Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)

			March 31, 2023						December 31, 2022
			(in millions, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	1,441					$	1,374
Restricted cash			456						536
Short-term investments			822						730
Accounts receivable, net of allowance for doubtful accounts of $5 and $5, respectively			1,859						1,799
Inventory			864						1,055
Prepaid expenses			167						98
Other current assets			1,523						1,533
Current held-for-sale assets			511						518
Total current assets			7,643						7,643
NONCURRENT ASSETS
Property, Plant and Equipment:
Land			477						470
Electric generation, distribution assets and other			27,054						26,599
Accumulated depreciation			(8,882)						(8,651)
Construction in progress			5,564						4,621
Property, plant and equipment, net			24,213						23,039
Other Assets:
Investments in and advances to affiliates			768						952
Debt service reserves and other deposits			180						177
Goodwill			362						362
Other intangible assets, net of accumulated amortization of $455 and $434, respectively			1,862						1,841
Deferred income taxes			324						319
Loan receivable, net of allowance of $25 and $26, respectively			1,044						1,051
Other noncurrent assets, net of allowance of $46 and $51, respectively			2,961						2,979
Total other assets			7,501						7,681
TOTAL ASSETS			$	39,357					$	38,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable			$	1,505					$	1,730
Accrued interest			296						249
Accrued non-income taxes			289						249
Accrued and other liabilities			2,103						2,151
Recourse debt			500						—
Non-recourse debt, including $314 and $416, respectively, related to variable interest entities			1,737						1,758
Current held-for-sale liabilities			346						354
Total current liabilities			6,776						6,491
NONCURRENT LIABILITIES
Recourse debt			4,081						3,894
Non-recourse debt, including $2,413 and $2,295, respectively, related to variable interest entities			18,513						17,846
Deferred income taxes			1,110						1,139
Other noncurrent liabilities			3,131						3,168
Total noncurrent liabilities			26,835						26,047
Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries			1,283						1,321
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, 2023 and December 31, 2022)			838						838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,808,272 issued and 669,335,716 outstanding at March 31, 2023 and 818,790,001 issued and 668,743,464 outstanding at December 31, 2022)			8						8
Additional paid-in capital			6,557						6,688
Accumulated deficit			(1,484)						(1,635)
Accumulated other comprehensive loss			(1,742)						(1,640)
Treasury stock, at cost (149,472,556 and 150,046,537 shares at March 31, 2023 and December 31, 2022, respectively)			(1,815)						(1,822)
Total AES Corporation stockholders’ equity			2,362						2,437
NONCONTROLLING INTERESTS			2,101						2,067
Total equity			4,463						4,504
TOTAL LIABILITIES AND EQUITY			$	39,357					$	38,363

See Notes to Condensed Consolidated Financial Statements.

3 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

									Three Months Ended March 31,
															2023						2022
												(in millions, except share and per share amounts)
Revenue:
Non-Regulated															$	2,287					$	2,017
Regulated															952						835
Total revenue															3,239						2,852
Cost of Sales:
Non-Regulated															(1,797)						(1,617)
Regulated															(848)						(705)
Total cost of sales															(2,645)						(2,322)
Operating margin															594						530
General and administrative expenses															(55)						(52)
Interest expense															(330)						(258)
Interest income															123						75
Loss on extinguishment of debt															(1)						(6)
Other expense															(14)						(12)
Other income															10						6
Gain on disposal and sale of business interests															—						1
Asset impairment expense															(20)						(1)
Foreign currency transaction losses															(42)						(19)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES															265						264
Income tax expense															(72)						(60)
Net equity in losses of affiliates															(4)						(33)
NET INCOME															189						171
Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries															(38)						(56)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION															$	151					$	115
BASIC EARNINGS PER SHARE:
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS															$	0.22					$	0.17
DILUTED EARNINGS PER SHARE:
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS															$	0.21					$	0.16
DILUTED SHARES OUTSTANDING															712						711

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

			Three Months Ended March 31,
			2023						2022
			(in millions)
NET INCOME			$	189					$	171
Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods			40						132
Total foreign currency translation adjustments			40						132
Derivative activity:
Change in derivative fair value, net of income tax benefit (expense) of $31, and $(73), respectively			(122)						272
Reclassification to earnings, net of income tax benefit (expense) of $9, and $(10), respectively			(41)						18
Total change in fair value of derivatives			(163)						290
Pension activity:
Change in pension adjustments due to net actuarial gain (loss) for the period, net of $0 income tax for all periods			1						—
Reclassification to earnings, net of $0 income tax for all periods			—						1
Total pension adjustments			1						1
OTHER COMPREHENSIVE INCOME (LOSS)			(122)						423
COMPREHENSIVE INCOME			67						594
Less: Comprehensive income attributable to noncontrolling interests and redeemable stock of subsidiaries			(18)						(82)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE AES CORPORATION			$	49					$	512

