aes-20230630

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 June 30, 2023


☐			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 August 1, 2023 was 669,629,035.

The AES Corporation

Form 10-Q for the Quarterly Period ended June 30, 2023

Table of Contents


Glossary of Terms		1

PART I: FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Changes in Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
	Note 1 - Financial Statement Presentation	9
	Note 2 - Inventory	12

	Note 3 - Fair Value	12
	Note 4 - Derivative Instruments and Hedging Activities	16
	Note 5 - Financing Receivables	17
	Note 6 - Investments in and Advances to Affiliates	18
	Note 7 - Debt	18
	Note 8 - Commitments and Contingencies	20
	Note 9 - Leases	21
	Note 10 - Redeemable Stock of Subsidiaries	22
	Note 11 - Equity	23
	Note 12 - Segments	25
	Note 13 - Revenue	28
	Note 14 - Other Income and Expense	29
	Note 15 - Asset Impairment Expense	29


	Note 1 6 - Held-for-Sale	30
	Note 1 7 - Acquisitions	31
	Note 1 8 - Earnings Per Share	32
	Note 19 - Risks and Uncertainties	33


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
	Executive Summary	34

	Review of Consolidated Results of Operations	38
	SBU Performance Analysis	44
	Key Trends and Uncertainties	52
	Capital Resources and Liquidity	59
	Critical Accounting Policies and Estimates	65

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	66

ITEM 4.	CONTROLS AND PROCEDURES	68

PART II: OTHER INFORMATION		69

ITEM 1.	LEGAL PROCEEDINGS	69

ITEM 1A.	RISK FACTORS	72

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	72

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	72

ITEM 4.	MINE SAFETY DISCLOSURES	72

ITEM 5.	OTHER INFORMATION	72

ITEM 6.	EXHIBITS	73

SIGNATURES		74

1 | The AES Corporation | June 30, 2023 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 EBITDA			Adjusted earnings before interest income and expense, taxes, depreciation and amortization, a non-GAAP measure of operating performance
Adjusted EBITDA with Tax Attributes			Adjusted earnings before interest income and expense, taxes, depreciation and amortization, adding back the pre-tax effect of Production Tax Credits, Investment Tax Credits and depreciation tax expense allocated to tax equity investors, a non-GAAP measure
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 Brasil Operações 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



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


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
COD			Commercial Operation Date

CSAPR			Cross-State Air Pollution Rule

CWA			U.S. Clean Water Act
DG Comp			Directorate-General for Competition



DPL			DPL Inc.


EBITDA			Earnings before interest income and expense, taxes, depreciation and amortization, a non-GAAP measure of operating performance
EPA			United States Environmental Protection Agency
EPC			Engineering, Procurement and Construction


ESP			Electric Security Plan
EU			European Union


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)



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 at Book Value


IPALCO			IPALCO Enterprises, Inc.



ITC			Investment Tax Credit
IURC			Indiana Utility Regulatory Commission

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
NEK			Natsionalna Elektricheska Kompania (state-owned electricity public supplier in Bulgaria)

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







Parent Company			The AES Corporation

Pet Coke			Petroleum Coke


PPA			Power Purchase Agreement
PREPA			Puerto Rico Electric Power Authority


PUCO			The Public Utilities Commission of Ohio


RSU			Restricted Stock Unit

2 | The AES Corporation | June 30, 2023 Form 10-Q


SBU			Strategic Business Unit
SEC			United States Securities and Exchange Commission






SO2			Sulfur Dioxide




TDSIC			Transmission, Distribution, and Storage System Improvement Charge
U.S.			United States

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

3 | The AES Corporation | June 30, 2023 Form 10-Q

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets (Unaudited)


	June 30, 2023		December 31, 2022

	(in millions, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,322	$	1,374
Restricted cash	517		536
Short-term investments	713		730
Accounts receivable, net of allowance for doubtful accounts of $8 and $5, respectively	1,710		1,799
Inventory	774		1,055
Prepaid expenses	218		98
Other current assets	1,449		1,533
Current held-for-sale assets	502		518
Total current assets	7,205		7,643
NONCURRENT ASSETS
Property, Plant and Equipment:
Land	490		470
Electric generation, distribution assets and other	27,312		26,599
Accumulated depreciation	(8,413)		(8,651)
Construction in progress	6,688		4,621
Property, plant and equipment, net	26,077		23,039
Other Assets:
Investments in and advances to affiliates	858		952
Debt service reserves and other deposits	171		177
Goodwill	362		362
Other intangible assets, net of accumulated amortization of $475 and $434, respectively	2,282		1,841
Deferred income taxes	383		319

Loan receivable, net of allowance of $25 and $26, respectively	1,018		1,051
Other noncurrent assets, net of allowance of $21 and $51, respectively	3,149		2,979

