Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)


	September 30, 2023		December 31, 2022

	(in millions, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,765	$	1,374
Restricted cash	365		536
Short-term investments	538		730
Accounts receivable, net of allowance for doubtful accounts of $9 and $5, respectively	1,725		1,799
Inventory	798		1,055
Prepaid expenses	161		98
Other current assets	1,472		1,533
Current held-for-sale assets	493		518
Total current assets	7,317		7,643
NONCURRENT ASSETS
Property, Plant and Equipment:
Land	492		470
Electric generation, distribution assets and other	27,998		26,599
Accumulated depreciation	(8,602)		(8,651)
Construction in progress	7,647		4,621
Property, plant and equipment, net	27,535		23,039
Other Assets:
Investments in and advances to affiliates	894		952
Debt service reserves and other deposits	205		177
Goodwill	362		362
Other intangible assets, net of accumulated amortization of $486 and $434, respectively	2,290		1,841
Deferred income taxes	428		319

Loan receivable, net of allowance of $24 and $26, respectively	990		1,051
Other noncurrent assets, net of allowance of $16 and $51, respectively	3,140		2,979

Total other assets	8,309		7,681
TOTAL ASSETS	$	43,161	$	38,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,641	$	1,730
Accrued interest	379		249
Accrued non-income taxes	269		249
Accrued and other liabilities	2,442		2,151
Recourse debt	700		—
Non-recourse debt, including $1,015 and $416, respectively, related to variable interest entities	3,060		1,758

Current held-for-sale liabilities	328		354
Total current liabilities	8,819		6,491
NONCURRENT LIABILITIES
Recourse debt	4,864		3,894
Non-recourse debt, including $1,781 and $2,295, respectively, related to variable interest entities	18,767		17,846

Deferred income taxes	1,257		1,139

Other noncurrent liabilities	2,775		3,168

Total noncurrent liabilities	27,663		26,047
Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries	1,423		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 September 30, 2023 and December 31, 2022)	838		838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 819,051,591 issued and 669,629,035 outstanding at September 30, 2023 and 818,790,001 issued and 668,743,464 outstanding at December 31, 2022)	8		8
Additional paid-in capital	6,449		6,688
Accumulated deficit	(1,292)		(1,635)
Accumulated other comprehensive loss	(1,410)		(1,640)
Treasury stock, at cost (149,422,556 and 150,046,537 shares at September 30, 2023 and December 31, 2022, respectively)	(1,814)		(1,822)
Total AES Corporation stockholders’ equity	2,779		2,437
NONCONTROLLING INTERESTS	2,477		2,067
Total equity	5,256		4,504
TOTAL LIABILITIES AND EQUITY	$	43,161	$	38,363

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in millions, except share and per share amounts)
Revenue:
Non-Regulated	$	2,571	$	2,651	$	7,051	$	6,944
Regulated	863		976		2,649		2,613
Total revenue	3,434		3,627		9,700		9,557
Cost of Sales:
Non-Regulated	(1,813)		(1,839)		(5,392)		(5,237)
Regulated	(703)		(896)		(2,298)		(2,335)
Total cost of sales	(2,516)		(2,735)		(7,690)		(7,572)
Operating margin	918		892		2,010		1,985
General and administrative expenses	(64)		(51)		(191)		(149)
Interest expense	(326)		(276)		(966)		(813)
Interest income	144		100		398		270
Loss on extinguishment of debt	—		(1)		(1)		(8)
Other expense	(12)		(10)		(38)		(51)
Other income	12		4		36		80
Gain (loss) on disposal and sale of business interests	—		1		(4)		—

Asset impairment expense	(158)		(50)		(352)		(533)
Foreign currency transaction gains (losses)	(100)		8		(209)		(60)

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES	414		617		683		721
Income tax expense	(109)		(145)		(179)		(186)
Net equity in losses of affiliates	(14)		(26)		(43)		(54)



NET INCOME	291		446		461		481



Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries	(60)		(25)		(118)		(124)
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION	$	231	$	421	$	343	$	357




BASIC EARNINGS PER SHARE:


NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	0.34	$	0.63	$	0.51	$	0.53
DILUTED EARNINGS PER SHARE:


NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	0.32	$	0.59	$	0.48	$	0.50
DILUTED SHARES OUTSTANDING	712		711		712		711

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in millions)
NET INCOME	$	291	$	446	$	461	$	481




Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods	(44)		(80)		75		(97)

Total foreign currency translation adjustments	(44)		(80)		75		(97)
Derivative activity:
Change in derivative fair value, net of income tax expense of $73, $62, $78, and $196, respectively	274		189		276		731
Reclassification to earnings, net of income tax benefit (expense) of $0, $1, $11 and $(12), respectively	(1)		14		(49)		52
Total change in fair value of derivatives	273		203		227		783
Pension activity:

Change in pension adjustments due to net actuarial gain for the period, net of $0 income tax for all periods	—		—		1		—
Reclassification to earnings, net of income tax benefit (expense) of $0, $(1), $0, $(1), respectively	—		1		—		2
Total pension adjustments	—		1		1		2
OTHER COMPREHENSIVE INCOME	229		124		303		688
COMPREHENSIVE INCOME	520		570		764		1,169
Less: Comprehensive income attributable to noncontrolling interests and redeemable stock of subsidiaries	(109)		(50)		(168)		(207)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE AES CORPORATION	$	411	$	520	$	596	$	962

See Notes to Condensed Consolidated Financial Statements.

6 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


	Nine Months Ended September 30, 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
Net income (loss)	—	—		—	—		—	—		—		(39)		—		42
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		74		4
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		101		—

Total other comprehensive income	—	—		—	—		—	—		—		—		175		4




Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(90)


Sales to noncontrolling interests	—	—		—	—		—	—		(17)		—		—		209




Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		—	—		(0.1)	1		10		—		—		—
Balance at June 30, 2023	1.0	$	838	818.8	$	8	149.4	$	(1,814)	$	6,550	$	(1,523)	$	(1,567)	$	2,266
Net income	—	—		—	—		—	—		—		231		—		68
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		(36)		(7)
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		216		(3)

Total other comprehensive income (loss)	—	—		—	—		—	—		—		—		180		(10)




Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(7)
Acquisitions of noncontrolling interests	—	—		—	—		—	—		25		—		—		(46)

Sales to noncontrolling interests	—	—		—	—		—	—		(21)		—		(23)		206


Dividends declared on common stock ($0.1659/share)	—	—		—	—		—	—		(111)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		0.3	—		—	—		6		—		—		—
Balance at September 30, 2023	1.0	$	838	819.1	$	8	149.4	$	(1,814)	$	6,449	$	(1,292)	$	(1,410)	$	2,477

7 | The AES Corporation


	Nine Months Ended September 30, 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
Net income (loss)	—	—		—	—		—	—		—		(179)		—		50
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		(146)		(3)
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		255		15

Total other comprehensive income	—	—		—	—		—	—		—		—		109		12




Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(45)
Acquisitions of noncontrolling interests	—	—		—	—		—	—		—		—		—		(2)
Contributions from noncontrolling interests	—	—		—	—		—	—		—		—		—		3
Sales to noncontrolling interests	—	—		—	—		—	—		10		—		—		170




Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		—	—		—	—		11		—		—		—
Balance at June 30, 2022	1.0	$	838	818.7	$	8	150.9	$	(1,832)	$	6,924	$	(1,153)	$	(1,790)	$	1,858
Net income	—	—		—	—		—	—		—		421		—		31
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		(75)		(4)
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		174		14
Total pension adjustments, net of income tax	—	—		—	—		—	—		—		—		—		1
Total other comprehensive income	—	—		—	—		—	—		—		—		99		11




Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(38)
Acquisitions of noncontrolling interests	—	—		—	—		—	—		(3)		—		—		(2)
Contributions from noncontrolling interests	—	—		—	—		—	—		—		—		—		78
Sales to noncontrolling interests	—	—		—	—		—	—		(2)		—		—		114

Dividends declared on AES common stock ($0.1580/share)	—	—		—	—		—	—		(106)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		0.1	—		(0.1)	—		5		—		—		—
Balance at September 30, 2022	1.0	$	838	818.8	$	8	150.8	$	(1,832)	$	6,818	$	(732)	$	(1,691)	$	2,052

See Notes to Condensed Consolidated Financial Statements.

