	—	—		—	—		—	—		—		—		397		23




Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(25)
Acquisitions of noncontrolling interests	—	—		—	—		—	—		(93)		—		(76)		(367)
Contributions from noncontrolling interests	—	—		—	—		—	—		—		—		—		86
Sales to noncontrolling interests	—	—		—	—		—	—		7		—		—		30
Issuance of preferred shares in subsidiaries	—	—		—	—		—	—		—		—		—		60


Dividends declared on common stock ($0.1580/share)	—	—		—	—		—	—		(105)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		—	—		(1.1)	13		(12)		—		—		—
Balance at March 31, 2022	1.0	$	838	818.7	$	8	150.9	$	(1,832)	$	6,903	$	(974)	$	(1,899)	$	1,670

(1) The balance at January 1, 2022 includes a $13 million reclass from Additional paid-in capital to Preferred stock to reflect the retrospective adoption of ASU 2020-06. For further information, see Note 1—Financial Statement Presentation.


	Three Months Ended March 31, 2021
	Preferred Stock			Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interests
	Shares	Amount		Shares	Amount		Shares	Amount
	(in millions)
Balance at January 1, 2021	—	$	—	818.4	$	8	153.0	$	(1,858)	$	7,561	$	(680)	$	(2,397)	$	2,086
Net income (loss)	—	—		—	—		—	—		—		(148)		—		119
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		(53)		(16)
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		219		27
Total pension adjustments, net of income tax	—	—		—	—		—	—		—		—		—		1
Total other comprehensive income	—	—		—	—		—	—		—		—		166		12

Fair value adjustment (1)	—	—		—	—		—	—		33		—		—		—


Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(17)
Acquisitions of noncontrolling interests	—	—		—	—		—	—		(5)		—		(6)		(3)
Contributions from noncontrolling interests	—	—		—	—		—	—		—		—		—		94

Issuance of preferred stock	1.0	1,043		—	—		—	—		(235)		—		—		—
Dividends declared on common stock ($0.1505/share)	—	—		—	—		—	—		(101)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		0.2	—		(0.7)	8		(12)		—		—		—
Balance at March 31, 2021	1.0	$	1,043	818.6	$	8	152.3	$	(1,850)	$	7,241	$	(828)	$	(2,237)	$	2,291

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

See Notes to Condensed Consolidated Financial Statements.

6 | The AES Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2022		2021

	(in millions)
OPERATING ACTIVITIES:
Net income (loss)	$	171	$	(29)
Adjustments to net income (loss):
Depreciation and amortization	270		275
Loss (gain) on disposal and sale of business interests	(1)		5
Impairment expense	1		473
Deferred income taxes	(7)		21

Loss on extinguishment of debt	6		1
Loss (gain) on sale and disposal of assets	4		(20)


Loss of affiliates, net of dividends	33		36
Emissions allowance expense	118		58
Other	50		19
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(77)		(79)
(Increase) decrease in inventory	(44)		14
(Increase) decrease in prepaid expenses and other current assets	59		22
(Increase) decrease in other assets	(10)		31
Increase (decrease) in accounts payable and other current liabilities	(124)		(337)
Increase (decrease) in income tax payables, net and other tax payables	7		(92)
Increase (decrease) in deferred income	10		(142)
Increase (decrease) in other liabilities	(9)		(3)
Net cash provided by operating activities	457		253
INVESTING ACTIVITIES:
Capital expenditures	(766)		(432)



Sale of short-term investments	197		257
Purchase of short-term investments	(345)		(130)
Contributions and loans to equity affiliates	(93)		(64)



Purchase of emissions allowances	(136)		(31)
Other investing	(10)		13
Net cash used in investing activities	(1,153)		(387)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities	1,193		792
Repayments under the revolving credit facilities	(715)		(793)
Issuance of recourse debt	—		7
Repayments of recourse debt	(29)		(7)
Issuance of non-recourse debt	1,710		307
Repayments of non-recourse debt	(788)		(320)
Payments for financing fees	(27)		(5)
Distributions to noncontrolling interests	(47)		(17)
Acquisitions of noncontrolling interests	(535)		(13)
Contributions from noncontrolling interests	8		94
Sales to noncontrolling interests	48		1
Issuance of preferred shares in subsidiaries	60		—
Issuance of preferred stock	—		1,017
Dividends paid on AES common stock	(105)		(100)
Payments for financed capital expenditures	(4)		(1)


Other financing	49		31
Net cash provided by financing activities	818		993
Effect of exchange rate changes on cash, cash equivalents and restricted cash	20		(22)
Increase in cash, cash equivalents and restricted cash of held-for-sale businesses	(64)		(58)
Total increase in cash, cash equivalents and restricted cash	78		779
Cash, cash equivalents and restricted cash, beginning	1,484		1,827
Cash, cash equivalents and restricted cash, ending	$	1,562	$	2,606
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized	$	185	$	167
Cash payments for income taxes, net of refunds	46		50
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:






Dividends declared but not yet paid	105		101
Non-cash consideration transferred for Clean Energy acquisitions (see Note 17)	—		119

See Notes to Condensed Consolidated Financial Statements.

7 | Notes to Condensed Consolidated Financial Statements | March 21, 2022 and 2021

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

FINANCIAL STATEMENT PRESENTATION

Consolidation — In this Quarterly Report, the terms “AES,” “the Company,” “us” or “we” refer to the consolidated entity, including its subsidiaries and affiliates. The terms “The AES Corporation” or “the Parent Company” refer only to the publicly held holding company, The AES Corporation, excluding its subsidiaries and affiliates. Furthermore, VIEs in which the Company has a variable interest have been consolidated where the Company is the primary beneficiary. Investments in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting. All intercompany transactions and balances have been eliminated in consolidation.

Interim Financial Presentation — The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with GAAP, as contained in the FASB ASC, for interim financial information and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, comprehensive income, changes in equity, and cash flows. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of expected results for the year ending December 31, 2022. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2021 audited consolidated financial statements and notes thereto, which are included in the 2021 Form 10-K filed with the SEC on February 28, 2022 (the “2021 Form 10-K”).