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

			Three Months Ended March 31, 2023
			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, 2023			1.0						$	838					818.8						$	8					150.0						$	(1,822)					$	6,688					$	(1,635)					$	(1,640)					$	2,067
Net income			—						—						—						—						—						—						—						151						—						52
Total foreign currency translation adjustment, net of income tax			—						—						—						—						—						—						—						—						33						7
Total change in derivative fair value, net of income tax			—						—						—						—						—						—						—						—						(135)						1
Total pension adjustments, net of income tax			—						—						—						—						—						—						—						—						—						1
Total other comprehensive income (loss)			—						—						—						—						—						—						—						—						(102)						9
Distributions to noncontrolling interests			—						—						—						—						—						—						—						—						—						(37)
Acquisitions of noncontrolling interests			—						—						—						—						—						—						(1)						—						—						1
Contributions from noncontrolling interests			—						—						—						—						—						—						—						—						—						2
Sales to noncontrolling interests			—						—						—						—						—						—						(7)						—						—						3
Issuance of preferred shares in subsidiaries			—						—						—						—						—						—						—						—						—						4
Dividends declared on common stock ($0.1659/share)			—						—						—						—						—						—						(111)						—						—						—
Issuance and exercise of stock-based compensation benefit plans, net of income tax			—						—						—						—						(0.5)						7						(12)						—						—						—
Balance at March 31, 2023			1.0						$	838					818.8						$	8					149.5						$	(1,815)					$	6,557					$	(1,484)					$	(1,742)					$	2,101

			Three Months Ended March 31, 2022
			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, 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 income			—						—						—						—						—						—						—						—						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

See Notes to Condensed Consolidated Financial Statements.

6 | The AES Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

			Three Months Ended March 31,
			2023						2022
			(in millions)
OPERATING ACTIVITIES:
Net income			$	189					$	171
Adjustments to net income:
Depreciation and amortization			273						270
Gain on disposal and sale of business interests			—						(1)
Impairment expense			20						1
Deferred income taxes			(11)						(7)
Loss on extinguishment of debt			1						6
Loss of affiliates, net of dividends			4						33
Emissions allowance expense			89						118
Other			51						54
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(62)						(77)
(Increase) decrease in inventory			191						(44)
(Increase) decrease in prepaid expenses and other current assets			64						59
(Increase) decrease in other assets			50						(10)
Increase (decrease) in accounts payable and other current liabilities			(293)						(124)
Increase (decrease) in income tax payables, net and other tax payables			(7)						7
Increase (decrease) in deferred income			21						10
Increase (decrease) in other liabilities			45						(9)
Net cash provided by operating activities			625						457
INVESTING ACTIVITIES:
Capital expenditures			(1,551)						(766)
Proceeds from the sale of business interests, net of cash and restricted cash sold			98						1
Sale of short-term investments			356						197
Purchase of short-term investments			(418)						(345)
Contributions and loans to equity affiliates			(20)						(93)
Purchase of emissions allowances			(78)						(136)
Other investing			(11)						(11)
Net cash used in investing activities			(1,624)						(1,153)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities and commercial paper program			2,335						1,193
Repayments under the revolving credit facilities and commercial paper program			(1,625)						(715)
Issuance of recourse debt			500						—
Repayments of recourse debt			—						(29)
Issuance of non-recourse debt			690						1,710
Repayments of non-recourse debt			(660)						(788)
Payments for financing fees			(18)						(27)
Purchases under supplier financing arrangements			529						93
Repayments of obligations under supplier financing arrangements			(587)						(50)
Distributions to noncontrolling interests			(47)						(47)
Acquisitions of noncontrolling interests			—						(535)
Contributions from noncontrolling interests			18						8
Sales to noncontrolling interests			—						48
Issuance of preferred shares in subsidiaries			3						60
Dividends paid on AES common stock			(111)						(105)
Payments for financed capital expenditures			(4)						(4)
Other financing			(7)						6
Net cash provided by financing activities			1,016						818
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(18)						20
Increase in cash, cash equivalents and restricted cash of held-for-sale businesses			(9)						(64)
Total increase (decrease) in cash, cash equivalents and restricted cash			(10)						78
Cash, cash equivalents and restricted cash, beginning			2,087						1,484
Cash, cash equivalents and restricted cash, ending			$	2,077					$	1,562
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized			$	252					$	185
Cash payments for income taxes, net of refunds			53						46
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends declared but not yet paid			111						105

See Notes to Condensed Consolidated Financial Statements.

7 | Notes to Condensed Consolidated Financial Statements | March 31, 2023 and 2022

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

1. 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, except for our investment in Alto Maipo, for which we have elected the fair value option as permitted under ASC 825. 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, 2023 are not necessarily indicative of expected results for the year ending December 31, 2023. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2022 audited consolidated financial statements and notes thereto, which are included in the 2022 Form 10-K filed with the SEC on March 1, 2023 (the “2022 Form 10-K”).