8 | The AES Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
	2023		2022

	(in millions)
OPERATING ACTIVITIES:
Net income	$	461	$	481
Adjustments to net income:
Depreciation and amortization	836		800
Loss on disposal and sale of business interests	4		—
Impairment expense	358		533
Deferred income taxes	(102)		—





Loss of affiliates, net of dividends	47		78
Emissions allowance expense	211		319
Loss on realized/unrealized foreign currency	184		45
Other	150		(1)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	16		(409)
(Increase) decrease in inventory	253		(361)
(Increase) decrease in prepaid expenses and other current assets	76		(116)
(Increase) decrease in other assets	(4)		251
Increase (decrease) in accounts payable and other current liabilities	(187)		108
Increase (decrease) in income tax payables, net and other tax payables	(67)		(131)
Increase (decrease) in deferred income	50		48
Increase (decrease) in other liabilities	23		4
Net cash provided by operating activities	2,309		1,649
INVESTING ACTIVITIES:
Capital expenditures	(5,295)		(2,711)
Acquisitions of business interests, net of cash and restricted cash acquired	(311)		(114)
Proceeds from the sale of business interests, net of cash and restricted cash sold	98		1

Sale of short-term investments	1,002		654
Purchase of short-term investments	(764)		(1,091)
Contributions and loans to equity affiliates	(147)		(202)


Affiliate repayments and returns of capital	—		71
Purchase of emissions allowances	(161)		(415)

Other investing	(95)		(18)
Net cash used in investing activities	(5,673)		(3,825)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities and commercial paper program	33,981		4,214
Repayments under the revolving credit facilities and commercial paper program	(32,168)		(2,782)
Issuance of recourse debt	1,400		200
Repayments of recourse debt	—		(29)
Issuance of non-recourse debt	1,784		3,554
Repayments of non-recourse debt	(1,262)		(1,772)
Payments for financing fees	(76)		(83)
Purchases under supplier financing arrangements	1,307		299
Repayments of obligations under supplier financing arrangements	(1,099)		(234)
Distributions to noncontrolling interests	(173)		(129)
Acquisitions of noncontrolling interests	(12)		(541)
Contributions from noncontrolling interests	63		122
Sales to noncontrolling interests	371		336
Issuance of preferred shares in subsidiaries	3		60

Dividends paid on AES common stock	(333)		(316)
Payments for financed capital expenditures	(8)		(23)


Other financing	(38)		(13)
Net cash provided by financing activities	3,740		2,863
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(108)		(44)
Increase in cash, cash equivalents and restricted cash of held-for-sale businesses	(20)		(93)
Total increase in cash, cash equivalents and restricted cash	248		550
Cash, cash equivalents and restricted cash, beginning	2,087		1,484
Cash, cash equivalents and restricted cash, ending	$	2,335	$	2,034
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized	$	735	$	654
Cash payments for income taxes, net of refunds	267		203
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:









Initial recognition of contingent consideration for acquisitions (see Note 18)	215		15
Noncash recognition of new operating and financing leases	187		129
Noncash contributions from noncontrolling interests	60		—

See Notes to Condensed Consolidated Financial Statements.

9 | Notes to Condensed Consolidated Financial Statements | September 30, 2023 and 2022

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

FINANCIAL STATEMENT PRESENTATION

Consolidation — In this Quarterly Report, the terms “AES,” “the Company,” “us” or “we” refer to the consolidated entity, including its subsidiaries and affiliates. The terms “The AES Corporation” or “the Parent Company” refer only to the publicly held holding company, The AES Corporation, excluding its subsidiaries and affiliates. Furthermore, VIEs in which the Company has a variable interest have been consolidated where the Company is the primary beneficiary. Investments in which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting, 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 and nine months ended September 30, 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”) and in Exhibit 99.1 to the Form 8-K filed with the SEC on May 8, 2023.

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 Sheets that reconcile to the total of such amounts as shown on the Condensed Consolidated Statements of Cash Flows (in millions):


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	1,765	$	1,374
Restricted cash	365		536
Debt service reserves and other deposits	205		177
Cash, Cash Equivalents, and Restricted Cash	$	2,335	$	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):

10 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


Nine Months Ended September 30, 2023	Accounts Receivable		Mong Duong Receivables		Argentina Receivables		Lease Receivable (2)		Other		Total
CECL reserve balance at beginning of period	$	4	$	28	$	31	$	20	$	1	$	84
Current period provision	14		—		—		—		11		25
Write-offs charged against allowance	(12)		—		—		(20)		—		(32)
Recoveries collected	2		(2)		—		—		—		—
Foreign exchange	—		—		(15)		—		—		(15)
CECL reserve balance at end of period	$	8	$	26	$	16	$	—	$	12	$	62


Nine Months Ended September 30, 2022	Accounts Receivable (1)		Mong Duong Receivables		Argentina Receivables		Lease Receivable (2)		Other		Total






CECL reserve balance at beginning of period	$	3	$	30	$	23	$	—	$	7	$	63
Current period provision	7		—		22		20		—		49
Write-offs charged against allowance	(9)		—		—		—		(6)		(15)
Recoveries collected	2		(1)		—		—		—		1
Foreign exchange	—		—		(8)		—		—		(8)
CECL reserve balance at end of period	$	3	$	29	$	37	$	20	$	1	$	90

**(1)**Excludes operating lease receivable allowances and contractual dispute allowances of $2 million as of September 30, 2022. 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 Condensed Consolidated Balance Sheets as the amounts are all due in less than a year; the related interest expense is recorded on the Condensed Consolidated Statements of Operations within Interest expense. The company had 32 supplier financing arrangements with a total outstanding balance of $775 million as of September 30, 2023, and 46 supplier financing arrangements with a total outstanding balance of $662 million as of December 31, 2022. The agreements ranged from less than $1 million to $69 million with a weighted average interest rate of 7.37% as of September 30, 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, $607 million and $296 million were guaranteed by the Parent Company as of September 30, 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 condensed 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 condensed 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 is being applied to any business combinations that occur in 2023 or after. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

11 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 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 rollforward information, which is effective for fiscal years beginning after December 15, 2023.	The ASU only requires disclosures related to the Company's supplier finance programs and does not affect the recognition, measurement, or presentation of supplier finance program obligations on the balance sheet or cash flow statement. The Company adopted the new disclosure requirements in the first quarter of 2023, except for the annual requirement to disclose rollforward information, which the Company expects to adopt and present prospectively beginning in the 2024 annual financial statements.
2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)	This Accounting Standards Update amends various SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. The amendments in this Update are effective for all entities upon issuance of this Update.	June 30, 2023	The adoption of this ASU did not have a material impact on the Company’s consolidated 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 condensed 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 condensed consolidated financial statements.