Reclassifications — To comply with newly adopted accounting standards, certain prior period adjustments in the consolidated financial statements have been reclassified to conform to the current presentation. The beneficial conversion feature associated with the Equity Units was reclassified from Additional paid-in capital to Preferred stock in the Consolidated Balance Sheet for the year ended December 31, 2021. See further detail in the new accounting pronouncements discussion.

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


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	1,056	$	943
Restricted cash	334		304
Debt service reserves and other deposits	172		237
Cash, Cash Equivalents, and Restricted Cash	$	1,562	$	1,484

ASC 326 - Financial Instruments - Credit Losses - The following table represents the rollforward of the allowance for credit losses for the period indicated (in millions):

8 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021


Three Months Ended March 31, 2022	Accounts Receivable (1)		Mong Duong Loan Receivable (2)		Argentina Receivables		Other		Total
CECL reserve balance at beginning of period	$	3	$	30	$	23	$	7	$	63
Current period provision	2		—		2		—		4
Write-offs charged against allowance	(2)		—		—		—		(2)

Foreign exchange	—		—		(2)		—		(2)
CECL reserve balance at end of period	$	3	$	30	$	23	$	7	$	63


Three Months Ended March 31, 2021	Accounts Receivable (1)		Mong Duong Loan Receivable (2)		Argentina Receivables		Other		Total
CECL reserve balance at beginning of period	$	9	$	32	$	20	$	1	$	62
Current period provision	—		—		1		—		1
Write-offs charged against allowance	(3)		—		—		—		(3)

Foreign exchange	—		—		(1)		—		(1)
CECL reserve balance at end of period	$	6	$	32	$	20	$	1	$	59

**(1)**Excludes operating lease receivable allowances and contractual dispute allowances of $2 million and $5 million as of March 31, 2022 and March 31, 2021, respectively. These reserves are not in scope under ASC 326.

**(2)**Mong Duong loan receivable credit losses allowance was reclassified to held-for-sale assets on the Condensed Consolidated Balance Sheet as of March 31, 2022.

New Accounting Pronouncements Adopted in 2022 — The following table provides a brief description of recent accounting pronouncements that had an impact on the Company’s consolidated financial statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or did not have a material impact on the Company’s consolidated financial statements.


New Accounting Standards Adopted
ASU Number and Name	Description	Date of Adoption	Effect on the financial statements upon adoption
2021-05, Leases (Topic 842), Lessors—Certain Leases with Variable Lease Payments	The amendments in this update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (a) The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3, (b) The lessor would have otherwise recognized a day-one loss. This update could be applied either (1) retrospectively to leases that commenced or were modified on or after the adoption of Update 2016-02 or (2) prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments.	January 1, 2022	The Company adopted this standard on a prospective basis and it did not have a material impact on the financial statements.
2020-06, Debt - Debt with conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Equity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Equity’s Own Equity	The amendments in this update affect entities that issue convertible instruments and/or contracts indexed to and potentially settled in an entity’s own equity. The new ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.	January 1, 2022	The Company adopted this standard on a fully retrospective basis and its adoption resulted in a $13 million increase to Preferred Stock and a corresponding decrease to Additional paid-in capital. No impact to Earnings per Share amounts reported in 2021 or 2022.
2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in these updates provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued by reference rate reform, and clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These amendments are effective for a limited period of time (March 12, 2020 - December 31, 2022).	Effective for all entities as of March 12, 2020 through December 31, 2022	The Company is implementing the reference rate reform and does not expect these amendments to have a material impact on the financial statements.

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

9 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

be either not applicable or are expected to have no material impact on the Company’s consolidated financial statements.



New Accounting Standards Issued But Not Yet Effective
ASU Number and Name	Description	Date of Adoption	Effect on the financial statements upon adoption

2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	This update is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following: (1) Recognition of an acquired contract liability, 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.	For fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.	The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.

INVENTORY

The following table summarizes the Company’s inventory balances as of the periods indicated (in millions):


	March 31, 2022		December 31, 2021
Fuel and other raw materials	$	407	$	366
Spare parts and supplies	281		238
Total	$	688	$	604

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. For further information on our valuation techniques and policies, see Note 5—Fair Value in Item 8.—Financial Statements and Supplementary Data of our 2021 Form 10-K.

Recurring Measurements

The following table presents, by level within the fair value hierarchy, 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:

10 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021


	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
DEBT SECURITIES:
Available-for-sale:

Certificates of deposit	$	—	$	408	$	—	$	408	$	—	$	199	$	—	$	199

Total debt securities	—		408		—		408		—		199		—		199
EQUITY SECURITIES:
Mutual funds	30		12		—		42		31		13		—		44

Total equity securities	30		12		—		42		31		13		—		44
DERIVATIVES:
Interest rate derivatives	—		157		3		160		—		51		2		53
Cross-currency derivatives	—		—		—		—		—		5		—		5
Foreign currency derivatives	—		20		93		113		—		29		108		137
Commodity derivatives	—		132		6		138		—		32		6		38
Total derivatives — assets	—		309		102		411		—		117		116		233
TOTAL ASSETS	$	30	$	729	$	102	$	861	$	31	$	329	$	116	$	476
Liabilities
DERIVATIVES:
Interest rate derivatives	$	—	$	128	$	2	$	130	$	—	$	286	$	8	$	294
Cross-currency derivatives	—		55		—		55		—		11		—		11
Foreign currency derivatives	—		23		—		23		—		35		—		35
Commodity derivatives	—		100		19		119		—		37		7		44
Total derivatives — liabilities	—		306		21		327		—		369		15		384
TOTAL LIABILITIES	$	—	$	306	$	21	$	327	$	—	$	369	$	15	$	384

As of March 31, 2022, all available-for-sale debt securities had stated maturities within one year. There were no other-than-temporary impairments of marketable securities during the three months ended March 31, 2022. Credit-related impairments are recognized in earnings under ASC 326. Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from the sale of available-for-sale securities during the periods indicated (in millions):


	Three Months Ended March 31,
		2022		2021
Gross proceeds from sale of available-for-sale securities		$	197	$	245

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 three months ended March 31, 2022 and 2021 (presented net by type of derivative in millions). Transfers between Level 3 and Level 2 principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.


