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What changed in AES Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AES Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+891 added−892 removedSource: 10-K (2024-02-26) vs 10-K (2023-03-01)

Top changes in AES Corporation's 2023 10-K

891 paragraphs added · 892 removed · 615 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

318 edited+133 added−141 removed136 unchanged
Biggest changeThe following table lists our South America SBU generation facilities: 26 | 2022 Annual Report Business Location Fuel Gross MW AES Equity Interest Year Acquired or Began Operation Contract Expiration Date Customer(s) Chivor Colombia Hydro 1,000 99 % 2000 2023-2039 Various San Fernando Colombia Solar 61 99 % 2021 2036 Ecopetrol Brisas Colombia Solar 27 99 % 2022 2037 Ecopetrol Castilla Colombia Solar 21 99 % 2019 2034 Ecopetrol Tunjita Colombia Hydro 20 99 % 2016 2023-2039 Various Colombia Subtotal 1,129 Ventanas (1) Chile Coal 745 99 % 2000, 2010, 2013 Angamos Chile Coal 558 99 % 2011 Various Cochrane Chile Coal 550 57 % 2016 2030-2037 SQM, Sierra Gorda, Quebrada Blanca Alto Maipo (2) Chile Hydro 531 99 % 2021 2040 Minera Los Pelambres Norgener Chile Coal 276 99 % 2000 2028 Codelco Cordillera Hydro Complex (3) Chile Hydro 240 99 % 2000 2023-2024 Various Los Olmos Chile Wind 110 51 % 2022 2032 Google, Various Los Cururos Chile Wind 109 51 % 2019 Various Andes Solar 2a Chile Solar 81 51 % 2021 Google, Various Mesamavida Chile Wind 63 99 % 2022 2038 Google, Various Andes Solar 1 Chile Solar 22 99 % 2016 2036 Quebrada Blanca Cochrane ES Chile Energy Storage 20 57 % 2016 Angamos ES Chile Energy Storage 20 99 % 2011 Laja Chile Biomass 13 99 % 2000 2023 CMPC Norgener ES (Los Andes) Chile Energy Storage 12 99 % 2009 Alfalfal Virtual Reservoir Chile Energy Storage 10 99 % 2020 PFV Kaufmann Chile Solar 1 99 % 2021 2040 Kaufmann Chile Subtotal 3,361 TermoAndes (4) Argentina Gas/Diesel 643 99 % 2000 2023-2024 Various AES Andes Subtotal (5) 5,133 Alicura Argentina Hydro 1,050 100 % 2000 Paraná-GT Argentina Gas/Diesel 870 100 % 2001 San Nicolás Argentina Coal/Gas/Oil/Energy Storage 691 100 % 1993 Guillermo Brown (6) Argentina Gas/Diesel 576 — % 2016 Cabra Corral Argentina Hydro 102 100 % 1995 Various Vientos Bonaerenses Argentina Wind 100 100 % 2020 2024-2040 Various Vientos Neuquinos Argentina Wind 100 100 % 2020 2024-2040 Various Ullum Argentina Hydro 45 100 % 1996 Various Sarmiento Argentina Gas/Diesel 33 100 % 1996 El Tunal Argentina Hydro 10 100 % 1995 Various Argentina Subtotal 3,577 AES Brasil Operações (Tietê) (7) Brazil Hydro 2,658 48 % 1999 2032 Various Cubico II Brazil Wind 456 48 % 2022 2034-2035 CCEE Alto Sertão II Brazil Wind 386 36 % 2017 2033-2035 Various, CCEE Ventus Brazil Wind 187 36 % 2020 2034 CCEE Mandacaru and Salinas Brazil Wind 159 48 % 2021 2033-2034 CCEE Guaimbê Brazil Solar 150 36 % 2018 2037 CCEE Tucano (8) Brazil Wind 99 24 % 2022 2042 Unipar AGV Solar Brazil Solar 76 36 % 2019 2039 Various, CCEE Boa Hora Brazil Solar 69 48 % 2019 2035 CCEE AES Brasil Subtotal 4,240 12,950 _____________________________ (1) In December 2020, AES Andes requested the retirement of Ventanas 2 and is awaiting regulatory approval.
Biggest changeThe following table lists our Energy Infrastructure segment generation facilities: Business Location Fuel Gross MW AES Equity Interest Year Acquired or Began Operation Contract Expiration Date Customer(s) Mong Duong 2 (1) Vietnam Coal 1,242 51 % 2015 2040 EVN Southland—Alamitos US-CA Gas 1,200 100 % 1998 2026 California Department of Water Resources Paraná-GT Argentina Gas/Diesel 870 100 % 2001 Southland Energy—Huntington Beach (3) US-CA Gas 694 50 % 2020 2040 Southern California Edison Southland Energy—Alamitos (3) US-CA Gas 693 50 % 2020 2040 Southern California Edison San Nicolás Argentina Coal/Gas/Oil/Energy Storage 691 100 % 1993 Maritza Bulgaria Coal 690 100 % 2011 2026 National Electric Company (NEK) TermoAndes (4) Argentina Gas/Diesel 643 99 % 2000 2024-2025 Various Guillermo Brown (5) Argentina Gas/Diesel 576 — % 2016 Angamos Chile Coal 558 99 % 2011 Various Cochrane Chile Coal 550 57 % 2016 2030-2037 SQM, Sierra Gorda, Quebrada Blanca Ventanas Chile Coal 537 99 % 2010, 2013 Alto Maipo (2) Chile Hydro 531 99 % 2021 2040 Minera Los Pelambres AES Puerto Rico US-PR Coal 524 100 % 2002 2027 LUMA Energy Merida III Mexico Gas/Diesel 505 75 % 2000 2025 Comision Federal de Electricidad Amman East (6) Jordan Gas 472 37 % 2009 2033 National Electric Power Company Colon (7) Panama Gas 381 65 % 2018 2028 ENSA, Edemet, Edechi DPP (Los Mina) Dominican Republic Gas 358 65 % 1996 2025 Ede Este, Ede Norte, Ede Sur, Non-Regulated Users Andres (8) Dominican Republic Gas/Diesel 319 65 % 2003 2025 Ede Este, Ede Norte, Ede Sur, Non-Regulated Users Andes 2b Chile Solar 180 99 % 2023 Various Energy Storage 112 Norgener Chile Coal 276 99 % 2000 2028 Codelco Termoelectrica del Golfo (TEG) Mexico Pet Coke 275 99 % 2007 2027 CEMEX Termoelectrica del Penoles (TEP) Mexico Pet Coke 275 99 % 2007 2027 Peñoles IPP4 (6) Jordan Gas 250 36 % 2014 2039 National Electric Power Company Cordillera Hydro Complex (9) Chile Hydro 240 99 % 2000 2042 Various Southland—Huntington Beach US-CA Gas 236 100 % 1998 2026 California Department of Water Resources Warrior Run (10) US-MD Coal 205 100 % 2000 2024 Potomac Edison Bolero Chile Solar 146 99 % 2023 2030 Various Los Olmos Chile Wind 110 51 % 2022 2032 Google, Various Los Cururos Chile Wind 109 51 % 2019 Various Andes