AES CORP

126 | Notes to Consolidated Financial Statements | December 31, 2024, 2023 and 2022

Notes to Consolidated Financial Statements

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The AES Corporation is a holding company (the "Parent Company") that, through its subsidiaries and affiliates, (collectively, "AES" or "the Company") operates a geographically diversified portfolio of electricity generation and distribution businesses. Generally, the liabilities of individual operating entities are non-recourse to the Parent Company and are isolated to the operating entities. Most of our operating entities are structured as limited liability entities, which limit the liability of shareholders. The structure is generally the same regardless of whether a subsidiary is consolidated under a voting or variable interest model. The preparation of these consolidated financial statements is in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

PRINCIPLES OF CONSOLIDATION— The consolidated financial statements of the Company include the accounts of The AES Corporation and its controlled subsidiaries. Furthermore, VIEs in which the Company has an ownership interest and is the primary beneficiary, thus controlling the VIE, have been consolidated. Certain consolidated VIEs have arrangements which may require the Company to contribute additional equity totaling $1.7 billion. Such contributions are generally contingent upon the underlying asset achieving specific project milestones. Intercompany transactions and balances are eliminated in consolidation. Investments in entities where the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting.

NONCONTROLLING INTERESTS— Noncontrolling interests are classified as a separate component of equity in the Consolidated Balance Sheets and Consolidated Statements of Changes in Equity. Additionally, net income and comprehensive income attributable to noncontrolling interests are reflected separately from consolidated net income and comprehensive income on the Consolidated Statements of Operations and Consolidated Statements of Changes in Equity. Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and noncontrolling interests. Losses continue to be attributed to the noncontrolling interests, even when the noncontrolling interests' basis has been reduced to zero.

Noncontrolling interests with redemption features that are not solely within the control of the issuer are classified as temporary equity and are included in Redeemable stock of subsidiaries on the Consolidated Balance Sheets. Generally, initial measurement will be at fair value. The subsequent allocation of income and dividends is classified in temporary equity. Subsequent measurement and classification vary depending on whether the instrument is probable of becoming redeemable. For those securities that are currently redeemable or where it is probable that the instrument will become redeemable, AES recognizes any changes from the carrying value to redemption value at each reporting period against retained earnings or additional paid-in capital in the absence of retained earnings; such adjustments are classified in temporary equity. When the equity instrument is not probable of becoming redeemable, no adjustment to the carrying value is recognized. Instruments that are mandatorily redeemable are classified as a liability.

EQUITY METHOD INVESTMENTS— Investments in entities over which the Company has the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting and reported in Investments in and advances to affiliates on the Consolidated Balance Sheets. The Company’s proportionate share of the net income or loss of these companies is included in Net equity in losses of affiliateson the Consolidated Statements of Operations.

The Company utilizes the cumulative earnings approach to determine whether distributions received from equity method investees are returns on investment or returns of investment. The Company discontinues the application of the equity method when an investment is reduced to zero and the Company is not otherwise committed to provide further financial support to the investee. The Company resumes the application of the equity method accounting to the extent that net income is greater than the share of net losses not previously recorded.

Upon acquiring the investment, we determine the fair value of the identifiable assets and assumed liabilities and the basis difference between the fair value and the carrying amount of each corresponding asset or liability in the financial statements of the investee. The AES share of the amortization of the basis difference is recognized in Net equity in losses of affiliates in the Consolidated Statements of Operations over the life of the asset or liability.

127 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

The Company periodically assesses if impairment indicators exist at our equity method investments. When an impairment is observed, any excess of the carrying amount over its estimated fair value is recognized as impairment expense when the loss in value is deemed other-than-temporary and included in Other non-operating expense in the Consolidated Statements of Operations.

BUSINESS INTERESTS— Acquisitions and disposals of business interests are generally transactions pertaining to operational legal entities, which may be accounted for as a consolidated business, an asset acquisition, or an equity method investment. Any gains or losses upon the completion of disposals, which include reclassification of cumulative translation adjustments, are recognized in Gain (loss) on disposal and sale of business interests in the Consolidated Statements of Operations upon completion of the sale.

ALLOCATION OF EARNINGS — Certain of the Company's businesses are subject to profit-sharing arrangements where the allocation of earnings and losses, cash distributions, and tax benefits are not based on fixed ownership percentages.

Many of these arrangements exist for certain U.S. renewable generation partnerships to designate different allocations of value among investors, where the allocations change in form or percentage over the life of the partnership. For these businesses, the Company uses the HLBV method when it is a reasonable approximation of the profit-sharing arrangement. The HLBV method calculates the proceeds that would be attributable to each partner based on the liquidation provisions of the respective operating partnership agreement if the partnership was to be liquidated at book value at the balance sheet date. Each partner’s share of income in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions.

The HLBV method is used both to allocate the equity earnings attributable to AES when the Company accounts for the renewables business as an equity method investment and to calculate the earnings attributable to noncontrolling interest when the business is consolidated by AES. In the early months of operations of a renewable generation facility where HLBV results in a significant decrease in the hypothetical liquidation proceeds attributable to the tax equity investor due to the recognition of ITCs or other adjustments as required by the U.S. Internal Revenue Code, the Company records the impact (sometimes referred to as the ‘Day one gain’) to income in the same period.

In some other arrangements, consolidated subsidiaries are subject to profit-sharing arrangements where cash distributions to noncontrolling interest holders are based on a stated internal rate of return, among other criteria. In many of these arrangements, earnings are allocated to noncontrolling interest holders based on the stated internal rate of return to the noncontrolling interest holders for any given period.

USE OF ESTIMATES— U.S. GAAP requires the Company to make estimates and assumptions that affect the asset and liability balances reported as of the date of the consolidated financial statements, as well as the revenues and expenses recognized during the reporting period. Actual results could differ from those estimates. Items subject to such estimates and assumptions include: estimated useful lives of long-lived assets; asset retirement obligations; impairment of goodwill, long-lived assets and equity method investments; valuation allowances for receivables and deferred tax assets; the recoverability of regulatory assets; regulatory liabilities; the fair value of financial instruments; the fair value of assets and liabilities acquired as business combinations or as asset acquisitions by variable interest entities; contingent consideration arising from business combinations or asset acquisitions by variable interest entities; the measurement of equity method investments or noncontrolling interest using the HLBV method for certain renewable generation partnerships; pension liabilities; the incremental borrowing rates used in the determination of lease liabilities; the determination of lease and non-lease components in certain generation contracts; environmental liabilities; temporary equity; and potential litigation claims and settlements.

HELD-FOR-SALE DISPOSAL GROUPS— A disposal group classified as held-for-sale is reflected on the balance sheet at the lower of its carrying amount or estimated fair value less costs to sell. A loss is recognized if the carrying amount of the disposal group exceeds its estimated fair value less costs to sell. If the fair value of the disposal group subsequently exceeds the carrying amount while the disposal group is still held-for-sale, any impairment expense previously recognized will be reversed up to the lesser of the previously recognized expense or the subsequent excess.

Assets and liabilities related to a disposal group classified as held-for-sale are segregated in the balance sheet in the period in which the disposal group is classified as held-for-sale. Assets and liabilities of held-for-sale disposal groups are classified as current when they are expected to be settled or disposed of within twelve months and as

128 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

noncurrent when they are not expected to be settled or disposed of within the next twelve months. Transactions between the held-for-sale disposal group and businesses that are expected to continue to exist after the disposal are not eliminated to appropriately reflect the continuing operations and balances held-for-sale. See Note 25—Held-for-Sale and Dispositions for further information.

DISCONTINUED OPERATIONS— Discontinued operations reporting occurs only when the disposal of a business or a group of businesses represents a strategic shift that has (or will have) a major effect on the Company's operations and financial results. The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Prior period amounts in the Consolidated Statements of Operations and Consolidated Balance Sheets are retrospectively revised to reflect the businesses determined to be discontinued operations. The cash flows of businesses that are determined to be discontinued operations are included within the relevant categories within operating, investing and financing activities on the face of the Consolidated Statements of Cash Flows.

