AES CORP

Overview

As of December 31, 2024, the Company had unrestricted cash and cash equivalents of $1.5 billion, of which $265 million was held at the Parent Company and qualified holding companies. The Company had $79 million in short-term investments, held primarily at subsidiaries, and restricted cash and debt service reserves of $515 million. The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $22.7 billion and $5.7 billion, respectively. Of the $2.7 billion of our current non-recourse debt, $2.5 billion was presented as such because it is due in the next twelve months and $186 million relates to debt considered in default. AES Puerto Rico is in payment default. 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. Additionally, on February 6, 2025, AES Dominican Renewable Energy failed to comply with a covenant on its debt of $354 million, resulting in a technical default. AES Dominican Renewable Energy is classified as held-for-sale as of December 31, 2024, therefore the associated non-recourse debt is classified in Current held-for-sale liabilities on the Consolidated Balance Sheet. See Note 12—Obligations and Note 25—Held-For-Sale and Dispositionsin Item 8.—Financial Statementsof this Form 10-K for additional detail. As of December 31, 2024, the Company also had $917 million outstanding related to supplier financing arrangements.

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 $899 million in recourse debt which matures within the next twelve months. Furthermore, we have $616 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 does not have any material unhedged exposure to variable interest rate debt. 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 $28.8 billion of total gross debt outstanding as of December 31, 2024, approximately $8.9 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 December 31, 2024, the total maximum outstanding amount of hedges protecting the company against variable rate exposure was $7.9 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 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 in support of tax equity partnerships or 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 December 31, 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 $3.0 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 December 31, 2024, we had $378 million in letters of credit under bilateral agreements, $129 million in letters of credit outstanding provided under our unsecured credit facilities, and $18 million in letters of credit outstanding provided under our revolving credit facilities. These letters of credit operate to guarantee performance relating to certain project development and construction activities and business operations. During the year ended December 31, 2024, the Parent 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 December 31, 2024, the maximum undiscounted potential exposure to guarantees and letters of credit issued by our subsidiaries was $5.3 billion, including $2.2 billion of customary payment guarantees under EPC contracts and other agreements, $1.4 billion of letters of credit outstanding, $1.2 billion of surety bonds and other guarantees issued by insurance companies, and $388 million of tax equity financing related guarantees.

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 December 31, 2024, the Company had approximately $102 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 December 31, 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 7—Financing Receivables included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

As of December 31, 2024, the Company had approximately $963 million of loans receivable related to the Mong Duong facility in Vietnam, which was constructed under a BOT 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 December 31, 2024, Mong Duong met the held-for-sale criteria and the loan receivable balance, net of CECL reserve of $23 million, was classified in held-for-sale assets. Of the loan receivable balance, $121 million was classified in Current held-for-sale assets, and $842 million was classified in Noncurrent held-for-sale assetson the Consolidated Balance Sheets. See Note 21—Revenue included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Cash Sources and Uses

The primary sources of cash for the Company in the year ended December 31, 2024 were debt financings, cash flows from operating activities, purchases under supplier financing arrangements, sales to noncontrolling interests, and sales of short-term investments. The primary uses of cash in the year ended December 31, 2024 were repayments of debt, capital expenditures, repayments of obligations under supplier financing arrangements, and purchases of short-term investments.

The primary sources of cash for the Company in the year ended December 31, 2023 were debt financings, cash flows from operating activities, sales to noncontrolling interests, purchases under supplier financing arrangements, and sales of short-term investments. The primary uses of cash in the year ended December 31, 2023 were repayments of debt, capital expenditures, repayments of obligations under supplier financing arrangements, purchases of short-term investments, and acquisitions of business interests.

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

(1)Includes interest capitalized on development and construction of $637 million and $563 million for the years ended December 31, 2024 and 2023, respectively. Of the total capitalized in 2024 and 2023, $577 million and $486 million, respectively, are related to recourse and non-recourse debt interest payments. The remaining capitalized interest is primarily related to supplier financing arrangements.

(2)Includes the $63 million and $270 million effect of exchange rate changes on cash, cash equivalents and restricted cash for the years ended December 31, 2024 and 2023, respectively. The impacts in 2023 are primarily related to the devaluation of the Argentine peso as Argentina's economy was highly inflationary. See Item 7.—Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties—Foreign Exchange Ratesfor further information.

Consolidated Cash Flows

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

Operating Activities

Net cash provided by operating activities decreased $282 million for the year ended December 31, 2024, compared to December 31, 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 Consolidated Statements of Cash Flows in Item 8.—Financial Statements and Supplementary Data of this Form 10-K.