Solar 2a Chile Solar 81 51 % 2021 Google, Various 30 | 2023 Annual Report Mesamávida Chile Wind 68 51 % 2022 2038 Google, Various Campo Lindo Chile Wind 65 51 % 2023 Various Virtual Reservoir 2 Chile Energy Storage 50 99 % 2023 Sarmiento Argentina Gas/Diesel 33 100 % 1996 Andes Solar 4 Chile Solar 13 99 % 2023 Google, Various Energy Storage 13 Andes Solar 1 Chile Solar 22 99 % 2016 2036 Quebrada Blanca Cochrane ES Chile Energy Storage 20 57 % 2016 Angamos ES Chile Energy Storage 20 99 % 2011 San Matias Chile Wind 17 99 % 2023 2038 Microsoft Laja Chile Biomass 13 99 % 2000 2023 CMPC Andes Chile Energy Storage 12 99 % 2009 Alfalfal Virtual Reservoir Chile Energy Storage 10 99 % 2020 PFV Kaufmann Chile Solar 1 99 % 2021 2040 Kaufmann 14,885 _____________________________ (1) In November 2023, agreed to sell this business to Sev.en Global Investments Pty Ltd.
To the extent possible, we utilize our global sourcing program to maximize the purchasing power of our fuel procurement. 2% of the capacity of our generation fleet utilizes pet coke, diesel or oil for fuel. We source oil and diesel locally at prices linked to international markets. We largely source pet coke from Mexico and the U.S.
To the extent possible, we utilize our global sourcing program to maximize the purchasing power of our fuel procurement. 2% of the capacity of our generation fleet utilizes pet coke or oil for fuel. We source oil and diesel locally at prices linked to international markets. We largely source pet coke from Mexico and the U.S.
Rubiolo joined AES in 2001 and has worked in AES businesses in the Philippines, Argentina, Mexico, Panama, and the Dominican Republic. Mr. Rubiolo serves on the boards of AES Andes, AES Brasil Energia, and AES Colombia & Cia S.C.A. E.S.P. Mr.
Mr. Rubiolo joined AES in 2001 and has worked in AES businesses in the Philippines, Argentina, Mexico, Panama, and the Dominican Republic. Mr. Rubiolo serves on the boards of AES Andes, AES Brasil Energia, and AES Colombia & Cia S.C.A. E.S.P. Mr.
Key Financial Drivers — Financial results are driven by many factors, including, but not limited to: • changes in hydrology, which impacts commodity prices and exposes the business to variability in the cost of replacement power; • fluctuations in commodity prices, mainly oil and natural gas, which affect the cost of thermal generation and spot prices; • constraints imposed by the capacity of transmission lines connecting the west side of the country with the load, keeping surplus power trapped during the rainy season; and • country demand as GDP growth is expected to remain strong over the short and medium term.
Key Financial Drivers — Financial results are driven by many factors, including, but not limited to: • changes in hydrology, which impacts the spot prices and exposes the business to variability in the cost of replacement power; • fluctuations in commodity prices, mainly fuel oil and natural gas, which affect the cost of thermal generation and spot prices; • constraints imposed by the capacity of transmission lines connecting the west side of the country with the load, keeping surplus power trapped during the rainy season; and • country demand as GDP growth is expected to remain strong over the short and medium term.
In line with AES' strategy of using partnerships to promote the effective deployment of capital, in February 2023, the Company sold 49% of its indirect interest in a 1.3 GW portfolio of sPower's operating assets ("OpCo B") that includes 17 solar projects and one wind project, located across six states, to Hannon Armstrong Sustainable Infrastructure Capital, Inc.
In line with AES' strategy of using partnerships to promote the effective deployment of capital, in February 2023, the Company sold 49% of its indirect interest in a 1.3 GW portfolio of sPower's operating assets ("OpCo B") that includes 17 solar projects and one wind project, located across six states, to Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("HASI").
Key Financial Drivers — Financial results are driven by many factors, including, but not limited to: • improved operational performance; • regulatory outcomes and impacts; • variability in energy demand driven by weather; and • the impact of fuel oil prices on energy tariff prices, which affect cash flow due to a three-month delay in the pass-through of energy costs to the tariffs charged to customers.
Key Financial Drivers — Financial results are driven by many factors, including, but not limited to: • operational performance; • regulatory outcomes and impacts; • variability in energy demand driven by weather; and • the impact of fuel oil prices on energy tariff prices, which affect cash flow due to a three-month delay in the pass-through of energy costs to the tariffs charged to customers.
On November 1, 2021, Fluence Energy, Inc. completed its IPO, generating proceeds of approximately $936 million, after expenses, and is listed on NASDAQ under the symbol "FLNC". AES owns Class B-1 common stock, entitling AES to five votes per share held, and continues to hold its economic interest in the operating subsidiary of Fluence Energy, Inc.
On November 1, 2021, Fluence Energy, Inc. completed its IPO, generating primary proceeds of approximately $936 million, after expenses, and is listed on Nasdaq under the symbol "FLNC". AES owns Class B-1 common stock, entitling AES to five votes per share held, and continues to hold its economic interest in the operating subsidiary of Fluence Energy, Inc.
