AES CORP

Overview

As of December 31, 2025, the Company had unrestricted cash and cash equivalents of $1.4 billion, of which $10 million was held at the Parent Company and qualified holding companies. The Company had restricted cash and debt service reserves of $780 million. The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $23.2 billion and $6 billion, respectively. Of the $2.2 billion of our current non-recourse debt, $2.2 billion was presented as such because it is due in the next twelve months and $20 million relates to debt considered in default. This default is not a payment default but is instead a technical default triggered by failure to comply with covenants or other requirements contained in the non-recourse debt documents. See Note 12—Obligations in Item 8.—Financial Statementsof this Form 10-K for additional detail. As of December 31, 2025, the Company also had $616 million outstanding related to supplier financing arrangements.

We expect current maturities of non-recourse debt, recourse debt, and amounts due under supplier financing arrangements to be repaid from net cash provided by operating activities of the subsidiary to which the liability relates, through opportunistic refinancing activity, or some combination thereof. We have $879 million in recourse debt which matures within the next twelve months, including $79 million in outstanding borrowings under the commercial paper program. Furthermore, we have $391 million due under supplier financing arrangements that have a guarantee, $204 million guaranteed by the Parent Company and $187 million guaranteed by subsidiaries. From time to time, we may elect to repurchase our outstanding debt through cash purchases, privately negotiated transactions, or otherwise when management believes that such securities are attractively priced. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, and other factors. The amounts involved in any such repurchases may be material.

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

Given our long-term debt obligations, the Company is subject to interest rate risk on debt balances that accrue interest at variable rates. When possible, the Company will borrow funds at fixed interest rates or hedge its variable rate debt to fix its interest costs on such obligations. In addition, the Company has historically tried to maintain at least 70% of its consolidated long-term obligations at fixed interest rates, including fixing the interest rate through the use of interest rate swaps. These efforts apply to the notional amount of the swaps compared to the amount of related underlying debt. Presently, the Parent Company does not have any material unhedged exposure to variable interest rate debt. Additionally, commercial paper issuances are short term in nature and subject the Parent Company to interest rate risk at the time of refinancing the paper. On a consolidated basis, of the Company's $29.5 billion of total gross debt outstanding as of December 31, 2025, approximately $7.3 billion accrues interest at variable rates. The Company actively hedges its current and expected variable rate exposure through a combination of currently effective and forward starting interest rate swaps. As of December 31, 2025, the total maximum outstanding amount of hedges protecting the company against current and expected variable rate exposure was $9.1 billion. These hedges generally provide economic protection through the entire expected life of the projects, regardless of the type of debt issued to finance construction or refinance the projects in the future.

In addition to utilizing non-recourse debt at a subsidiary level when available, the Parent Company provides a portion, or in certain instances all, of the remaining long-term financing or credit required to fund development, construction, or acquisition of a particular project. These investments have generally taken the form of equity investments or intercompany loans, which are subordinated to the project's non-recourse loans. We generally obtain the funds for these investments from our cash flows from operations, proceeds from the sales of assets and/or the proceeds from our issuances of debt, common stock, and other securities. Similarly, in certain of our businesses, the Parent Company may provide financial and performance-related guarantees or other credit support for the benefit of counterparties who have entered into contracts for the purchase or sale of electricity, equipment, or other services with our subsidiaries or lenders. In such circumstances, if a business defaults on its payment or supply obligation, the Parent Company will be responsible for the business' obligations up to the amount provided for in the relevant guarantee or other credit support. As of December 31, 2025, the Parent Company had provided outstanding financial and performance-related guarantees or other credit support commitments to or for the benefit of our businesses, which were limited by the terms of the agreements, of approximately $3.8 billion in aggregate. This amount excludes arrangements that relate solely to the Company's own future performance, as well as those that are collateralized by letters of credit and other obligations discussed below.

Some counterparties may be unwilling to accept our general unsecured commitments to provide credit support. Accordingly, with respect to both new and existing commitments, the Parent Company may be required to provide some other form of assurance, such as a letter of credit, to backstop or replace our credit support. The Parent Company may not be able to provide adequate assurances to such counterparties. To the extent we are required and able to provide letters of credit or other collateral to such counterparties, this will reduce the amount of credit available to us to meet our other liquidity needs. As of December 31, 2025, we had $220 million in letters of credit under bilateral agreements, $117 million in letters of credit outstanding provided under our unsecured credit facilities, and $50 million in letters of credit outstanding provided under our revolving credit facilities. These letters of credit operate to guarantee performance relating to certain project development and construction activities and business operations.

