AES CORP

Overview

As of September 30, 2024, the Company had unrestricted cash and cash equivalents of $1.9 billion, of which $6 million was held at the Parent Company and qualified holding companies. The Company had $62 million in short-term investments, held primarily at subsidiaries, and restricted cash and debt service reserves of $640 million. The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $22.5 billion and $6.5 billion, respectively. Of the $3.2 billion of our current non-recourse debt, $2.9 billion was presented as such because it is due in the next twelve months and $330 million relates to debt considered in default. AES Puerto Rico is in payment default. See Note 8—Debt in Item 1.—Financial Statementsof this Form 10-Q for additional detail. All other defaults are not payment defaults but are instead technical defaults triggered by failure to comply with covenants or other requirements contained in the non-recourse debt documents. As of September 30, 2024, the Company also had $698 million outstanding related to supplier financing arrangements, which are classified as Supplier financing arrangementson the Condensed Consolidated Balance Sheets.

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We expect current maturities of non-recourse debt, recourse debt, and amounts due under supplier financing arrangements to be repaid from net cash provided by operating activities of the subsidiary to which the liability relates, through opportunistic refinancing activity, or some combination thereof. We have $1.7 billion in recourse debt which matures within the next twelve months, including $611 million in outstanding borrowings under the commercial paper program. Furthermore, we have $447 million due under supplier financing arrangements that have a Parent Company guarantee. From time to time, we may elect to repurchase our outstanding debt through cash purchases, privately negotiated transactions, or otherwise when management believes that such securities are attractively priced. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, and other factors. The amounts involved in any such repurchases may be material.

We rely mainly on long-term debt obligations to fund our construction activities. We have, to the extent available at acceptable terms, utilized non-recourse debt to fund a significant portion of the capital expenditures and investments required to construct and acquire our electric power plants, distribution companies, and related assets. Our non-recourse financing is designed to limit cross-default risk to the Parent Company or other subsidiaries and affiliates. Our non-recourse long-term debt is a combination of fixed and variable interest rate instruments. Debt is typically denominated in the currency that matches the currency of the revenue expected to be generated from the benefiting project, thereby reducing currency risk. In certain cases, the currency is matched through the use of derivative instruments. The majority of our non-recourse debt is funded by international commercial banks, with debt capacity supplemented by multilaterals and local regional banks.

Given our long-term debt obligations, the Company is subject to interest rate risk on debt balances that accrue interest at variable rates. When possible, the Company will borrow funds at fixed interest rates or hedge its variable rate debt to fix its interest costs on such obligations. In addition, the Company has historically tried to maintain at least 70% of its consolidated long-term obligations at fixed interest rates, including fixing the interest rate through the use of interest rate swaps. These efforts apply to the notional amount of the swaps compared to the amount of related underlying debt. Presently, the Parent Company’s only material unhedged exposure to variable interest rate debt relates to $200 million in senior unsecured term loans. Additionally, commercial paper issuances are short-term in nature and subject the Parent Company to interest rate risk at the time of refinancing the paper. On a consolidated basis, of the Company’s $29.3 billion of total gross debt outstanding as of September 30, 2024, approximately $9.1 billion accrues interest at variable rates. The Company actively hedges its current and expected variable rate exposure through a combination of currently effective and forward starting interest rate swaps. As of September 30, 2024, the total maximum outstanding amount of hedges protecting the company against variable rate exposure was $8.9 billion. These hedges generally provide economic protection through the entire expected life of the projects, regardless of the type of debt issued to finance construction or refinance the projects in the future. In addition, AES Brasil holds $2.3 billion of floating rate non-recourse debt, which is classified in Current held-for-sale liabilitiesand Noncurrent held-for-sale liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2024, as variable rate instruments act as a natural hedge against inflation in Brazil.