Fluence Business Description — Fluence, created in 2018 as a joint venture by AES and Siemens, is a global energy storage technology and services company aligned with the AES strategy to drive decarbonization of the electric sector. Fluence is a leading global provider of energy storage products and services and artificial intelligence (AI)-enabled digital applications for renewables and storage.
Fluence Business Description — Fluence, created in 2018 as a joint venture by AES and Siemens AG, is a global energy storage technology and services company aligned with the AES strategy to drive decarbonization of the electric sector. Fluence is a leading global provider of energy storage products and services and artificial intelligence (AI)-enabled digital applications for renewables and storage.
Our US and Utilities SBU participates in our second business line, utilities, in which we own and/or operate utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors within a defined service area. In certain circumstances, our utilities also generate and sell electricity on the wholesale market.
Our Utilities SBU participates in our second business line, utilities, in which we own and/or operate utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors within a defined service area. In certain circumstances, our utilities also generate and sell electricity on the wholesale market.
During 2022, new regulations associated with monitoring requirements were published, including Law 21,455, which is the framework on climate change; the new Ventanas power plant Operational Plan; emission standards for back up generators; and recently enacted Law 21,505, which promotes electric energy storage and electromobility.
During 2022, new regulations associated with enviromental monitoring requirements were published, including Law 21,455, which is the framework on climate change; the Ventanas power plant new Operational Plan; emission standards for back up generators; and recently enacted Law 21,505, which promotes electric energy storage and electromobility.
In September 2019, we received formal approval as the government-mandated investor with 100% equity ownership in the Son My 2 CCGT project and executed a statutory memorandum of understanding with Vietnam’s Ministry of Industry and Trade in November 2019 to continue developing the Son My 2 CCGT project under Vietnam’s Build-Operate-Transfer legal framework.
In September 2019 we received a formal approval as the government-mandated investor with 100% equity ownership in the Son My 2 CCGT project and executed a statutory memorandum of understanding with Vietnam’s Ministry of Industry and Trade to continue developing the Son My 2 CCGT project under Vietnam’s Build-Operate-Transfer legal framework.
These contracts are intended to reduce exposure to the volatility of fuel and electricity prices by linking the business's revenues and costs. We generally structure our business to eliminate or reduce foreign exchange risk by matching the currency of revenue and expenses, including fixed costs and debt.
Many of these contracts are intended to reduce exposure to the volatility of fuel and electricity prices by linking the business's revenues and costs. We generally structure our business to eliminate or reduce foreign exchange risk by matching the currency of revenue and expenses, including fixed costs and debt.
Freedman is a member of the Boards of, AES U.S. Investments, Inc., IPALCO, AES Ohio, AES Southland Energy Holdings, LLC, Business Council for International Understanding, and the Coalition for Integrity. Prior to joining AES, Mr. Freedman was Chief Counsel for credit programs at the U.S.
Freedman is a member of the Boards of, AES U.S. Investments, Inc., IPALCO, AES Ohio, and AES Southland Energy Holdings, LLC. Additionally, Mr Freedman is a member of the Boards of the Business Council for International Understanding and the Coalition for Integrity. Prior to joining AES, Mr. Freedman was Chief Counsel for credit programs at the U.S.
AES Indiana and AES Ohio have implemented Uplight's consumer engagement solutions in support of energy efficiency and demand response programs, as well as piloted new solutions with Uplight. 5B Business Description — The Company made a strategic investment in 5B, a solar technology innovator with the mission to accelerate the transformation of the world to a clean energy future. 5B's technology design enables solar projects to be installed up to three times faster, while allowing for up to two times more energy within the same footprint and can sustain higher wind speeds than traditional solar plants.
AES Indiana and AES Ohio have implemented Uplight's consumer engagement solutions in support of energy efficiency and demand response programs, as well as piloted new solutions with Uplight. 5B Business Description — The Company has a strategic investment in 5B, a solar technology innovator with the mission to accelerate the transformation of the world to a clean energy future. 5B's technology design enables solar projects to be installed up to three times faster, while allowing for up to two times more energy within the same footprint and can sustain higher wind speeds than traditional solar plants.
On October 23, 2015, the EPA's rule establishing NSPS for new electric generating units became effective, establishing CO 2 emissions standards for newly constructed coal-fueled electric generating plants, which reflects the partial capture and storage of CO 2 emissions from the plants.
On October 23, 2015, the EPA's rule establishing NSPS for new electric generating units ("EGUs") became effective, establishing CO 2 emissions standards for newly constructed coal-fueled electric generating plants, which reflects the partial capture and storage of CO 2 emissions from the plants.
We typically contract with a third party to manage construction, although our construction management team supervises the construction work and tracks progress against the project's budget and the required safety, efficiency and productivity standards.
We typically contract with a third party to manage construction, although our construction management team supervises the construction work and tracks progress against the project's budget, schedule, and the required safety, efficiency and productivity standards.
For non-collectively bargained employees at certain levels in the organization, we offer annual incentives (bonus) and long-term compensation to reinforce the alignment between AES' employees and AES. Executive Officers The following individuals are our executive officers: Stephen Coughlin, 51 years old, has served as Executive Vice President and Chief Financial Officer since October 2021.
For non-collectively bargained employees at certain levels in the organization, we offer annual incentives (bonus) and long-term compensation to reinforce the alignment between AES' employees and AES. Executive Officers The following individuals are our executive officers: Stephen Coughlin, 52 years old, has served as Executive Vice President and Chief Financial Officer since October 2021.
Gluski , 65 years old, has been President, Chief Executive Officer and a member of our Board of Directors since September 2011 and is a member of the Innovation and Technology Committee. Under his leadership, AES has become a world leader in implementing clean technologies, including energy storage and renewable power. Prior to assuming his current position, Mr.
Gluski , 66 years old, has been President, Chief Executive Officer and a member of our Board of Directors since September 2011 and is a member of the Innovation and Technology Committee. Under his leadership, AES has become a world leader in implementing clean technologies, including energy storage and renewable power. Prior to assuming his current position, Mr.