12 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022



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

2023-05 Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement	The amendments in this Update address the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. The objectives of the amendments are to (1) provide decision-useful information to investors and other allocators of capital (collectively, investors) in a joint venture’s financial statements and (2) reduce diversity in practice. To reduce diversity in practice and provide decision-useful information to a joint venture’s investors, the Board decided to require that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments in this Update do not amend the definition of a joint venture (or a corporate joint venture), the accounting by an equity method investor for its investment in a joint venture, or the accounting by a joint venture for contributions received after its formation. The amendments in this Update permit a joint venture to apply the measurement period guidance in Subtopic 805-10 if the initial accounting for a joint venture formation is incomplete by the end of the reporting period in which the formation occurs.	Prospectively for all Joint Venture formations with a formation date on or after January 1, 2025. For Joint Ventures formed before January 1, 2025, entities may elect to apply the amendments retrospectively if it has sufficient information.	The Company is currently evaluating the impact of adopting the standard on its consolidated financial statements.
2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative	In U.S. Securities and Exchange Commission (SEC) Release No. 33-10532, Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles (GAAP) to the FASB for potential incorporation into the Codification. The amendments in this Update are the result of the Board’s decision to incorporate into the Codification 14 of the 27 disclosures referred by the SEC. The amendments in this Update represent changes to clarify or improve disclosure and presentation requirements of a variety of Topics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations.	The effective date for each amendment will be the date on which the SEC's removal of that related disclosure becomes effective, with early adoption prohibited. The amendments in this Update should be applied prospectively.	The Company will provide the required disclosures on a prospective basis on the date each amendment becomes effective. The Company does not expect ASU 2023-06 will have any impact to our consolidated financial statements.

INVENTORY

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


	September 30, 2023		December 31, 2022
Fuel and other raw materials	$	498	$	733
Spare parts and supplies	300		322
Total	$	798	$	1,055

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:

13 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


	September 30, 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	$	—	$	493	$	—	$	493	$	—	$	698	$	—	$	698
Government debt securities	—		—		—		—		—		3		—		3
Total debt securities	—		493		—		493		—		701		—		701
EQUITY SECURITIES:
Mutual funds	43		—		—		43		38		—		—		38

Total equity securities	43		7		—		50		38		—		—		38
DERIVATIVES:
Interest rate derivatives	—		478		—		478		—		314		—		314

Foreign currency derivatives	—		22		46		68		—		22		64		86
Commodity derivatives	—		137		4		141		—		232		13		245
Total derivatives — assets	—		637		50		687		—		568		77		645
TOTAL ASSETS	$	43	$	1,137	$	50	$	1,230	$	38	$	1,269	$	77	$	1,384
Liabilities
Contingent consideration	$	—	$	—	$	267	$	267	$	—	$	—	$	48	$	48
DERIVATIVES:
Interest rate derivatives	—		—		—		—		—		6		—		6
Cross-currency derivatives	—		54		—		54		—		42		—		42
Foreign currency derivatives	—		26		—		26		—		20		—		20
Commodity derivatives	—		127		80		207		—		346		60		406
Total derivatives — liabilities	—		207		80		287		—		414		60		474
TOTAL LIABILITIES	$	—	$	207	$	347	$	554	$	—	$	414	$	108	$	522

As of September 30, 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 and nine months ended September 30, 2023. The level 3 contingent consideration relates mainly to the acquisition of Bellefield on June 5, 2023. For further information on the acquisition, see Note 18—Acquisitions. 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Gross proceeds from sale of available-for-sale securities	$	308	$	318	$	1,047	$	665

The following tables present a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 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.

14 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


	Derivative Assets and Liabilities
Three Months Ended September 30, 2023	Interest Rate		Foreign Currency		Commodity		Contingent Consideration		Total
Balance at July 1, 2023	$	(1)	$	63	$	(78)	$	(274)	$	(290)
Total realized and unrealized gains (losses):
Included in earnings	—		(6)		(3)		(1)		(10)
Included in other comprehensive income (loss) — derivative activity	5		(2)		7		—		10


Acquisitions	—		—		—		3		3
Settlements	—		(9)		(2)		5		(6)

Transfers of assets, net out of Level 3	(4)		—		—		—		(4)
Balance at September 30, 2023	$	—	$	46	$	(76)	$	(267)	$	(297)
Total (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	$	—	$	(13)	$	(3)	$	(1)	$	(17)

	Derivative Assets and Liabilities
Three Months Ended September 30, 2022	Interest Rate		Foreign Currency		Commodity		Contingent Consideration		Total
Balance at July 1, 2022	$	1	$	50	$	37	$	(80)	$	8
Total realized and unrealized gains (losses):
Included in earnings	1		22		(1)		4		26
Included in other comprehensive income (loss) — derivative activity	(1)		7		(14)		—		(8)
Included in other comprehensive income (loss) — foreign currency translation activity	—		—		—		1		1
Included in regulatory (assets) liabilities	—		—		(3)		—		(3)

Settlements	—		(9)		—		16		7
Transfers of liabilities, net into Level 3	—		—		(2)		—		(2)
Transfers of assets, net out of Level 3	(2)		—		(15)		—		(17)
Balance at September 30, 2022	$	(1)	$	70	$	2	$	(59)	$	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	$	—	$	14	$	(1)	$	4	$	17

15 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


	Derivative Assets and Liabilities
Nine Months Ended September 30, 2023	Interest Rate		Foreign Currency		Commodity		Contingent Consideration		Total
Balance at January 1, 2023	$	—	$	64	$	(47)	$	(48)	$	(31)
Total realized and unrealized gains (losses):
Included in earnings	—		—		(3)		(9)		(12)
Included in other comprehensive income (loss) — derivative activity	2		—		(20)		—		(18)
Included in other comprehensive income (loss) — foreign currency translation activity	—		—		—				—
Included in regulatory (assets) liabilities	—		—		(2)		—		(2)
Acquisitions	—		—		—		(215)		(215)
Settlements	—		(18)		(5)		5		(18)

Transfers of (assets) liabilities, net out of Level 3	(2)		—		1		—		(1)
Balance at September 30, 2023	$	—	$	46	$	(76)	$	(267)	$	(297)
Total (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	$	—	$	(14)	$	(4)	$	(9)	$	(27)

	Derivative Assets and Liabilities
Nine Months Ended September 30, 2022	Interest Rate		Foreign Currency		Commodity		Contingent Consideration		Total
Balance at January 1, 2022	$	(6)	$	108	$	(1)	$	(67)	$	34
Total realized and unrealized gains (losses):
Included in earnings	4		(22)		(4)		4		(18)
Included in other comprehensive income (loss) — derivative activity	13		(7)		(7)		—		(1)
Included in other comprehensive income (loss) — foreign currency translation activity	—		—		—		(1)		(1)
Included in regulatory (assets) liabilities	—		—		13		—		13
Acquisitions	—		—		—		(15)		(15)
Settlements	(1)		(9)		1		20		11

Transfers of assets, net out of Level 3	(11)		—		—		—		(11)
Balance at September 30, 2022	$	(1)	$	70	$	2	$	(59)	$	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	$	3	$	(44)	$	1	$	4	$	(36)

The following table summarizes the significant unobservable inputs used for Level 3 derivative assets (liabilities) as of September 30, 2023 (in millions, except range amounts):


Type of Derivative	Fair Value		Unobservable Input	Amount or Range (Weighted Average)


Foreign currency:
Argentine peso	$	46	Argentine peso to U.S. dollar currency exchange rate after one year	860 to 1,500 (1,222)

Commodity:
CAISO Energy Swap	(79)		Forward energy prices per MWh after 2030	$12 to $96 ($52)
Other	3
Total	$	(30)

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.