In addition to utilizing non-recourse debt at a subsidiary level when available, the Parent Company provides a portion, or in certain instances all, of the remaining long-term financing or credit required to fund development, construction, or acquisition of a particular project. These investments have generally taken the form of equity investments or intercompany loans, which are subordinated to the project’s non-recourse loans. We generally obtain the funds for these investments from our cash flows from operations, proceeds from the sales of assets and/or the proceeds from our issuances of debt, common stock, and other securities. Similarly, in certain of our businesses, the Parent Company may provide financial guarantees or other credit support for the benefit of counterparties who have entered into contracts for the purchase or sale of electricity, equipment, or other services with our subsidiaries or lenders. In such circumstances, if a business defaults on its payment or supply obligation, the Parent Company will be responsible for the business’ obligations up to the amount provided for in the relevant guarantee or other credit support. As of September 30, 2024, the Parent Company had provided outstanding financial and performance-related guarantees or other credit support commitments to or for the benefit of our businesses, which were limited by the terms of the agreements, of approximately $4.3 billion in aggregate (excluding those collateralized by letters of credit and other obligations discussed below).

Some counterparties may be unwilling to accept our general unsecured commitments to provide credit support. Accordingly, with respect to both new and existing commitments, the Parent Company may be required to provide some other form of assurance, such as a letter of credit, to backstop or replace our credit support. The Parent Company may not be able to provide adequate assurances to such counterparties. To the extent we are required and able to provide letters of credit or other collateral to such counterparties, this will reduce the amount of credit available to us to meet our other liquidity needs. As of September 30, 2024, we had $237 million in letters of credit outstanding provided under our unsecured credit facilities, $290 million in letters of credit under bilateral agreements, and $24 million in letters of credit outstanding provided under our revolving credit facility. These letters

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of credit operate to guarantee performance relating to certain project development and construction activities and business operations. During the quarter ended September 30, 2024, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts.

Additionally, in connection with certain project financings, some of the Company's subsidiaries have expressly undertaken limited obligations and commitments. These contingent contractual obligations are issued at the subsidiary level and are non-recourse to the Parent Company. As of September 30, 2024, the maximum undiscounted potential exposure to guarantees issued by our subsidiaries was $2.6 billion, including $1.6 billion of customary payment guarantees under EPC contracts and other agreements, and $996 million of tax equity financing related guarantees. In addition, as of September 30, 2024, our subsidiaries had $1.9 billion of letters of credit outstanding.

We expect to continue to seek, where possible, non-recourse debt financing in connection with the assets or businesses that we or our affiliates may develop, construct, or acquire. However, depending on local and global market conditions and the unique characteristics of individual businesses, non-recourse debt may not be available on economically attractive terms or at all. If we decide not to provide any additional funding or credit support to a subsidiary project that is under construction or has near-term debt payment obligations and that subsidiary is unable to obtain additional non-recourse debt, such subsidiary may become insolvent, and we may lose our investment in that subsidiary. Additionally, if any of our subsidiaries lose a significant customer, the subsidiary may need to withdraw from a project or restructure the non-recourse debt financing. If we or the subsidiary choose not to proceed with a project or are unable to successfully complete a restructuring of the non-recourse debt, we may lose our investment in that subsidiary.

Many of our subsidiaries depend on timely and continued access to capital markets to manage their liquidity needs. The inability to raise capital on favorable terms, to refinance existing indebtedness, or to fund operations and other commitments during times of political or economic uncertainty may have material adverse effects on the financial condition and results of operations of those subsidiaries. In addition, changes in the timing of tariff increases or delays in the regulatory determinations under the relevant concessions could affect the cash flows and results of operations of our businesses.

Long-Term Receivables

As of September 30, 2024, the Company had approximately $97 million of gross accounts receivable classified as Other noncurrent assets. These noncurrent receivables mostly consist of accounts receivable in the U.S. and Chile that, pursuant to amended agreements or government resolutions, have collection periods that extend beyond September 30, 2025, or one year from the latest balance sheet date. Noncurrent receivables in the U.S. pertain to the sale of the Redondo Beach land. Noncurrent receivables in Chile pertain primarily to revenues recognized on regulated energy contracts that were impacted by the Stabilization Funds created by the Chilean government. See Note 5—Financing Receivables in Item 1.—Financial Statements of this Form 10-Q for further information.