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, 2023						December 31, 2022
Cash and cash equivalents			$	1,441					$	1,374
Restricted cash			456						536
Debt service reserves and other deposits			180						177
Cash, Cash Equivalents, and Restricted Cash			$	2,077					$	2,087

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, 2023 and 2022

Three Months Ended March 31, 2023			Accounts Receivable (1)						Mong Duong Loan Receivable						Argentina Receivables						Lease Receivable (2)						Other						Total
CECL reserve balance at beginning of period			$	3					$	28					$	30					$	20					$	2					$	83
Current period provision			2						—						—						—						6						8
Write-offs charged against allowance			(3)						—						—						—						—						(3)
Recoveries collected			1						1						—						—						—						2
Foreign exchange			—						—						(5)						—						—						(5)
CECL reserve balance at end of period			$	3					$	29					$	25					$	20					$	8					$	85

Three Months Ended March 31, 2022			Accounts Receivable (1)						Mong Duong Loan Receivable						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)
Recoveries collected			—						—						—						—						—
Foreign exchange			—						—						(2)						—						(2)
CECL reserve balance at end of period			$	3					$	30					$	23					$	7					$	63

---

**(1)**Excludes operating lease receivable allowances and contractual dispute allowances of $1 million and $2 million as of March 31, 2023 and March 31, 2022, respectively. These reserves are not in scope under ASC 326.

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

ASC 450 - Liabilities - Supplier Finance Programs — With some purchases, AES enters into supplier financing arrangements. The company generally uses an intermediary entity between the supplier and the Company, but sometimes enters into these agreements directly with the supplier, with the goal of securing improved payment terms. These arrangements are included in Accrued and other liabilities on the Consolidated Balance Sheets as the amounts are all due in less than a year; the related interest expense is recorded on the Consolidated Statement of Operations within Interest expense. The company had 33 supplier financing arrangements with a total outstanding balance of $645 million as of March 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 6.58% as of March 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, $473 million and $296 million were guaranteed by the Parent Company as of March 31, 2023 and December 31, 2022, respectively.

New Accounting Pronouncements Adopted in 2023 — 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
2021-08, 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.			January 1, 2023			The Company adopted this standard on a prospective basis, which will be 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.

9 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures			ASU 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, 2023			The Company adopted this standard on a prospective basis and it did not have a material impact on the financial statements.
2022-04,Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations			This update is to provide additional information and disclosures about an entity’s use of supplier finance programs to see how these programs will affect an entity’s working capital, liquidity, and cash flows. Entities that use supplier finance programs as the buyer party should disclose (1) the key terms of the payment terms and assets pledged as security or other forms of guarantees provided and (2) the unpaid amount outstanding, a description of where those obligations are presented on the balance sheet, and a rollforward of those obligations during the annual period.			January 1, 2023, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.			The ASU only requires disclosures related to the Company's supplier finance programs and does not affect the recognition, measurement, or presentation of supplier finance program obligations on the balance sheet or cash flow statement. The Company 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.

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

New Accounting Standards Issued But Not Yet Effective
ASU Number and Name			Description			Date of Adoption			Effect on the financial statements upon adoption
2023-01 Leases (Topic 842): Common Control Arrangements			The amendments in this Update require that leasehold improvements associated with common control leases be: 1, Amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. However, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group. 2. Accounted for as a transfer between entities under common control through an adjustment to equity (or net assets for not-for-profit entities) if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment.			For fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.			The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method			The amendments in this Update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if: 1. It is probable that the income tax credits allocable to the tax equity investor will be available. 2. The tax equity investor does not have the ability to exercise significant influence. 3. Substantially all of the projected benefits are from income tax credits and other income tax benefits. 4. The tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive. 5. The tax equity investor is a limited liability investor, and the tax equity investor’s liability is limited to its capital investments			For fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.			The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.

10 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

2. INVENTORY

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

			March 31, 2023						December 31, 2022
Fuel and other raw materials			$	587					$	733
Spare parts and supplies			277						322
Total			$	864					$	1,055

3. 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 2022 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:

			March 31, 2023																								December 31, 2022
			Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Assets
DEBT SECURITIES:
Available-for-sale:
Certificates of deposit			$	—					$	778					$	—					$	778					$	—					$	698					$	—					$	698
Government debt securities			—						4						—						4						—						3						—						3
Total debt securities			—						782						—						782						—						701						—						701
EQUITY SECURITIES:
Mutual funds			40						—						—						40						38						—						—						38
Total equity securities			40						—						—						40						38						—						—						38
DERIVATIVES:
Interest rate derivatives			—						187						5						192						—						314						—						314
Cross-currency derivatives			—						—						—						—						—						—						—						—
Foreign currency derivatives			—						22						62						84						—						22						64						86
Commodity derivatives			—						238						8						246						—						232						13						245
Total derivatives — assets			—						447						75						522						—						568						77						645
TOTAL ASSETS			$	40					$	1,229					$	75					$	1,344					$	38					$	1,269					$	77					$	1,384
Liabilities
DERIVATIVES:
Interest rate derivatives			$	—					$	36					$	10					$	46					$	—					$	6					$	—					$	6
Cross-currency derivatives			—						50						—						50						—						42						—						42
Foreign currency derivatives			—						17						—						17						—						20						—						20
Commodity derivatives			—						255						77						332						—						346						60						406
Total derivatives — liabilities			—						358						87						445						—						414						60						474
TOTAL LIABILITIES			$	—					$	358					$	87					$	445					$	—					$	414					$	60					$	474

As of March 31, 2023, 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, 2023. 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,
						2023						2022
Gross proceeds from sale of available-for-sale securities						$	369					$	197

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, 2023 and 2022

11 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 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.