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

Nonrecurring Measurements

16 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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 on the Condensed Consolidated Statements of Operations. The following table summarizes our major categories of asset groups measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions).


	Measurement Date		Carrying Amount (1)			Fair Value								Pre-tax Loss
Nine Months Ended September 30, 2023		Level 1			Level 2			Level 3
Long-lived asset groups held and used:
Norgener (2)	5/1/2023		$	196		$	—		$	—		$	24	$	137
GAF Projects (AES Renewable Holdings)	5/31/2023		29			—			—			11		18
TEP	7/31/2023		153			—			—			94		59
TEG	7/31/2023		170			—			—			93		77
Held-for-sale businesses: (3)
Jordan (4)	3/31/2023		$	179		$	—		$	170		$	—	$	14
Jordan (4)	6/30/2023		179			—			170			—		15
Jordan (4)	9/30/2023		178			—			170			—		14

	Measurement Date		Carrying Amount (1)			Fair Value
Nine Months Ended September 30, 2022		Level 1			Level 2			Level 3			Pre-tax Loss
Long-lived asset groups held and used:
Maritza	4/30/2022		$	920		$	—		$	—		$	452	$	468
Held-for-sale businesses: (3)
Jordan (4)	9/30/2022		216			—			170			—		51

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

(2)The Norgener asset group includes long-lived assets, inventory, land, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. See Note 15—Asset Impairment Expense for further information. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and determined that the carrying value of the other assets should not be reduced.

(3)See Note 17—Held-for-Sale for further information.

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

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets held and used measured on a nonrecurring basis during the nine months ended September 30, 2023 (in millions, except range amounts):


	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)



Long-lived asset groups held and used:
TEP	$	94	Discounted cash flow	Annual revenue growth	(31)% to 6% (-2%)
				Annual variable margin	22% to 37% (26%)
				Discount rate	14% to 25% (14%)
TEG	93		Discounted cash flow	Annual revenue growth	(7)% to 9% (—%)
				Annual variable margin	14% to 33% (20%)
				Discount rate	14% to 25% (14%)
Norgener (1)	24		Discounted cash flow	Annual revenue growth	(90)% to 994% (85%)
				Annual variable margin	(75)% to 276% (16%)

GAF Projects (AES Renewable Holdings)	11		Discounted cash flow	Annual revenue growth	(42)% to 44% (1%)
				Annual variable margin	(194)% to 77% (66%)
				Discount rate	9%
Total	$	222

(1)The fair value of the Norgener asset group is mainly related to existing coal inventory not subject to impairment under ASC 360-10.

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:

17 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


		September 30, 2023
		Carrying Amount		Fair Value
		Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent (1)	$	117	$	153	$	—	$	—	$	153
Liabilities:	Non-recourse debt	21,618		21,108		—		19,646		1,462
	Recourse debt	5,564		5,106		—		5,106		—


		December 31, 2022
		Carrying Amount		Fair Value
		Total		Level 1		Level 2		Level 3
Assets:	Accounts receivable — noncurrent (1)	$	301	$	340	$	—	$	—	$	340
Liabilities:	Non-recourse debt	19,429		18,527		—		17,089		1,438
	Recourse debt	3,894		3,505		—		3,505		—

(1)These amounts primarily relate to 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.

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 September 30, 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	$	5,949	2059
Cross-currency swaps (Brazilian real)	404		2026
Foreign Currency:
Chilean peso	220		2026
Euro	100		2026
Mexican peso	73		2024
Colombian peso	43		2025
Brazilian real	39		2026
Argentine peso	2		2026


Commodity Derivatives	Maximum Notional	Latest Maturity
Natural Gas (in MMBtu)	62	2029
Power (in MWhs)	14	2040
Coal (in Tons or Metric Tons)	5	2025

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


Fair Value	September 30, 2023						December 31, 2022
Assets	Designated		Not Designated		Total		Designated		Not Designated		Total
Interest rate derivatives	$	478	$	—	$	478	$	313	$	1	$	314

Foreign currency derivatives	20		48		68		27		59		86
Commodity derivatives	—		141		141		—		245		245
Total assets	$	498	$	189	$	687	$	340	$	305	$	645
Liabilities
Interest rate derivatives	$	—	$	—	$	—	$	6	$	—	$	6
Cross-currency derivatives	54		—		54		42		—		42
Foreign currency derivatives	11		15		26		9		11		20
Commodity derivatives	79		128		207		59		347		406
Total liabilities	$	144	$	143	$	287	$	116	$	358	$	474


	September 30, 2023				December 31, 2022
Fair Value	Assets		Liabilities		Assets		Liabilities
Current	$	355	$	113	$	271	$	168
Noncurrent	332		174		374		306
Total	$	687	$	287	$	645	$	474

18 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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


	Three Months Ended September 30,						Nine Months Ended September 30,
2023			2022			2023			2022
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives	$	358		$	238		$	380		$	865

Foreign currency derivatives	(18)			8			(6)			(4)
Commodity derivatives	7			5			(20)			66
Total	$	347		$	251		$	354		$	927
Gains (losses) reclassified from AOCL into earnings
Interest rate derivatives	$	(2)		$	(11)		$	47		$	(61)

Foreign currency derivatives	(1)			2			(4)			2
Commodity derivatives	4			(4)			17			(5)
Total	$	1		$	(13)		$	60		$	(64)
Gains (losses) on fair value hedging relationship

Cross-currency derivatives	$	29		$	6		$	(57)		$	(29)
Hedged items	1			—			54			22
Total	$	30		$	6		$	(3)		$	(7)


Gains reclassified from AOCL to earnings due to change in forecast	$	—		$	2		$	14		$	17
Gains recognized in earnings related to

Not designated as hedging instruments:
Interest rate derivatives	$	—		$	1		$	—		$	4
Foreign currency derivatives	3			35			3			20
Commodity derivatives and other	74			3			265			20
Total	$	77		$	39		$	268		$	44

AOCL reclassifications are expected to increase pre-tax income from continuing operations for the twelve months ended September 30, 2024 by $198 million, primarily due to interest rate derivatives.

FINANCING RECEIVABLES

Receivables with contractual maturities of greater than one year are considered financing receivables. The following table presents financing receivables by country as of the dates indicated (in millions):


	September 30, 2023						December 31, 2022
	Gross Receivable		Allowance		Net Receivable		Gross Receivable		Allowance		Net Receivable
U.S.	$	77	$	—	$	77	$	46	$	—	$	46
Chile	29		—		29		239		—		239



Other	12		—		12		18		—		18
Total	$	118	$	—	$	118	$	303	$	—	$	303

U.S. — During this period, AES has recorded non-current receivables pertaining to the sale of the Redondo Beach land and the Warrior Run PPA termination agreement. The anticipated collection period extends beyond September 30, 2024. See Note 13—Revenue for further details regarding the Warrior Run PPA termination agreement.

Chile — AES Andes has recorded receivables pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Funds created by the Chilean government in October 2019 and August 2022, in conjunction with the Tariff Stabilization Laws. Historically, the government updated the prices for these contracts every six months to reflect the contracts' indexation to exchange rates and commodities prices. The Tariff Stabilization Laws do not allow the pass-through of these contractual indexation updates to customers beyond the pricing in effect at July 1, 2019, until new lower-cost renewable contracts are incorporated to supply regulated contracts. Consequently, costs incurred in excess of the July 1, 2019 price are accumulated and borne by generators. Through different programs, AES Andes aims to reduce its exposure and has already sold a significant portion of the receivables accumulated as of September 30, 2023.