Additionally, in connection with certain project financings, some of the Company's subsidiaries have expressly undertaken limited obligations and commitments. These contingent contractual obligations are issued at the subsidiary level and are non-recourse to the Parent Company. As of December 31, 2025, the consolidated maximum undiscounted potential exposure to guarantees, letters of credit, and surety bonds issued by our subsidiaries was $4.7 billion, including $2.5 billion of guarantees and commitments, $2.1 billion of letters of credit outstanding, and $74 million of surety bonds.

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

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

Long-Term Receivables

As of December 31, 2025, the Company had approximately $119 million of gross accounts receivable classified as Other noncurrent assets. These noncurrent receivables mostly consist of accounts receivable in the U.S. and Chile that, pursuant to amended agreements or government resolutions, have collection periods that extend beyond December 31, 2026, or one year from the latest balance sheet date. Noncurrent receivables in the U.S. pertain to the sale of the Redondo Beach land. Noncurrent receivables in Chile pertain primarily to payment deferrals granted to mining customers as part of our green blend agreements. See Note 7—Financing Receivables included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

As of December 31, 2025, the Company had an $862 million loan receivable related to the Mong Duong facility in Vietnam, which was constructed under a build, operate, and transfer contract. This loan receivable represents contract consideration related to the construction of the facility, which was substantially completed in 2015, and will be collected over the 25-year term of the plant's PPA. Of the loan receivable balance, $107 million was classified in Other current assets and $755 million was classified in Loan receivableon the Consolidated Balance Sheets. See Note 7—Financing Receivables and Note 21—Revenue included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Cash Sources and Uses

The primary sources of cash for the Company in the year ended December 31, 2025 were debt financings, cash flows from operating activities, sales to noncontrolling interests, and purchases under supplier financing arrangements. The primary uses of cash in the year ended December 31, 2025 were repayments of debt, capital expenditures, repayments of obligations under supplier financing arrangements, and distributions to noncontrolling interests.

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

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

(1)Includes interest capitalized on development and construction of $502 million and $637 million for the years ended December 31, 2025 and 2024, respectively. Of the total capitalized in 2025 and 2024, $483 million and $577 million, respectively, are related to recourse and non-recourse debt interest payments. The remaining capitalized interest is primarily related to supplier financing arrangements.

(2)Includes the $27 million and $63 million effect of exchange rate changes on cash, cash equivalents and restricted cash for the years ended December 31, 2025 and 2024, respectively.

Consolidated Cash Flows

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

Operating Activities

Net cash provided by operating activities increased $1.6 billion for the year ended December 31, 2025, compared to December 31, 2024.

Operating Cash Flows

(1)The change in adjusted net income is defined as the variance innet income, net of the total adjustments to net incomeas shown on the Consolidated Statements of Cash Flows in Item 8.—Financial Statements and Supplementary Data of this Form 10-K.

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

•Adjusted net income increased $1.3 billion, primarily due to increased proceeds from the transfer of U.S. investment tax credits, and a decrease in cash paid for interest and income taxes, partially offset by lower margin at our Energy Infrastructure SBU.

•Change in working capital increased $291 million, primarily due to a decrease in accounts receivable due to the timing of collections and billings and an increase in contract liabilities related to development services in the U.S. These increases were partially offset by an increase in other current assets due to the timing of collection of tax credit transfer proceeds, the prior year sale of financing receivables under the Warrior Run PPA termination agreement, and an increase in inventory due to higher purchases and lower consumption.

Investing Activities

Net cash used in investing activities decreased $1.5 billion for the year ended December 31, 2025 compared to December 31, 2024.

Investing Cash Flows

•Cash paid for acquisitions of business interests decreased $138 million, primarily due to the prior year acquisition of Atacama Solar in Chile for $105 million, higher net acquisitions in the prior year of $64 million for various businesses at AES Clean Energy Development, and the prior year acquisition of Hoosier Wind for $49 million; partially offset by the current year acquisition of Crossvine for $78 million.