These four units together have an installed capacity of 1,095 MW and each unit has publicly announced phase-out plans in line with the Company’s decarbonization strategy. In July 2021, the Company also sold its entire ownership interest in Guacolda, a 764 MW coal-fired plant located in Chile.
These four units together have an installed capacity of 1,097 MW and each unit has publicly announced phase-out plans in line with the Company’s decarbonization strategy. In July 2021, the Company also sold its entire ownership interest in Guacolda, a 764 MW coal-fired plant located in Chile.
No individual customer accounted for 10% or more of our 2022 total revenue. In our generation business, we own and/or operate power plants to generate and sell power to wholesale customers such as utilities and other intermediaries. Our utilities sell to end-user customers in the residential, commercial, industrial, and governmental sectors in a defined service area.
No individual customer accounted for 10% or more of our 2023 total revenue. In our generation business, we own and/or operate power plants to generate and sell power to wholesale customers such as utilities and other intermediaries. Our utilities sell to end-user customers in the residential, commercial, industrial, and governmental sectors in a defined service area.
Short-Term Sales — Our other generation businesses sell power and ancillary services under short-term contracts with average terms of less than two years, including spot sales, directly in the short-term market or at regulated prices. The short-term markets are typically administered by a system operator to coordinate dispatch.
Short-Term Sales — Our generation businesses also sell power and ancillary services under short-term contracts with average terms of less than two years, including spot sales, directly in the short-term market or at regulated prices. The short-term markets are typically administered by a system operator to coordinate dispatch.
Smart Grid and Comprehensive Settlement — On October 23, 2020, AES Ohio entered into a Stipulation and Recommendation (settlement) with the staff of the PUCO and various customers, and organizations representing customers of AES Ohio and certain other parties with respect to, among other matters, AES Ohio's applications pending at the PUCO for (i) approval of AES Ohio's plan to modernize its distribution grid (the "Smart Grid Plan"), (ii) findings that AES Ohio passed the Significantly Excessive Earnings Test ("SEET") for 2018 and 2019, and (iii) findings that AES Ohio's current ESP 1 satisfies the SEET and the more favorable in the aggregate ("MFA") regulatory test.
Smart Grid Comprehensive Settlement — In October 2020, AES Ohio entered into a Stipulation and Recommendation (settlement) with the staff of the PUCO and various customers, and organizations representing customers of AES Ohio and certain other parties with respect to, among other matters, AES Ohio's applications pending at the PUCO for (i) approval of AES Ohio's plan to modernize its distribution grid ("Smart Grid Phase 1"), (ii) findings that AES Ohio passed the Significantly Excessive Earnings Test ("SEET") for 2018 and 2019, and (iii) findings that AES Ohio's current ESP 1 satisfies the SEET and the more favorable in the aggregate ("MFA") regulatory test.
In 2022, AES Clean Energy largely generated investment tax credits ("ITCs") from its renewable assets. We expect that the extension of the current ITCs and production tax credits ("PTCs"), as well as higher credits available for projects that satisfy wage and apprenticeship requirements under the IRA, will increase demand for our renewable products.
In 2023, AES Clean Energy largely generated investment tax credits ("ITCs") from its renewable assets. We expect that the extension of the current ITCs and production tax credits ("PTCs"), as well as higher credits available for projects that satisfy wage and apprenticeship requirements under the IRA, will increase demand for our renewable products.
The expansion of renewable capacity in the system is promoted by allowing the new power plants to sign contracts either with CAMMESA through the RenovAr program or directly by trading energy in the private market. During 2022, although the government increased prices to the end user, subsidies and the system deficit also increased.
The expansion of renewable capacity in the system is promoted by allowing the new power plants to sign contracts either with CAMMESA through the RenovAr program or directly by trading energy in the private market. During 2023, although the government increased prices to the end user, subsidies and the system deficit also increased.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 18— Segment and Geographic Information included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further discussion of the Company's segment structure. 11 | 2022 Annual Report (1) Non-GAAP measure.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 18— Segment and Geographic Information included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further discussion of the Company's segment structure. 11 | 2023 Annual Report (1) Non-GAAP measure.
The Chilean government’s decarbonization plan includes the complete retirement of the SEN coal fleet by the end of 2040 and carbon neutrality by 2050.
Decarbonization Strategy — The Chilean government’s decarbonization plan includes the complete retirement of the SEN coal fleet by the end of 2040 and carbon neutrality by 2050.
With the exception of our plants in the Dominican Republic and Panama, where we import LNG to utilize in the local market, we use gas from local suppliers in each market. 20% of the capacity of our generation fleet is coal-fired. In the U.S., most of our coal-fired plants are supplied from domestic coal.
With the exception of our plants in the Dominican Republic and Panama, where we import LNG to utilize in the local market, we use gas from local suppliers in each market. 18% of the capacity of our generation fleet is coal-fired. In the U.S., most of our coal-fired plants are supplied from domestic coal.
Uplight offers a comprehensive digital platform for utility customer engagement. Uplight provides software and services to approximately 80 of the leading electric and gas utilities, principally in the U.S., with the mission of motivating and enabling energy users and providers to transition to a clean energy ecosystem.
Uplight offers a comprehensive digital platform for utility customer engagement. Uplight provides software and services to approximately 70 of the leading electric and gas utilities, principally in the U.S., with the mission of motivating and enabling energy users and providers to transition to a clean energy ecosystem.
Environmental Regulation — Argentina has agreed to commitments made by the international community ratified in the Paris Agreement and in Law 27,270 passed in September 2016. In October 2015, Law 27,191 was passed, seeking to create a successful framework for the development of renewable energy.
Argentina Argentina has agreed to commitments made by the international community ratified in the Paris Agreement and in Law 27,270 passed in September 2016. In October 2015, Law 27,191 was passed, seeking to create a successful framework for the development of renewable energy.
In addition, certain employees in non-U.S. locations were subject to collective bargaining agreements, representing approximately 60% of the non-U.S. workforce. Management believes that the Company's employee relations are favorable. Safety At AES, safety is one of our core values.