Transactions between the businesses determined to be discontinued operations and businesses that are expected to continue to exist after the disposal are not eliminated to appropriately reflect the continuing operations and balances held-for-sale. The results of discontinued operations include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less costs to sell, including gains or losses associated with noncontrolling interests upon completion of the disposal transaction. Adjustments related to components previously reported as discontinued operations under prior accounting guidance are presented as discontinued operations in the current period even if the disposed-of component to which the adjustments are related would not meet the criteria for presentation as a discontinued operation under current guidance.

FAIR VALUE— Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly, hypothetical transaction between market participants at the measurement date, or exit price. The Company applies the fair value measurement accounting guidance to financial assets and liabilities in determining the fair value of investments in marketable debt and equity securities, included in the Consolidated Balance Sheet line items Short-term investments and Other noncurrent assets; derivative assets, included in Other current assets and Other noncurrent assets; and, derivative liabilities, included in Accrued and other liabilities (current) and Other noncurrent liabilities. The Company applies the fair value measurement guidance to nonfinancial assets and liabilities upon the acquisition of a business or assets, or in conjunction with the measurement of an asset retirement obligation or a potential impairment loss on an asset group, equity method investments, or goodwill.

When determining the fair value measurements for assets and liabilities required to be reflected at their fair values, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance. The Company is prohibited from including transaction costs and any adjustments for blockage factors in determining fair value.

In determining fair value measurements, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. Assets and liabilities are categorized within a fair value hierarchy based upon the lowest level of input that is significant to the fair value measurement:

•Level 1: Quoted prices in active markets for identical assets or liabilities;

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Any transfers between all levels within the fair value hierarchy levels are recognized at the end of the reporting period.

CASH AND CASH EQUIVALENTS— The Company considers unrestricted cash on hand, cash balances not restricted as to withdrawal or usage, deposits in banks, certificates of deposit and short-term marketable securities with original maturities of three months or less to be cash and cash equivalents.

RESTRICTED CASH AND DEBT SERVICE RESERVES— Cash balances restricted as to withdrawal or usage, primarily via contract, are considered restricted cash.

129 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

The following table provides a summary of cash, cash equivalents, and restricted cash amounts reported on the Consolidated Balance Sheets that reconcile to the total of such amounts as shown on the Consolidated Statements of Cash Flows (in millions):

INVESTMENTS IN MARKETABLE SECURITIES— The Company's marketable investments are primarily certificates of deposit, government debt securities and money market funds.

Short-term investments consist of marketable equity securities and debt securities with original maturities in excess of three months with remaining maturities of less than one year. Marketable debt securities where the Company has both the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost, net of any allowance for credit losses in accordance with ASC 326. Remaining marketable debt securities are classified as available-for-sale or trading and are carried at fair value.

Unrealized gains or losses on available-for-sale debt securities that are not credit-related are reflected in AOCL, a separate component of equity, and the Consolidated Statements of Comprehensive Income (Loss). Any credit-related impairments are recognized as an allowance with a corresponding impact recognized as a credit loss in Other expense. Unrealized gains or losses on equity investments are reported in Other income. Interest and dividends on investments are reported in Interest income and Other income, respectively. Gains and losses on sales of investments are determined using the specific identification method.

ACCOUNTS AND NOTES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES— Accounts and notes receivable are carried at amortized cost. The Company periodically assesses the collectability of accounts receivable, considering factors such as historical collection experience, the age of accounts receivable and other currently available evidence supporting collectability, and records an allowance for credit losses for the estimated uncollectible amount as appropriate. Credit losses on accounts and notes receivable are generally recognized in Cost of Sales. Certain of our businesses charge interest on accounts receivable. Interest income is recognized on an accrual basis. When collection of such interest is not reasonably assured, interest income is recognized as cash is received. Individual accounts and notes receivable are written off when they are no longer deemed collectible.

INVENTORY— Inventory primarily consists of fuel and other raw materials used to generate power, and operational spare parts and supplies used to maintain power generation and distribution facilities. Inventory is carried at lower of cost or net realizable value. Cost is the sum of the purchase price and expenditures incurred to bring the inventory to its existing location. Inventory is primarily valued using the average cost method. Generally, if it is expected fuel inventory will not be recovered through revenue earned from power generation, an impairment is recognized to reflect the fuel at net realizable value. The carrying amount of spare parts and supplies is typically reduced only in instances where the items are considered obsolete.

LONG-LIVED ASSETS— Long-lived assets include property, plant and equipment, assets under finance leases and intangible assets subject to amortization (i.e., finite-lived intangible assets).

Property, plant and equipment— Property, plant and equipment are stated at cost, net of accumulated depreciation. The cost of renewals and improvements that extend the useful life of property, plant and equipment are capitalized.

Construction progress payments, engineering costs, insurance costs, salaries, interest and other costs directly relating to construction in progress are capitalized during the construction period, provided the completion of the construction project is deemed probable, or expensed at the time construction completion is determined to no longer be probable. The continued capitalization of such costs is subject to risks related to successful completion, including those related to government approvals, site identification, financing, construction permitting and contract compliance. Assets are placed in service when an asset group is ready for its intended use. Government subsidies, refundable income tax credits that are accounted for as government grants, and liquidated damages recovered for construction delays are recorded as a reduction to property, plant and equipment and reflected in cash flows from investing activities. Maintenance and repairs are charged to expense as incurred.

Depreciation, after consideration of salvage value and asset retirement obligations, is computed using the straight-line method over the estimated useful lives of the assets, which are determined on a composite or

130 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

component basis. Capital spare parts, including rotable spare parts, are included in electric generation and distribution assets. If the spare part is considered a component, it is depreciated over its useful life after the part is placed in service. If the spare part is deemed part of a composite asset, the part is depreciated over the composite useful life even when being held as a spare part.

Certain of the Company's subsidiaries operate under concession contracts. Certain estimates are utilized to determine depreciation expense for the subsidiaries, including the useful lives of the property, plant and equipment and the amounts to be recovered at the end of the concession contract. The amounts to be recovered under these concession contracts are based on estimates that are inherently uncertain and actual amounts recovered may differ from those estimates. These concession contracts are not within the scope of ASC 853.

Intangible Assets Subject to Amortization— Finite-lived intangible assets are amortized over their useful lives which range from 1 –50 years and are included in the Consolidated Balance Sheet line item Other intangible assets. Net assets acquired in a business combination recognized as project development intangibles represent the value attributable to in-process development associated with future operating assets. An intangible asset is recognized when construction activities have yet to commence and the development work completed consists of contractual arrangements which are intangible in nature, such as permitting, contracting, and surveying. Amortization is computed using the straight-line method beginning when a project is placed in service and continuing over the estimated useful lives of the assets. The Company accounts for purchased emission allowances as intangible assets and records an expense when they are utilized or sold. Granted emission allowances are valued at zero.

Impairment of Long-lived Assets— When circumstances indicate the carrying amount of long-lived assets in a held-for-use asset group may not be recoverable, the Company evaluates the assets for potential impairment using internal projections of undiscounted cash flows resulting from the use and eventual disposal of the assets. Events or changes in circumstances that may necessitate a recoverability evaluation include, but are not limited to, adverse changes in the regulatory environment, unfavorable changes in power prices or fuel costs, increased competition due to additional capacity in the grid, technological advancements, declining trends in demand, or an expectation it is more likely than not that the asset will be disposed of before the end of its previously estimated useful life. If the carrying amount of the assets exceeds the undiscounted cash flows, an impairment expense is recognized for the amount by which the carrying amount of the asset group exceeds its fair value (subject to the carrying amount not being reduced below fair value for any individual long-lived asset that is determinable without undue cost and effort). An impairment expense for certain assets may be reduced by the establishment of a regulatory asset if recovery through approved rates is probable.

DEBT ISSUANCE COSTS— Costs incurred in connection with the issuance of long-term debt are deferred and presented as a direct reduction from the face amount of that debt and amortized over the related financing period using the effective interest method. Debt issuance costs related to a line-of-credit or revolving credit facility are deferred and presented as an asset and amortized over the related financing period. Make-whole payments in connection with early debt retirements are classified as cash flows used in financing activities.

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS— The Company evaluates goodwill and indefinite-lived intangible assets for impairment on an annual basis and whenever events or changes in circumstances necessitate an evaluation for impairment. The Company's annual impairment testing date is October 1 st.