As of September 30, 2024, the Company had approximately $1 billion of loans receivable primarily related to the Mong Duong facility in Vietnam, which was constructed under a build, operate, and transfer contract. This loan receivable represents contract consideration related to the construction of the facility, which was substantially completed in 2015, and will be collected over the 25-year term of the plant’s PPA. As of September 30, 2024, Mong Duong met the held-for-sale criteria and the loan receivable balance of $1 billion, net of CECL reserves of $24 million, was classified in held-for-sale assets. Of the loan receivable balance, $118 million was classified in Current held-for-sale assets, and $873 million was classified in Noncurrent held-for-sale assetson the Condensed Consolidated Balance Sheets. See Note 14—Revenue in Item 1.—Financial Statements of this Form 10-Q for further information.

Cash Sources and Uses

The primary sources of cash for the Company in the nine months ended September 30, 2024 were debt financings, cash flows from operating activities, purchases under supplier financing arrangements, and sales to noncontrolling interests. The primary uses of cash in the nine months ended September 30, 2024 were capital expenditures, repayments of debt, repayments of obligations under supplier financing arrangements, and purchases of short-term investments.

The primary sources of cash for the Company in the nine months ended September 30, 2023 were debt financings, cash flows from operating activities, purchases under supplier financing arrangements, and sales of short-term investments. The primary uses of cash in the nine months ended September 30, 2023 were repayments

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of debt, capital expenditures, repayments of obligations under supplier financing arrangements, and purchases of short-term investments.

A summary of cash-based activities is as follows (in millions):

Consolidated Cash Flows

The following table reflects the changes in operating, investing, and financing cash flows for the comparative nine-month period (in millions):

Operating Activities

Net cash provided by operating activities decreased $645 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Operating Cash Flows

(1)The change in adjusted net income is defined as the variance innet income, net of the total adjustments to net incomeas shown on the Condensed Consolidated Statements of Cash Flows in Item 1.—Financial Statementsof this Form 10-Q.

(2)The change in working capital is defined as the variance in total changes in operating assets and liabilities as shown on the Condensed Consolidated Statements of Cash Flows in Item 1.—Financial Statementsof this Form 10-Q.

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•Adjusted net income increased $84 million, primarily due to higher margins at our Utilities SBU and proceeds from the transfer of U.S. investment tax credits; partially offset by lower margins at our Renewables and Energy Infrastructure SBUs, an increase in interest expense, and a decrease in interest income.

•Change in working capital decreased $729 million, primarily due to an increase in receivables due to timing of billings and collections, and higher coal consumption coupled with lower coal prices in the prior year; partially offset by the impact of lower coal purchases on accounts payable, and a decrease in other assets due to the sale of financing receivables under the Warrior Run PPA termination agreement.

Investing Activities

Net cash used in investing activities increased $416 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Investing Cash Flows

•Cash used for short-term investing activities increased $232 million, primarily as a result of lower net short-term investment sales at our Renewables SBU.

•Proceeds from sales of business interests decreased $87 million, primarily due to the prior year selldown of sPower OpCo B.

•Acquisitions of business interests decreased $232 million, primarily due to the prior year acquisitions of Bellefield and Bolero Solar Park at AES Clean Energy and AES Andes, respectively, partially offset by the current year acquisition of Hoosier Wind at AES Indiana.

•Capital expenditures increased $370 million, discussed further below.

Capital Expenditures

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(1)Growth expenditures generally include expenditures related to development projects in construction, expenditures that increase capacity of a facility beyond the original design, and investments in general load growth or system modernization.

(2)Maintenance expenditures generally include expenditures that are necessary to maintain regular operations or net maximum capacity of a facility.

(3)Environmental expenditures generally include expenditures to comply with environmental laws and regulations, expenditures for safety programs and other expenditures to ensure a facility continues to operate in an environmentally responsible manner.