In addition, certain employees in non-U.S. locations were subject to collective bargaining agreements, representing approximately 50% of the non-U.S. workforce. Management believes that the Company's employee relations are favorable. Safety At AES, safety is one of our core values.
For further information about these risks, see Item 1A.— Risk Factors — Our operations are subject to significant 49 | 2022 Annual Report government regulation and could be adversely affected by changes in the law or regulatory schemes; Several of our businesses are subject to potentially significant remediation expenses, enforcement initiatives, private party lawsuits and reputational risk associated with CCR; Our businesses are subject to stringent environmental laws, rules and regulations; and Concerns about GHG emissions and the potential risks associated with climate change have led to increased regulation and other actions that could impact our businesses in this Form 10-K.
For further information about these risks, see Item 1A.— Risk Factors — Our operations are subject to significant government regulation and could be adversely affected by changes in the law or regulatory schemes; Several of our businesses are subject to potentially significant remediation expenses, enforcement initiatives, private party lawsuits and reputational risk associated with CCR; Our businesses are subject to stringent environmental laws, rules and regulations; and Concerns about GHG emissions and the potential risks associated with climate change have led to increased regulation and other actions that could impact our businesses in this Form 10-K.
Key Financial Drivers — The financial results of AES Clean Energy are primarily driven by the efficient construction and operation of renewable energy facilities across the U.S. under long-term PPAs, through which the energy price on the entire production of these facilities is guaranteed.
Key Financial Drivers — The financial results of AES Clean Energy are primarily driven by the efficient construction and operation of renewable energy facilities across the U.S. under long-term PPAs, through which the energy price on the entire production of these facilities is determined.
In July 2021, AES Andes committed to allow the shutdown of coal-fired operations at its Ventanas 3, Ventanas 4, Angamos 1, and Angamos 2 units as soon as January 1, 2025, once the safety, sufficiency, and competitiveness of the system allows it.
In July 2021, AES Andes committed to allow the shutdown of coal-fired operations at its Ventanas 3, Ventanas 4, Angamos 1, and Angamos 2 units as early as January 1, 2025, once the safety, sufficiency, and competitiveness of the system allows it.
The GHG BACT requirements will not apply at least until we construct a new major source or make a major modification of an existing major source, and the NSPS will not require us to comply with an emissions standard until we construct a new electric generating unit.
The GHG BACT requirements will not apply at least until we construct a new major source or make a major modification of an existing major source, and the NSPS for new EGUs will not require us to comply with an emissions standard until we construct a new electric generating unit.
AES Ohio is a utility company that transmits and distributes electricity to approximately 536,000 retail customers in a 6,000 square mile area of West Central Ohio and is subject to regulatory authority—see Regulatory Framework and Market Structure below.
AES Ohio is a utility company that transmits and distributes electricity to approximately 539,000 retail customers in a 6,000 square mile area of West Central Ohio and is subject to regulatory authority—see Regulatory Framework and Market Structure below.
Under the current terms of the 2018 legal agreement in connection with AES Brasil's concession with the state government, AES Brasil is required to increase its capacity in the state of São Paulo by an additional 81 MW by October 2024.
Under the current terms of the 2018 legal agreement in connection with AES Brasil's concession with the state government, AES Brasil is required to increase its capacity in the state of São Paulo by an additional 28 MW by October 2024.
The GHG NSPS remains in effect at this time, and, absent further action from the EPA that rescinds or substantively revises the NSPS, it could impact any Company plans to construct and/or modify or reconstruct electric generating units in some locations, which may have a material impact on our business, financial condition, or results of operations.
The GHG NSPS for new EGUs remains in effect at this time, and, absent further action from the EPA that rescinds or substantively revises the NSPS, it could impact any Company plans to construct and/or modify or reconstruct electric generating units in some locations, which may have a material impact on our business, financial condition, or results of operations.
Beginning in June 2020, AES Indiana files an annual TDSIC rate adjustment for a return on, and of, investments through March 31 with rates requested to be effective each November. Annual TDSIC plan update filings are required to be staggered by six months as ordered by the IURC and are filed each December.
Beginning in June 2020, AES Indiana files an annual TDSIC rate adjustment for a return on, and of, 25 | 2023 Annual Report investments through March 31 with rates requested to be effective each November. Annual TDSIC plan update filings are required to be staggered by six months as ordered by the IURC and are filed each December.
AES' economic interest in Fluence is currently 33.5%. The Company continues to account for Fluence as an equity method investment. Key Financial Drivers — Fluence's financial results are driven by the growth in its product revenue, an efficient cost structure that is expected to benefit from increased scale, and profit margins on customer contracts.
AES' economic interest in Fluence is currently 29%. The Company continues to account for Fluence as an equity method investment. Key Financial Drivers — Fluence's financial results are driven by the growth in its product revenue, an efficient cost structure that is expected to benefit from increased scale, and profit margins on customer contracts.
The CSAPR required significant reductions in SO 2 and NO X emissions from power plants in many states in which subsidiaries of the Company operate. The Company is currently required to comply with the CSAPR in Indiana and Maryland.
The CSAPR required significant reductions in SO 2 and NO X emissions from power plants in many states in which subsidiaries of the Company operate. The Company is currently required to comply with the CSAPR in certain states, including in Indiana and Maryland.
AES Colombia’s installed capacity accounted for approximately 6% of system capacity at the end of 2022. AES Colombia is dependent on hydrological conditions, which influence generation and spot prices of non-contracted generation in Colombia.
AES Colombia’s installed capacity accounted for approximately 6% of system capacity at the end of 2023. AES Colombia is dependent on hydrological conditions, which influence generation and spot prices of non-contracted generation in Colombia.
These standards require affected facilities to choose among seven BTA options to reduce fish impingement. In addition, certain facilities must conduct studies to assist permitting authorities to determine whether and what site-specific controls, if any, would be required to reduce entrainment of aquatic organisms.
These standards require affected facilities to choose among seven best technology available ("BTA") options to reduce fish impingement. In addition, certain facilities must conduct studies to assist permitting authorities to determine whether and what site-specific controls, if any, would be required to reduce entrainment of aquatic organisms.