(2)The change in working capital is defined as the variance in total changes in operating assets and liabilities as shown on the Consolidated Statements of Cash Flows in Item 8.—Financial Statements and Supplementary Data of this Form 10-K.

•Adjusted net income increased $120 million, primarily due to higher margin 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, higher interest expense, and lower interest income.

•Change in working capital decreased $402 million, primarily due to a $522 million increase in accounts receivable resulting from higher billings and the timing of collections and an increase in inventory of $220 million due to higher coal consumption in the prior year; partially offset by a $153 million decrease in prepaid expenses and other assets due to proceeds from interest rate swap settlements, insurance recoveries, and VAT recoveries as well as the collection of Stabilization Fund receivables in Chile, partially offset by additional lease options and long-term security deposits in the current year at ACED.

Investing Activities

Net cash used in investing activities decreased $488 million for the year ended December 31, 2024 compared to December 31, 2023.

Investing Cash Flows

•Acquisitions of business interests decreased $296 million, primarily due to the prior year acquisitions of Rexford at AES Renewable Holdings for $228 million, Bellefield at ACED for $165 million, and Bolero Solar Park in Chile for $114 million; partially offset by the current year acquisitions of Atacama Solar in Chile for $105 million and various acquisitions of renewables development projects at ACED in the current year totaling $79 million.

•Proceeds from sales of business interests increased $169 million, primarily due to proceeds of $412 million, net of transaction costs and cash sold, from the sale of AES Brasil; partially offset by the prior year selldowns of our ownership interests in Fluence for $156 million and in sPower OpCo B for $98 million.

•Cash from short-term investing activities decreased $403 million, primarily driven by a decrease of $363 million in Brazil due to lower cash requirements for capital expenditures and the sale of AES Brasil in October 2024.

•Capital expenditures decreased $332 million, discussed further below.

Capital Expenditures

(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 decreased $322 million, primarily driven by lower expenditures in Brazil of $406 million primarily due to completion of the Cajuina wind projects in the prior year and the sale of AES Brasil in October 2024, and a $246 million decrease in expenditures for U.S. renewables projects compared to the prior year; partially offset by higher expenditures at our U.S. utilities of $187 million mainly due to higher transmission and distribution project investments, and higher expenditures in Chile of $121 million due to new solar project development.

•Maintenance expenditures decreased $11 million, primarily due to lower expenditures in Brazil of $40 million primarily due to completion of the Cajuina wind projects in the prior year and the sale of AES Brasil in October 2024; partially offset by higher expenditures of $32 million at Southland due to the extension of compliance dates for the OTC units.

•Environmental expenditures increased $1 million, with no material drivers.

Financing Activities

Net cash provided by financing activities decreased $442 million for the year ended December 31, 2024 compared to December 31, 2023.

Financing Cash Flows

See Notes 12—Obligationsand 18—Equity in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for more information regarding significant transactions.

•The $691 million impact from sales to noncontrolling interests is primarily due to a $210 million decrease in proceeds received at AES Clean Energy from the sales of ownership in project companies to tax equity investors, the prior year sales of a 20% interest in AES Dominicana for $192 million and a 35% interest in Colon for $140 million, and a $146 million decrease in sales under the Chile Renovables renewables partnerships with GIP.

•The $534 million impact from non-recourse revolvers is primarily due to higher net repayments at our Energy Infrastructure and Renewables SBUs.

•The $421 million impact from issuance of preferred shares in subsidiaries is due to $275 million of proceeds received in the prior year from the issuance of preferred shares to GIP as part of the Chile Renovables partnership, and the prior year issuance of $143 million of preferred shares to HASI at AES Renewable Holdings for OpCo 1.

•The $375 million impact from supplier financing arrangements is primarily due to higher net cash outflows at the Renewables SBU; partially offset by higher net cash inflows at the Energy Infrastructure SBU.

•The $904 million impact from non-recourse debt transactions is mainly due to higher net borrowings at the Energy Infrastructure and Utilities SBUs of $236 million and $248 million, respectively, and lower net repayments at AES Hispanola Holdings, BV, and the Renewables SBU of $279 million and $142 million, respectively.

•The $350 million impact from recourse debt is primarily due to the issuance of $1.5 billion of subordinated notes and repayments of $200 million at the Parent Company in the current year; partially offset by the issuance of $900 million of senior notes at the Parent Company in the prior year.