Three Months Ended March 31, 2022	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at January 1	$	(6)	$	—	$	108	$	(1)	$	101
Total realized and unrealized gains (losses):
Included in earnings	2		—		(11)		1		(8)
Included in other comprehensive income — derivative activity	5		—		(4)		(14)		(13)


Settlements	—		—		—		(1)		(1)

Transfers of (assets)/liabilities, net out of Level 3	—		—		—		2		2
Balance at March 31	$	1	$	—	$	93	$	(13)	$	81
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	2	$	—	$	(11)	$	2	$	(7)
















Three Months Ended March 31, 2021	Interest Rate		Cross Currency		Foreign Currency		Commodity		Total
Balance at January 1	$	(236)	$	(2)	$	146	$	2	$	(90)
Total realized and unrealized gains (losses):
Included in earnings	2		(1)		(29)		—		(28)
Included in other comprehensive income — derivative activity	37		—		(10)		—		27


Settlements	12		—		(9)		(1)		2

Transfers of (assets) liabilities, net out of Level 3	19		—		—		—		19
Balance at March 31	$	(166)	$	(3)	$	98	$	1	$	(70)
Total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period	$	2	$	—	$	(39)	$	—	$	(37)

11 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

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


Type of Derivative	Fair Value		Unobservable Input	Amount or Range (Weighted Average)
Interest rate	$	1	Subsidiaries’ credit spreads	0.7% - 3.9% (1.5%)

Foreign currency:
Argentine peso	93		Argentine peso to U.S. dollar currency exchange rate after one year	179 - 451 (325)

Commodity:
Other	(13)
Total	$	81

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

Nonrecurring Measurements

The Company measures fair value using the applicable fair value measurement guidance. Impairment expense, shown as pre-tax loss below, is measured by comparing the fair value at the evaluation date to the then-latest available carrying amount and is included in Asset impairment expense or Other non-operating expense, as applicable*,* on the Condensed Consolidated Statements of Operations. The following table summarizes our major categories of assets measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions). There were no material impairments during the three months ended March 31, 2022.









	Measurement Date		Carrying Amount (1)			Fair Value							Pre-tax Loss
Three Months Ended March 31, 2021		Level 1			Level 2			Level 3
Long-lived assets held and used:
Puerto Rico	03/31/2021		$	548		$	—		$	—	$	73	$	475

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

Financial Instruments not Measured at Fair Value in the Condensed 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 Condensed Consolidated Balance Sheets as of the periods indicated, but for which fair value is disclosed:


		March 31, 2022
		Carrying Amount		Fair Value
		Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent (1)	$	51	$	106	$	—	$	—	$	106
Liabilities:	Non-recourse debt	16,117		16,355		—		14,139		2,216
	Recourse debt	3,982		3,822		—		3,822		—


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

(1)These amounts primarily relate to amounts due from CAMMESA, the administrator of the wholesale electricity market in Argentina, and amounts impacted by the Stabilization Fund enacted by the Chilean government, and are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The fair value and carrying amount of these receivables exclude VAT of $2 million and $2 million as of March 31, 2022 and December 31, 2021, respectively.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

For further information on the Company’s derivative and hedge accounting policies, see Note 1—General and Summary of Significant Accounting Policies—Derivative Instruments and Hedging Activities of Item 8.—Financial Statements and Supplementary Data in the 2021 Form 10-K.

12 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

Volume of Activity — The following tables present the Company’s maximum notional (in millions) over the remaining contractual period by type of derivative as of March 31, 2022, regardless of whether they are in qualifying cash flow hedging relationships, and the dates through which the maturities for each type of derivative range:


Interest Rate and Foreign Currency Derivatives	Maximum Notional Translated to USD		Latest Maturity
Interest rate	$	5,346	2059
Cross-currency swaps (Brazilian real)	254		2026
Foreign Currency:
Colombian peso	163		2024
Euro	138		2024
Mexican peso	53		2023
Brazilian real	35		2024
Chilean peso	33		2024
Argentine peso	10		2026


Commodity Derivatives	Maximum Notional	Latest Maturity
Natural Gas (in MMBtu)	105	2029
Power (in MWhs)	15	2040
Coal (in Tons or Metric Tons)	6	2027

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


Fair Value	March 31, 2022						December 31, 2021
Assets	Designated		Not Designated		Total		Designated		Not Designated		Total
Interest rate derivatives	$	160	$	—	$	160	$	53	$	—	$	53
Cross-currency derivatives	—		—		—		5		—		5
Foreign currency derivatives	25		88		113		28		109		137
Commodity derivatives	37		101		138		6		32		38
Total assets	$	222	$	189	$	411	$	92	$	141	$	233
Liabilities
Interest rate derivatives	$	127	$	3	$	130	$	288	$	6	$	294
Cross-currency derivatives	55		—		55		11		—		11
Foreign currency derivatives	8		15		23		23		12		35
Commodity derivatives	19		100		119		11		33		44
Total liabilities	$	209	$	118	$	327	$	333	$	51	$	384


	March 31, 2022				December 31, 2021
Fair Value	Assets		Liabilities		Assets		Liabilities
Current	$	170	$	90	$	85	$	83
Noncurrent	241		237		148		301
Total	$	411	$	327	$	233	$	384

13 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 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):


	Three Months Ended March 31,
		2022			2021
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives			$	304		$	309