Tish Mendoza , 47 years old, has served as Executive Vice President and Chief Human Resources Officer since February 2021. Prior to assuming her current position, Ms.
Tish Mendoza , 48 years old, has served as Executive Vice President and Chief Human Resources Officer since February 2021. Prior to assuming her current position, Ms.
Jordan Business Description — In Jordan, AES has a 37% controlling interest in Amman East, a 472 MW oil/gas-fired plant fully contracted with the national utility under a 25-year PPA expiring in 2033, a 36% controlling interest in the IPP4 plant, a 250 MW oil/gas-fired peaker plant fully contracted with the national utility until 2039, and a 36% controlling interest in a 52 MW solar plant fully contracted with the national utility under a 20-year PPA expiring in 2039.
AES Jordan Business Description — In Jordan, AES has a 37% controlling interest in Amman East, a 472 MW oil/gas-fired plant fully contracted with the national utility under a 25-year PPA expiring in 2033, and a 36% controlling interest in the IPP4 plant, a 250 MW oil/gas-fired peaker plant fully contracted with the national utility until 2039.
By December 2022, distribution companies recovered an average 40% of the total cost of the system. In past years, AES Argentina contributed certain accounts receivable to fund the construction of three power plants under FONINVEMEM agreements. These receivables accrue interest and are collected in monthly installments over 10 years after commercial operation date of the related plant takes place.
By December 2023, distribution companies recovered an average 47% of the total cost of the system. In past years, AES Argentina contributed certain accounts receivable to fund the construction of three power plants under FONINVEMEM agreements. These receivables accrue interest and are collected in monthly installments over 10 years after commercial operation date of the related plant takes place.
Thus, these contracts, or other related commercial arrangements, significantly mitigate our exposure to changes in power and, as applicable, fuel prices, currency fluctuations and changes in interest rates.
Thus, these contracts, or other related commercial arrangements, significantly mitigate our exposure to changes in electricity and, as applicable, fuel prices, currency fluctuations and changes in interest rates.
This framework fostered AES Argentina's construction of Vientos Bonaerenses and Vientos Neuquinos power plants, which are fully contracted with national and private customers in the long term.
This framework fostered AES Argentina's construction of Vientos Bonaerenses and Vientos Neuquinos power plants, which are fully contracted with public and private customers in the long term.
Da Santos holds a bachelor’s degree with Cum Laude distinction in Business Administration and Public Administration from Universidad José Maria Vargas, a bachelor’s degree with Cum Laude distinction in Business Management and Finance, and an MBA with Cum Laude distinction from Universidad José Maria Vargas. Paul L.
Da Santos holds a bachelor’s degree with Cum Laude distinction in Business Administration and Public Administration from Universidad José Maria Vargas, a bachelor’s degree with Cum Laude distinction in Business Management and Finance, and an MBA with Cum Laude distinction from Universidad José Maria Vargas.
These certifications are included as exhibits to this Annual Report on Form 10-K. Our CEO provided a certification pursuant to Section 303A of the New York Stock Exchange Listed Company Manual on April 28, 2022. Our Code of Business Conduct ("Code of Conduct") and Corporate Governance Guidelines have been adopted by our Board of Directors.
These certifications are included as exhibits to this Annual Report on Form 10-K. Our CEO provided a certification pursuant to Section 303A of the New York Stock Exchange Listed Company Manual on April 27, 2023. Our Code of Business Conduct ("Code of Conduct") and Corporate Governance Guidelines have been adopted by our Board of Directors.
In October 2019, we received formal approval as a government-mandated investor in the Son My LNG terminal project in partnership with PetroVietnam Gas and in September 2021, we signed the joint venture agreement with PetroVietnam Gas. In April 2022, we, together with our partner PetroVietnam Gas, established Son My LNG Terminal LLC.
In October 2019, we received formal approval as a government-mandated investor in the Son My LNG terminal project in partnership with PetroVietnam Gas. In September 2021, we signed the joint venture agreement with PetroVietnam Gas and established Son My LNG Terminal LLC in April 2022.
Da Santos held several positions at AES, including Chief Operating Officer and Senior Vice President from 2014 to 2017, Chief Financial Officer, Global Finance Operations from 2012 to 2014, Chief Financial Officer of Global Utilities from 2011 to 2012, Chief Financial Officer of Latin America and Africa from 2009 to 2011, Chief Financial Officer of Latin America from 2007 to 2009, Managing Director of Finance for Latin America from 2005 to 2007, and VP and Controller of La Electricidad de Caracas (“EDC”) (Venezuela).
Da Santos held several positions at AES, including Chief Operating Officer and Executive Vice President from December 2017 to July 2023, Chief Operating Officer and Senior Vice President from 2014 to 2017, Chief Financial Officer, Global Finance Operations from 2012 to 2014, Chief Financial Officer of Global Utilities from 2011 to 2012, Chief Financial Officer of Latin America and Africa from 2009 to 2011, Chief Financial Officer of Latin America from 2007 to 2009, Managing Director of Finance for Latin America from 2005 to 2007, and VP and Controller of La Electricidad de Caracas (“EDC”) (Venezuela).
The proceeds from the issuance of tax equity are recorded as Noncontrolling interest or Redeemable stock of subsidiaries in the Company's Consolidated Balance Sheets, depending on the partnership rights of the specific project. (4) Owned by AES Renewable Holdings. (5) On December 1, 2022, Southland Energy sold an additional 14.9% ownership interest in the Southland Energy assets.
The proceeds from the issuance of tax equity are recorded as Noncontrolling interest or Redeemable stock of subsidiaries in the Company's Consolidated Balance Sheets, depending on the partnership rights of the specific project. (4) Owned by ACED. (5) On December 1, 2022, Southland Energy sold an additional 14.9% ownership interest in the Southland Energy assets.
Among other matters, the order (i) establishes a revenue increase of $76 million for AES Ohio’s base rates for electric distribution service and (ii) provides for a return on equity of 9.999% and a cost of long-term debt of 4.4% on a rate base of $783 million and based on a capital structure of 53.87% equity and 46.13% long-term debt.