Total other assets	8,223		7,681
TOTAL ASSETS	$	41,505	$	38,363
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,583	$	1,730
Accrued interest	303		249
Accrued non-income taxes	228		249
Accrued and other liabilities	2,232		2,151
Recourse debt	500		—
Non-recourse debt, including $896 and $416, respectively, related to variable interest entities	2,445		1,758

Current held-for-sale liabilities	337		354
Total current liabilities	7,628		6,491
NONCURRENT LIABILITIES
Recourse debt	4,976		3,894
Non-recourse debt, including $2,032 and $2,295, respectively, related to variable interest entities	18,622		17,846

Deferred income taxes	1,104		1,139

Other noncurrent liabilities	3,128		3,168

Total noncurrent liabilities	27,830		26,047
Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries	1,289		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 June 30, 2023 and December 31, 2022)	838		838
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,808,272 issued and 669,385,716 outstanding at June 30, 2023 and 818,790,001 issued and 668,743,464 outstanding at December 31, 2022)	8		8
Additional paid-in capital	6,550		6,688
Accumulated deficit	(1,523)		(1,635)
Accumulated other comprehensive loss	(1,567)		(1,640)
Treasury stock, at cost (149,422,556 and 150,046,537 shares at June 30, 2023 and December 31, 2022, respectively)	(1,814)		(1,822)
Total AES Corporation stockholders’ equity	2,492		2,437
NONCONTROLLING INTERESTS	2,266		2,067
Total equity	4,758		4,504
TOTAL LIABILITIES AND EQUITY	$	41,505	$	38,363

See Notes to Condensed Consolidated Financial Statements.

4 | The AES Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in millions, except share and per share amounts)
Revenue:
Non-Regulated	$	2,193	$	2,276	$	4,480	$	4,293
Regulated	834		802		1,786		1,637
Total revenue	3,027		3,078		6,266		5,930
Cost of Sales:
Non-Regulated	(1,782)		(1,781)		(3,579)		(3,398)
Regulated	(747)		(734)		(1,595)		(1,439)
Total cost of sales	(2,529)		(2,515)		(5,174)		(4,837)
Operating margin	498		563		1,092		1,093
General and administrative expenses	(72)		(46)		(127)		(98)
Interest expense	(310)		(279)		(640)		(537)
Interest income	131		95		254		170
Loss on extinguishment of debt	—		(1)		(1)		(7)
Other expense	(12)		(29)		(26)		(41)
Other income	14		70		24		76
Loss on disposal and sale of business interests	(4)		(2)		(4)		(1)

Asset impairment expense	(174)		(482)		(194)		(483)
Foreign currency transaction losses	(67)		(49)		(109)		(68)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES	4		(160)		269		104
Income tax benefit (expense)	2		19		(70)		(41)
Net equity in earnings (losses) of affiliates	(25)		5		(29)		(28)



NET INCOME (LOSS)	(19)		(136)		170		35



Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries	(20)		(43)		(58)		(99)
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION	$	(39)	$	(179)	$	112	$	(64)




BASIC EARNINGS PER SHARE:


NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	(0.06)	$	(0.27)	$	0.17	$	(0.10)
DILUTED EARNINGS PER SHARE:


NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS	$	(0.06)	$	(0.27)	$	0.16	$	(0.10)
DILUTED SHARES OUTSTANDING	669		668		712		668

See Notes to Condensed Consolidated Financial Statements.

5 | The AES Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in millions)
NET INCOME (LOSS)	$	(19)	$	(136)	$	170	$	35




Foreign currency translation activity:
Foreign currency translation adjustments, net of $0 income tax for all periods	79		(149)		119		(17)

Total foreign currency translation adjustments	79		(149)		119		(17)
Derivative activity:
Change in derivative fair value, net of income tax expense of $36, $61, $5, and $134, respectively	124		270		2		542
Reclassification to earnings, net of income tax benefit (expense) of $2, $(3), $11 and $(13), respectively	(7)		20		(48)		38
Total change in fair value of derivatives	117		290		(46)		580
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 $0 income tax for all periods	—		—		—		1
Total pension adjustments	—		—		1		1
OTHER COMPREHENSIVE INCOME	196		141		74		564
COMPREHENSIVE INCOME	177		5		244		599
Less: Comprehensive income attributable to noncontrolling interests and redeemable stock of subsidiaries	(41)		(75)		(59)		(157)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION	$	136	$	(70)	$	185	$	442

See Notes to Condensed Consolidated Financial Statements.

6 | The AES Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


	Six Months Ended June 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

7 | The AES Corporation


	Six Months Ended June 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

See Notes to Condensed Consolidated Financial Statements.

8 | The AES Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,

2023

2022