Three Months Ended March 31, 2023			Interest Rate												Foreign Currency						Commodity						Total
Balance at January 1			$	—											$	64					$	(47)					$	17
Total realized and unrealized gains (losses):
Included in earnings			—												(2)						—						(2)
Included in other comprehensive income — derivative activity			(1)												—						(17)						(18)
Included in regulatory (assets) liabilities			—												—						(5)						(5)
Transfers of assets (liabilities), net into Level 3			(4)												—						—						(4)
Balance at March 31			$	(5)											$	62					$	(69)					$	(12)
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			$	—											$	(1)					$	1					$	—
Three Months Ended March 31, 2022			Interest Rate												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)

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

Type of Derivative						Fair Value						Unobservable Input						Amount or Range (Weighted Average)
Interest rate						$	(5)					Subsidiary credit spread						0.5725% - 2.5% (1.6%)
Foreign currency:
Argentine peso						62						Argentine peso to U.S. dollar currency exchange rate after one year						405 - 1,059 (808)
Commodity:
CAISO Energy Swap						(76)						Forward energy prices per MWh after 2030						21 - 112.11 (63.35)
Other						7
Total						$	(12)

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, 2023						Level 1						Level 2						Level 3
Held-for-sale businesses: (2)
Jordan (3)			3/31/2023						$	179					$	—					$	170					$	—					$	14

---

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

(2)See Note 16 — Held-for-Sale and Dispositions for further information.

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

12 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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, 2023
						Carrying Amount						Fair Value
						Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (1)			$	190					$	229					$	—					$	—					$	229
Liabilities:			Non-recourse debt			20,073						19,851						—						18,375						1,476
			Recourse debt			4,581						4,231						—						4,231						—

						December 31, 2022
						Carrying Amount						Fair Value
						Total						Level 1						Level 2						Level 3
Assets:			Accounts receivable — noncurrent (1)			$	255					$	294					$	—					$	—					$	294
Liabilities:			Non-recourse debt			19,429						18,527						—						17,089						1,438
			Recourse debt			3,894						3,505						—						3,505						—

---

(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 Funds enacted by the Chilean government, and are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets.

4. 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—Derivatives and Hedging Activities of Item 8.—Financial Statements and Supplementary Data in the 2022 Form 10-K.

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, 2023, 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						$	6,413					2059
Cross-currency swaps (Brazilian real)						404						2026
Foreign Currency:
Chilean peso						144						2025
Euro						141						2025
Colombian peso						50						2024
Brazilian real						25						2024
Mexican peso						11						2024
Argentine peso						4						2026

Commodity Derivatives						Maximum Notional						Latest Maturity
Natural Gas (in MMBtu)						103						2030
Power (in MWhs)						13						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, 2023																		December 31, 2022
Assets			Designated						Not Designated						Total						Designated						Not Designated						Total
Interest rate derivatives			$	192					$	—					$	192					$	313					$	1					$	314
Foreign currency derivatives			28						56						84						27						59						86
Commodity derivatives			—						246						246						—						245						245
Total assets			$	220					$	302					$	522					$	340					$	305					$	645
Liabilities
Interest rate derivatives			$	46					$	—					$	46					$	6					$	—					$	6
Cross-currency derivatives			50						—						50						42						—						42
Foreign currency derivatives			5						12						17						9						11						20
Commodity derivatives			76						256						332						59						347						406
Total liabilities			$	177					$	268					$	445					$	116					$	358					$	474

13 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

			March 31, 2023												December 31, 2022
Fair Value			Assets						Liabilities						Assets						Liabilities
Current			$	295					$	161					$	271					$	168
Noncurrent			227						284						374						306
Total			$	522					$	445					$	645					$	474

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,
												2023						2022
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives															$	(138)					$	304
Foreign currency derivatives															8						12
Commodity derivatives															(23)						29
Total															$	(153)					$	345
Gains (losses) reclassified from AOCL into earnings
Interest rate derivatives															$	36					$	(27)
Commodity derivatives															14						(1)
Total															$	50					$	(28)
Gains (losses) on fair value hedging relationship
Cross-currency derivatives															$	(53)					$	(55)
Hedged items															50						57
Total															$	(3)					$	2
Gains reclassified from AOCL to earnings due to discontinuance of hedge accounting															$	1					$	—
Gains (losses) recognized in earnings related to
Not designated as hedging instruments:
Interest rate derivatives															$	—					$	2
Foreign currency derivatives															(4)						(19)
Commodity derivatives and other															65						(13)
Total															$	61					$	(30)

AOCL is expected to decrease pre-tax income from continuing operations for the twelve months ended March 31, 2024 by $15 million, primarily due to interest rate derivatives.