On August 14, 2023, AES Andes executed an agreement aiming for the sale of up to $227 million of receivables pursuant to the Stabilization Funds, of which $122 million was sold and collected as of September 30, 2023. Through different agreements and programs, as of September 30, 2023, $16 million of current receivables and $7 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets,

19 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

respectively. Additionally, $22 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 September 30, 2023.

INVESTMENTS IN AND ADVANCES TO AFFILIATES

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


	50%-or-less Owned Affiliates				Majority-Owned Unconsolidated Subsidiaries
Nine Months Ended September 30,	2023		2022		2023		2022
Revenue	$	2,089	$	1,218	$	1	$	1
Operating loss	(21)		(322)		(1)		—
Net loss	(129)		(410)		(1)		—
Net loss attributable to affiliates	(111)		(332)		(1)		—

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

sPower — In December 2022, the Company agreed to sell 49% of its indirect interest in a portfolio of sPower's operating assets ("OpCo B"). On February 28, 2023, sPower closed on the sale for $196 million. As a result of the transaction, the Company received $98 million in sales proceeds and recorded a pre-tax gain on sale of $5 million, recorded in Gain (loss) on disposal and sale of business interests. After the sale, the Company's ownership interest in OpCo B decreased from 50% to approximately 26%. As the Company still does not control but has significant influence over sPower after the transaction, it continues to be accounted for as an equity method investment and is reported in the Renewables SBU reportable segment.

Alto Maipo — In May 2022, Alto Maipo emerged from bankruptcy in accordance with Chapter 11 of the U.S. Bankruptcy Code. Alto Maipo, as restructured, is considered a VIE. As the Company lacks the power to make significant decisions, it does not meet the criteria to be considered the primary beneficiary of Alto Maipo and therefore does not consolidate the entity. The Company has elected the fair value option to account for its investment in Alto Maipo as management believes this approach will better reflect the economics of its equity interest. As of September 30, 2023, the fair value is insignificant. Alto Maipo is reported in the Energy Infrastructure SBU reportable segment.

20 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

DEBT

Recourse Debt

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

AES Clean Energy Development — In March 2023, AES Clean Energy Development Holdings, LLC executed a $500 million bridge loan due in December 2023 and used the proceeds for general corporate purposes. The obligations under the bridge loan 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 commercial paper program is backed by the Company's $1.5 billion revolving credit facility, and the Company cannot issue commercial paper in an aggregate amount exceeding the then available capacity under its revolving credit facilities. As of September 30, 2023, the Company had $604 million outstanding borrowings under the commercial paper program with a weighted average interest rate of 6.16%. The Notes are classified as noncurrent.

Revolving Credit Facility — In September 2022, AES executed an amendment to its revolving credit facility. The aggregate commitment under the new agreement is $1.5 billion and matures in August 2027. The existing credit agreement had an aggregate commitment of $1.25 billion and matured in September 2026. As of September 30, 2023, AES had no outstanding drawings under its revolving credit facility.

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

Non-Recourse Debt

During the nine months ended September 30, 2023, the Company’s following subsidiaries had significant debt issuances (in millions):


Subsidiary	Issuances (1)


AES Clean Energy	$	885
Netherlands and Colon	350

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

21 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 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 nine months ended September 30, 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. In 2023, the Issuers sold an additional $246 million in 6.37% notes, resulting in aggregate principal amount of notes issued of $893 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 2023 issuance, AES Clean Energy Development recorded an increase in liabilities of $215 million, resulting in an aggregate carrying amount of the notes attributable to AES Clean Energy Development and AES Renewable Holdings of $252 million as of September 30, 2023.

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 $2.3 billion, bringing the total commitments under the new agreements to $3.5 billion. Under a 2023 amendment, the maturity date of one of the Credit Agreements was extended from December 2024 to May 2026. Each of the Borrowers is considered a “Co-Borrower” and will be jointly and severally liable with each other Co-Borrower for all obligations under the facilities. As a result of increases in commitments used, AES Clean Energy Development and AES Renewable Holdings recorded, in aggregate, an increase in liabilities of $1.4 billion in 2023, resulting in total commitments used under the revolving credit facilities, as of September 30, 2023, of $2.7 billion. As of September 30, 2023, the aggregate commitments used under the revolving credit facilities for the Co-Borrowers was $3.4 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 September 30, 2023 and December 31, 2022, approximately $369 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. As of September 30, 2023 and December 31, 2022, approximately $91 million and $56 million, respectively, of the restricted cash balances were for collateral held to cover potential liability for current and future insurance claims being assumed by AGIC, AES' captive insurance company.

Various lender and governmental provisions restrict the ability of certain of the Company's subsidiaries to transfer their net assets to the Parent Company. Such restricted net assets of subsidiaries amounted to approximately $1.4 billion at September 30, 2023.

The following table summarizes the Company’s subsidiary non-recourse debt in default (in millions) as of September 30, 2023. Due to the defaults, these amounts are included in the current portion of non-recourse debt unless otherwise indicated:

22 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


Subsidiary	Primary Nature of Default	Debt in Default		Net Assets (Liabilities)
AES Mexico Generation Holdings (TEG and TEP) (1)	Covenant	$	157	$	50
AES Puerto Rico	Covenant/Payment	143		(169)
AES Ilumina (Puerto Rico)	Covenant	25		28
AES Jordan Solar	Covenant	7		11
Total		$	332

(1)On October 3, 2023, AES Mexico Generation Holdings failed to comply with a covenant on its debt, resulting in a technical default. The associated non-recourse debt is classified as current in the accompanying Condensed Consolidated Balance Sheets.

The amounts in default related to AES Puerto Rico are covenant and payment defaults. In July 2023, AES Puerto Rico signed forbearance and standstill agreements with its noteholders because of the insufficiency of funds to meet the principal and interest obligations on its Series A Bond Loans due and payable on June 1, 2023, and going forward. AES Puerto Rico continues to work with PREPA and its noteholders on these liquidity challenges. These agreements will expire on December 31, 2023.

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

The AES Corporation’s recourse debt agreements include cross-default clauses that will trigger if a subsidiary 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 September 30, 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.

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 33 years.

The following table summarizes the Parent Company’s contingent contractual obligations as of September 30, 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	$	2,431	81	<$1 — 484
Letters of credit under bilateral agreements	248		3	$59 — 125
Letters of credit under the unsecured credit facilities	136		30	<$1 — 50
Letters of credit under the revolving credit facility	39		6	<$1 — 30
Surety bonds	2		2	<$1 — 1

Total	$	2,856	122

During the nine months ended September 30, 2023, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts of letters of credit.

23 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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 September 30, 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 September 30, 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 September 30, 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 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 September 30, 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 $182 million and $219 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.

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 September 30,				Nine Months Ended September 30,
Operating Lease Revenue	2023		2022		2023		2022
Total lease revenue	$	133	$	134	$	390	$	408
Less: Variable lease revenue	(22)		(14)		(54)		(37)
Total Non-variable lease revenue	$	111	$	120	$	336	$	371

24 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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 as of the periods indicated (in millions):


Property, Plant and Equipment, Net	September 30, 2023		December 31, 2022
Gross assets	$	1,223	$	1,319
Less: Accumulated depreciation	(180)		(139)
Net assets	$	1,043	$	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 September 30, 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 September 30, 2023 for the remainder of 2023 through 2027 and thereafter (in millions):


	Future Cash Receipts for
	Sales-Type Leases		Operating Leases
2023	$	7	$	96
2024	26		385
2025	26		386
2026	26		278
2027	26		183
Thereafter	375		544
Total	$	486	$	1,872
Less: Imputed interest	(257)
Present value of total lease receipts	$	229

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 $3 million and $10 million for the three and nine months ended September 30, 2023, respectively; and $4 million and $20 million for the three and nine months ended September 30, 2022, respectively.

