aes-20220331

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, 2022


☐			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, 2022 was 667,859,645.

The AES Corporation

Form 10-Q for the Quarterly Period ended March 31, 2022

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	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	9

	Note 3 - Fair Value	9
	Note 4 - Derivative Instruments and Hedging Activities	11
	Note 5 - Financing Receivables	13
	Note 6 - Investments in and Advances to Affiliates	14
	Note 7 - Debt	14
	Note 8 - Commitments and Contingencies	15
	Note 9 - Leases	16
	Note 1 0 - Redeemable Stock of Subsidiaries	17
	Note 1 1 - Equity	17
	Note 1 2 - Segments	20
	Note 1 3 - Revenue	22
	Note 1 4 - Other Income and Expense	23
	Note 1 5 - Asset Impairment Expense	23


	Note 1 6 - Held-for-Sale	23
	Note 1 7 - Acquisitions	24
	Note 1 8 - Earnings Per Share	25
	Note 19 - Risks and Uncertainties	26


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
	Executive Summary	27

	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	49

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50

ITEM 4.	CONTROLS AND PROCEDURES	52

PART II: OTHER INFORMATION		53

ITEM 1.	LEGAL PROCEEDINGS	53

ITEM 1A.	RISK FACTORS	56

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	58

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	58

ITEM 4.	MINE SAFETY DISCLOSURES	58

ITEM 5.	OTHER INFORMATION	58

ITEM 6.	EXHIBITS	59

SIGNATURES		60

1 | The AES Corporation | March 31, 2022 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 Andes			AES Andes S.A., formerly AES Gener
AES Brasil			AES Tietê Energia S.A., formerly branded as AES Tietê
AES Clean Energy Development			AES Clean Energy Development, LLC
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
AES Renewable Holdings			AES Renewable Holdings, LLC, formerly branded as AES Distributed Energy

AFUDC			Allowance for Funds Used During Construction
AIMCo			Alberta Management Investment Corporation
ANEEL			Brazilian National Electric Energy Agency

AOCL			Accumulated Other Comprehensive Loss

ASC			Accounting Standards Codification
ASU			Accounting Standards Update
BESS			Battery Energy Storage System




CAA			United States Clean Air Act
CAMMESA			Wholesale Electric Market Administrator in Argentina

CCEE			Brazilian Chamber of Electric Energy Commercialization
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

ESP			Electric Security Plan

EURIBOR			Euro Interbank Offered Rate
FASB			Financial Accounting Standards Board

Fluence			Fluence Energy, Inc and its subsidiaries, including Fluence Energy, LLC, which was previously our joint venture with Siemens (NASDAQ: FLNC)

FX			Foreign Exchange
GAAP			Generally Accepted Accounting Principles in the United States
GHG			Greenhouse Gas



GILTI			Global Intangible Low Taxed Income
GW			Gigawatts
GWh			Gigawatt Hours
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



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




SO2			Sulfur Dioxide

SWRCB			California State Water Resources Board

TCJA			Tax Cuts and Jobs Act
TDSIC			Transmission, Distribution, and Storage System Improvement Charge
U.S.			United States

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

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

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)


	March 31, 2022		December 31, 2021

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


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

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

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

Deferred income taxes	1,035		977

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

See Notes to Condensed Consolidated Financial Statements.

3 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
		2022		2021

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

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

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



NET INCOME (LOSS)		171		(29)



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




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


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


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

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
		2022		2021

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




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

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

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

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


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




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


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

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

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


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

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


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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

6 | The AES Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2022		2021

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

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


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



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



Purchase of emissions allowances	(136)		(31)
Other investing	(10)		13
Net cash used in investing activities	(1,153)		(387)
FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities	1,193		792
Repayments under the revolving credit facilities	(715)		(793)
Issuance of recourse debt	—		7
Repayments of recourse debt	(29)		(7)
Issuance of non-recourse debt	1,710		307
Repayments of non-recourse debt	(788)		(320)
Payments for financing fees	(27)