Among other matters, the order (i) establishes a revenue increase of $76 million for AES Ohio’s base rates for electric distribution service and (ii) provides for a return on equity of 9.999% and a cost of long-term debt of 27 | 2023 Annual Report 4.4% on a rate base of $783 million and based on a capital structure of 53.87% equity and 46.13% long-term debt.
Regulatory Framework and Market Structure — Puerto Rico has a single electric grid managed by PREPA, a state-owned entity that provides virtually all of the electric power consumed in Puerto Rico and generates, transmits, and distributes electricity to 1.5 million customers. Since June 2021, PREPA has contracted LUMA Energy to manage the transmission, distribution and commercialization activities.
Puerto Rico Puerto Rico has a single electric grid managed by PREPA, a state-owned entity that provides virtually all of the electric power consumed in Puerto Rico and generates, transmits, and distributes electricity to 1.5 million customers. Since June 2021, PREPA has contracted LUMA Energy to manage the transmission, distribution and commercialization activities.
Governance and standards are guided by the Chief Human Resources Officer, with input from members of the Executive Leadership Team. Compensation AES’ executive compensation philosophy emphasizes pay-for-performance. Our incentive plans are designed to reward strong performance, with greater compensation paid when performance exceeds expectations and less compensation paid when performance falls below expectations.
Governance and standards are guided by the Chief Human Resources Officer, with input from members of the Executive Leadership Team. Compensation 52 | 2023 Annual Report AES’ executive compensation philosophy emphasizes pay-for-performance. Our incentive plans are designed to reward strong performance, with greater compensation paid when performance exceeds expectations and less compensation paid when performance falls below expectations.
One of its main objectives is to promote investment in non-conventional renewable sources to diversify the energy matrix. • The General Superintendence of Electricity and Telecommunications regulates the market and sets consumer prices, and, jointly with the distribution companies in El Salvador, developed the tariff calculation applicable from 2018 until 2022.
One of its main objectives is to promote investment in non-conventional renewable sources to diversify the energy matrix. • The General Superintendence of Electricity and Telecommunications regulates the market and sets consumer prices, and, jointly with the distribution companies in El Salvador, developed the tariff calculation applicable from 2023 until 2027.
With a total of 847 MW of installed capacity, AES provides 16% of the country's capacity and supplies approximately 22% of the country's energy demand via these generation facilities. 668 MW was predominantly contracted until 2022 with government-owned distribution companies and large customers, and have been contracted back with the distribution companies in January 2023.
With a total of 697 MW of installed capacity, AES provides 12% of the country's capacity and supplies approximately 16% of the country's energy demand via these generation facilities. 668 MW was predominantly contracted until 2022 with government-owned distribution companies and large customers, and have been contracted back with the distribution companies in January 2023.
The Ethics and Compliance Department also has programs in place to prevent and detect criminal conduct, promote an organizational culture that encourages ethical behavior and a commitment to compliance with the law, and to monitor and enforce AES policies on corruption, bribery, money laundering and associations with terrorists groups.
The Ethics and Compliance Department also has programs in place to prevent and detect criminal conduct, promote an organizational culture that encourages ethical behavior and a commitment to compliance with the law, and to monitor and enforce AES policies on corruption, bribery, money laundering and 54 | 2023 Annual Report associations with terrorists groups.
NAAQS — Under the CAA, the EPA sets NAAQS for six principal pollutants considered harmful to public health and the environment, including ozone, particulate matter, NO X , and SO 2 , which result from coal combustion.
NAAQS — Under the CAA, the EPA sets NAAQS for six principal pollutants considered harmful to public health and the environment, including ozone, particulate matter, NO X , and SO 2 , which result from fossil-fuel combustion.
Southland OTC units enter into commodity swap contracts to economically hedge price variability inherent in electricity sales arrangements. Compensation under these RAPAs is dependent on the availability of the Southland OTC units in the California ISO market. Failure to achieve the minimum availability target would result in an assessed penalty.
Southland OTC units entered into commodity swap contracts to economically hedge price variability inherent in electricity sales arrangements. Compensation under these RAPAs was dependent on the availability of the Southland OTC units in the California ISO market. Failure to achieve the minimum availability target would result in an assessed penalty.
We have a comprehensive approach to managing our talent and developing our leaders in order to ensure our people have the right skills for today and tomorrow, whether that requires us to build new business models or leverage leading technologies. 56 | 2022 Annual Report We emphasize employee development and training.
We have a comprehensive approach to managing our talent and developing our leaders in order to ensure our people have the right skills for today and tomorrow, whether that requires us to build new business models or leverage leading technologies. We emphasize employee development and training.
The U.S. wholesale electricity market consists of multiple distinct regional markets that are subject to both federal regulation, as implemented by FERC, and regional regulation as defined by rules designed and 21 | 2022 Annual Report implemented by the RTOs, non-profit corporations that operate the regional transmission grid and maintain organized markets for electricity.
The U.S. wholesale electricity market consists of multiple distinct regional markets that are subject to both federal regulation, as implemented by FERC, and regional regulation as defined by rules designed and implemented by the RTOs, non-profit corporations that operate the regional transmission grid and maintain organized markets for electricity.
The marked seasonal variations in Colombia's hydrology result in price volatility in the short-term market. In 2022, 84% of total energy demand was supplied by hydroelectric plants. The electricity sector in Colombia operates under a competitive market framework for the generation and sale of electricity, and a regulated framework for transmission and distribution of electricity.
The marked seasonal variations in Colombia's hydrology result in price volatility in the short-term market. In 2023, 74% of total energy demand was supplied by hydroelectric plants. The electricity sector in Colombia operates under a competitive market framework for the generation and sale of electricity, and a regulated framework for transmission and distribution of electricity.
Prior to joining AES in 2000, Mr. Da Santos held a number of financial leadership positions at EDC. Mr. Da Santos is a member of the boards of AES Brasil Energia S.A., AES Mong Duong Power Co. Ltd., AES Andes, IPALCO, Son My LNG Terminal LLC, AES Renewable Holdings, LLC. Mr.