•Growth expenditures increased $364 million, primarily driven by an increase in renewables project investments in the U.S. and Chile and higher transmission and distribution project investments at our Utilities SBU; partially offset by lower expenditures in Brazil primarily due to the completion of the Cajuina wind projects.

•Maintenance expenditures increased $5 million, primarily due to higher expenditures at Southland due to the extension of compliance dates for the OTC units, partially offset by the timing of maintenance activities at our Renewables SBU.

Financing Activities

Net cash provided by financing activities increased $1.4 billion for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Financing Cash Flows

See Notes 1—Financial Statement Presentation, 8—Debt, and 12—Equityin Item 1.—Financial Statements of this Form 10-Q for more information regarding significant supplier financing arrangements, debt, and equity transactions, respectively.

•The $1.4 billion impact from non-recourse debt transactions is mainly due to an increase in borrowings at AES Indiana, AES Andes, and AES Clean Energy Development.

•The $857 million impact from the Parent Company revolver is due to higher net borrowings in the current period.

•The $498 million impact from sales to noncontrolling interest is primarily due to an increase in proceeds received at AES Clean Energy from the sales of ownership in project companies to tax equity investors.

•The $465 million impact from non-recourse revolvers is primarily due to higher net repayments at our Energy Infrastructure and Utilities SBUs.

•The $450 million impact from recourse debt is primarily due to the prior year issuance of a bridge loan at AES Clean Energy, which was fully guaranteed by the Parent Company, partially offset by an increase in issuances at the Parent Company in the current period.

•The $409 million impact from supplier financing arrangements is primarily due to higher net repayments at our Renewables SBU.

Parent Company Liquidity

The following discussion is included as a useful measure of the liquidity available to The AES Corporation, or the Parent Company, given the non-recourse nature of most of our indebtedness. Parent Company Liquidity, as outlined below, is a non-GAAP measure and should not be construed as an alternative to Cash and cash equivalents, which is determined in accordance with GAAP. Parent Company Liquidity may differ from similarly titled measures used by other companies. The principal sources of liquidity at the Parent Company level are dividends

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and other distributions from our subsidiaries, including refinancing proceeds; proceeds from debt and equity financings at the Parent Company level, including availability under our revolving credit facility and commercial paper program; and proceeds from asset sales. The Parent Company credit facility and commercial paper program are generally used for short-term cash needs to bridge the timing of distributions from subsidiaries. Cash requirements at the Parent Company level are primarily to fund interest and principal repayments of debt, construction commitments, other equity commitments, acquisitions, taxes, Parent Company overhead and development costs, and dividends on common stock.

The Company defines Parent Company Liquidity as cash available to the Parent Company, including cash at qualified holding companies, plus available borrowings under our existing credit facility and commercial paper program. The cash held at qualified holding companies represents cash sent to subsidiaries of the Company domiciled outside of the U.S. Such subsidiaries have no contractual restrictions on their ability to send cash to the Parent Company. Parent Company Liquidity is reconciled to its most directly comparable GAAP financial measure, Cash and cash equivalents, at the periods indicated as follows (in millions):

The Parent Company paid dividends of $0.1725 per outstanding share to its common stockholders during the first, second, and third quarters of 2024 for dividends declared in December 2023, February 2024, and July 2024, respectively. While we intend to continue payment of dividends and believe we will have sufficient liquidity to do so, we can provide no assurance that we will continue to pay dividends, or if continued, the amount of such dividends.

Recourse Debt

Our total recourse debt was $6.5 billion and $4.5 billion as of September 30, 2024 and December 31, 2023, respectively. See Note 8—Debt in Item 1.—Financial Statementsof this Form 10-Q and Note 11—Debt in Item 8.—Financial Statements and Supplementary Data of our 2023 Form 10-K for additional detail.