Cross-currency derivatives			—			2
Foreign currency derivatives			12			(1)
Commodity derivatives			29			—
Total			$	345		$	310
Losses reclassified from AOCL into earnings
Interest rate derivatives			$	(27)		$	(24)
Cross-currency derivatives			—			(1)
Foreign currency derivatives			—			(3)
Commodity derivatives			(1)			(2)
Total			$	(28)		$	(30)
Gains (losses) on fair value hedging relationship

Cross-currency derivatives			$	(55)		$	—
Hedged items			57			—
Total			$	2		$	—

Loss reclassified from AOCL to earnings due to impairment of assets			$	—		$	(4)
Gains (losses) recognized in earnings related to

Not designated as hedging instruments:
Interest rate derivatives			$	2		$	60
Foreign currency derivatives			(19)			(11)
Commodity derivatives and other			(13)			(93)
Total			$	(30)		$	(44)

AOCL is expected to decrease pre-tax income from continuing operations for the twelve months ended March 31, 2023 by $11 million, primarily due to interest rate derivatives.

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):


	March 31, 2022						December 31, 2021
	Gross Receivable		Allowance		Net Receivable		Gross Receivable		Allowance		Net Receivable
Chile	$	19	$	—	$	19	$	17	$	—	$	17
Argentina	10		1		9		11		1		10



Other	25		—		25		30		—		30
Total	$	54	$	1	$	53	$	58	$	1	$	57

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

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

14 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

INVESTMENTS IN AND ADVANCES TO AFFILIATES

Summarized Financial Information — The following table summarizes financial information of the Company’s 50%-or-less-owned affiliates that are accounted for using the equity method (in millions):


	50%-or-less Owned Affiliates (1)
Three Months Ended March 31,	2022		2021
Revenue	$	302	$	506
Operating margin (loss)	(214)		32
Net loss	(254)		(17)

(1) As of July 1, 2021, AES began to account for its investment in Fluence quarterly, on a three-month lag. This shift in timing is necessary due to the nature of the entity subsequent to its IPO.

sPower — On February 1, 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, a consolidated entity, which will serve as the development vehicle for all future renewable projects in the U.S. Since the sPower development platform was carved-out of AES’ existing equity method investment, this transaction resulted in a $77 million decrease in the carrying value of the sPower investment. See Note 17*—Acquisitions* for further information. As the Company still does not control sPower after the transaction, it continues to be accounted for as an equity method investment and is reported in the US and Utilities SBU reportable segment.

DEBT

Non-Recourse Debt

During the three months ended March 31, 2022, the Company’s subsidiaries had the following significant debt transactions:


Subsidiary	Transaction Period	Issuances		Repayments
United Kingdom	Q1	$	710	$	(350)
Netherlands/Panama	Q1	500		—
AES Brasil	Q1	219		(192)
AES Andes	Q1	175		(95)

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

United Kingdom — On January 6, 2022, Mercury Chile HoldCo LLC (“Mercury Chile”), a UK based company, executed a $350 million bridge loan, and used the proceeds, as well as an additional capital contribution of $196 million from the Parent Company, to purchase the minority interest in AES Andes through intermediate holding companies (see Note 11—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.

Non-Recourse Debt in Default — The following table summarizes the Company’s subsidiary non-recourse debt in default (in millions) as of March 31, 2022. Due to the defaults, these amounts are included in the current portion of non-recourse debt:


Subsidiary	Primary Nature of Default	Debt in Default		Net Assets
AES Puerto Rico	Covenant	$	195	$	(183)
AES Ilumina (Puerto Rico)	Covenant	28		26
AES Jordan Solar	Covenant	7		7
Total		$	230

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

The AES Corporation’s recourse debt agreements include cross-default clauses that will trigger if a subsidiary or group of subsidiaries for which the non-recourse debt is in default provides 20% or more of the Parent Company’s total cash distributions from businesses for the four most recently completed fiscal quarters. As of March 31, 2022, the Company had no defaults which resulted in, or were at risk of triggering, a cross-default under the recourse debt of the Parent Company. In the event the Parent Company is not in compliance with the financial covenants of its revolving credit facility, restricted payments will be limited to regular quarterly shareholder dividends

15 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

at the then-prevailing rate. Payment defaults and bankruptcy defaults would preclude the making of any restricted payments.

COMMITMENTS AND CONTINGENCIES

Guarantees, Letters of Credit and Commitments — In connection with certain project financings, acquisitions and dispositions, power purchases and other agreements, the Parent Company has expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events. In the normal course of business, the Parent Company has entered into various agreements, mainly guarantees and letters of credit, to provide financial or performance assurance to third parties on behalf of AES businesses. These agreements are entered into primarily to support or enhance the creditworthiness otherwise achieved by a business on a stand-alone basis, thereby facilitating the availability of sufficient credit to accomplish their intended business purposes. Most of the contingent obligations relate to future performance commitments which the Company or its businesses expect to fulfill within the normal course of business. The expiration dates of these guarantees vary from less than one year to no more than 14 years.

The following table summarizes the Parent Company’s contingent contractual obligations as of March 31, 2022. Amounts presented in the following table represent the Parent Company’s current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees.


Contingent Contractual Obligations	Amount (in millions)		Number of Agreements	Maximum Exposure Range for Each Agreement (in millions)
Guarantees and commitments	$	2,277	98	$0 — 400
Letters of credit under the unsecured credit facilities	140		35	$0 — 37
Letters of credit under the revolving credit facility	14		17	$0 — 3
Surety bonds	2		2	$1


Total	$	2,433	152

During the three months ended March 31, 2022, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts of letters of credit.