Goodwill— Goodwill represents the excess of the purchase price of the business acquisition over the fair value of identifiable net assets acquired. Goodwill resulting from an acquisition is assigned to the reporting units that are expected to benefit from the synergies of the acquisition. Generally, each AES business with a goodwill balance constitutes a reporting unit as they are not similar to other businesses in a segment nor are they reported to segment management together with other businesses.

Goodwill is evaluated for impairment either under the qualitative assessment option or the quantitative test option to determine the fair value of the reporting unit. If goodwill is determined to be impaired, an impairment loss measured at the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill, is recorded.

Indefinite-Lived Intangible Assets— The Company's indefinite-lived intangible assets primarily include land-use rights and transmission rights. Indefinite-lived intangible assets are evaluated for impairment either under the qualitative assessment option or by performing the quantitative impairment test. If the carrying amount of an

131 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

intangible asset being tested for impairment exceeds its fair value, the excess is recognized as impairment expense.

ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES— Accounts payable consists of amounts due to trade creditors related to the Company's core business operations. These payables include amounts owed to vendors and suppliers for items such as energy purchased for resale, fuel, maintenance, inventory and other raw materials. The remaining balance of other accrued liabilities includes items such as income taxes, regulatory liabilities, legal contingencies, environmental remediation costs, and employee-related costs, including payroll, and benefits.

REGULATORY ASSETS AND LIABILITIES— The Company recognizes assets and liabilities that result from regulated ratemaking processes. Regulatory assets generally represent incurred costs which have been deferred due to the probable future recovery via customer rates. Generally, returns earned on regulatory assets are reflected in the Consolidated Statements of Operations within Interest income. Regulatory liabilities generally represent obligations to refund customers. Management continually assesses whether regulatory assets are probable of future recovery and regulatory liabilities are probable of future payment by considering factors such as applicable regulatory changes, recent rate orders applicable to other regulated entities, and the status of any pending or potential deregulation legislation. If future recovery of costs previously deferred ceases to be probable, the related regulatory assets are written off and recognized in income from continuing operations.

PENSION AND OTHER POSTRETIREMENT PLANS— The Company recognizes in its Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in actuarial gains or losses recognized in AOCL, except for those plans at certain of the Company's regulated utilities that can recover portions of their pension and postretirement obligations through future rates. All plan assets are recorded at fair value and categorized by level within the fair value hierarchy as described in Note 1—General and Summary of Significant Accounting Policies—Fair Value. AES follows the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

INCOME TAXES— Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities, and their respective income tax basis. The Company establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company's tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions have been classified as noncurrent income tax liabilities unless expected to be paid within one year. The Company's policy for interest and penalties related to income tax exposures is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

The Company has elected to treat GILTI as an expense in the period in which the tax is accrued. Accordingly, no deferred tax assets or liabilities are recorded related to GILTI.

The Company applies the flow-through method to account for its investment tax credits.

The Company's accounting policy for releasing the income tax effects from AOCL occurs on a portfolio basis.

The Company has elected an accounting policy not to consider the effects of being subject to the corporate alternative minimum tax in future periods when assessing the realizability of our deferred tax assets, carryforwards, and tax credits. Any effect on the realization of deferred tax assets will be recognized in the period they arise.

Historically, the Company has financed renewables projects with investments from tax equity investors who are allocated certain tax benefits associated with renewable energy projects (e.g. investment tax credits) through partnership agreements. The U.S. Inflation Reduction Act of 2022 (the "IRA") allows the owners of renewable energy projects to transfer tax credits directly to unrelated tax credit buyers. This provides the Company with the flexibility to obtain financing on any particular project with (i) the transfer of tax credits or (ii) investments from tax equity investors who are allocated tax benefits. The Company may also elect to retain the tax credit and use it to reduce its tax liability.

132 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

The Company accounts for tax credits that it will retain or transfer under ASC 740—Income Taxes, as a reduction in income tax expense by either including the expected amount of the tax credit to be claimed or the cash to be received when transferred, respectively, in the calculation of its annual effective tax rate throughout the year the renewables project is placed in service. The estimated tax credits are updated on a quarterly basis, with the year-end calculation including only the tax credits that are associated with projects placed in service, comprising credits claimed or transferred during the year. In assessing realizability for credits to be transferred, the Company includes cash it anticipates receiving in establishing any valuation allowance and establishes a valuation allowance equal to its best estimate of any discount on the transfer. During the year ended December 31, 2024, the Company executed agreements to transfer ITCs directly to third parties for $555 million. Of this amount, $309 million and $26 million was allocated to AES and recorded as an income tax benefit in 2024 and 2023, respectively, and $220 million was allocated to noncontrolling interests and treated as a contribution from noncontrolling interest holders. The Company received cash proceeds from these tax credit transfers of $480 million during the year ended December 31, 2024, and recorded a receivable in Other current assets on the Consolidated Balance Sheets for the remaining $75 million, which is expected to be received in March 2025. The receipt of cash from the transfer of tax credits is treated as an operating cash inflow on the Consolidated Statements of Cash Flows.

ASSET RETIREMENT OBLIGATIONS— The Company records the fair value of a liability for a legal obligation to retire an asset in the period in which the obligation is incurred. When a new liability is recognized, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, the Company eliminates the liability and, based on the actual cost to retire, may incur a gain or loss.

FOREIGN CURRENCY TRANSLATION— A business's functional currency is the currency of the primary economic environment in which the business operates and is generally the currency in which the business generates and expends cash. Subsidiaries and affiliates whose functional currency is a currency other than the U.S. dollar translate their assets and liabilities into U.S. dollars at the current exchange rates in effect at the end of the fiscal period. Adjustments arising from the translation of the balance sheet of such subsidiaries are included in AOCL. The revenue and expense accounts of such subsidiaries and affiliates are translated into U.S. dollars at the average exchange rates for the period. Gains and losses on intercompany foreign currency transactions that are long-term in nature and which the Company does not intend to settle in the foreseeable future, are also recognized in AOCL. Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in determining net income. Accumulated foreign currency translation adjustments are reclassified from AOCL to net income only when realized upon sale or upon complete or substantially complete liquidation of the investment in a foreign entity. The accumulated adjustments are included in carrying amounts in impairment assessments where the Company has committed to a plan that will cause the accumulated adjustments to be reclassified to earnings.

REVENUE RECOGNITION— Revenue is earned from the sale of electricity from our utilities, the production and sale of electricity and capacity from our generation facilities, and development and construction of generation facilities. Revenue is recognized upon the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recorded net of any taxes assessed on and collected from customers, which are remitted to the governmental authorities.

Utilities —Our utilities sell electricity directly to end-users, such as homes and businesses, and bill customers directly. The majority of our utility contracts have a single performance obligation, as the promises to transfer energy, capacity, and other distribution and/or transmission services are not distinct. Additionally, as the performance obligation is satisfied over time as energy is delivered, and the same method is used to measure progress, the performance obligation meets the criteria to be considered a series. Utility revenue is classified as regulated on the Consolidated Statements of Operations.

In exchange for the right to sell or distribute electricity in a service territory, our utility businesses are subject to government regulation. This regulation sets the framework for the prices (“tariffs”) that our utilities are allowed to charge customers for electricity. Since tariffs are determined by the regulator, the price that our utilities have the right to bill corresponds directly with the value to the customer of the utility's performance completed in each period. The Company also has some month-to-month contracts. Revenue under these contracts is recognized using an

133 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

output method measured by the MWh delivered each month, which best depicts the transfer of goods or services to the customer, at the approved tariff.

The Company has businesses where it sells and purchases power to and from ISOs and RTOs. Our utility businesses generally purchase power to satisfy the demand of customers that is not contracted through separate PPAs. In these instances, the Company accounts for these transactions on a net hourly basis because the transactions are settled on a net hourly basis. In limited situations, a utility customer may choose to receive generation services from a third-party provider, in which case the Company may serve as a billing agent for the provider and recognize revenue on a net basis.

Generation —Most of our generation fleet sells electricity under contracts to customers such as utilities, industrial users, and corporate clients. Our generation contracts, based on specific facts and circumstances, can have one or more performance obligations as the promise to transfer energy, capacity, and other services may or may not be distinct depending on the nature of the market and terms of the contract.