•Contributions to equity affiliates decreased $84 million, primarily driven by the prior year contributions to Gatun and sPower for $64 million and $22 million, respectively.

•Cash proceeds from sales of business interests decreased $315 million, primarily due to proceeds of $412 million, net of transaction costs and cash sold, from the sale of AES Brasil in the prior year; partially offset by the current year sell-down of Dominican Republic Renewables for $103 million.

•Capital expenditures decreased $1.5 billion, discussed further below.

Capital Expenditures

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

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

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

•Growth expenditures decreased $1.3 billion, primarily driven by a decrease in expenditures for U.S. and Dominican Republic renewables as well as transmission and distribution project investments at our U.S. utilities compared to the prior year; partially offset by an increase in expenditures for renewables projects in Chile in the current year.

•Maintenance expenditures decreased $186 million, primarily driven by a $69 million decrease due to timing of maintenance at Southland, AES Ohio, and TermoAndes, and a $61 million decrease due to the sale of AES Brasil in October 2024.

•Environmental expenditures decreased $3 million, with no material drivers.

Financing Activities

Net cash provided by financing activities decreased $3 billion for the year ended December 31, 2025 compared to December 31, 2024.

Financing Cash Flows

See Notes 12—Obligations, 17—Redeemable stock of subsidiaries, and 18—Equity in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for more information regarding significant transactions.

•The $2.4 billion impact from non-course revolvers is primarily due to $1.4 billion of net repayments in the current year and $751 million net borrowings in the prior year at the Renewables SBU, and $247 million of net repayments in the current year and $69 million of net borrowings in the prior year at the Utilities SBU; partially offset by $122 million of higher net repayments at the Energy Infrastructure SBU in the prior year.

•The $1.3 billion impact from recourse debt is primarily due to the issuance of $1.5 billion subordinated notes at the Parent Company in the prior year and repayments of $898 million at the Parent Company in the current year, partially offset by current year issuance of $800 million of senior notes and repayments of $200 million in the prior year.

•The $881 million impact from non-recourse debt transactions is primarily due to $963 million lower net borrowings at the Utilities SBU and $451 increase in net repayments at the Energy Infrastructure SBU, partially offset by a $533 increase in net borrowings at the Renewables SBU.

•The $482 million impact from distributions to noncontrolling interests is primarily related to increases of $307 million and $191 million at AES Clean Energy and AES Indiana, respectively, mainly due to higher proceeds from the transfer of U.S. investment tax credits distributed to tax equity partners.

•The $300 million impact from the Parent Company revolver is due to higher net borrowings in the current year.

•The $992 million impact from issuance of preferred shares in subsidiaries is primarily due to the proceeds received from the issuance of preferred shares in AES Global Insurance, Bellefield 2 Equity Holdings, AES DevCo HoldCo, Desarrollos Renovables, and the Bolero BESS project.

•The $837 million impact from sales to noncontrolling interests is primarily due to $540 million from the sale of ownership interest in AES Ohio and increase in proceeds of $328 million and $207 million at AES Clean Energy Development and AES Indiana, respectively, due to higher sales of ownership in project companies to tax equity investors; partially offset by a $104 million decrease in sales under the Chile Renovables partnership with GIP, a decrease of $103 million in proceeds at AES Renewable Holdings due to higher sales of ownership in project companies to tax equity investors in the prior year, and $35 million related to the prior year sale of ownership interest in the Marahu project.

Parent Company Liquidity

The following discussion is included as a useful measure of the liquidity available to The AES Corporation, or the Parent Company, given the non-recourse nature of most of our indebtedness. Parent Company Liquidity as outlined below is a non-GAAP measure and should not be construed as an alternative to Cash and cash equivalents, which is determined in accordance with GAAP. Parent Company Liquidity may differ from similarly titled measures used by other companies. The principal sources of liquidity at the Parent Company level are dividends and other distributions from our subsidiaries, including refinancing proceeds; proceeds from debt and equity financings at the Parent Company level, including availability under our revolving credit facilities and commercial paper program; and proceeds from asset sales. The Parent Company credit facilities and commercial paper program are generally used for short-term cash needs to bridge the timing of distributions from subsidiaries. Cash requirements at the Parent Company level are primarily to fund interest and principal repayments of debt, construction commitments, other equity commitments, acquisitions, taxes, Parent Company overhead and development costs, and dividends on common stock.

