aes-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________________________________________________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-12291

THE AES CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						54-1163725
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


4300 Wilson Boulevard
Arlington,	Virginia	22203
(Address of principal executive offices)		(Zip Code)


Registrant's telephone number, including area code:			(703)			522-1315


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	AES	New York Stock Exchange
Corporate Units	AESC	New York Stock Exchange

______________________________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Non-accelerated filer

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

______________________________________________________________________________________________

The number of shares outstanding of Registrant’s Common Stock, par value $0.01 per share, on May 3, 2021 was 666,257,334.

The AES Corporation

Form 10-Q for the Quarterly Period ended March 31, 2021

Table of Contents


Glossary of Terms		1

PART I: FINANCIAL INFORMATION		2

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
	Note 1 - Financial Statement Presentation	7
	Note 2 - Inventory	8

	Note 3 - Fair Value	8
	Note 4 - Derivative Instruments and Hedging Activities	11
	Note 5 - Financing Receivables	12
	Note 6 - Investments in and Advances to Affiliates	13
	Note 7 - Debt	13
	Note 8 - Commitments and Contingencies	14
	Note 9 - Leases	16
	Note 1 0 - Redeemable Stock of Subsidiaries	17
	Note 1 1 - Equity	17
	Note 1 2 - Segments	19
	Note 1 3 - Revenue	21
	Note 1 4 - Other Income and Expense	22
	Note 1 5 - Asset Impairment Expense	22
	Note 1 6 - Income Taxes	22

	Note 1 7 - Held-for-Sale and Dispositions	23
	Note 1 8 - Acquisitions	24
	Note 19 - Earnings Per Share	24
	Note 2 0 - Risks and Uncertainties	25
	Note 2 1 - Subsequent Events	25

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
	Executive Summary	26

	Review of Consolidated Results of Operations	29
	SBU Performance Analysis	33
	Key Trends and Uncertainties	38
	Capital Resources and Liquidity	43
	Critical Accounting Policies and Estimates	50

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50

ITEM 4.	CONTROLS AND PROCEDURES	52

PART II: OTHER INFORMATION		54

ITEM 1.	LEGAL PROCEEDINGS	54

ITEM 1A.	RISK FACTORS	57

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	57

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	57

ITEM 4.	MINE SAFETY DISCLOSURES	57

ITEM 5.	OTHER INFORMATION	57

ITEM 6.	EXHIBITS	57

SIGNATURES		58

1 | The AES Corporation | March 31, 2021 Form 10-Q

Glossary of Terms

The following terms and acronyms appear in the text of this report and have the definitions indicated below:


Adjusted EPS			Adjusted Earnings Per Share, a non-GAAP measure
Adjusted PTC			Adjusted Pre-tax Contribution, a non-GAAP measure of operating performance
AES			The Parent Company and its subsidiaries and affiliates
AES Brasil			AES Tietê Energia S.A., formerly branded as AES Tietê
AES Indiana			Indianapolis Power & Light Company, formerly branded as IPL. AES Indiana is wholly-owned by IPALCO
AES Ohio			The Dayton Power & Light Company, formerly branded as DP&L. AES Ohio is wholly-owned by DPL


AIMCo			Alberta Management Investment Corporation


AOCL			Accumulated Other Comprehensive Loss
ARO			Asset Retirement Obligations
ASC			Accounting Standards Codification
ASU			Accounting Standards Update




BTA			Best Technology Available
CAA			United States Clean Air Act
CAMMESA			Wholesale Electric Market Administrator in Argentina

CCR			Coal Combustion Residuals, which includes bottom ash, fly ash and air pollution control wastes generated at coal-fired generation plant sites


CECL			Current Expected Credit Loss
CO2			Carbon Dioxide


CSAPR			Cross-State Air Pollution Rule





DPL			DPL Inc.


EPA			United States Environmental Protection Agency
EPC			Engineering, Procurement and Construction



EURIBOR			Euro Interbank Offered Rate
FASB			Financial Accounting Standards Board

FONINVEMEM			Fund for the Investment Needed to Increase the Supply of Electricity in the Wholesale Market in Argentina
FX			Foreign Exchange
GAAP			Generally Accepted Accounting Principles in the United States
GHG			Greenhouse Gas



GILTI			Global Intangible Low Taxed Income
GW			Gigawatts
HLBV			Hypothetical Liquidation Book Value

IDEM			Indiana Department of Environmental Management
IPALCO			IPALCO Enterprises, Inc.




