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 September 30, 2023

or

☐ 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 October 31, 2023 was 669,629,035.

The AES Corporation

Form 10-Q for the Quarterly Period ended September 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	17
	Note 5 - Financing Receivables	18
	Note 6 - Investments in and Advances to Affiliates	19
	Note 7 - Debt	20
	Note 8 - Commitments and Contingencies	22
	Note 9 - Leases	23
	Note 10 - Redeemable Stock of Subsidiaries	24
	Note 11 - Equity	25
	Note 12 - Segments	28
	Note 13 - Revenue	30
	Note 14 - Other Income and Expense	31
	Note 15 - Asset Impairment Expense	32
	Note 16 - Income Taxes	32
	Note 17 - Held-for-Sale	33
	Note 18 - Acquisitions	33
	Note 19 - Earnings Per Share	34
	Note 20 - Risks and Uncertainties	35
	Note 21 - Subsequent Events	36
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
	Executive Summary	37
	Review of Consolidated Results of Operations	40
	SBU Performance Analysis	46
	Key Trends and Uncertainties	53
	Capital Resources and Liquidity	61
	Critical Accounting Policies and Estimates	68
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	68
ITEM 4.	CONTROLS AND PROCEDURES	71
PART II: OTHER INFORMATION		72
ITEM 1.	LEGAL PROCEEDINGS	72
ITEM 1A.	RISK FACTORS	75
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	75
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	75
ITEM 4.	MINE SAFETY DISCLOSURES	75
ITEM 5.	OTHER INFORMATION	75
ITEM 6.	EXHIBITS	76
SIGNATURES		77

1 | The AES Corporation | September 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
AGIC	AES Global Insurance Company, AES’ captive insurance company
AOCL	Accumulated Other Comprehensive Loss
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
BESS	Battery Energy Storage System
CAA	United States Clean Air Act
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
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
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
SBU	Strategic Business Unit
SEC	United States Securities and Exchange Commission

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

SO2	Sulfur Dioxide
TDSIC	Transmission, Distribution, and Storage System Improvement Charge
TEG	Termoeléctrica del Golfo, S. de R.L. de C.V.
TEP	Termoeléctrica Peñoles, S. de R.L. de C.V.
U.S.	United States
USD	United States Dollar
VIE	Variable Interest Entity

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

PART I: FINANCIAL INFORMATION

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		(