AES CORP

Components of Revenue, Cost of Sales, and Operating Margin —Revenue includes revenue earned from the sale of energy from our utilities and the production and sale of energy from our generation plants, which are classified as regulated and non-regulated, respectively, on the Consolidated Statements of Operations. Revenue also includes the gains or losses on derivatives associated with the sale of electricity.

Cost of sales includes costs incurred directly by the businesses in the ordinary course of business. Examples include electricity and fuel purchases, O&M costs, depreciation and amortization expenses, bad debt expense and recoveries, and general administrative and support costs (including employee-related costs directly associated with the operations of the business). Cost of sales also includes the gains or losses on derivatives (including embedded derivatives other than foreign currency embedded derivatives) associated with the purchase of electricity or fuel.

Operating margin is defined as revenue less cost of sales.

Consolidated Revenue and Operating Margin

Year Ended December 31, 2025

Revenue

Consolidated Revenue —Revenue decreased $45 million in 2025 compared to 2024, driven by:

•$805 million at Energy Infrastructure primarily driven by $921 million of prior year revenue related to the AES Andes portfolio, which is reported in the Renewables SBU beginning in 2025 following the sale and expiration of certain coal-related assets and contracts; $174 million due to prior year unrealized and realized derivative gains, $171 million of prior year revenues from the monetization of the Warrior Run coal plant PPA, and $23 million due to the prior year sell-down of Amman East and IPP4 in Jordan; partially offset by $317 million due to higher fuel prices and transportation costs passed through to the offtaker, $148 million of higher CO 2 purchases passed through due to higher production, and $28 million due to higher availability; and

•$50 million at Corporate, Other and Eliminations mainly driven by higher eliminations of inter-segment revenue.

These unfavorable impacts were partially offset by increases of:

•$514 million at Utilities mainly driven by $422 million increase in transmission, distribution, rider, and wholesale revenues mainly due to higher rates, and $93 million due to higher net retail demand mainly driven by favorable weather; and

•$296 million at Renewables mainly driven by an $832 million increase due to the results of AES Andes moving to Renewables in 2025, as described above, net of a current year decrease in regulated contract sales, $232 million due to new projects in service, and $105 million due to development services in the U.S.; partially offset by a $615 million decrease due to the sale of AES Brasil, $243 million net lower spot sales and prices, mainly in Colombia, and a $42 million decrease related to changes in mark-to-market of energy derivatives.

Operating Margin

Consolidated Operating Margin —Operating margin decreased $103 million, or 4%, in 2025 compared to 2024, driven by:

•$332 million at Energy Infrastructure mainly driven by $160 million higher prior year revenues from the monetization of the Warrior Run coal plant PPA, $108 million due to prior year net derivative gains as part of our commercial hedging strategy, $60 million of prior year operating margin related to the AES Andes portfolio, which is reported in the Renewables SBU beginning in 2025 following the sale and expiration of certain coal-related assets and contracts, $23 million of lower LNG sales net of higher terminal fees, $18 million of one-time costs due to restructuring, and $17 million due to the prior year sell-down of Amman East and IPP4 in Jordan; partially offset by $49 million driven by higher availability in 2025 due to lower maintenance.

These unfavorable impacts were partially offset by increases of:

•$104 million at Renewables mainly driven by $91 million due to development services in the U.S., $89 million from new businesses, $68 million in Colombia as a result of increased availability and lower spot prices on energy purchases, $60 million due to the results of AES Andes moving to Renewables in 2025, as described above, and $36 million due to higher generation in Panama as a result of better hydrological conditions during the first quarter of 2025. These increases were partially offset by a $177 million decrease due to the sale of AES Brasil, a $42 million decrease related to changes in mark-to-market of energy derivatives, a $38 million increase in fixed costs primarily related to an accelerated growth plan, and $15 million of one-time costs due to restructuring;

•$92 million at Utilities mainly driven by $191 million due to higher retail rates as a result of the AES Indiana 2024 Base Rate Order and AES Ohio 2024 DRC Settlement, higher transmission and rider revenues, and higher demand due to the impact of weather; partially offset by a $46 million increase in depreciation expense from additional assets placed in service, a $33 million increase in fixed cost mainly driven by higher property taxes, and a $14 million impact of planned outages; and

•$37 million at Corporate and Other mainly driven by higher premiums earned by AGIC and lower eliminations of insurance recoveries booked at the businesses related to AGIC.