LIBOR			London Interbank Offered Rate
LNG			Liquid Natural Gas


MMBtu			Million British Thermal Units

MW			Megawatts
MWh			Megawatt Hours
NAAQS			National Ambient Air Quality Standards
NCI			Noncontrolling Interest

NM			Not Meaningful
NOV			Notice of Violation
NOX			Nitrogen Oxide
NPDES			National Pollutant Discharge Elimination System


OPGC			Odisha Power Generation Corporation, Ltd.
OTC Policy			Statewide Water Quality Control Policy on the Use of Coastal and Estuarine Waters for Power Plant Cooling



PPA			Power Purchase Agreement
PREPA			Puerto Rico Electric Power Authority
PUCO			The Public Utilities Commission of Ohio
RSU			Restricted Stock Unit


SBU			Strategic Business Unit
SEC			United States Securities and Exchange Commission



SIP			State Implementation Plan
SO2			Sulfur Dioxide
SSO			Standard Service Offer
SWRCB			California State Water Resources Board

TCJA			Tax Cuts and Jobs Act

U.S.			United States

USD			United States Dollar
VAT			Value-Added Tax
VIE			Variable Interest Entity

2 | The AES Corporation | March 31, 2021 Form 10-Q

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2021		December 31, 2020

	(in millions, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,886	$	1,089
Restricted cash	325		297
Short-term investments	187		335
Accounts receivable, net of allowance for doubtful accounts of $11 and $13, respectively	1,342		1,300
Inventory	446		461
Prepaid expenses	105		102
Other current assets, net of allowance of $0	728		726
Current held-for-sale assets	1,218		1,104
Total current assets	6,237		5,414
NONCURRENT ASSETS
Property, Plant and Equipment:
Land	404		417
Electric generation, distribution assets and other	25,660		26,707
Accumulated depreciation	(8,342)		(8,472)
Construction in progress	4,776		4,174
Property, plant and equipment, net	22,498		22,826
Other Assets:
Investments in and advances to affiliates	785		835
Debt service reserves and other deposits	395		441
Goodwill	1,146		1,061
Other intangible assets, net of accumulated amortization of $343 and $330, respectively	797		827
Deferred income taxes	235		288


Other noncurrent assets, net of allowance of $20 and $21, respectively	1,878		1,660
Noncurrent held-for-sale assets	1,232		1,251
Total other assets	6,468		6,363
TOTAL ASSETS	$	35,203	$	34,603
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	832	$	1,156
Accrued interest	227		191
Accrued non-income taxes	286		257
Deferred income	299		438
Accrued and other liabilities	1,173		1,223

Non-recourse debt, including $346 and $336, respectively, related to variable interest entities	1,505		1,430

Current held-for-sale liabilities	699		667
Total current liabilities	5,021		5,362
NONCURRENT LIABILITIES
Recourse debt	3,365		3,446
Non-recourse debt, including $3,945 and $3,918, respectively, related to variable interest entities	15,014		15,005

Deferred income taxes	1,136		1,100

Other noncurrent liabilities	3,110		3,241
Noncurrent held-for-sale liabilities	856		857
Total noncurrent liabilities	23,481		23,649
Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries	1,033		872
EQUITY
THE AES CORPORATION STOCKHOLDERS’ EQUITY
Preferred stock (without par value, 50,000,000 shares authorized; 1,043,050 issued and outstanding at March 31, 2021)	1,043		—
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,616,804 issued and 666,257,334 outstanding at March 31, 2021 and 818,398,654 issued and 665,370,128 outstanding at December 31, 2020)	8		8
Additional paid-in capital	7,241		7,561
Accumulated deficit	(828)		(680)
Accumulated other comprehensive loss	(2,237)		(2,397)
Treasury stock, at cost (152,359,470 and 153,028,526 shares at March 31, 2021 and December 31, 2020, respectively)	(1,850)		(1,858)
Total AES Corporation stockholders’ equity	3,377		2,634
NONCONTROLLING INTERESTS	2,291		2,086
Total equity	5,668		4,720
TOTAL LIABILITIES AND EQUITY	$	35,203	$	34,603

See Notes to Condensed Consolidated Financial Statements.