We believe that our sources of liquidity will be adequate to meet our needs for the foreseeable future. This belief is based on a number of material assumptions, including, without limitation, assumptions about our ability to access the capital markets, the operating and financial performance of our subsidiaries, currency exchange rates, power market pool prices, and the ability of our subsidiaries to pay dividends. In addition, our subsidiaries’ ability to declare and pay cash dividends to us (at the Parent Company level) is subject to certain limitations contained in loans, governmental provisions and other agreements. We can provide no assurance that these sources will be available when needed or that the actual cash requirements will not be greater than anticipated. We have met our interim needs for shorter-term and working capital financing at the Parent Company level with our revolving credit facility and commercial paper program. See Item 1A.—Risk Factors—The AES Corporation’s ability to make payments on its outstanding indebtedness is dependent upon the receipt of funds from our subsidiaries of the Company’s 2023 Form 10-K for additional information.

Various debt instruments at the Parent Company level, including our revolving credit facility and commercial paper program, contain certain restrictive covenants. The covenants provide for, among other items, limitations on other indebtedness, liens, investments and guarantees; limitations on dividends, stock repurchases and other equity transactions; restrictions and limitations on mergers and acquisitions, sales of assets, leases, transactions with affiliates and off-balance sheet and derivative arrangements; maintenance of certain financial ratios; and financial and other reporting requirements. As of September 30, 2024, we were in compliance with these covenants at the Parent Company level.

Non-Recourse Debt

While the lenders under our non-recourse debt financings generally do not have direct recourse to the Parent Company, defaults thereunder can still have important consequences for our results of operations and liquidity, including, without limitation:

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•reducing our cash flows as the subsidiary will typically be prohibited from distributing cash to the Parent Company during the time period of any default;

•triggering our obligation to make payments under any financial guarantee, letter of credit, or other credit support we have provided to or on behalf of such subsidiary;

•causing us to record a loss in the event the lender forecloses on the assets; and

•triggering defaults in our outstanding debt at the Parent Company.

For example, our revolving credit facility and outstanding debt securities at the Parent Company include events of default for certain bankruptcy-related events involving material subsidiaries. In addition, our revolving credit agreement at the Parent Company includes events of default related to payment defaults and accelerations of outstanding debt of material subsidiaries.

Some of our subsidiaries are currently in default with respect to all or a portion of their outstanding indebtedness. The total non-recourse debt classified as current in the accompanying Condensed Consolidated Balance Sheets amounts to $3.2 billion. The portion of current debt related to such defaults was $330 million at September 30, 2024, all of which was non-recourse debt related to five subsidiaries: AES Puerto Rico, AES Mexico Generation Holdings, AES Ilumina, AES Jordan Solar, and a project entity at AES Clean Energy Development. AES Puerto Rico is in payment default on its long-term debt and preferred shares due to failure to implement the cash sweep mechanism in accordance with the terms of the loan agreements. AES Puerto Rico is working with the noteholders to resolve this matter. All other subsidiary defaults listed are not payment defaults, but are instead technical defaults triggered by failure to comply with other covenants or other requirements contained in the non-recourse debt documents of the applicable subsidiary. See Note 8—Debt in Item 1.—Financial Statementsof this Form 10-Q for additional detail.

None of the subsidiaries that are currently in default are subsidiaries that met the applicable definition of materiality under the Parent Company’s debt agreements as of September 30, 2024, in order for such defaults to trigger an event of default or permit acceleration under the Parent Company’s indebtedness. However, as a result of additional dispositions of assets, other significant reductions in asset carrying values or other matters in the future that may impact our financial position and results of operations or the financial position of the individual subsidiary, it is possible that one or more of these subsidiaries could fall within the definition of a “material subsidiary” and thereby trigger an event of default and possible acceleration of the indebtedness under the Parent Company’s outstanding debt securities. A material subsidiary is defined in the Parent Company’s revolving credit agreement as any business that contributed 20% or more of the Parent Company’s total cash distributions from businesses for the four most recently ended fiscal quarters. As of September 30, 2024, none of the defaults listed above resulted in a cross-default under the recourse debt of the Parent Company. Furthermore, none of the non-recourse debt in default listed above is guaranteed by the Parent Company.