For contracts determined to have multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price using a market or expected cost plus margin approach. Additionally, the Company allocates variable consideration to one or more, but not all, distinct goods or services that form part of a single performance obligation when (1) the variable consideration relates specifically to the efforts to transfer the distinct good or service and (2) the variable consideration depicts the amount to which the Company expects to be entitled in exchange for transferring the promised good or service to the customer.

If the contract is determined to contain a performance obligation related to capacity, the performance obligation is generally satisfied over time, and if we use the same method to measure progress, the performance obligations meet the criteria to be considered a series. In measuring progress toward satisfaction of a performance obligation, the Company applies the "right to invoice" practical expedient when available and recognizes revenue in the amount to which the Company has a right to consideration from a customer that corresponds directly with the value of the performance completed to date. Revenue from generation businesses is classified as non-regulated on the Consolidated Statements of Operations.

Energy performance obligations are recognized using an output method, as energy delivered best depicts the transfer of goods or services to the customer. Performance obligations to deliver energy are generally satisfied when the MW is generated. In certain contracts, if plant availability exceeds a contractual target, the Company may receive a performance bonus payment, or if the plant availability falls below a guaranteed minimum target, we may incur a non-availability penalty. Such bonuses or penalties represent a form of variable consideration and are estimated and recognized when it is probable that there will not be a significant reversal.

Certain generation contracts contain operating and sales-type leases where capacity payments are generally considered lease elements. In such cases, the allocation between the lease and non-lease elements is made at the inception of the lease following the guidance in ASC 842.

In assessing whether variable quantities are considered variable consideration or an option to acquire additional goods and services, the Company evaluates the nature of the promise and the legally enforceable rights in the contract. In some contracts, such as requirement contracts, the legally enforceable rights merely give the customer a right to purchase additional goods and services which are distinct. In these contracts, the customer's action results in a new obligation, and the variable quantities are considered an option.

When energy or capacity is sold or purchased in the spot market or to ISOs, the Company assesses the facts and circumstances to determine gross versus net presentation of spot revenues and purchases. Generally, the nature of the performance obligation is to sell surplus energy or capacity above contractual commitments, or to purchase energy or capacity to satisfy deficits. Generally, on an hourly basis, a generator is either a net seller or a net buyer in terms of the amount of energy or capacity transacted with the ISO. In these situations, the Company recognizes revenue for the hours where the generator is a net seller and cost of sales for the hours where the generator is a net buyer.

The transaction price allocated to a construction performance obligation is recognized as revenue over time as construction activity occurs, with revenue being fully recognized upon completion of construction. These contracts may include a difference in timing between revenue recognition and the collection of cash receipts, which may be collected over the term of the entire arrangement. The timing difference could result in a significant financing component for the construction performance obligation if determined to be a material component of the transaction

134 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

price. The Company accounts for a significant financing component under the effective interest rate method, recognizing a long-term receivable for the expected future payments related to the construction performance obligation in the Other noncurrent assets line item on the Consolidated Balance Sheets. As payments are collected from the customer over the term of the contract, consideration related to the construction performance obligation is bifurcated between the principal repayment of the long-term receivable and the related interest income, recognized in the Consolidated Statements of Operations.

Contract Balances — The timing of revenue recognition, billings, and cash collections results in accounts receivable and contract liabilities. Accounts receivable represent unconditional rights to consideration and consist of both billed amounts and unbilled amounts typically resulting from sales under long-term contracts when revenue recognized exceeds the amount billed to the customer. We bill both generation and utilities customers on a contractually agreed-upon schedule, typically at periodic intervals (e.g., monthly). The calculation of revenue earned but not yet billed is based on the number of days not billed in the month, the estimated amount of energy delivered during those days and the estimated average price per customer class for that month.

Our contract liabilities consist of deferred revenue which is classified as current or noncurrent based on the timing of when we expect to recognize revenue. The current portion of our contract liabilities is reported in Accrued and other liabilities and the noncurrent portion is reported in Other noncurrent liabilities on the Consolidated Balance Sheets.

Remaining Performance Obligations —The transaction price allocated to remaining performance obligations represents future consideration for unsatisfied (or partially unsatisfied) performance obligations at the end of the reporting period. The Company has elected to apply the optional disclosure exemptions under ASC 606. Therefore, the amount disclosed in Note 21—Revenue excludes contracts with an original length of one year or less, contracts for which we recognize revenue based on the amount we have the right to invoice for services performed, and variable consideration allocated entirely to a wholly unsatisfied performance obligation when the consideration relates specifically to our efforts to satisfy the performance obligation and depicts the amount to which we expect to be entitled. As such, consideration for energy is excluded from the amount disclosed as the variable consideration relates to the amount of energy delivered and reflects the value the Company expects to receive for the energy transferred. Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase additional goods or services that do not represent material rights to the customer.

LEASES— The Company has operating and finance leases for energy production facilities, land, office space, transmission lines, vehicles and other operating equipment in which the Company is the lessee. The Company has elected an accounting policy, applied to all classes of assets, to not separate lease components from non-lease components where the Company is a lessee. Operating leases with an initial term of 12 months or less are not recorded on the balance sheet, but are expensed on a straight-line basis over the lease term. The Company’s leases do not contain any material residual value guarantees, restrictive covenants or subleases.

Right-of-use assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized on commencement of the lease based on the present value of lease payments over the lease term. Generally, the rate implicit in the lease is not readily determinable; as such, we use the subsidiaries’ incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. The right-of-use asset also includes any lease payments made and excludes lease incentives that are paid or payable to the lessee at commencement. The lease term includes the option to extend or terminate the lease if it is reasonably certain that the option will be exercised.

The Company has operating leases for certain generation contracts that contain provisions to provide capacity to a customer, which is a stand-ready obligation to deliver energy when required by the customer in which the Company is the lessor. Capacity payments are generally considered lease elements as they cover the majority of available output from a facility. The allocation of contract payments between the lease and non-lease elements is made at the inception of the lease. Fixed lease payments from such contracts are recognized as lease revenue on a straight-line basis over the lease term, whereas variable lease payments are recognized when earned.

The Company has sales-type leases for BESS in which the Company is the lessor. These arrangements allow customers the ability to determine when to charge and discharge the BESS, representing the transfer of control and constitutes the arrangement as a sales-type lease. Upon commencement of the lease, the book value of the leased

135 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

asset is removed from the balance sheet and a net investment in sales-type lease is recognized based on the present value of fixed payments under the contract and the residual value of the underlying asset.

SHARE-BASED COMPENSATION— The Company grants share-based compensation in the form of restricted stock units, performance stock units, performance cash units, and stock options. The expense is based on the grant-date fair value of the equity or liability instrument issued and is recognized on a straight-line basis over the requisite service period, net of estimated forfeitures. The Company uses a Black-Scholes option pricing model to estimate the fair value of stock options granted to its employees.

GENERAL AND ADMINISTRATIVE EXPENSES— General and administrative expenses include corporate and other expenses related to corporate staff functions and initiatives, primarily executive management, finance, legal, human resources, and information systems, which are not directly allocable to our business segments. Additionally, all costs associated with corporate business development efforts are classified as general and administrative expenses.

DERIVATIVES AND HEDGING ACTIVITIES— Under the accounting standards for derivatives and hedging, the Company recognizes all contracts that meet the definition of a derivative, except those designated as normal purchase or normal sale at inception, as either assets or liabilities in the Consolidated Balance Sheets and measures those instruments at fair value. See Note 5—Fair Value and Fair value in this section for additional discussion regarding the determination of fair value.

PPAs and fuel supply agreements are evaluated to assess if they either meet the definition of a derivative or contain an embedded derivative requiring separate valuation and accounting. When available, the Company elects the normal purchase normal sale scope exception for these contracts.

The Company typically designates its derivative instruments as cash flow hedges if they meet the criteria specified in ASC 815. The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. Foreign currency derivative contracts are primarily used to reduce risks arising from variability in forecasted cash flows denominated in non-functional currencies. The objective of these contracts is to minimize the impact of foreign currency fluctuations on operating results. The Company also enters into commodity futures, swaps and options to hedge price variability inherent in forecasted purchases and sales of electricity, fuels, and other commodities. The objectives of the commodity contracts are to minimize the impact of variability in spot commodity prices and stabilize estimated revenue and expense streams. The Company does not use derivative instruments for speculative purposes.