REDEEMABLE STOCK OF SUBSIDIARIES

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


	September 30, 2023		December 31, 2022
IPALCO common stock	$	778	$	782
AES Clean Energy Development common stock	557		436
AES Clean Energy tax equity partnerships	70		86

Potengi common and preferred stock	18		17

Total redeemable stock of subsidiaries	$	1,423	$	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.

25 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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

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

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

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

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

The 2024 Purchase Contracts obligate the holders to purchase, on February 15, 2024, for a price of $100 in cash, a maximum number of 57,407,386 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 September 30, 2023, due to the customary anti-dilution provisions, the maximum settlement rate was 3.8768, equivalent to a reference price of $25.79. 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.

26 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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 September 30, 2023, the present value of the Contract Adjustment Payments was $36 million.

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

Equity Transactions with Noncontrolling Interests

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

During the nine months ended September 30, 2023 and 2022, AES Clean Energy Development and AES Renewable Holdings, through multiple transactions, sold noncontrolling interests in project companies to tax equity partners, resulting in increases to NCI of $292 million and $210 million, respectively.

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

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. During the nine months ended September 30, 2022 and 2023, AES Andes completed the sale of the following projects to Chile Renovables (in millions):


Business	Transaction Period	Sale Price		Increase to Noncontrolling Interests		Increase (Decrease) to Additional Paid-In Capital
Andes Solar 2a	January 2022	$	37	$	28	$	9
Los Olmos	June 2022	80		68		12
Campo Lindo	September 2023	50		59		(9)

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

AES Panama — In September 2023, AES Latin America completed the sale of its interest in the Grupo Energía Gas Panamá joint venture to AES Panama, a 49%-owned consolidated subsidiary. See Note 6—Investments in and Advances to Affiliates for further information. As a result of the transaction, AES Panama received $42 million from noncontrolling interest holders and the Company reclassified accumulated other comprehensive income from AOCL to NCI of $23 million. AES Panama is reported in the Renewables SBU reportable segment however the investment in Grupo Energía Gas Panamá is reported in the Energy Infrastructure SBU reportable segment.

AES Brasil — In September 2022, AES Brasil commenced a private placement offering for its existing shareholders to subscribe for up to 107 million newly issued shares. AES Holdings Brasil Ltda. subscribed for 54 million shares and noncontrolling interest holders subscribed for 53 million shares, thereby increasing AES’ indirect beneficial interest in AES Brasil to 47.4%. AES Brasil received $77 million from noncontrolling interest holders during the third quarter of 2022, prior to the issuance of the shares in October 2022. Since the consideration received was nonrefundable, the impact was recorded in noncontrolling interests. AES Brasil is reported in the Renewables 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.

27 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 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 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 nine months ended September 30, 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 before reclassifications	71		227		—		298
Amount reclassified to earnings	—		(45)		—		(45)
Other comprehensive income	71		182		—		253
Reclassification to NCI due to sales	—		(23)		—		(23)
Balance at the end of the period	$	(1,757)	$	370	$	(23)	$	(1,410)

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 September 30,				Nine Months Ended September 30,
	2023	2022		2023		2022





Derivative gains (losses), net
	Non-regulated revenue	$	—	$	—	$	(8)	$	(1)
	Non-regulated cost of sales	(1)		(5)		(2)		(7)
	Interest expense	(3)		(9)		13		(42)
	Gain (loss) on disposal and sale of business interests	—		—		33		—
	Asset impairment expense	—		—		—		(16)
	Foreign currency transaction gains (losses)	—		2		(3)		2
	Income from continuing operations before taxes and equity in earnings of affiliates	(4)		(12)		33		(64)
	Income tax expense	—		(1)		(11)		12
	Net equity in losses of affiliates	5		(1)		27		—

	Net income	1		(14)		49		(52)
	Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries	1		3		(4)		11
	Net income attributable to The AES Corporation	$	2	$	(11)	$	45	$	(41)
Amortization of defined benefit pension actuarial gain (loss), net
	Regulated cost of sales	$	—	$	—	$	—	$	(1)


	Other expense	—		(2)		—		(2)

	Income from continuing operations before taxes and equity in earnings of affiliates	—		(2)		—		(3)
	Income tax expense	—		1		—		1



	Net income	—		(1)		—		(2)
	Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries	—		1		—		1

	Net income attributable to The AES Corporation	$	—	$	—	$	—	$	(1)
Total reclassifications for the period, net of income tax and noncontrolling interests		$	2	$	(11)	$	45	$	(42)

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

On October 6, 2023, the Board of Directors declared a quarterly common stock dividend of $0.1659 per share payable on November 15, 2023, to shareholders of record at the close of business on November 1, 2023.

28 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

SEGMENTS

The segment reporting structure uses the Company’s management reporting structure as its foundation to reflect how the Company manages the businesses internally. In our 2022 Form 10-K, the management reporting structure and the Company’s reportable segments were mainly organized by geographic regions. In March 2023, we announced internal management changes as a part of our ongoing strategy to align our business to meet our customers’ needs and deliver on our major strategic objectives. The management reporting structure is now composed of four SBUs, mainly organized by technology, led by our President and Chief Executive Officer. Using the accounting guidance on segment reporting, the Company determined that its four operating segments are aligned with its four reportable segments corresponding to its SBUs. All prior period results have been retrospectively revised to reflect the new segment reporting structure.

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

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

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

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

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

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

During the first quarter of 2023, management began assessing operational performance and making resource allocation decisions using Adjusted EBITDA. Therefore, the Company uses Adjusted EBITDA as its primary segment performance measure. Adjusted EBITDA, a non-GAAP measure, is defined by the Company as earnings before interest income and expense, taxes, depreciation and amortization, adjusted for the impact of NCI and interest, taxes, depreciation and amortization of our equity affiliates, and adding back interest income recognized under service concession arrangements; excluding gains or losses of both consolidated entities and entities accounted for under the equity method due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; and (f) net gains at Angamos, one of our businesses in the Energy Infrastructure SBU, associated with the early contract terminations with Minera Escondida and Minera Spence.

The Company has concluded Adjusted EBITDA better reflects the underlying business performance of the Company and is the most relevant measure considered in the Company's internal evaluation of the financial 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.