Contingencies

Environmental — The Company periodically reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. For the periods ended March 31, 2022 and December 31, 2021, the Company recognized liabilities of $4 million 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 March 31, 2022. 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 $28 million and $23 million as of March 31, 2022 and December 31, 2021, respectively. These amounts are reported on the Condensed 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 March 31, 2022. The material contingencies where a loss is reasonably possible primarily include disputes with offtakers, suppliers and EPC contractors; alleged breaches of contract; alleged violation of laws and regulations; income tax and non-income tax matters with tax authorities; and regulatory matters. In aggregate, the Company estimates the range of potential losses, where estimable, related to these reasonably possible material contingencies to be between $252 million and $909 million. The amounts considered reasonably possible do not include the amounts accrued, as discussed above. These material

16 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

contingencies do not include income tax-related contingencies which are considered part of our uncertain tax positions.

Tietê GSF Settlement — In accordance with the regulation published by ANEEL in December 2020 regarding the incorrect application of the GSF mechanism between 2013 and 2018, Tietê will be compensated in the form of a concession extension period, initially determined to be 2.7 years, which will be amortized from the date of the agreement until the end of the new concession period. As of December 31, 2020, the compensation to be received from the concession extension was estimated to have a fair value of $184 million, based on a preliminary time-value equivalent calculation made by the CCEE. In March 2021, the CCEE’s final calculation of fair value was $190 million and the Company recognized an additional reversal of Non-Regulated Cost of Sales of $6 million. In August 2021, ANEEL published Resolution 2.919/2021, establishing an extension for the end of the concession originally granted to AES Brasil’s hydroelectric plants, from 2029 to 2032. On April 14, 2022, the amended term was finalized and agreed upon by ANEEL and AES.

LEASES

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 receipts 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 receipts from such contracts are recognized as lease revenue on a straight-line basis over the lease term, whereas variable lease receipts are recognized when earned.

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


	Three Months Ended March 31,
Operating Lease Revenue		2022		2021
Total lease revenue		$	134	$	143
Less: Variable lease revenue		(7)		(14)
Total Non-variable lease revenue		$	127	$	129

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


Property, Plant and Equipment, Net	March 31, 2022		December 31, 2021
Gross assets	$	2,403	$	2,423
Less: Accumulated depreciation	(780)		(765)
Net assets	$	1,623	$	1,658

The option to extend or terminate a lease is based on customary early termination provisions in the contract, such as payment defaults, bankruptcy, and lack of performance on energy delivery. The Company has not recognized any early terminations as of March 31, 2022. Certain leases may provide for variable lease payments based on usage or index-based (e.g., the U.S. Consumer Price Index) adjustments to lease payments.

The following table shows the future lease receipts as of March 31, 2022 for the remainder of 2022 through 2026 and thereafter (in millions):


	Future Cash Receipts for
	Sales-Type Leases		Operating Leases
2022	$	19	$	339
2023	20		393
2024	21		394
2025	21		394
2026	21		281
Thereafter	289		747
Total	$	391	$	2,548
Less: Imputed interest	(173)
Present value of total lease receipts	$	218

17 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

Battery Storage Lease Arrangements — The Company is constructing and operating projects that pair BESS with solar energy systems, which allows the project more flexibility on when to provide energy to the grid. The Company will enter into PPAs for the full output of the facility that allow customers the ability to determine when to charge and discharge the BESS. These arrangements include both lease and non-lease elements under ASC 842, with the BESS component constituting a sales-type lease. Prior to January 1, 2022, upon commencement of the lease, the book value of the leased asset was removed from the balance sheet and a net investment in a sales-type lease was recognized based on the present value of fixed payments under the contract and the residual value of the underlying asset. Due to the variable nature of lease payments under these contracts, the Company recorded a loss at commencement of sales-type leases of $13 million for the three months ended March 31, 2021. This amount is recognized in Other expense in the Consolidated Statement of Operations. See Note 14—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 variable lease payments as operating leases. The Company adopted this standard on a prospective basis. See Note 1—Financial Statement Presentation for further information. The Company recognized lease income on sales-type leases through interest income of $3 million and $4 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

REDEEMABLE STOCK OF SUBSIDIARIES

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


	March 31, 2022		December 31, 2021
IPALCO common stock	$	700	$	700
AES Clean Energy Development common stock	362		497

AES Indiana preferred stock	60		60
Potengi common and preferred stock	12		—

Total redeemable stock of subsidiaries	$	1,134	$	1,257

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

AES Clean Energy Development — On February 1, 2021, the Company substantially completed the merger of the sPower and AES Renewable Holdings development platforms to form AES Clean Energy Development, which will serve as the development vehicle for all future renewable projects in the U.S. As part of the transaction, AlMCo, our existing partner in the sPower equity method investment, received a 25% minority ownership interest in the newly formed entity along with certain partnership rights, though not currently in effect, that would enable AIMCo to exit in the future. As a result, the minority ownership interest is considered temporary equity, which will be adjusted for earnings or losses allocated to the noncontrolling interest under ASC 810. Any subsequent changes in the redemption value of the exit rights will be recognized against permanent equity in accordance with ASC 480-10-S99, as it is probable that the shares will become redeemable. See Note 17*—Acquisitions* for further information.

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”).

18 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

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

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

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

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

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

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

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

The 2024 Purchase Contracts obligate the holders to purchase, on February 15, 2024, for a price of $100 in cash, a maximum number of 57,225,895 shares of the Company’s common stock (subject to customary anti-dilution adjustments). The 2024 Purchase Contract holders may elect to settle their obligation early, in cash. The Series A Preferred Stock is pledged as collateral to guarantee the holders’ obligations to purchase common stock under the terms of the 2024 Purchase Contracts. The initial settlement rate determining the number of shares that each holder must purchase will not exceed the maximum settlement rate and is determined over a market value averaging period preceding February 15, 2024.

The initial maximum settlement rate of 3.864 was calculated using an initial reference price of $25.88, equal to the last reported sale price of the Company’s common stock on March 4, 2021. As of March 31, 2022, due to the customary anti-dilution provisions, the maximum settlement rate was 3.865, equivalent to a reference price of $25.87. If the applicable market value of the Company’s common stock is less than or equal to the reference price, the settlement rate will be the maximum settlement rate; and if the applicable market value of common stock is greater than the reference price, the settlement rate will be a number of shares of the Company’s common stock equal to $100 divided by the applicable market value. Upon successful remarketing of the Series A Preferred Stock (“Remarketed Series A Preferred Stock”), the Company expects to receive additional cash proceeds of $1 billion and issue shares of Remarketed Series A Preferred Stock.