For our cash flow hedges, changes in fair value are deferred in AOCL and are recognized into earnings as the hedged transactions affect earnings. If a derivative is no longer highly effective, hedge accounting will be discontinued prospectively. For cash flow hedges of forecasted transactions, AES estimates the future cash flows of the forecasted transactions and evaluates the probability of the occurrence and timing of such transactions.

Changes in the fair value of derivatives not designated and qualifying as accounting hedges are immediately recognized in earnings. Regardless of when gains or losses on derivatives are recognized in earnings, they are generally classified as interest expense for interest rate and cross-currency derivatives, foreign currency transaction gains or losses for foreign currency derivatives, and non-regulated revenue or non-regulated cost of sales for commodity and other derivatives. Cash flows arising from derivatives are included in the Consolidated Statements of Cash Flows as an operating activity given the nature of the underlying risk being economically hedged and the lack of significant financing elements, except that cash flows on designated and qualifying hedges of variable-rate interest during construction are classified as an investing activity. Cash payments and receipts to terminate interest rate derivatives prior to the end of their effective date are classified as an operating activity; however, they are excluded from the Cash payments for interest, net of amounts capitalized supplementary disclosure on the Consolidated Statements of Cash Flows. These cash receipts totaled $187 million, $181 million, and $239 million for the years ended December 31, 2024, 2023, and 2022, respectively. The Company has elected not to offset derivative positions on the balance sheet where a right to offset exists.

CREDIT LOSSES— In accordance with ASC 326, the Company records an allowance for CECL for accounts and notes receivable, financing receivables, contract assets, net investments in leases recognized as a lessor, held-to-maturity debt securities, financial guarantees related to the non-payment of a financial obligation, and off-balance sheet credit exposures not accounted for as insurance. The Company has elected to write off accrued interest receivables by reversing interest income. The CECL allowance is based on the asset's amortized cost and reflects management's expected risk of credit losses over the remaining contractual life of the asset. CECL allowances are

136 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

estimated using relevant information about the collectability of cash flows and considering information about past events, current conditions, and reasonable and supportable forecasts of future economic conditions.

NEW ACCOUNTING PRONOUNCEMENTS—The following table provides a brief description of recent accounting pronouncements that had an impact on the Company’s consolidated financial statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or did not have a material impact on the Company’s consolidated financial statements.

137 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

New Accounting Pronouncements Issued But Not Yet Effective—The following table provides a brief description of recent accounting pronouncements that could have a material impact on the Company’s consolidated financial statements once adopted. Accounting pronouncements not listed below were assessed and determined to be either not applicable or are expected to have no material impact on the Company’s consolidated financial statements.

138 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

2. INVENTORY

Inventory is valued primarily using the average-cost method. The following table summarizes the Company's inventory balances as of the dates indicated (in millions):

3. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes the components of property, plant and equipment (in millions) with their estimated useful lives (in years). The amounts are stated net of all prior asset impairment losses recognized.

The following table summarizes depreciation expense (including the amortization of assets recorded under finance leases and the amortization of asset retirement obligations) and interest capitalized during development and construction on qualifying assets for the periods indicated (in millions):

Property, plant and equipment, net of accumulated depreciation, of $9.9 billion and $9.5 billion was mortgaged, pledged or subject to liens as of December 31, 2024 and 2023, respectively, including assets classified as held-for-sale.

The following table summarizes non-regulated and regulated electric generation, distribution, and other property, plant and equipment and accumulated depreciation as of the dates indicated (in millions):

4. ASSET RETIREMENT OBLIGATIONS

The following table presents amounts recognized related to asset retirement obligations for the periods indicated (in millions):

139 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

(1)Includes $16 million and $13 million at AES Indiana for the years ended December 31, 2024 and 2023, respectively, reflected as a change in regulatory liabilities on the Consolidated Balance Sheets. See Note 11—Regulatory Assets and Liabilities for further information.

The Company's asset retirement obligations include active ash landfills, water treatment basins, and the removal or dismantlement of certain plants and equipment. The Company uses the expected cash flow technique to determine the initial value of ARO liabilities, which is estimated by discounting expected cash outflows to their present value using market-based rates at the initial recording of the liabilities. Cash outflows are based on the approximate future disposal costs as determined by market information, historical information, or other management estimates. Subsequent downward revisions of ARO liabilities are discounted using the market-based rates that existed when the liability was initially recognized. These inputs to the fair value of the ARO liabilities are considered Level 3 inputs under the fair value hierarchy.

During the year ended December 31, 2024, the Company increased the asset retirement obligations and corresponding assets at AES Indiana and AES Clean Energy by $129 million and $73 million, respectively. The increase at AES Indiana is primarily related to revisions to cash flow estimates due to increases in closure costs and groundwater treatment measures for ash ponds and landfills. The increase at AES Clean Energy is mostly due to additional liabilities incurred for sites that were placed in service during 2024. This was offset by decreases at Ventanas of $43 million due to held-for-sale classification in December 2024, and $15 million at AES Brasil due to the sale of the business in October 2024.

During the year ended December 31, 2023, the Company increased the asset retirement obligations and corresponding assets at AES Clean Energy and AES Indiana by $43 million and $34 million, respectively. This was offset by decreases at Southland Energy and AES Brasil of $51 million and $20 million, respectively. The increase at AES Clean Energy is mostly due to an upward revision of estimated cash flows as a result of a decommissioning study done in the fourth quarter of 2023, which mostly impacted the estimated cash flows related to solar assets. The increase at AES Indiana is mostly due to additional liabilities incurred due to revised remediation plans for ash ponds at Eagle Valley and AES Indiana's solar projects. The decrease at Southland Energy is mostly due to a downward revision of estimated cash flows as a result of revised quotes from vendors for the demolition of the Southland legacy units. The decrease at AES Brasil is mostly due to a downward revision of estimated cash flows at the Mandacaru, Salinas, and Cubico II wind complexes and AES Brasil solar facilities.

5. FAIR VALUE

The fair value of current financial assets and liabilities, debt service reserves, and other deposits approximate their reported carrying amounts. The estimated fair values of the Company's assets and liabilities have been determined using available market information. Because these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Valuation Techniques— The fair value measurement accounting guidance describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach, (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on current market expectations of the return on those future amounts. The cost approach is based on the amount that would currently be required to replace an asset. The Company measures its investments and derivatives at fair value on a recurring basis. Additionally, in connection with annual or event-driven impairment evaluations, certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis. These include long-lived tangible assets (i.e., property, plant and equipment), goodwill, and intangible assets (e.g., sales concessions, land use rights and water rights, etc.). In general, the Company determines the fair value of investments and derivatives using the market approach

140 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

and the income approach, respectively. In the nonrecurring measurements of nonfinancial assets and liabilities, all three approaches are considered; however, the value estimated under the income approach is often the most representative of fair value.

Investments— The Company's investments measured at fair value generally consist of marketable debt and equity securities. Equity securities are either measured at fair value using quoted market prices or based on comparisons to market data obtained for similar assets. Debt securities primarily consist of government debt securities and certificates of deposit held by foreign subsidiaries. Debt securities are measured at fair value based on comparisons to market data obtained for similar assets.

Derivatives— Derivatives are measured at fair value using quoted market prices or the income approach utilizing spot and forward benchmark interest rates, foreign exchange rates, commodity prices, volatilities and credit data, as applicable. When significant inputs are not observable, the Company uses relevant techniques to determine the inputs, such as regression analysis or prices for similarly traded instruments available in the market.

The Company's methodology to fair value its derivatives is to start with any observable inputs; however, in certain instances the published forward rates or prices may not extend through the remaining term of the contract, and management must make assumptions to extrapolate the curve, which necessitates the use of unobservable inputs, such as proxy commodity prices or historical settlements to forecast forward prices. With respect to credit inputs, in certain instances the spread that reflects the credit or nonperformance risk is unobservable, requiring the use of proxy yield curves of similar credit quality.