29 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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


	Three Months Ended September 30,				Nine Months Ended September 30,
Total Revenue	2023		2022		2023		2022
Renewables SBU	$	708	$	532	$	1,744	$	1,407
Utilities SBU	880		994		2,703		2,674
Energy Infrastructure SBU	1,861		2,126		5,239		5,553
New Energy Technologies SBU	—		—		75		2
Corporate and Other	29		24		96		81
Eliminations	(44)		(49)		(157)		(160)
Total Revenue	$	3,434	$	3,627	$	9,700	$	9,557


	Three Months Ended September 30,				Nine Months Ended September 30,
Reconciliation of Adjusted EBITDA (in millions)	2023		2022		2023		2022
Net income	$	291	$	446	$	461	$	481
Income tax expense	109		145		179		186
Interest expense	326		276		966		813
Interest income	(144)		(100)		(398)		(270)
Depreciation and amortization	286		266		836		800
EBITDA	$	868	$	1,033	$	2,044	$	2,010

Less: Adjustment for noncontrolling interests and redeemable stock of subsidiaries (1)	(183)		(174)		(508)		(486)
Less: Income tax expense (benefit), interest expense (income) and depreciation and amortization from equity affiliates	27		36		93		93
Interest income recognized under service concession arrangements	18		19		54		58
Unrealized derivative and equity securities losses (gains)	10		(8)		3		—
Unrealized foreign currency losses	97		3		161		23
Disposition/acquisition losses	8		4		21		36
Impairment losses	145		17		318		497
Loss on extinguishment of debt	—		1		1		7

Adjusted EBITDA	$	990	$	931	$	2,187	$	2,238

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


	Three Months Ended September 30,				Nine Months Ended September 30,
Adjusted EBITDA	2023		2022		2023		2022
Renewables SBU	$	267	$	195	$	557	$	476
Utilities SBU	216		137		526		456
Energy Infrastructure SBU	520		620		1,165		1,353
New Energy Technologies SBU	(22)		(27)		(61)		(88)
Corporate and Other	8		9		20		10
Eliminations	1		(3)		(20)		31
Adjusted EBITDA	$	990	$	931	$	2,187	$	2,238

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	September 30, 2023		December 31, 2022
Renewables SBU	$	13,618	$	9,533
Utilities SBU	6,809		6,311
Energy Infrastructure SBU	7,467		7,532
New Energy Technologies SBU	8		2

Corporate and Other	10		17
Long-Lived Assets	27,912		23,395
Current assets	7,317		7,643
Investments in and advances to affiliates	894		952
Debt service reserves and other deposits	205		177
Goodwill	362		362
Other intangible assets	2,290		1,841
Deferred income taxes	428		319
Loan receivable	990		1,051
Other noncurrent assets, excluding right-of-use assets for operating leases	2,763		2,623
Total Assets	$	43,161	$	38,363

30 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

REVENUE

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



	Three Months Ended September 30, 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	$	672	$	16	$	1,655	$	—	$	(14)	$	2,329


Other non-regulated revenue (1)	36		1		206		—		(1)		242
Total non-regulated revenue	708		17		1,861		—		(15)		2,571
Regulated Revenue
Revenue from contracts with customers	—		855		—		—		—		855

Other regulated revenue	—		8		—		—		—		8
Total regulated revenue	—		863		—		—		—		863
Total revenue	$	708	$	880	$	1,861	$	—	$	(15)	$	3,434

	Three Months Ended September 30, 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	$	494	$	17	$	2,030	$	—	$	(25)	$	2,516


Other non-regulated revenue (1)	38		1		96		—		—		135
Total non-regulated revenue	532		18		2,126		—		(25)		2,651
Regulated Revenue
Revenue from contracts with customers	—		968		—		—		—		968

Other regulated revenue	—		8		—		—		—		8
Total regulated revenue	—		976		—		—		—		976
Total revenue	$	532	$	994	$	2,126	$	—	$	(25)	$	3,627



	Nine Months Ended September 30, 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	$	1,654	$	51	$	4,717	$	74	$	(60)	$	6,436


Other non-regulated revenue (1)	90		3		522		1		(1)		615
Total non-regulated revenue	1,744		54		5,239		75		(61)		7,051
Regulated Revenue
Revenue from contracts with customers	—		2,624		—		—		—		2,624

Other regulated revenue	—		25		—		—		—		25
Total regulated revenue	—		2,649		—		—		—		2,649
Total revenue	$	1,744	$	2,703	$	5,239	$	75	$	(61)	$	9,700

	Nine Months Ended September 30, 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	$	1,325	$	58	$	5,207	$	1	$	(79)	$	6,512


Other non-regulated revenue (1)	82		3		346		1		—		432
Total non-regulated revenue	1,407		61		5,553		2		(79)		6,944
Regulated Revenue
Revenue from contracts with customers	—		2,590		—		—		—		2,590

Other regulated revenue	—		23		—		—		—		23
Total regulated revenue	—		2,613		—		—		—		2,613
Total revenue	$	1,407	$	2,674	$	5,553	$	2	$	(79)	$	9,557

(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 $379 million and $337 million as of September 30, 2023 and December 31, 2022, respectively.

31 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

During the nine months ended September 30, 2023 and 2022, we recognized revenue of $30 million and $34 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

In June 2023, the Company closed on an agreement to terminate the PPA for the Warrior Run coal-fired power plant for total consideration of $357 million, to be paid by the offtaker through the end of the previous contract term in January 2030. Under the termination agreement, the plant will continue providing capacity through May 2024. The termination represents a contract modification under which the discounted termination payments, as well as a pre-existing contract liability, will be recognized as revenue on a straight-line basis over the remaining performance obligation period for approximately $32 million per month. As of September 30, 2023, the corresponding receivable balance was $77 million, of which $40 million and $37 million was recorded in Other current assets and Other noncurrent assets, respectively*,* on the Condensed Consolidated Balance Sheet. A significant financing component of $57 million will be recognized over the life of the payment term as interest income using the effective interest method.

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 September 30, 2023 and December 31, 2022, the Mong Duong loan receivable had a balance of $1.1 billion, net of CECL reserves of $26 million and $28 million, respectively. Of the loan receivable balance, $105 million and $97 million, respectively, was classified as Other current assets, and $990 million and $1 billion, respectively, was classified as 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 September 30, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $6 million, primarily consisting of fixed consideration for the sale of renewable energy credits in long-term contracts in the U.S. We expect to recognize revenue of approximately $1 million per year between 2023 and 2027 and the remainder thereafter.

OTHER INCOME AND EXPENSE

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


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Other Income	AFUDC (US Utilities)	$	5	$	4	$	11	$	9
	Legal settlements	—		—		3		6
	Gain on sale of assets	1		—		3		—
	Gain on remeasurement of investment (1)	—		—		—		26
	Insurance proceeds (2)	—		—		—		16
	Gain on acquired customer contracts	—		—		—		5
	Gain on remeasurement of contingent consideration	—		—		—		3


	Other	6		—		19		15
	Total other income	$	12	$	4	$	36	$	80




Other Expense	Loss on sale and disposal of assets	$	3	$	—	$	12	$	9
	Non-service pension and other postretirement costs	2		—		9		—
	Loss on remeasurement of contingent consideration	1		—		9		—
	Allowance for lease receivable (3)	—		—		—		20
	Legal contingencies and settlements	—		8		1		8
	Other	6		2		7		14
	Total other expense	$	12	$	10	$	38	$	51

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

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

(3) Related to a full allowance recognized on a sales-type lease receivable at AES Gilbert due to a fire incident in April 2022.

32 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

ASSET IMPAIRMENT EXPENSE

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Norgener	$	—	$	—	$	137	$	—
TEG	77		—		77		—
TEP	59		—		59		—
Jordan	14		51		43		51
GAF Projects (AES Renewable Holdings)	—		—		18		—
Maritza	—		—		—		468












Other	8		(1)		18		14
Total	$	158	$	50	$	352	$	533

TEG and TEP — During the third quarter of 2023, management identified an impairment indicator at the TEG and TEP asset groups due to a reduction in expected cash flows after expiration of the current PPAs. The Company performed an impairment analysis as of July 31, 2023, and determined that the carrying amounts of the asset groups were not recoverable. The TEG and TEP asset groups were determined to have fair values of $93 million and $94 million, respectively, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $77 million and $59 million, respectively. TEG and TEP are reported in the Energy Infrastructure SBU reportable segment.