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

The Parent Company paid dividends of $0.70 per outstanding share to its common stockholders during the year ended December 31, 2025. While we intend to continue payment of dividends and believe we will have sufficient liquidity to do so, we can provide no assurance that we will continue to pay dividends, or if continued, the amount of such dividends.

Recourse Debt

Our total recourse debt was $6.0 billion and $5.7 billion as of December 31, 2025 and 2024, respectively. See Note 12—Obligations in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional detail.

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

Various debt instruments at the Parent Company level, including our revolving credit facilities and commercial paper program, contain certain restrictive covenants. The covenants provide for, among other items, limitations on other indebtedness, liens, investments and guarantees; limitations on dividends, stock repurchases and other equity transactions; restrictions and limitations on mergers and acquisitions, sales of assets, leases, transactions with affiliates and off-balance sheet and derivative arrangements; maintenance of certain financial ratios; and financial and other reporting requirements. As of December 31, 2025, we were in compliance with these covenants at the Parent Company level.

Non-Recourse Debt

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

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

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

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

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

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

Some of our subsidiaries are currently in default with respect to all or a portion of their outstanding indebtedness. The total non-recourse debt classified as current in the accompanying Consolidated Balance Sheets amounts to $2.2 billion. The portion of current debt related to such defaults was $20 million at December 31, 2025, all of which was non-recourse debt related to AES Ilumina. This default is not a payment default, but is instead a technical default triggered by failure to comply with other covenants or other conditions contained in the non-recourse debt documents. See Note 12—Obligations in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional detail.

None of the subsidiaries that are currently in default are subsidiaries that met the applicable definition of materiality under the Parent Company's debt agreements as of December 31, 2025, in order for such defaults to trigger an event of default or permit acceleration under the Parent Company's indebtedness. However, as a result of additional dispositions of assets, other significant reductions in asset carrying values or other matters in the future that may impact our financial position and results of operations or the financial position of the individual subsidiary, it is possible that one or more of these subsidiaries could fall within the definition of a "material subsidiary" and thereby trigger an event of default and possible acceleration of the indebtedness under the Parent Company's outstanding debt securities. A material subsidiary is defined in the Parent Company's revolving credit agreement as any business that contributed 20% or more of the Parent Company's total cash distributions from businesses for the four most recently completed fiscal quarters. As of December 31, 2025, none of the defaults listed above resulted in a cross-default under the recourse debt of the Parent Company. Furthermore, none of the non-recourse debt in default listed above is guaranteed by the Parent Company.

Contractual Obligations and Contingent Contractual Obligations

A summary of our contractual obligations, commitments, and other liabilities as of December 31, 2025 is presented below (in millions):

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

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

(3)Interest payments are estimated based on final maturity dates of debt securities outstanding at December 31, 2025 and do not reflect anticipated future refinancing, early redemptions, or new debt issuances. Variable rate interest obligations are estimated based on rates as of December 31, 2025.

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

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

The following table presents our Parent Company's consolidated contingent contractual obligations as of December 31, 2025:

(1)Excludes payment obligation and commercial transaction arrangements entered into by the Parent Company on behalf of its consolidated subsidiaries, which relate to the Company's own future performance. See Schedule I—Condensed Financial Information of Registrant for additional information on guarantees issued by the Parent Company.

Additionally, some of the Company's subsidiaries have contingent contractual obligations that are non-recourse to the Parent Company. The following table presents our subsidiaries' consolidated contingent contractual obligations as of December 31, 2025:

We have a diverse portfolio of performance-related contingent contractual obligations. These obligations are designed to cover potential risks and only require payment if certain targets are not met or certain contingencies occur. The risks associated with these obligations include change of control, construction cost overruns, subsidiary default, political risk, tax indemnities, spot market power prices, sponsor support, and liquidated damages under power sales agreements for projects in development, in operation and under construction. While we do not expect that we will be required to fund any material amounts under these contingent contractual obligations beyond 2025, many of the events which would give rise to such obligations are beyond our control. We can provide no assurance that we will be able to fund our obligations under these contingent contractual obligations if we are required to make substantial payments thereunder.