See Item 7.—Management's Discussion and Analysis of Financial Condition and Results of Operations—SBU Performance Analysis of this Form 10-K for additional discussion and analysis of operating results for each SBU.

Consolidated Results of Operations — Other

General and administrative expenses

General and administrative expenses include expenses related to corporate staff functions and initiatives, executive management, finance, legal, human resources, and information systems, as well as global development costs.

General and administrative expenses decreased $47 million, or 16%, to $241 million in 2025 compared to $288 million in 2024, primarily due to a $34 million decrease in business development costs, driven by the Company's restructuring program, $18 million lower IT costs, and $8 million lower professional fees, partially offset by $14 million of one-time costs due to restructuring.

Interest expense

Interest expense decreased $78 million, or 5%, to $1,407 million in 2025, compared to $1,485 million in 2024. This decrease is primarily due to a $200 million impact from the sale of AES Brasil in October 2024 and lower debt balances at the Energy Infrastructure SBU; partially offset by lower capitalized interest at the Renewables SBU due to fewer projects under construction, and a higher weighted average interest rate and debt balance at the Parent Company.

Interest income

Interest income decreased $94 million, or 25%, to $287 million in 2025, compared to $381 million in 2024, primarily due to a $46 million impact from the sale of AES Brasil in October 2024, prior year interest recognized of $34 million on the Stabilization Fund receivables in Chile, and a $24 million decrease at Argentina due to lower short-term investments at lower rates; partially offset by a $15 million increase in sales type lease receivables at the Renewables SBU.

Loss on extinguishment of debt

Loss on extinguishment of debt increased $9 million, or 53%, to $26 million in 2025, compared to $17 million in 2024. This increase was primarily driven by a $9 million loss related to a revolver amendment and prepayment of debt at AES Clean Energy, a $7 million loss due to prepayment of debt at Jordan Solar, and a $5 million loss due to prepayment of senior notes at Mercury Chile; partially offset by a prior year loss of $10 million due to a prepayment at AES Andes.

See Note 12—Obligations included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Other income

Other income decreased $89 million, or 57%, to $67 million in 2025, compared to $156 million in 2024 primarily due to the prior year recognition of a $20 million bargain purchase gain on the Madison and Birdseye acquisition, a prior year gain of $14 million corresponding to the step acquisition of Felix, and a prior year indexation adjustment of Stabilization Fund receivables at AES Andes of $12 million, as well as a $10 million decrease in insurance proceeds and a $7 million decrease in AFUDC at our U.S. utilities in the current year. This was partially offset by a $10 million gain at AES Andes in the current year corresponding to the write-off of contingent consideration for a renewables development project determined to be no longer viable.

Other expense

Other expense increased $283 million to $458 million in 2025, compared to $175 million in 2024 primarily driven by $159 million higher losses on commencement of sales-type leases at AES Clean Energy and AES Renewable Holdings, a $74 million increase in losses on remeasurement of contingent consideration primarily on projects acquired at AES Clean Energy, and a $48 million current year loss on remeasurement of our investment in 5B, accounted for using the measurement alternative; partially offset by a $20 million loss recognized in the prior year related to legal expenses and other direct costs associated with the troubled debt restructuring at Puerto Rico.

See Note 22—Other Income and Expense included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Gain on disposal and sale of business interests

Gain on disposal and sale of business decreased $293 million to $58 million in 2025, compared to $351 million in 2024. This decrease was primarily due to the prior year gain on sale of AES Brasil of $312 million and a $52 million gain in the prior year on dilution of AES' ownership interest in Uplight as a result of the AutoGrid acquisition. This was partially offset by a $70 million gain on the sell-down of Dominican Republic Renewables, which is now accounted for as an equity method investment.