19 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

The Company pays Contract Adjustment Payments to the holders of the 2024 Purchase Contracts at a rate of 6.875% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15, commencing on May 15, 2021. The $205 million present value of the Contract Adjustment Payments at inception reduced the Series A Preferred Stock. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between the cash payment and the present value will accrete to interest expense, approximately $5 million over the three-year term. As of March 31, 2022, the present value of the Contract Adjustment Payments was $141 million.

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

Equity Transactions with Noncontrolling Interests

Guaimbê Holding — In January 2022, Guaimbê Solar Holding S.A (“Guaimbê Holding”), a subsidiary of AES Brasil, issued preferred shares representing 3.5% ownership in the subsidiary for total proceeds of $63 million. The transaction decreased the Company’s indirect ownership interest in the operational entities from 37.4% to 35.8%. As the Company maintained control after the transaction, Guaimbê Holding continues to be consolidated by the Company within the South America SBU reportable segment.

Chile Renovables — Under its agreement with Global Infrastructure Management, LLC (“GIP”), the minority interest holder in Chile Renovables SpA since July 2021, AES Andes will contribute a specified pipeline of renewable development projects to Chile Renovables as the projects reach commercial operations, and GIP will make additional contributions to maintain its 49% ownership interest. In January 2022, AES Andes completed the sale of Andes Solar 2a to Chile Renovables for $37 million, resulting in an increase to NCI of $28 million and an increase to additional paid-in capital of $9 million. As the Company maintained control after the transaction, Chile Renovables continues to be consolidated by the Company within the South America SBU reportable segment.

AES Andes — On December 29, 2020, AES Andes commenced a preemptive rights offering for its existing shareholders to subscribe for up to 1.98 billion of newly issued shares to fund its renewable growth program. The period ended on February 5, 2021 and Inversiones Cachagua SpA (“Cachagua”), 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%. Through multiple transactions following the tender offer, Cachagua acquired an additional 1% ownership in AES Andes for $13 million, further increasing AES’ indirect beneficial interest to 99%. These transactions resulted in a $169 million decrease to Parent Company Stockholder’s Equity due to a decrease in additional paid-in capital of $93 million and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $76 million. AES Andes is reported in the South America SBU reportable segment.

AES Brasil — 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, a listing segment of the Brazilian stock exchange that requires equity capital to be composed only of common shares, 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, and as such, continues to consolidate AES Brasil’s results in the South America SBU reportable segment.

During the first quarter of 2021, AHB acquired an additional 1.2% ownership in AES Brasil for $13 million. These transactions increased the Company’s economic interest in AES Brasil to 45.3% and resulted in a $10 million decrease in Parent Company Stockholder’s Equity due to a decrease in additional paid-in capital of $4 million and the reclassification of accumulated other comprehensive losses from NCI to AOCL of $6 million.

20 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

Accumulated Other Comprehensive Loss — The following table summarizes the changes in AOCL by component, net of tax and NCI, for the three months ended March 31, 2022 (in millions):


	Foreign currency translation adjustment, net		Unrealized derivative gains (losses), net		Unfunded pension obligations, net		Total
Balance at the beginning of the period	$	(1,734)	$	(456)	$	(30)	$	(2,220)
Other comprehensive income before reclassifications	131		258		—		389
Amount reclassified to earnings	—		7		1		8
Other comprehensive income	131		265		1		397
Reclassification from NCI due to share repurchases	(53)		(20)		(3)		(76)
Balance at the end of the period	$	(1,656)	$	(211)	$	(32)	$	(1,899)

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


AOCL Components	Affected Line Item in the Condensed Consolidated Statements of Operations	Three Months Ended March 31,
		2022	2021





Derivative gains (losses), net
	Non-regulated revenue		$	(1)	$	—
	Non-regulated cost of sales		(1)		(1)
	Interest expense		(23)		(16)

	Asset impairment expense		—		(4)
	Foreign currency transaction losses		—		(3)
	Income from continuing operations before taxes and equity in earnings of affiliates		(25)		(24)
	Income tax expense		10		7
	Net equity in losses of affiliates		(3)		(6)

	Net income (loss)		(18)		(23)
	Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries		11		6
	Net income (loss) attributable to The AES Corporation		$	(7)	$	(17)
Amortization of defined benefit pension actuarial gain (loss), net



	Other expense		$	(1)	$	—









	Net income (loss) attributable to The AES Corporation		$	(1)	$	—
Total reclassifications for the period, net of income tax and noncontrolling interests			$	(8)	$	(17)

Common Stock Dividends — The Parent Company paid dividends of $0.1580 per outstanding share to its common stockholders during the first quarter of 2022 for dividends declared in December 2021.

On February 24, 2022, the Board of Directors declared a quarterly common stock dividend of $0.1580 per share payable on May 13, 2022, to shareholders of record at the close of business on April 29, 2022.

SEGMENTS

The segment reporting structure uses the Company’s management reporting structure as its foundation to reflect how the Company manages the businesses internally and is mainly organized by geographic regions, which provides a socio-political-economic understanding of our business. The management reporting structure is organized by four SBUs led by our President and Chief Executive Officer: US and Utilities, South America, MCAC, and Eurasia SBUs. Using the accounting guidance on segment reporting, the Company determined that its four operating segments are aligned with its four reportable segments corresponding to its SBUs. In January 2022, we internally announced a reorganization as a part of our ongoing strategy to align our business to meet our customers' needs and deliver on our major strategic objectives. The Company performed an assessment in accordance with ASC 280 and determined there were no changes to its operating or reportable segments.