To determine the fair value of a derivative, cash flows are discounted using the relevant spot benchmark interest rate. The Company then makes a credit valuation adjustment ("CVA"), as applicable, by further discounting the cash flows for nonperformance or credit risk based on the observable or estimated debt spread of the Company's subsidiary or its counterparty and the tenor of the respective derivative instrument. The CVA for potential future scenarios in which the derivative is in an asset position is based on the counterparty's credit ratings, credit default swap spreads, and debt spreads, as available. The CVA for potential future scenarios in which the derivative is in a liability position is based on the Parent Company's or the subsidiary's current debt spread. In the absence of readily obtainable credit information, the Parent Company's or the subsidiary's estimated credit rating and spreads of comparably rated entities or the respective country's debt spreads are used as a proxy. All derivative instruments are analyzed individually and are subject to unique risk exposures.

The fair value hierarchy of an asset or a liability is based on the level of significance of the input assumptions. An input assumption is considered significant if it affects the fair value by at least 10%. Assets and liabilities are classified as Level 3 when the use of unobservable inputs is significant. When the use of unobservable inputs is insignificant, assets and liabilities are classified as Level 2. Transfers between Level 3 and Level 2 result from changes in significance of unobservable inputs used to calculate the CVA.

Contingent consideration— Contingent consideration is primarily related to future milestone payments associated with acquisitions of renewables development projects. The estimated fair value of contingent consideration is determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. Changes in Level 3 inputs, particularly changes in the probability of achieving development milestones, could result in material changes to the fair value of the contingent consideration and could materially impact the amount of expense or income recorded each reporting period. Contingent consideration is updated quarterly with any prospective changes in fair value recorded through earnings. Gains and losses on the remeasurement of contingent consideration are recognized in Other income and Other expense, respectively.

Debt— Recourse and non-recourse debt are carried at amortized cost. The fair value of recourse debt is estimated based on quoted market prices. The fair value of non-recourse debt is estimated based upon interest rates and other features of the loan. In general, the carrying amount of variable rate debt is a close approximation of its fair value. For fixed rate loans, the fair value is estimated using quoted market prices or discounted cash flow ("DCF") analyses. The fair value of recourse and non-recourse debt excludes accrued interest at the valuation date. The fair value was determined using available market information as of December 31, 2024. The Company is not aware of any factors that would significantly affect the fair value amounts subsequent to December 31, 2024.

Nonrecurring measurements— For nonrecurring measurements derived using the income approach, fair value is generally determined using valuation models based on the principles of DCF. The income approach is most often used in the impairment evaluation of long-lived tangible assets, equity method investments, goodwill, and intangible assets. Where the use of market observable data is limited or not available for certain input assumptions, the

141 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

Company develops its own estimates using a variety of techniques such as regression analysis and extrapolations. Depending on the complexity of a valuation, an independent valuation firm may be engaged to assist management in the valuation process.

For nonrecurring measurements derived using the market approach, recent market transactions involving the sale of identical or similar assets are considered. The use of this approach is limited because it is often difficult to identify sale transactions of identical or similar assets. This approach is used in impairment evaluations of certain intangible assets. Otherwise, it is used to corroborate the fair value determined under the income approach.

For nonrecurring measurements derived using the cost approach, fair value is typically based upon a replacement cost approach. This approach involves a considerable amount of judgment, which is why its use is limited to the measurement of long-lived tangible assets. Like the market approach, this approach is also used to corroborate the fair value determined under the income approach.

Fair Value Considerations— In determining fair value, the Company considers the source of observable market data inputs, liquidity of the instrument, the credit risk of the counterparty, and the risk of the Company's or its counterparty's nonperformance. The conditions and criteria used to assess these factors are:

Sources of market assumptions— The Company derives most of its market assumptions from market efficient data sources (e.g., Bloomberg and Reuters). To determine fair value where market data is not readily available, management uses comparable market sources and empirical evidence to develop its own estimates of market assumptions.

Market liquidity— The Company evaluates market liquidity based on whether the financial or physical instrument, or the underlying asset, is traded in an active or inactive market. An active market exists if the prices are fully transparent to market participants, can be measured by market bid and ask quotes, the market has a relatively large proportion of trading volume as compared to the Company's current trading volume, and the market has a significant number of market participants that will allow the market to rapidly absorb the quantity of assets traded without significantly affecting the market price. Another factor the Company considers when determining whether a market is active or inactive is the presence of government or regulatory controls over pricing that could make it difficult to establish a market-based price when entering into a transaction.

Nonperformance risk— Nonperformance risk refers to the risk that an obligation will not be fulfilled and affects the value at which a liability is transferred or an asset is sold. Nonperformance risk includes, but may not be limited to, the Company's or its counterparty's credit and settlement risk. Nonperformance risk adjustments are dependent on credit spreads, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. The Company is party to various interest rate swaps and options, foreign currency options and forwards, and derivatives and embedded derivatives, which subject the Company to nonperformance risk. The financial and physical instruments held at the subsidiary level are generally non-recourse to the Parent Company.

Nonperformance risk on the investments held by the Company is incorporated in the fair value derived from quoted market data to mark the investments to fair value.

Recurring Measurements —The following table presents, by level within the fair value hierarchy as described in Note 1—General and Summary of Significant Accounting Policies, the Company's financial assets and liabilities that were measured at fair value on a recurring basis as of the dates indicated (in millions). For the Company's investments in marketable debt securities, the security classes presented were determined based on the nature and risk of the security and are consistent with how the Company manages, monitors, and measures its marketable securities:

142 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

As of December 31, 2024, all available-for-sale debt securities had stated maturities within one year. For the years ended December 31, 2024 and 2023, no impairments of marketable securities were recognized in earnings or other comprehensive income (loss). Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from sale of available-for-sale securities for the periods indicated (in millions):

The Company accounts for equity securities without readily determinable fair values using the measurement alternative in accordance with ASC 321. These securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. As of both December 31, 2024 and 2023, the carrying amount of equity securities accounted for using the measurement alternative was $62 million. Upward adjustments resulting from observable price changes are recorded in Other incomeand impairments and downward adjustments are recorded in Other expense.

The following tables present a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2024 and 2023 (derivative balances are presented net), in millions. Transfers between Level 3 and Level 2 principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.

143 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

The following table summarizes the significant unobservable inputs used for the Level 3 derivative assets (liabilities) as of December 31, 2024 (in millions, except range amounts):

For the Argentine peso foreign currency derivatives, increases (decreases) in the estimate of the above exchange rate would increase (decrease) the value of the derivative. For the CAISO Energy Swap, increases (decreases) in the estimate above would decrease (increase) the value of the derivative.

Nonrecurring Measurements— The Company measures fair value using the applicable fair value measurement guidance. Impairment expense, shown as pre-tax loss below, is measured by comparing the fair value at the evaluation date to the then-latest available carrying amount. The following table summarizes our major categories of asset groups measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):

144 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

(1)Represents the carrying values of the asset groups at the dates of measurement, before fair value adjustment.

(2)See Note 25—Held-for-Sale and Dispositions for further information.

(3)The pre-tax loss recognized was calculated using the fair value of the AES Brasil disposal group less costs to sell of $13 million. A subsequent impairment analysis was performed as of June 30, 2024 and no additional impairment was identified.

(4)The pre-tax loss recognized was calculated using the fair value of the AES Brasil disposal group less costs to sell of $22 million.

(5)The pre-tax loss recognized was calculated using the fair value of the Mong Duong disposal group less costs to sell of $5 million.

(6)See Note 23—Asset Impairment Expense for further information. Per ASC 360-10, the pre-tax impairment expense for long-lived asset groups held and used is limited to the carrying amount of the long-lived assets.

(7)The Norgener asset group includes long-lived assets, inventory, land, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and determined that the carrying value of the other assets should not be reduced.

(8)The Warrior Run asset group includes long-lived assets, inventory, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and recognized an inventory impairment of $6 million in Other expense. See Note 22—Other Income and Expense for further information.

(9)The pre-tax loss recognized was calculated using the fair value of the Jordan disposal group less costs to sell of $5 million for the March 31, 2023 measurement date and $6 million for the June 30, 2023, September 30, 2023, and December 31, 2023 measurement dates.

(10)See Note 10—Goodwill and Other Intangible Assets for further information.