See Note 9—Investments in and Advances to Affiliates and Note 25—Held-for-Sale and Dispositions included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Asset impairment expense

Asset impairment expense decreased $150 million, or 40%, to $224 million in 2025, compared to $374 million in 2024. This decrease was primarily due to a $243 million increase in the carrying value of the Mong Duong asset group due to the derecognition of a valuation allowance on the loan receivable accounted for under ASC 310 and the elimination of net estimated costs to sell upon reclassifying Mong Duong from held-for-sale to held and used, and lower impairment expense of $45 million at Mong Duong and prior year impairments of $125 million and $80 million at Ventanas and AES Brasil, respectively, associated with the held-for-sale classification. This was partially offset by a $264 million impairment at Maritza due to a reduction in expected cash flows after the expiration of the current PPA, and higher impairment expense of $62 million and $16 million at AES Clean Energy Development and AES Andes, respectively, due to the write-off of project development intangibles and capitalized development costs for projects that were determined to be no longer viable, including $51 million at AES Clean Energy Development due to the right sizing of our development company as part of the restructuring program initiated in February 2025.

See Note 23—Asset Impairment Expense included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Foreign currency transaction gains (losses)

Foreign currency transaction gains (losses) in millions were as follows:

(1) Includes losses of $26 million and gains of $137 million on foreign currency derivative contracts for the years ended December 31, 2025 and 2024, respectively.

The Company recognized net foreign currency transaction losses of $79 million in 2025, primarily driven by unrealized losses due to the depreciation of the Argentine peso, and unrealized losses in Chile due to the appreciation of the Chilean peso and the appreciation of the Colombian peso, which negatively impacted foreign currency forwards.

The Company recognized net foreign currency transaction gains of $31 million in 2024, primarily driven by realized gains on swaps and options denominated in the Brazilian real.

Other non-operating expense

Other non-operating expense was $113 million in 2025 due to a $103 million impairment of the Uplight equity method investment and convertible notes as a result of observable market factors; and a $10 million other-than-temporary impairment of convertible notes for 5B as a result of an observable price change from a transaction between 5B and a third party.

See Note 9—Investments In and Advances to Affiliates included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Income tax benefit (expense)

Income tax benefit was $181 million in 2025 compared to income tax expense of $59 million in 2024. The Company's effective tax rates were (241)% and 7% for the years ended December 31, 2025 and 2024, respectively.

The 2025 effective tax rate was impacted by the current year benefits associated with ITCs and the reclassification of the Mong Duong asset group as held and used from held-for-sale, partially offset by the impacts of allocations of losses to tax equity investors on renewables projects. The 2024 effective tax rate was impacted by the prior year benefits associated with ITCs and the restructuring of a foreign holding company. These drivers were partially offset by the impacts of allocations of losses to tax equity investors on renewables projects. See Note 23—Asset Impairment Expense included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional information regarding the Mong Duong reclassification.

Our effective tax rate reflects the tax effect of significant operations outside the U.S., which are generally taxed at rates different than the U.S. statutory rate. Foreign earnings may be taxed at rates higher than the U.S. corporate rate of 21% and are also subject to current U.S. taxation under the GILTI rule. A future proportionate change in the composition of income before income taxes from foreign and domestic tax jurisdictions could impact our periodic effective tax rate. The Company also benefits from reduced tax rates in certain countries as a result of satisfying specific commitments regarding employment and capital investment. See Note 24—Income Taxes included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for additional information regarding these reduced rates.

Net equity in losses of affiliates

Net equity in losses of affiliates increased $29 million to $55 million in 2025, compared to $26 million in 2024. This increase was primarily driven by lower earnings from sPower of $31 million, mainly due to lower contributions from renewables projects that came online.