5. 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, 2023																		December 31, 2022
			Gross Receivable						Allowance						Net Receivable						Gross Receivable						Allowance						Net Receivable
Chile			$	177					$	—					$	177					$	239					$	—					$	239
Other			14						—						14						18						—						18
Total			$	191					$	—					$	191					$	257					$	—					$	257

Chile — AES Andes has recorded receivables pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Funds created by the Chilean government in October 2019 and August 2022, in conjunction with the Tariff Stabilization Laws. Historically, the government updated the prices for these contracts every six months to reflect the contracts' indexation to exchange rates and commodities prices. The Tariff Stabilization Laws do not allow the pass-through of these contractual indexation updates to customers beyond the pricing in effect at July 1, 2019, until new lower-cost renewable contracts are incorporated to supply regulated contracts. Consequently, costs incurred in excess of the July 1, 2019 price are accumulated and borne by generators. Through different programs, AES Andes aims to reduce its exposure and has already sold a significant portion of the receivables accumulated as of December 31, 2021.

As of March 31, 2023, $26 million of current receivables and $162 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets, respectively, pertaining to the Stabilization Funds. Additionally, $15 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 March 31, 2023.

14 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

6. 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
Three Months Ended March 31,			2023						2022
Revenue			$	461					$	302
Operating loss			(43)						(214)
Net loss			(62)						(254)
Net loss attributable to affiliates			(60)						(238)

sPower — In December 2022, the Company agreed to sell 49% of its indirect interest in a portfolio of sPower's operating assets ("OpCo B"). 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 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 sPower after the transaction, it continues to be accounted for as an equity method investment and is reported in the Renewables SBU reportable segment.

7. DEBT

Recourse Debt

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 are unsecured and are fully guaranteed by the Parent Company.

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 Company must have revolving credit facilities in place, and the Company cannot issue commercial paper in an aggregate amount exceeding the then available capacity under its revolving credit facilities. As of March 31, 2023, the Company had $350 million outstanding borrowings under the commercial paper program with a weighted average interest rate of 5.62%. The Notes are classified as noncurrent.

Non-Recourse Debt

During the three months ended March 31, 2023, the Company’s subsidiaries had the following significant debt transactions (in millions):

Subsidiary						Transaction Period						Issuances						Repayments						Loss on Extinguishment of Debt
Netherlands and Colon						Q1						$	350					$	(500)					$	(1)
AES Brasil						Q1						169						—						—

15 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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 for the three months ended March 31, 2023.

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.

AES Clean Energy — 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 energy storage projects that are owned by the Issuers. On December 13, 2022, the Issuers entered into the Note Purchase Agreement for the issuance of up to $647 million of 6.55% Senior Notes due in 2047. The notes were sold on December 14, 2022, at par for $647 million. Each of the Issuers is considered a “Co-Issuer” and will be jointly and severally liable with each other Co-Issuer for all obligations under the facility. As a result of the issuance, AES Clean Energy Development recorded a liability of $37 million, which represents its share of the notes issued. As of March 31, 2023, the aggregate carrying amount of the notes attributable to AES Clean Energy Development and AES Renewable Holdings was $37 million.

In 2021, AES Clean Energy Development, AES Renewable Holdings, and sPower, collectively referred to as the Borrowers, executed two Credit Agreements with aggregate commitments of $1.2 billion and maturity dates in December 2024 and September 2025. The Borrowers executed amendments to the revolving credit facilities, which resulted in an aggregate increase in the commitments of $1.3 billion, bringing the total commitments under the new agreements to $2.5 billion. There was no change to the maturity dates under the amendments. Each of the Borrowers is considered a “Co-Borrower” and will be jointly and severally liable with each other Co-Borrower for all obligations under the facilities. As a result of increases in commitments used, AES Clean Energy Development and AES Renewable Holdings recorded, in aggregate, an increase in liabilities of $434 million in 2023, resulting in total commitments used under the revolving credit facilities, as of March 31, 2023, of $1.7 billion. As of March 31, 2023, the aggregate commitments used under the revolving credit facilities for the Co-Borrowers was $2.3 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 March 31, 2023 and December 31, 2022, approximately $416 million and $424 million, respectively, of restricted cash was maintained in accordance with certain covenants of the non-recourse debt agreements. These amounts were included within Restricted cash and Debt service reserves and other deposits in the accompanying Condensed Consolidated Balance Sheets.