AES Clean Energy Development Projects— On a quarterly basis, the Company reviews the status of development projects to identify projects that are no longer viable and will be abandoned. The fair value of each abandoned project with no salvage value is determined to be zero as there are no future projected cash flows, resulting in a full write-off of the carrying value of project development intangibles and capitalized development costs incurred.

The Company recognized $95 million and $151 million of pre-tax asset impairment expense in 2024 and 2023, respectively, including $137 million during the fourth quarter of 2023 primarily related to the write-off of project development intangibles which were recognized at fair value when the Company acquired sPower's development platform as part of the formation of AES Clean Energy Development. See Note 23—Asset Impairment Expense for further information.

145 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived asset groups held and used measured on a nonrecurring basis during the year ended December 31, 2023 (in millions, except range amounts):

(1)The fair value of the Warrior Run asset group was mainly related to cash on hand and existing coal inventory not subject to impairment under ASC 360-10, and is partially reduced by expected decommissioning and demolition costs.

(2)The fair value of the Norgener asset group subsequent to the impairment analysis performed on May 1, 2023 was mainly related to existing coal inventory not subject to impairment under ASC 360-10. In December 2023, the Company recognized an inventory impairment of $23 million in Other expense. See Note 22—Other Income and Expense for further information.

Financial Instruments not Measured at Fair Value in the Consolidated Balance Sheets

The following table presents (in millions) the carrying amount, fair value, and fair value hierarchy of the Company's financial assets and liabilities that are not measured at fair value in the Consolidated Balance Sheets as of the dates indicated, but for which fair value is disclosed:

(1)These amounts primarily relate to the sale of the Redondo Beach land, the amounts impacted by the Stabilization Funds enacted by the Chilean government, and for December 31, 2023 only, the receivables under the Warrior Run PPA termination agreement. These are included in Other noncurrent assetson the Consolidated Balance Sheets. See Note 7—Financing Receivables for further information.

146 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Volume of Activity —The following table presents the Company's maximum notional (in millions) over the remaining contractual period by type of derivative as of December 31, 2024, and the dates through which the maturities for each type of derivative range:

(1)Maturity dates are consistent for both designated and non-designated positions.

(2)Includes one contract designated as a cash flow hedge with a final maturity date in 2038.

Accounting and Reporting —Assets and Liabilities—The following tables present the fair value of the Company's derivative assets and liabilities as of the dates indicated (in millions):

(1)As of December 31, 2023, the carrying amount of debt hedged by cross-currency derivatives designated as fair value hedges was $386 million. As of December 31, 2024, there was no carrying amount since the associated debt was included in the carrying value of AES Brasil, which was sold in October 2024.

(1)Includes $3 million of derivative assets reported in Current held-for-sale assetsand $3 million of derivative liabilities reported in Current held-for-sale liabilities on the Consolidated Balance Sheets related to Dominican Republic Renewables as of December 31, 2024.

147 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

Earnings and Other Comprehensive Income (Loss)—The following table presents the pre-tax gains (losses) recognized in AOCL and earnings related to all derivative instruments for the periods indicated (in millions):

Reclassifications from AOCL to earnings are forecasted to decrease pre-tax income from continuing operations by $13 million for the twelve months ended December 31, 2025, primarily related to interest rate derivatives.

7. FINANCING RECEIVABLES

Receivables with contractual maturities of greater than one year are considered financing receivables. The following table presents long-term financing receivables, excluding lease receivables and amounts classified as held for sale, by country as of the dates indicated(in millions).

U.S. — AES has recorded non-current receivables pertaining to the sale of the Redondo Beach land. The anticipated collection period extends beyond December 31, 2025. As of December 31, 2023, a significant financing receivable existed for the Warrior Run PPA termination agreement where $108 million was recorded in Other non-current assets on the Consolidated Balance Sheets. On February 1, 2024, the Company executed an agreement to sell all remaining future cash flows under the termination agreement. At the time of execution, the transaction was considered a sale of future revenue under U.S. GAAP. Upon completion of the remaining performance obligation in May 2024, the corresponding receivable balance of $267 million, net of valuation allowance of $7 million, was derecognized. See Note 21—Revenue for further details regarding the Warrior Run PPA termination agreement.

Chile — AES Andes has recorded receivables pertaining to revenues recognized on regulated energy contracts that were impacted by the Stabilization Funds created by the Chilean government in October 2019, August 2022, and April 2024, in conjunction with the Tariff Stabilization Laws. Historically, the government updated the prices for these contracts every six months to reflect the contracts' indexation to exchange rates and commodities prices. The Tariff Stabilization Laws do not allow the pass-through of these contractual indexation updates to customers beyond the pricing in effect at July 1, 2019, until new lower-cost renewables contracts are incorporated to supply regulated contracts. Consequently, costs incurred in excess of the July 1, 2019 price were

148 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

accumulated and borne by generators. As of December 31, 2024, AES Andes aimed to reduce its exposure through the sale of receivables.

Through different agreements and programs, as of December 31, 2024 AES Andes sold and collected $151 million and $217 million related to agreements executed in August 2023 and October 2024 to sell up to $227 million and $254 million of receivables pursuant to the Stabilization Funds, respectively. As of December 31, 2024, $8 million of current receivables and $5 million of noncurrent receivables were recorded in Accounts receivable and Other noncurrent assets, respectively. Additionally, $39 million of payment deferrals granted to mining customers as part of our green blend agreements were recorded as financing receivables included in Other noncurrent assetsat December 31, 2024.

8. ALLOWANCE FOR CREDIT LOSSES

The following table represents the rollforward of the allowance for credit losses for the periods indicated (in millions):

(1)Mong Duong loan receivable credit losses allowance was classified in held-for-sale assets on the Consolidated Balance Sheets as of December 31, 2024 and 2023.

(2)Primarily relates to credit losses allowance on financing receivables in the U.S. and credit losses allowance at AES Brasil which was sold on October 31, 2024.

(3)Lease receivable credit losses allowance at Southland Energy (AES Gilbert).

During 2024, the current period provision and allowance for credit losses on customer accounts receivable increased due to a temporary pause of customer disconnections and certain collection efforts and write-off processes after the implementation of customer billing system upgrades at our utilities. This has resulted in higher past due customer receivables as of December 31, 2024. The utilities anticipate reinstituting customer disconnections and write-off processes during 2025.

149 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

9. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The following table summarizes the relevant effective equity ownership interest and carrying values for the Company's investments accounted for under the equity method as of the periods indicated:

(1)The Company owns 50% of sPower, LLC and accounts for its investment as an equity method investment. Furthermore, there are two specific portfolios of operating solar and wind assets, OpCo A and OpCo B, in which sPower, LLC owns 51%, resulting in an AES effective ownership of approximately 26% in these portfolios.

(2)The Company's ownership in Grupo Energía Gas Panamá is held through AES Panama, a 49%-owned consolidated subsidiary. AES Panama owns 49% of Grupo Energía Gas Panamá, resulting in an AES effective ownership of 24%.

(3)The Company's ownership in Energía Natural Dominicana Enadom is held through Andres, a 65%-owned consolidated subsidiary. Andres owns 50% of Energía Natural Dominicana Enadom, resulting in an AES effective ownership of 33%.

(4)Includes Bosforo, Jordan, Barry, Alto Maipo, and various other equity method investments. Barry and Alto Maipo represent VIEs in which the Company holds a variable interest but is not the primary beneficiary.

Jordan — In March 2024, the Company completed the sale of approximately 26% ownership interest in Amman East and IPP4 for a sale price of $58 million. After adjusting for dividends received since the execution of the sale and purchase agreement, the Company received a net cash payment of $45 million. After completion of the sale, the Company retained 10% ownership interest in each of the businesses, which are accounted for as equity method investments. See Note 25—Held-for-Sale and Dispositionsfor further information. Amman East and IPP4 are reported in the Energy Infrastructure SBU reportable segment.

Uplight — In February 2024, Uplight acquired AutoGrid, a market leader in the Virtual Power Plant space, from Schneider Electric. As part of the transaction, Schneider contributed an additional $40 million to Uplight, and Uplight issued approximately 91 million additional common units to Schneider as consideration for the acquisition. No incremental investment was required from AES or any other investor. As a result, AES'29% ownership interest in Uplight was diluted to 25%. The transaction was accounted for as a partial disposition in which AES recognized a gain of $52 million in Gain (loss) on disposal and sale of business interests upon remeasurement. As the Company still does not control but has significant influence over Uplight after the transaction, it continues to be accounted for as an equity method investment and is reported in the New Energy Technologies SBU reportable segment.