See Note 9—Investments In and Advances to Affiliates included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Loss from disposal of discontinued businesses

Net loss from disposal of discontinued businesses was $39 million in 2025, compared to $7 million in 2024, primarily related to alleged damages plus interest, as well as potential future damages, under a dispute related to representations and warranties in the 2016 share purchase agreement for Sul in the current year.

See Note 31—Discontinued Operations included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.

Net income (loss) attributable to noncontrolling interests and redeemable stock of subsidiaries

Net loss attributable to noncontrolling interests and redeemable stock of subsidiaries decreased $129 million, or 15%, to $748 million in 2025, compared to $877 million in 2024. This decrease was primarily due to a decrease of $149 million at Mong Duong mostly driven by the derecognition of a valuation allowance on the loan receivable accounted for under ASC 310 upon reclassifying Mong Duong from held-for-sale to held and used, a decrease of $135 million at AES Clean Energy primarily attributable to lower allocation of losses to tax equity investors on projects placed in service and increased development services in the U.S., $34 million related to the sale of AES Brasil, $25 million related to improved operating results at Southland Energy after maintenance in the prior year, and $23 million related to the sell-down of AGIC. This was partially offset by an increase of $150 million at AES Indiana primarily attributable to higher allocation of losses to tax equity investors on BESS projects placed in service, $55 million due to day-one losses on the commencement of sales-type leases at AES Clean Energy Development, and $25 million related to acquisition of the remaining common shares in Cochrane.

Net income (loss) attributable to The AES Corporation

Net income attributable to The AES Corporation decreased $769 million, or 46%, to $910 million in 2025, compared to $1,679 million in 2024. This decrease was primarily due to:

•The prior year gain on sale of AES Brasil of $312 million;

•Lower margins from the Energy Infrastructure SBU of $271 million, excluding one-time restructuring costs, primarily due to higher prior year revenues from the monetization of the Warrior Run coal plant PPA and prior year net derivative gains as part of our commercial hedging strategy;

•Higher other expense of $211 million primarily related to day-one losses on commencement of sales-type leases and remeasurement of contingent consideration at AES Clean Energy Development;

•Higher impairments of $264 million at Maritza due to a reduction in expected cash flows after the expiration of the current PPA, partially offset by a $125 million prior-year impairment at Ventanas;

•Other non-operating expense of $113 million due to an impairment of the Uplight equity method investment and convertible notes, as well as an other-than-temporary impairment of convertible notes for 5B;

•Higher foreign currency translation losses of $102 million primarily related to unrealized losses due to the depreciation of the Argentine peso and unrealized losses in Chile due to the appreciation of the Chilean peso and the appreciation of the Colombian peso;

•Lower other income of $73 million primarily related to the prior year recognition of a bargain purchase gain on the Madison and Birdseye acquisition, a prior year gain corresponding to the step acquisition of Felix, and a prior year indexation adjustment of Stabilization Fund receivables at AES Andes;

•Lower interest income of $55 million primarily related to the sale of AES Brasil and prior year interest recognized on Stabilization Fund receivables in Chile; and

•One-time restructuring costs of $51 million.

These drivers were partially offset by:

•Higher income tax benefit of $257 million due to a lower effective tax rate, mainly driven by tax credit transfers;

•Higher margins from the Renewables SBU of $144 million, excluding one-time restructuring costs, primarily due to increases from new businesses and development services in the U.S., increased availability and lower spot prices on energy purchases in Colombia, and better hydrology in Colombia and Panama, partially offset by the negative impact of the sale of AES Brasil; and

•Derecognition of a valuation allowance on the loan receivable accounted for under ASC 310 upon reclassifying Mong Duong from held-for-sale to held and used of $127 million; and

•Higher margins from the Utilities SBU of $48 million, excluding one-time restructuring costs, primarily due to higher retail rates as a result of the AES Indiana 2024 Base Rate Order and AES Ohio 2024 DRC Settlement, higher transmission rates and rider revenues, and higher demand due to the impact of weather.