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

The Company uses Adjusted PTC as its primary segment performance measure. Adjusted PTC, a non-GAAP measure, is defined by the Company as pre-tax income from continuing operations attributable to The AES Corporation excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; and (f) net gains at Angamos, one of our businesses in the

21 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

South America SBU, associated with the early contract terminations with Minera Escondida and Minera Spence. Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis adjusted for the same gains or losses excluded from consolidated entities. The Company has concluded that Adjusted PTC better reflects the underlying business performance of the Company and is the most relevant measure considered in the Company’s internal evaluation of the financial performance of its segments. Additionally, given its large number of businesses and complexity, the Company concluded that Adjusted PTC is a more transparent measure that better assists investors in determining which businesses have the greatest impact on the Company’s results.

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

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


	Three Months Ended March 31,
Total Revenue		2022		2021
US and Utilities SBU		$	1,117	$	949
South America SBU		810		884
MCAC SBU		566		535
Eurasia SBU		368		270
Corporate and Other		23		24
Eliminations		(32)		(27)
Total Revenue		$	2,852	$	2,635


	Three Months Ended March 31,
Total Adjusted PTC		2022		2021
Income from continuing operations before taxes and equity in earnings of affiliates		$	264	$	9
Add: Net equity in losses of affiliates		(33)		(30)
Less: Income from continuing operations before taxes, attributable to noncontrolling interests and redeemable stock of subsidiaries		(66)		(163)
Pre-tax contribution		165		(184)
Unrealized derivative and equity securities losses		41		69
Unrealized foreign currency losses (gains)		(19)		6
Disposition/acquisition losses (gains)		9		(15)
Impairment losses		1		475
Loss on extinguishment of debt		10		6
Net gains from early contract terminations at Angamos		—		(110)

Total Adjusted PTC		$	207	$	247


	Three Months Ended March 31,
Total Adjusted PTC		2022		2021
US and Utilities SBU		$	57	$	44
South America SBU		128		88
MCAC SBU		37		61
Eurasia SBU		65		51
Corporate and Other		(75)		(7)
Eliminations		(5)		10
Total Adjusted PTC		$	207	$	247


Total Assets	March 31, 2022		December 31, 2021
US and Utilities SBU	$	17,305	$	16,512
South America SBU	8,544		7,728
MCAC SBU	4,609		4,545
Eurasia SBU	3,495		3,466

Corporate and Other	695		712
Total Assets	$	34,648	$	32,963

22 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

REVENUE

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



	Three Months Ended March 31, 2022
	US and Utilities SBU		South America SBU		MCAC SBU		Eurasia SBU		Corporate, Other and Eliminations		Total
Regulated Revenue
Revenue from contracts with customers	$	828	$	—	$	—	$	—	$	—	$	828

Other regulated revenue	7		—		—		—		—		7
Total regulated revenue	835		—		—		—		—		835
Non-Regulated Revenue
Revenue from contracts with customers	269		805		541		309		(9)		1,915


Other non-regulated revenue (1)	13		5		25		59		—		102
Total non-regulated revenue	282		810		566		368		(9)		2,017
Total revenue	$	1,117	$	810	$	566	$	368	$	(9)	$	2,852


















	Three Months Ended March 31, 2021
	US and Utilities SBU		South America SBU		MCAC SBU		Eurasia SBU		Corporate, Other and Eliminations		Total
Regulated Revenue
Revenue from contracts with customers	$	698	$	—	$	—	$	—	$	—	$	698

Other regulated revenue	9		—		—		—		—		9
Total regulated revenue	707		—		—		—		—		707
Non-Regulated Revenue
Revenue from contracts with customers	224		883		510		209		(3)		1,823


Other non-regulated revenue (1)	18		1		25		61		—		105
Total non-regulated revenue	242		884		535		270		(3)		1,928
Total revenue	$	949	$	884	$	535	$	270	$	(3)	$	2,635

(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 $235 million and $216 million as of March 31, 2022 and December 31, 2021, respectively.

During the three months ended March 31, 2022 and 2021, we recognized revenue of $30 million and $183 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

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

A significant financing arrangement exists for our Mong Duong plant in Vietnam. The plant was constructed under a build, operate, and transfer 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 Condensed Consolidated Balance Sheet. As of March 31, 2022 and December 31, 2021, Mong Duong met the held-for-sale criteria and the loan receivable balance of approximately $1.2 billion net of CECL reserve of $30 million was classified as held-for-sale assets. Of the loan receivable balance, $93 million and $91 million was classified as Current held-for-sale assets, respectively, and $1.1 billion was classified as Noncurrent held-for-sale assets.

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 March 31, 2022, the aggregate amount of transaction price allocated to remaining performance obligations was $9 million, primarily consisting of fixed consideration for the sale of renewable energy credits (“RECs”) in long-term contracts in the U.S. We expect to recognize revenue on approximately one-fifth of the remaining performance obligations in 2022 and 2023, with the remainder recognized thereafter.

23 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

OTHER INCOME AND EXPENSE

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


		Three Months Ended March 31,
			2022		2021
Other Income	AFUDC (US Utilities)		$	3	$	2



	Gain on remeasurement to acquisition-date fair value (1)		—		36


	Other		3		5
	Total other income		$	6	$	43

Other Expense	Loss on sale and disposal of assets		$	4	$	3


	Loss on commencement of sales-type leases (2)		—		13



	Other		8		—
	Total other expense		$	12	$	16

(1) 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 17*—Acquisitions* for further information.

(2) Related to a loss recognized at commencement of a sales-type lease at AES Renewable Holdings. See Note 9—Leases for further information.

ASSET IMPAIRMENT EXPENSE

The following table presents our asset impairment expense for the periods indicated (in millions):


	Three Months Ended March 31,
		2022		2021

Puerto Rico		$	—	$	475
















Other		1		(2)
Total		$	1	$	473

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 US and Utilities SBU reportable segment.