Various lender and governmental provisions restrict the ability of certain of the Company's subsidiaries to transfer their net assets to the Parent Company. Such restricted net assets of subsidiaries amounted to approximately $1.7 billion at March 31, 2023.

The following table summarizes the Company’s subsidiary non-recourse debt in default (in millions) as of March 31, 2023. 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 (Liabilities)
AES Puerto Rico						Covenant						$	143					$	(175)
AES Ilumina (Puerto Rico)						Covenant						26						27
AES Jordan Solar						Covenant						7						10
Total												$	176

16 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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, 2023, the Company had no defaults which resulted in, or were at risk of triggering, a cross-default under the recourse debt of the Parent Company. In the event the Parent Company is not in compliance with the financial covenants of its revolving credit facility, restricted payments will be limited to regular quarterly shareholder dividends at the then-prevailing rate. Payment defaults and bankruptcy defaults would preclude the making of any restricted payments.

8. 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 18 years.

The following table summarizes the Parent Company’s contingent contractual obligations as of March 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 and excludes guarantees presented on the Condensed Consolidated Balance Sheets within Recourse debt. 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						$	2,648					73						<$1 — 400
Letters of credit under bilateral agreements						123						2						$59 — 64
Letters of credit under the unsecured credit facilities						109						34						<$1 — 36
Letters of credit under the revolving credit facility						20						16						<$1 — 4
Surety bonds						2						2						<$1 — 1
Total						$	2,902					127

During the three months ended March 31, 2023, 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, 2023 and December 31, 2022, the Company recognized liabilities of $10 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, 2023. In aggregate, the Company estimates the range of potential losses related to environmental matters, where estimable, to be up to $12 million. The amounts considered reasonably possible do not include amounts accrued as discussed above.

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

17 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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, 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 $52 million and $87 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.

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

			Three Months Ended March 31,
Operating Lease Revenue			2023						2022
Total lease revenue			$	121					$	134
Less: Variable lease revenue			(8)						(7)
Total Non-variable lease revenue			$	113					$	127

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

Property, Plant and Equipment, Net						March 31, 2023						December 31, 2022
Gross assets						$	1,272					$	1,319
Less: Accumulated depreciation						(147)						(139)
Net assets						$	1,125					$	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, and lack of performance on energy delivery. The Company has not recognized any early terminations as of March 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 March 31, 2023 for the remainder of 2023 through 2027 and thereafter (in millions):

			Future Cash Receipts for
			Sales-Type Leases						Operating Leases
2023			$	19					$	292
2024			25						390
2025			25						390
2026			25						279
2027			25						203
Thereafter			360						545
Total			$	479					$	2,099
Less: Imputed interest			(252)
Present value of total lease receipts			$	227

18 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

Battery Storage Lease Arrangements — The Company constructs and operates projects consisting only of a stand-alone battery energy storage system (“BESS”) facility, as well as projects that pair a BESS with solar energy systems. These projects allow more flexibility on when to provide energy to the grid. The Company will enter into PPAs for the full output of the facility that allow customers the ability to determine when to charge and discharge the BESS. These arrangements include both lease and non-lease elements under ASC 842, with the BESS component typically constituting a sales-type lease. The Company recognized lease income on sales-type leases through interest income of $4 million and $3 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

10. 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, 2023						December 31, 2022
IPALCO common stock			$	771					$	782
AES Clean Energy Development common stock			412						436
AES Clean Energy Development tax equity partnerships			83						86
Potengi common and preferred stock			17						17
Total redeemable stock of subsidiaries			$	1,283					$	1,321

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

11. 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 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.

19 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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 57,326,028 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, 2023, due to the customary anti-dilution provisions, the maximum settlement rate was 3.8713, equivalent to a reference price of $25.83. If the applicable market value of the Company’s common stock is less than or equal to the reference price, the settlement rate will be the maximum settlement rate; and if the applicable market value of common stock is greater than the reference price, the settlement rate will be a number of shares of the Company’s common stock equal to $100 divided by the applicable market value. Upon successful remarketing of the Series A Preferred Stock (“Remarketed Series A Preferred Stock”), the Company expects to receive additional cash proceeds of $1 billion and issue shares of Remarketed Series A Preferred Stock.

The Company pays Contract Adjustment Payments to the holders of the 2024 Purchase Contracts at a rate of 6.875% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15, commencing on May 15, 2021. The $205 million present value of the Contract Adjustment Payments at inception reduced the Series A Preferred Stock. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between the cash payment and the present value will accrete to interest expense, approximately $5 million over the three-year term. As of March 31, 2023, the present value of the Contract Adjustment Payments was $71 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

Chile Renovables — Under its renewable partnership agreement with Global Infrastructure Management, LLC (“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. 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 Energy Infrastructure SBU reportable segment.

Guaimbê Holding — In January 2022, the Ventus wind complex and AGV solar complex were incorporated by Guaimbê Holding. Guaimbê Holding 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 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.

