Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill — The following table summarizes the carrying amount of goodwill by reportable segment for the years ended December 31, 2023 and 2022 (in millions):

	Renewables SBU		Utilities SBU		Energy Infrastructure SBU		New Energy Technologies SBU		Total
Balance as of December 31, 2022
Goodwill	$	355	$	2,709	$	683	$	3	$	3,750
Accumulated impairment losses	(35)		(2,709)		(644)		—		(3,388)
Net balance	320		—		39		3		362
Impairment losses	—		—		(12)		—		(12)
Goodwill derecognized during the year	(2)		—		—		—		(2)
Balance as of December 31, 2023
Goodwill	353		2,709		683		3		3,748
Accumulated impairment losses	(35)		(2,709)		(656)		—		(3,400)
Net balance	$	318	$	—	$	27	$	3	$	348

TEG TEP — During the fourth quarter of 2023, the Company performed the goodwill impairment test for the TEG TEP reporting unit. The fair value of the reporting unit was determined under the income approach using a discounted cash flow valuation model. The estimated fair value was less than its carrying amount and as a result the Company recognized impairment expense of $12 million, reducing the goodwill balance of TEG TEP to zero. The decrease in fair value since the date of our last impairment test on July 31, 2023 was primarily driven by an increase in the discount rate due to increasing risk of non-renewal of operating permits required to operate after March 31, 2024. In February 2024, the Mexican Comision Reguladora de Energia (“CRE”) rejected TEG's request to transition to the new energy regime and renew its operating permits. This request was denied on the basis of a lawsuit concerning the electricity law that has been withdrawn. TEG has subsequently reiterated with the agency the lawsuit has been withdrawn and has formally requested that CRE issue a new permit. TEG and TEP are reported in the Energy Infrastructure SBU reportable segment.

AES Andes — During the fourth quarter of 2022, the Company performed the annual goodwill impairment test for the AES Andes reporting unit. The fair value of the reporting unit was determined under the income approach using a discounted cash flow valuation model. The estimated fair value was less than its carrying amount and as a result the Company recognized impairment expense of $644 million, reducing the goodwill balance of AES Andes to zero. The decrease in fair value since the date of our last impairment test was primarily driven by a higher discount rate resulting from increased interest rates and country risk premiums, as well as a decrease in forecasted energy prices and other unfavorable macroeconomic assumptions in Colombia. AES Andes is reported in the Energy Infrastructure SBU reportable segment.

AES El Salvador — During the fourth quarter of 2022, the Company performed the annual goodwill impairment test for the El Salvador reporting unit. The Company performed a quantitative impairment test and utilized the income approach. The estimated fair value was less than its carrying amount and as a result the Company recognized goodwill impairment expense of $133 million, reducing the goodwill balance of AES El Salvador to zero. Since the date of our last impairment test in 2021, the Company has seen market participants substantially increase return expectations for the perceived country risk for El Salvador. The impact of the increase has substantially increased our discount rate, resulting in a full impairment. AES El Salvador is reported in the Utilities SBU reportable segment.

Other Intangible Assets — The following table summarizes the balances comprising Other intangible assets in the accompanying Consolidated Balance Sheets (in millions) as of the periods indicated:

	December 31, 2023						December 31, 2022
	Gross Balance		Accumulated Amortization		Net Balance		Gross Balance		Accumulated Amortization		Net Balance
Subject to Amortization
Internal-use software	$	696	$	(324)	$	372	$	582	$	(307)	$	275
Contracts	337		(37)		300		342		(40)		302
Project development rights (1)	1,222		(43)		1,179		991		(17)		974
Emissions allowances (2)	50		—		50		37		—		37
Concession rights	222		(71)		151		207		(50)		157
Land use rights	119		(3)		116		20		(1)		19
Other (3)	45		(20)		25		37		(19)		18
Subtotal	2,691		(498)		2,193		2,216		(434)		1,782
Indefinite-Lived Intangible Assets
Land use rights	22		—		22		42		—		42
Transmission rights	20		—		20		16		—		16
Other	8		—		8		1		—		1
Subtotal	50		—		50		59		—		59
Total	$	2,741	$	(498)	$	2,243	$	2,275	$	(434)	$	1,841

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(1)Includes emission offset fee to the Air Quality Management District ("AQMD") in order to transfer emission offsets from retired legacy Southland units to the new CCGT.

(2)Acquired or purchased emissions allowances are finite-lived intangible assets that are expensed when utilized and included in net income for the year.

(3)Includes management rights, renewable energy credits and incentives, and other individually insignificant intangible assets.

The following tables summarize other intangible assets acquired during the periods indicated (in millions):

December 31, 2023	Amount		Subject to Amortization/Indefinite-Lived	Weighted Average Amortization Period (in years)	Amortization Method
Internal-use software	$	159	Subject to Amortization	15	Straight-line
Contracts	12		Subject to Amortization	21	Straight-line
Project development rights	242		Subject to Amortization	39	Straight-line
Emissions allowances	23		Subject to Amortization	Various	As utilized
Land use rights	91		Various	N/A	Various
Other	9		Various	N/A	N/A
Total	$	536

December 31, 2022	Amount		Subject to Amortization/Indefinite-Lived	Weighted Average Amortization Period (in years)	Amortization Method
Internal-use software	$	136	Subject to Amortization	14	Straight-line
Contracts	196		Subject to Amortization	23	Straight-line
Project development rights	67		Subject to Amortization	4	Straight-line
Emissions allowances	35		Subject to Amortization	Various	As utilized
Land use rights	13		Indefinite-Lived	N/A	N/A
Other	1		Subject to Amortization	N/A	N/A
Total	$	448

The following table summarizes the estimated amortization expense by intangible asset category for 2024 through 2028:

(in millions)	2024		2025		2026		2027		2028
Internal-use software	$	42	$	39	$	37	$	34	$	34
Contracts	21		17		17		17		17
Concession rights	17		17		17		17		17
Project development rights	10		10		12		12		12
Other	2		6		6		4		5
Total	$	92	$	89	$	89	$	84	$	85

Intangible asset amortization expense was $82 million, $71 million and $69 million for the years ended December 31, 2023, 2022 and 2021, respectively.