Fluence —In December 2023, the Company redeemed 7,087,500 common units of Fluence Energy, LLC. Fluence Energy, Inc. settled this redemption through the issuance of an equivalent number of shares of its Class A common stock. In conjunction with this redemption, the Company executed a public sale of the Class A shares, resulting in proceeds received of $156 million, after expenses, and a pre-tax gain on sale of $136 million, recorded in Gain (loss) on disposal and sale of business interests. As a result of this transaction, AES' ownership interest decreased from 33% to 29%. As the Company still does not control but has significant influence over Fluence after the transaction, it continues to be accounted for as an equity method investment. Fluence is reported in the New Energy Technologies SBU reportable segment.

Grupo Energía Gas Panamá —In September 2023, AES Latin America completed the sale of its interest in Grupo Energía Gas Panamá, a joint venture formed for the Gatun combined cycle natural gas development project, to AES Panama, a 49%-owned consolidated subsidiary. As a result of the transaction, the Company’s effective ownership in Grupo Energía Gas Panamá decreased from 49% to approximately 24%. As the Company still does not control the investment after this transaction, it continues to be accounted for as an equity method investment and is reported in the Energy Infrastructure SBU reportable segment.

sPower —In December 2022, the Company agreed to sell 49% of its indirect interest in a portfolio of sPower's operating assets ("OpCo B"). At the time the purchase and sale agreement was signed, a loss was expected upon closing the transaction. The expected loss on sale was identified as a triggering event and the Company evaluated whether its investment in sPower was other-than-temporarily impaired. Based on management’s estimate of fair

150 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

value of $432 million, the Company recognized an other-than-temporary impairment of $175 million in Other non-operating expense in December 2022.

sPower primarily holds operating assets where the tax credits associated with underlying projects have already been allocated to tax equity investors. The application of HLBV accounting increases the carrying value of these investments, as earnings are initially disproportionately allocated to the sponsor entity. Since sPower does not have any ongoing development or other value creation activities following the transfer of these activities to AES Clean Energy Development, the impairment adjusts the carrying value to the fair market value of the operating assets.

On February 28, 2023, sPower closed on the sale for $196 million. As a result of the transaction, the Company received $98 million in sales proceeds and recorded a pre-tax gain on sale of $5 million, recorded in Gain (loss) on disposal and sale of business interests. After the sale, the Company's ownership interest in OpCo B decreased from 50% to approximately 26%. As the Company still does not control but has significant influence over sPower after the transaction, it continues to be accounted for as an equity method investment. sPower is reported in the Renewables SBU reportable segment.

Alto Maipo —In May 2022, Alto Maipo emerged from bankruptcy in accordance with Chapter 11 of the U.S. Bankruptcy Code. Alto Maipo, as restructured, is considered a VIE. As the Company lacks the power to make significant decisions, it does not meet the criteria to be considered the primary beneficiary of Alto Maipo and therefore will not consolidate the entity. The Company has elected the fair value option to account for its investment in Alto Maipo as management believes this approach will better reflect the economics of its equity interest. As of December 31, 2024, the fair value is insignificant. Alto Maipo is reported in the Energy Infrastructure SBU reportable segment.

Barry— The Company holds a 100% ownership interest in AES Barry Ltd. ("Barry"), a dormant entity in the U.K. that disposed of its generation and other operating assets. Due to a debt agreement, no material financial or operating decisions can be made without the banks' consent, and the Company does not control Barry. As of both December 31, 2024 and 2023, other long-term liabilities included $41 million related to this debt agreement. Barry is reported in the Energy Infrastructure SBU reportable segment.

Summarized Financial Information —The following tables summarize financial information of the Company's 50%-or-less-owned affiliates and majority-owned unconsolidated subsidiaries that are accounted for using the equity method (in millions):

(1)The summarized financial information of Alto Maipo is not included in the table above as the Company is not the primary beneficiary, the fair value of the investment is insignificant, and the investment in Alto Maipo is not material to the financial results of the Company.

At December 31, 2024, retained earnings included $383 million related to the undistributed losses of the Company's affiliates. Dividends received from these affiliates were $32 million, $5 million, and $47 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, the aggregate carrying amount of our investments in equity affiliates exceeded the underlying equity in the net assets of our equity affiliates by $23 million.

151 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill—The following table summarizes the carrying amount of goodwill by reportable segment for the years ended December 31, 2024 and 2023 (in millions):

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 2024, TEG and TEP successfully migrated to the new energy regime and currently operate according to ISO instructions. 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 had 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 dates indicated:

152 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

(1)Includes emission offset fee to the Air Quality Management District 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):

The following table summarizes the estimated amortization expense by intangible asset category for 2025 through 2029:

Intangible asset amortization expense was $88 million, $82 million and $71 million for the years ended December 31, 2024, 2023 and 2022, respectively.

153 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

11. REGULATORY ASSETS AND LIABILITIES

The Company has recorded regulatory assets and liabilities (in millions) that it expects to pass through to its customers in accordance with, and subject to, regulatory provisions as follows:

(1)Past expenditures on which the Company earns a rate of return.

(2)AES Indiana acquired the Hoosier Wind project in February 2024. See Note 26—Acquisitionsfor further information.

Our current regulatory assets and liabilities primarily consist of under or overcollection of costs that are generally non-controllable, such as purchased electricity, energy transmission, fuel costs, and other sector costs. These costs are recoverable or refundable as defined by the laws and regulations in our markets. Our noncurrent regulatory assets include defined pension and postretirement benefit obligations equal to the previously unrecognized actuarial gains and losses and prior service costs that are expected to be recovered through future rates, as well as the carrying value of AES Indiana's Petersburg Units 1 through 4 at their retirement dates, which are amortized over the life of the assets beginning on the dates of retirement. Other current and noncurrent regulatory assets primarily consist of:

•Project development costs, mainly legal and consulting fees, incurred for renewables projects as well as carrying costs on AES Indiana's investments in the projects;

•Vegetation management costs and proactive reliability optimization at AES Ohio;

•Materials and supplies inventories related to AES Indiana's Petersburg Units 3 and 4;

•Deferred Midcontinent ISO costs at AES Indiana; and

•Unamortized premiums reacquired or redeemed on long-term debt, which are amortized over the lives of the original issuances, at AES Indiana.

Our noncurrent regulatory liabilities primarily consist of obligations for removal costs which do not have an associated legal retirement obligation. Our noncurrent regulatory liabilities also include deferred income taxes related to differences in income recognition between tax laws and accounting methods, which will be passed through to our regulated customers via a decrease in future retail rates.

154 | Notes to Consolidated Financial Statements—(Continued) | December 31, 2024, 2023 and 2022

In the accompanying Consolidated Balance Sheets, current regulatory assets and liabilities are reflected in Other current assets and Accrued and other liabilities, respectively, and noncurrent regulatory assets and liabilities are reflected in Other noncurrent assets and Other noncurrent liabilities, respectively. All of the regulatory assets and liabilities as of December 31, 2024 and December 31, 2023 are related to the Utilities SBU reportable segment.

Pending Regulatory Action — AES Ohio is facing appeals from the Office of the Ohio Consumers’ Council (“OCC”) regarding the PUCO’s decisions to approve the reversion to ESP 1 and the Smart Grid Comprehensive Settlement. The OCC is specifically seeking a refund of Rate Stabilization Charge revenues dating back to August 2021 and has appealed the final PUCO order with respect to the 2018 and 2019 SEET, which was part of the Smart Grid Comprehensive Settlement. Oral arguments for these appeals are scheduled for April 2025. Additionally, AES Ohio reached a settlement on its Smart Grid Phase 2 plan, which includes a 4-year plan for significant investments in grid modernization and distribution system enhancements; AES Ohio expects an order from the PUCO in the second quarter of 2025. In November 2024, AES Ohio filed an application with the PUCO to increase its distribution rates; the procedural schedule for the new distribution rate case has not yet been established.