•The $325 million impact from the Parent Company revolver is primarily due to lower net repayments in the current year.

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 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 facilities and commercial paper program; and proceeds from asset sales. The Parent Company credit facilities 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 facilities 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 $0.69 per outstanding share to its common stockholders during the year ended December 31, 2024. 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 $5.7 billion and $4.5 billion as of December 31, 2024 and 2023, respectively. See Note 12—Obligations in Item 8.—Financial Statements and Supplementary Data of this 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 facilities 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 this Form 10-K.

Various debt instruments at the Parent Company level, including our revolving credit facilities 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 December 31, 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:

•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 facilities 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 Consolidated Balance Sheets amounts to $2.7 billion. The portion of current debt related to such defaults was $186 million at December 31, 2024, all of which was non-recourse debt related to three subsidiaries — AES Puerto Rico, AES Ilumina, and AES Jordan Solar. AES Puerto Rico is in payment default. All other defaults are not payment defaults, but are instead technical defaults triggered by failure to comply with other covenants or other conditions contained in the non-recourse debt documents. Additionally, on February 6, 2025, AES Dominican Renewable Energy failed to comply with a covenant on its debt of $354 million, resulting in a technical default. AES Dominican Renewable Energy is classified as held-for-sale as of December 31, 2024, therefore the associated non-recourse debt is classified in Current held-for-sale liabilities on the Consolidated Balance Sheet. See Note 12—Obligations and Note 25—Held-For-Sale and Dispositionsin Item 8.—Financial Statements and Supplementary Data of this Form 10-K 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 December 31, 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 completed fiscal quarters. As of December 31, 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.

Contractual Obligations and Contingent Contractual Obligations

A summary of our contractual obligations, commitments and other liabilities as of December 31, 2024 is presented below (in millions):

(1)Includes recourse and non-recourse debt presented on the Consolidated Balance Sheets. These amounts exclude finance lease liabilities which are included in the finance lease obligations category.

(2)Excludes any businesses classified as held-for-sale. See Note 25—Held-for-Sale and Dispositions in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional information related to held-for-sale businesses.

(3)Interest payments are estimated based on final maturity dates of debt securities outstanding at December 31, 2024 and do not reflect anticipated future refinancing, early redemptions or new debt issuances. Variable rate interest obligations are estimated based on rates as of December 31, 2024.

(4)These amounts do not include current liabilities on the Consolidated Balance Sheets except for the current portion of uncertain tax obligations. Noncurrent uncertain tax obligations are reflected in the "Other" column of the table above as the Company is not able to reasonably estimate the timing of the future payments. In addition, these amounts do not include: (1) regulatory liabilities (See Note 11—Regulatory Assets and Liabilities), (2) contingencies (See Note 14—Contingencies), (3) pension and other postretirement employee benefit liabilities (see Note 16—Benefit Plans), (4) derivatives and incentive compensation (See Note 6—Derivative Instruments and Hedging Activities) or (5) any taxes (See Note 24—Income Taxes) except for uncertain tax obligations, as the Company is not able to reasonably estimate the timing of future payments. See the indicated notes to the Consolidated Financial Statements included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional information on the items excluded.

(5)For further information see the note referenced below in Item 8.—Financial Statements and Supplementary Data of this Form 10-K.

The following table presents our Parent Company's contingent contractual obligations as of December 31, 2024:

Additionally, some of the Company's subsidiaries have contingent contractual obligations that are non-recourse to the Parent Company. As of December 31, 2024, the maximum undiscounted potential exposure to guarantees issued by our subsidiaries was $5.3 billion, including $2.2 billion of customary payment guarantees under EPC contracts and other agreements, $1.4 billion of letters of credit outstanding, $1.2 billion of surety bonds and other guarantees issued by insurance companies, and $388 million of tax equity financing related guarantees.

We have a diverse portfolio of performance-related contingent contractual obligations. These obligations are designed to cover potential risks and only require payment if certain targets are not met or certain contingencies occur. The risks associated with these obligations include change of control, construction cost overruns, subsidiary default, political risk, tax indemnities, spot market power prices, sponsor support, and liquidated damages under power sales agreements for projects in development, in operation and under construction. While we do not expect that we will be required to fund any material amounts under these contingent contractual obligations beyond 2024, many of the events which would give rise to such obligations are beyond our control. We can provide no assurance that we will be able to fund our obligations under these contingent contractual obligations if we are required to make substantial payments thereunder.