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

Jordan — In November 2020, the Company signed an agreement to sell 26% ownership interest in Amman East and IPP4 for $58 million and as of September 30, 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 total pre-tax impairment expense of $43 million and $51 million was recorded during the nine months ended September 30, 2023 and 2022, respectively. See Note 17*—Held-for-Sale* for further information. Amman East and IPP4 are reported in the Energy Infrastructure SBU reportable segment.

GAF Projects — During the second quarter of 2023, management concluded that the carrying value of six project companies at AES Renewable Holdings (the “GAF Projects”) may not be recoverable as the expected purchase price on the buyout of tax equity partners implied a loss on the transaction. The buyout was completed in July 2023. Management performed a recoverability test as of May 31, 2023 and concluded that the undiscounted cash flows of the GAF Projects did not exceed the carrying values of the asset groups for five of the six projects. The asset groups for the GAF Projects were determined to have a fair value of $11 million, using the income approach. As a result, the Company recognized pre-tax asset impairment expense of $18 million. AES Renewable Holdings is reported in the Renewables SBU reportable segment.

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

INCOME TAXES

The Company’s provision for income taxes is based on the estimated annual effective tax rate, plus discrete items. The effective tax rate for both the three and nine months ended September 30, 2023 was 26%. The effective tax rates for the three and nine months ended September 30, 2022 were 24% and 26%, respectively. The difference between the Company’s effective tax rates for the 2023 and 2022 periods and the U.S. statutory tax rate of 21%

33 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

related primarily to U.S. taxes on foreign earnings, foreign tax rate differentials, the impacts of foreign currency fluctuations at certain foreign subsidiaries, nondeductible expenses, and valuation allowance.

For the three and nine months ended September 30, 2023, the Company recorded discrete tax benefit of approximately $15 million and $31 million, respectively, resulting from foreign currency fluctuations at certain Argentine businesses.

For the nine months ended September 30, 2022, the Company recorded discrete tax benefit of approximately $19 million resulting from foreign currency fluctuations at certain Argentine businesses.

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 September 30, 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 September 30, 2023 was $164 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 September 30, 2023 was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022

Jordan	$	5	$	(13)	$	16	$	(2)

ACQUISITIONS

Petersburg Solar Project — On August 31, 2023, the Company entered into agreements for project development and for the purchase of 100% of the membership in Petersburg Energy Center, LLC, a 250 MW solar and BESS project. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $49 million. Petersburg Solar Project is reported in the Utilities SBU reportable segment.

Calhoun — On July 18, 2023, the Company entered into an agreement for the purchase of 100% of the membership interests in Calhoun County Solar Project, LLC., which holds a late development-stage 125 MW solar project. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration paid of approximately $64 million, including contingent consideration of $42 million. The estimated fair value of the contingent consideration for Calhoun was determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. The probability of achieving the milestone payment used to calculate the acquisition date fair value of the contingent consideration was 99%. Payments under the contingent consideration arrangement are largely binary and thus, a single probability of achieving the milestone was applied in the calculation of fair value.The contingent consideration will be updated quarterly with any prospective changes in fair value recorded through earnings. Calhoun is reported in the Renewables SBU reportable segment.

Bellefield — On June 5, 2023, the Company entered into an agreement for the purchase of 100% of the membership interests in the Bellefield projects, consisting of two late development-stage solar and BESS projects of 1 GW each. The transaction was accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business. The Company agreed to make total cash payments including reimbursement of development and equipment costs of approximately $449 million, a portion of which is contingent upon future milestones and price adjustments. In the case that future milestones are not met, the total cash payment will be adjusted accordingly, along with any other purchase price adjustments.

The assets acquired and liabilities assumed were recorded at their fair values, which equaled the fair value of the consideration to be paid of approximately $358 million, including cash paid of $165 million, contingent consideration of $165 million, and deferred payments of $28 million.

34 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

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

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

Agua Clara — On June 17, 2022, the Company, through its subsidiaries AES Dominicana Renewable Energy and AES Andres DR, S.A., acquired 100% of the equity interests in Agua Clara, S.A.S., a wind project for consideration of $98 million. The transaction was accounted for as an asset acquisition that did not meet the definition of a business. As Agua Clara is not a VIE, any difference between the fair value of the assets and consideration transferred will be allocated to PP&E on a relative fair value basis. Agua Clara is reported in the Renewables SBU reportable segment.

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

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

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.

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 and nine months ended September 30, 2023 and 2022, where income represents the numerator and weighted average shares represent the denominator.

35 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022


Three Months Ended September 30,	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	$	231	670	$	0.34	$	421	668	$	0.63
EFFECT OF DILUTIVE SECURITIES

Stock options	—		—	—		—		1	—
Restricted stock units	—		2	—		—		2	—
Equity units	—		40	(0.02)		—		40	(0.04)
DILUTED EARNINGS PER SHARE	$	231	712	$	0.32	$	421	711	$	0.59


Nine Months Ended September 30,	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	$	343	669	$	0.51	$	357	668	$	0.53
EFFECT OF DILUTIVE SECURITIES

Stock options	—		1	—		—		1	—
Restricted stock units	—		2	—		—		2	—
Equity units	1		40	(0.03)		1		40	(0.03)
DILUTED EARNINGS PER SHARE	$	344	712	$	0.48	$	358	711	$	0.50

The calculation of diluted earnings per share excluded 2 million outstanding stock awards for the three and nine months ended September 30, 2023 and September 30, 2022, 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 September 30, 2023, due to customary anti-dilution provisions, the conversion rate was 31.6465, equivalent to a conversion price of approximately $31.60 per share of common stock. The Series A Preferred Stock and the 2024 Purchase Contracts are being accounted for as one unit of account. In calculating diluted EPS, the Company has applied the if-converted method to determine the impact of the forward purchase feature and considered if there are incremental shares that should be included related to the Series A Preferred conversion value.

RISKS AND UNCERTAINTIES

Puerto Rico — Earlier this year, AES Puerto Rico took certain measures to address identified liquidity challenges. On July 6, 2023, PREPA agreed to the release of funds in the escrow account guaranteeing AES Puerto Rico’s obligations under the Power Purchase and Operating Agreement (“PPOA”) in order to provide additional liquidity for the business. Additionally, AES Puerto Rico entered into a standstill and forbearance agreement with its noteholders because of the insufficiency of funds to meet the principal and interest obligations on its Series A Bond Loans due and payable on June 1, 2023, and going forward. AES Puerto Rico continues to work with PREPA and its noteholders on these liquidity challenges.

Despite these challenges and considering the information available as of the filing date, management believes the carrying amount of our long-lived assets at AES Puerto Rico of $63 million is recoverable as of September 30, 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.

36 | Notes to Condensed Consolidated Financial Statements—(Continued) | September 30, 2023 and 2022

SUBSEQUENT EVENTS

TEG and TEP — On October 3, 2023, AES Mexico Generation Holdings failed to comply with a covenant on its debt at TEG and TEP, resulting in a technical default. See Note 7—Debt for further information. TEG and TEP are reported in the Energy Infrastructure SBU reportable segment.

AES Clean Energy Development — On October 2, 2023, the Company completed the acquisition of a construction stage solar and BESS project in Tulare County, CA. The Company agreed to make total cash payments, including reimbursement of development and equipment costs, of approximately $253 million, a portion of which is contingent upon future milestones and price adjustments. The transaction is expected to be accounted for as an asset acquisition of variable interest entities that did not meet the definition of a business and will be reported in the Renewables SBU reportable segment.

37 | The AES Corporation | September 30, 2023 Form 10-Q

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