20 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

AES Andes — In January 2022, Inversiones Cachagua SpA (“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 following the tender offer during the first quarter of 2022, Cachagua acquired an additional 0.8% ownership in AES Andes for $13 million, further increasing AES’ indirect beneficial interest to 98.9%. The tender offer and these follow-on the 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 Energy Infrastructure SBU reportable segment.

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, 2023 (in millions):

			Foreign currency translation adjustment, net						Unrealized derivative gains (losses), net						Unfunded pension obligations, net						Total
Balance at the beginning of the period			$	(1,828)					$	211					$	(23)					$	(1,640)
Other comprehensive income (loss) before reclassifications			33						(95)						—						(62)
Amount reclassified to earnings			—						(40)						—						(40)
Other comprehensive income (loss)			33						(135)						—						(102)
Balance at the end of the period			$	(1,795)					$	76					$	(23)					$	(1,742)

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,
						2023						2022
Derivative gains (losses), net
						Non-regulated revenue						$	—					$	(1)
						Non-regulated cost of sales						(1)						(1)
						Interest expense						3						(23)
						Gain on disposal and sale of business interests						33						—
						Income from continuing operations before taxes and equity in earnings of affiliates						35						(25)
						Income tax expense						(9)						10
						Net equity in losses of affiliates						15						(3)
						Net income						41						(18)
						Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries						(1)						11
						Net income attributable to The AES Corporation						$	40					$	(7)
Amortization of defined benefit pension actuarial gain (loss), net
						Other expense						$	—					$	(1)
						Net income attributable to The AES Corporation						$	—					$	(1)
Total reclassifications for the period, net of income tax and noncontrolling interests												$	40					$	(8)

Common Stock Dividends — The Parent Company paid dividends of $0.1659 per outstanding share to its common stockholders during the first quarter of 2023 for dividends declared in December 2022.

On February 24, 2023, the Board of Directors declared a quarterly common stock dividend of $0.1659 per share payable on May 15, 2023, to shareholders of record at the close of business on May 1, 2023.

21 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

12. SEGMENTS

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, hydro, biomass, and landfill gas 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 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.

22 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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

									Three Months Ended March 31,
Total Revenue															2023						2022
Renewables SBU															$	495					$	420
Utilities SBU															971						859
Energy Infrastructure SBU															1,724						1,607
New Energy Technologies SBU															74						—
Corporate and Other															27						23
Eliminations															(52)						(57)
Total Revenue															$	3,239					$	2,852

									Three Months Ended March 31,
Reconciliation of Adjusted EBITDA (in millions)															2023						2022
Net income															$	189					$	171
Income tax expense															72						60
Interest expense															330						258
Interest income															(123)						(75)
Depreciation and amortization															273						270
EBITDA															$	741					$	684
Less: Adjustment for noncontrolling interests and redeemable stock of subsidiaries (1)															(170)						(156)
Less: Income taxes expense (benefit), interest expense (income) and depreciation and amortization from equity affiliates															39						34
Interest income recognized under service concession arrangements															18						19
Unrealized derivative and equity securities losses (gains)															(39)						42
Unrealized foreign currency losses (gains)															32						(18)
Disposition/acquisition losses (gains)															(3)						9
Impairment losses															9						1
Loss on extinguishment of debt															1						6
Adjusted EBITDA															$	628					$	621

---

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

									Three Months Ended March 31,
Adjusted EBITDA															2023						2022
Renewables SBU															$	124					$	119
Utilities SBU															162						184
Energy Infrastructure SBU															363						354
New Energy Technologies SBU															(26)						(35)
Corporate and Other															(1)						4
Eliminations															6						(5)
Adjusted EBITDA															$	628					$	621

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 Condensed Consolidated Balance Sheets.

Long-Lived Assets			March 31, 2023						December 31, 2022
Renewables SBU			$	10,611					$	9,533
Utilities SBU			6,452						6,311
Energy Infrastructure SBU			7,561						7,532
New Energy Technologies SBU			1						2
Corporate and Other			15						17
Long-Lived Assets			24,640						23,395
Current assets			7,643						7,643
Investments in and advances to affiliates			768						952
Debt service reserves and other deposits			180						177
Goodwill			362						362
Other intangible assets			1,862						1,841
Deferred income taxes			324						319
Loan receivable			1,044						1,051
Other noncurrent assets, excluding right-of-use assets for operating leases			2,534						2,623
Total Assets			$	39,357					$	38,363