HELD-FOR-SALE

Mong Duong — In December 2020, the Company entered into an agreement to sell its entire 51% ownership interest in Mong Duong, a coal-fired plant in Vietnam, and 51% equity interest in Mong Duong Finance Holdings B.V, an SPV accounted for as an equity affiliate. The sale is subject to regulatory approval and is expected to close in early 2023. As of March 31, 2022, the Mong Duong plant and SPV were classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the plant and SPV held-for-sale as of March 31, 2022 was $553 million. Mong Duong is reported in the Eurasia SBU reportable segment.

Jordan — In November 2020, the Company signed an agreement to sell 26% ownership interest in IPP1 and IPP4 for $58 million. The sale is expected to close in the second quarter of 2022. After completion of the sale, the Company will retain a 10% ownership interest in IPP1 and IPP4, which will be accounted for as an equity method investment. As of March 31, 2022, the generation plants were classified as held-for-sale, but did not meet the criteria to be reported as discontinued operations. On a consolidated basis, the carrying value of the plants held-for-sale as of March 31, 2022 was $190 million. Jordan is reported in the Eurasia SBU reportable segment.

24 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

Excluding any impairment charges, pre-tax income attributable to AES of businesses held-for-sale as of March 31, 2022 was as follows:


	Three Months Ended March 31,
(in millions)		2022		2021
Mong Duong		$	24	$	15
Jordan		5		5
Total		$	29	$	20

ACQUISITIONS

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

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

The sPower development platform was carved-out of AES’ existing equity method investment. AES’ basis in the portion of assets transferred was $77 million, and the contribution to AES Clean Energy Development resulted in a corresponding decrease in the carrying value of the sPower investment. See Note 6*—Investments in and Advances to Affiliates* for further information.

During the first quarter of 2021, the sPower development assets transferred were remeasured at their acquisition-date preliminary fair values, resulting in the recognition of a $36 million gain, recorded in Other income on the Condensed 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. These measurement period adjustments primarily related to higher expected developer profits and a higher growth rate, reflective of additional information that became available regarding market participants’ views of the value of early-stage renewable development projects as of the date of acquisition. As a result, 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.

25 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 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 Condensed Consolidated Balance Sheet. See Note 10*—Redeemable Stock of Subsidiaries* for further information. AES Clean Energy Development is reported in the US and Utilities SBU reportable segment.

Great Cove Solar— On January 25, 2021, AES Clean Energy Development completed the acquisition of Great Cove Solar, LLC. The fair value of the initial consideration paid to acquire Great Cove I was $13 million, which included contingent consideration liabilities of $6 million. This acquisition was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business; therefore, the assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration. Great Cove Solar is reported in the US and Utilities SBU reportable segment.

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 three months ended March 31, 2022 and 2021, where income represents the numerator and weighted average shares represent the denominator.


Three Months Ended March 31,	2022					2021
(in millions, except per share data)	Income		Shares	$ per Share		Loss		Shares	$ per Share

BASIC EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations attributable to The AES Corporation common stockholders	$	115	668	$	0.17	$	(148)	666	$	(0.22)
EFFECT OF DILUTIVE SECURITIES

Stock options	—		1	—		—		—	—
Restricted stock units	—		2	—		—		—	—
Equity units	—		40	(0.01)		—		—	—
DILUTED EARNINGS (LOSS) PER SHARE	$	115	711	$	0.16	$	(148)	666	$	(0.22)

The calculation of diluted earnings per share excluded 2 million outstanding stock awards for the three months ended March 31, 2022, which would be anti-dilutive. These stock awards could potentially dilute basic earnings per share in the future.

For the three months ended March 31, 2021, the calculation of diluted earnings per share excluded 5 million outstanding stock awards because their impact would be anti-dilutive given the loss from continuing operations. These stock awards could potentially dilute basic earnings per share in the future. Had the Company generated income, 4 million potential shares of common stock related to the stock awards would have been included in diluted weighted-average shares outstanding. Due to the full retrospective adoption of ASU 2020-06, an additional 2 million potential shares of common stock related to the assumed share settlement of the Contract Adjustment Payments would have been included in diluted weighted-average shares outstanding.

26 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2022 and 2021

As described in Note 11*—Equity*, the Company issued 10,430,500 Equity Units in March 2021 with a total notional value of $1,043 million. Each Equity Unit has a stated amount of $100 and was initially issued as a Corporate Unit, consisting of a 2024 Purchase Contract and a 10% undivided beneficial ownership interest in one share of Series A Preferred Stock. Prior to February 15, 2024, the Series A Preferred Stock may be converted at the option of the holder only in connection with a fundamental change. On and after February 15, 2024, the Series A Preferred Stock may be converted freely at the option of the holder. Upon conversion, the Company will deliver to the holder with respect to each share of Series A Preferred Stock being converted (i) a share of our Series B Preferred Stock, or, solely with respect to conversions in connection with a redemption, cash and (ii) shares of our common stock, if any, in respect of any conversion value in excess of the liquidation preference of the preferred stock being converted. The conversion rate 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 March 31, 2022, due to customary anti-dilution provisions, the conversion rate was 31.5536, equivalent to a conversion price of approximately $31.69 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.

RISKS AND UNCERTAINTIES

COVID-19 Pandemic — The COVID-19 pandemic has severely impacted global economic activity, including electricity and energy consumption, and caused significant volatility and negative pressure in financial markets. The magnitude and duration of the COVID-19 pandemic is unknown at this time and may have material and adverse effects on our results of operations, financial condition, and cash flows in future periods.

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

Alto Maipo is party to a restructuring support agreement to which holders of more than 78% of the outstanding senior indebtedness are party, and which contemplates a plan of reorganization in which AES Andes will own all of the equity of the reorganized company. If Alto Maipo is unable to renegotiate the terms of its financial arrangements with its creditors and is unable to meet its obligations under those arrangements as they come due, the creditors may enforce their rights under the credit agreements. These finance agreements are non-recourse with respect to The AES Corporation.

27 | The AES Corporation | March 31, 2022 Form 10-Q

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