3 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
		2021		2020

		(in millions, except share and per share amounts)
Revenue:
Regulated		$	707	$	712
Non-Regulated		1,928		1,626
Total revenue		2,635		2,338
Cost of Sales:
Regulated		(582)		(592)
Non-Regulated		(1,389)		(1,239)
Total cost of sales		(1,971)		(1,831)
Operating margin		664		507
General and administrative expenses		(46)		(38)
Interest expense		(190)		(233)
Interest income		68		70
Loss on extinguishment of debt		(1)		(1)
Other expense		(16)		(4)
Other income		43		45
Loss on disposal and sale of business interests		(5)		—

Asset impairment expense		(473)		(6)
Foreign currency transaction gains (losses)		(35)		24
Other non-operating expense		—		(44)
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES		9		320
Income tax expense		(8)		(89)
Net equity in losses of affiliates		(30)		(2)



NET INCOME (LOSS)		(29)		229



Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries		(119)		(85)
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION		$	(148)	$	144




BASIC EARNINGS PER SHARE:


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


NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS		$	(0.22)	$	0.22
DILUTED SHARES OUTSTANDING		666		668

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended March 31,
		2021		2020

		(in millions)
NET INCOME (LOSS)		$	(29)	$	229




Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods		(69)		(152)
Reclassification to earnings, net of $0 income tax for all periods		—		—
Total foreign currency translation adjustments		(69)		(152)
Derivative activity:
Change in derivative fair value, net of income tax benefit (expense) of $(67) and $133, respectively		243		(448)
Reclassification to earnings, net of income tax expense of $7 and $8, respectively		23		32
Total change in fair value of derivatives		266		(416)
Pension activity:

Change in pension adjustments due to net actuarial gain (loss) for the period, net of income tax benefit of $1 and $0, respectively		1		—
Reclassification to earnings, net of $0 income tax for all periods		—		—
Total pension adjustments		1		—
OTHER COMPREHENSIVE INCOME (LOSS)		198		(568)
COMPREHENSIVE INCOME (LOSS)		169		(339)
Less: Comprehensive loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries		(151)		21
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION		$	18	$	(318)

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


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

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


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

Issuance of preferred stock	1.0	1,043		—	—		—	—		(235)		—		—		—

Dividends declared on common stock ($0.1505/share)	—	—		—	—		—	—		(101)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		0.2	—		(0.7)	8		(12)		—		—		—

Balance at March 31, 2021	1.0	$	1,043	818.6	$	8	152.3	$	(1,850)	$	7,241	$	(828)	$	(2,237)	$	2,291

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


	Three Months Ended March 31, 2020
	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, 2020	—	$	—	817.8	$	8	153.9	$	(1,867)	$	7,776	$	(692)	$	(2,229)	$	2,233
Net income	—	—		—	—		—	—		—		144		—		82
Total foreign currency translation adjustment, net of income tax	—	—		—	—		—	—		—		—		(96)		(56)
Total change in derivative fair value, net of income tax	—	—		—	—		—	—		—		—		(366)		(25)

Total other comprehensive loss	—	—		—	—		—	—		—		—		(462)		(81)
Cumulative effect of a change in accounting principle (1)	—	—		—	—		—	—		—		(35)		—		(16)
Fair value adjustment (2)	—	—		—	—		—	—		(7)		—		—		—


Distributions to noncontrolling interests	—	—		—	—		—	—		—		—		—		(33)

Dividends declared on common stock ($0.1433/share)	—	—		—	—		—	—		(95)		—		—		—

Issuance and exercise of stock-based compensation benefit plans, net of income tax	—	—		0.1	—		(0.8)	9		(11)		—		—		—
Sales to noncontrolling interests	—	—		—	—		—	—		(1)		—		—		1
Acquisitions of noncontrolling interests	—	—		—	—		—	—		2		—		(1)		(8)

Balance at March 31, 2020	—	$	—	817.9	$	8	153.1	$	(1,858)	$	7,664	$	(583)	$	(2,692)	$	2,178