23 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

13. 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, 2023
			Renewables SBU						Utilities SBU						Energy Infrastructure SBU						New Energy Technologies SBU						Corporate, Other and Eliminations						Total
Non-Regulated Revenue
Revenue from contracts with customers			$	477					$	17					$	1,572					$	74					$	(25)					$	2,115
Other non-regulated revenue (1)			18						2						152						—						—						172
Total non-regulated revenue			495						19						1,724						74						(25)						2,287
Regulated Revenue
Revenue from contracts with customers			—						944						—						—						—						944
Other regulated revenue			—						8						—						—						—						8
Total regulated revenue			—						952						—						—						—						952
Total revenue			$	495					$	971					$	1,724					$	74					$	(25)					$	3,239
			Three Months Ended March 31, 2022
			Renewables SBU						Utilities SBU						Energy Infrastructure SBU						New Energy Technologies SBU						Corporate, Other and Eliminations						Total
Non-Regulated Revenue
Revenue from contracts with customers			$	425					$	23					$	1,501					$	—					$	(34)					$	1,915
Other non-regulated revenue (1)			(5)						1						106						—						—						102
Total non-regulated revenue			420						24						1,607						—						(34)						2,017
Regulated Revenue
Revenue from contracts with customers			—						828						—						—						—						828
Other regulated revenue			—						7						—						—						—						7
Total regulated revenue			—						835						—						—						—						835
Total revenue			$	420					$	859					$	1,607					$	—					$	(34)					$	2,852

---

(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 $364 million and $337 million as of March 31, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2023 and 2022, we recognized revenue of $7 million and $30 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

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, 2023 and December 31, 2022, the Mong Duong loan receivable balance of $1.1 billion, net of CECL reserves of $27 million and $28 million, respectively, was classified as a Loan receivable on the Condensed 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. As of March 31, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $5 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 2023 and 2027.

14. 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

24 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

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

						Three Months Ended March 31,
						2023						2022
Other Income			Legal settlements			$	3					$	—
			AFUDC (US Utilities)			3						3
			Gain on sale of assets			2						—
			Other			2						3
			Total other income			$	10					$	6
Other Expense			Loss on remeasurement of contingent consideration			$	7					$	—
			Loss on sale and disposal of assets			2						4
			Other			5						8
			Total other expense			$	14					$	12

15. ASSET IMPAIRMENT EXPENSE

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

			Three Months Ended March 31,
			2023						2022
Jordan			$	14					$	—
Other			6						1
Total			$	20					$	1

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 March 31, 2023, the generation plants were classified as held-for-sale. Due to the delay in closing the transaction, the carrying amount of the asset group in subsequent periods exceeded the agreed-upon sales price and pre-tax impairment expense of $14 million was recorded during the three months ended March 31, 2023. See Note 16*—Held-for-Sale and Dispositions* for further information. Amman East and IPP4 are reported in the Energy Infrastructure SBU reportable segment.

16. 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 2023. 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 March 31, 2023, 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, 2023 was $165 million. Amman East and IPP4 are 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 March 31, 2023 was as follows:

			Three Months Ended March 31,
(in millions)			2023						2022
Jordan			$	5					$	5

17. 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 Renewables 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 Renewables SBU reportable segment.

25 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

18. 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, 2023 and 2022, where income represents the numerator and weighted average shares represent the denominator.

Three Months Ended March 31,			2023																		2022
(in millions, except per share data)			Income						Shares						$ per Share						Income						Shares						$ per Share
BASIC EARNINGS PER SHARE
Income from continuing operations attributable to The AES Corporation common stockholders			$	151					669						$	0.22					$	115					668						$	0.17
EFFECT OF DILUTIVE SECURITIES
Stock options			—						1						—						—						1						—
Restricted stock units			—						2						—						—						2						—
Equity units			—						40						(0.01)						—						40						(0.01)
DILUTED EARNINGS PER SHARE			$	151					712						$	0.21					$	115					711						$	0.16

The calculation of diluted earnings per share excluded 1 million and 2 million outstanding stock awards for the three months ended March 31, 2023 and March 31, 2022, respectively, which would be anti-dilutive. These stock awards could potentially dilute basic earnings per share in the future.

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, 2023, due to customary anti-dilution provisions, the conversion rate was 31.6031, equivalent to a conversion price of approximately $31.64 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.

19. 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*.*

Puerto Rico — An indicator of impairment was identified at AES Puerto Rico related to the negative response from PREPA on March 6, 2023 for proposed Power Purchase and Operating Agreement (“PPOA”) amendments to maintain liquidity in the face of increased operational costs for the business. AES Puerto Rico notified its noteholders on March 17, 2023, as the business anticipates that it will not have sufficient funds to pay principal and interest obligations on its Series A Bond Loans due and payable on June 1, 2023. The AES Puerto Rico asset group passed the recoverability test, and thus no impairment was recorded.

Considering the information available as of the filing date, management believes the carrying amount of our long-lived assets at AES Puerto Rico of $62 million is recoverable as of March 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.

26 | Notes to Condensed Consolidated Financial Statements—(Continued) | March 31, 2023 and 2022

20. SUBSEQUENT EVENTS

AES Southland — In April 2023, AES Southland signed agreements with the California Department of Water Resources to extend operations of the once-through cooling (“OTC”) units at its Huntington Beach and Alamitos facilities through 2026. The extension is subject to the State Water Resources Control Board extending the OTC compliance dates, which is anticipated in the second half of 2023.

27 | The AES Corporation | March 31, 2023 Form 10-Q