Prior to joining AES in 2000, Mr. Da Santos held a number of financial leadership positions at EDC. Mr. Da Santos is a member of the boards of AES Brasil Energia S.A., AES Mong Duong Power Co. Ltd., IPALCO, and Son My LNG Terminal LLC. Mr.
Gluski served as Executive Vice President and Chief 57 | 2022 Annual Report Operating Officer of the Company from 2007 to 2011. Prior to that role, he served in a number of senior roles at AES, including as Regional President of Latin America and was Senior Vice President for the Caribbean and Central America.
Gluski served as Executive Vice President and Chief Operating Officer of the Company from 2007 to 2011. Prior to that role, he served in a number of senior roles at AES, including as Regional President of Latin America and was Senior Vice President for the Caribbean and Central America.
Thermoelectric generation in the SADI is primarily natural gas. However, scarcity of natural gas during winter periods (June to August) due to transport constraints result in the use of alternative fuels, such as oil and coal. The SADI is also highly reliant on hydroelectric plants.
Thermoelectric generation in the SADI is fueled primarily by natural gas. However, scarcity of natural gas during winter periods (June to August) due to transport constraints results in the use of alternative fuels, such as oil and coal. The SADI is also highly reliant on hydroelectric plants.
AES Clean Energy comprises AES Renewable Holdings, sPower, AES Clean Energy Development ("ACED"), and other renewable assets, as part of its broader investments in the U.S. ACED was formed on February 1, 2021, as specifically identified projects in the sPower and AES Renewable Holdings development platforms were merged.
AES Clean Energy comprises AES Renewable Holdings, sPower, ACED, and other renewable assets, as part 16 | 2023 Annual Report of its broader investments in the U.S. ACED was formed on February 1, 2021, as specifically identified projects in the sPower and AES Renewable Holdings development platforms were merged.
Coughlin joined AES in 2007 and spent his early years with the company leading Financial Planning & Analysis for AES’s renewables portfolio. Mr. Coughlin is a member of the boards of AES U.S. Investments, Inc., AES U.S. Generation, LLC, and IPALCO. Mr.
Coughlin joined AES in 2007 and spent his early years with the company leading Financial Planning & Analysis for AES’s renewables portfolio. Mr. Coughlin is a member of the boards of AES Clean Energy Development Holdings, LLC, AES U.S. Investments, Inc., AES U.S. Generation, LLC, and IPALCO. Mr.
Agency for International Development and he previously worked as an associate at the law firms of White & Case and Freshfields. Mr. Freedman received a B.A. from Columbia University and a J.D. from the Georgetown University Law Center. Andrés R.
Agency for International 53 | 2023 Annual Report Development and he previously worked as an associate at the law firms of White & Case and Freshfields. Mr. Freedman received a B.A. from Columbia University and a J.D. from the Georgetown University Law Center. Andrés R.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties—Macroeconomic and Political—Puerto Rico for further discussion of the long-term PPAs with PREPA. Key Financial Drivers — Financial results are driven by many factors, including, but not limited to, improved operational performance and plant availability.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Trends and Uncertainties— 20 | 2023 Annual Report Macroeconomic and Political—Puerto Rico for further discussion of the long-term PPAs with PREPA. Key Financial Drivers — Financial results are driven by many factors, including, but not limited to, operational performance and plant availability.
The IURC sets tariff rates for electric service provided by AES Indiana. The IURC considers all allowable costs for ratemaking purposes, including a fair return on assets used and useful to providing service to customers. AES Indiana's tariff rates for electric service to retail customers consist of basic rates and approved charges.
The IURC considers all allowable costs for ratemaking purposes, including a fair return on assets used and useful to providing service to customers. AES Indiana's tariff rates for electric service to retail customers consist of basic rates and approved charges.
The operation of the transmission system and the wholesale market is based on production costs with a 23 | 2022 Annual Report marginal economic model that rewards efficiency and allows investors to have guaranteed profits, while end users receive affordable rates.
The operation of the transmission system and the wholesale market is based on production costs with a marginal economic model that rewards efficiency and allows investors to have guaranteed profits, while end users receive affordable rates.
The third station, Eagle Valley, is a CCGT natural gas plant. The fourth station, Georgetown, is a small peaking station that uses natural gas to power combustion turbines. In addition, AES Indiana helps meet its customers' energy needs with long-term contracts for the purchase of 300 MW of wind-generated electricity and 94 MW of solar-generated electricity.
The fourth station, Georgetown, is a small peaking station that uses natural gas to power combustion turbines. In addition, AES Indiana helps meet its customers' energy needs with long-term contracts for the purchase of 300 MW of wind-generated electricity and 94 MW of solar-generated electricity.
Human Capital Management At AES, our people are instrumental to helping us meet the world’s energy needs. Supporting our people is a foundational value for AES. All of our actions are grounded in the shared values that shape AES’ culture: Safety 55 | 2022 Annual Report First, Highest Standards, and All Together.
Human Capital Management At AES, our people are instrumental to helping us meet the world’s energy needs. Supporting our people is a foundational value for AES. Our actions are grounded in the shared values that shape AES’ culture: Safety First, Highest Standards, and All Together.
In addition, these contracts generally provide for a recovery of our fixed operating expenses and a return on our investment, as long as we operate the plant to the reliability and efficiency standards required in the contract.
In addition, these contracts generally provide or account for a recovery of our fixed operating expenses and a return on our investment, as long as we operate the plant to the reliability, availability, and efficiency standards required in the contract or otherwise.
FONINVEMEM III is related to Termoeléctrica Guillermo Brown, which commenced operations in April 2016, and the installments are still being collected. AES Argentina will receive a pro rata ownership interest in this plant, which shall not be greater than 30%, 33 | 2022 Annual Report once the accounts receivables have been fully repaid.
FONINVEMEM III is related to Termoeléctrica Guillermo Brown, which began operations in April 2016, and the installments are still being collected. AES Argentina will receive a pro rata ownership interest in this plant, which shall not be greater than 30%, once the accounts receivables have been fully repaid.
AES Ohio's wholesale sales and SSO utility sales, which are sales to utility customers who use AES Ohio to source their electricity through a competitive bid process, were 4,676 GWh in 2022. AES Ohio owns a 4.9% equity ownership in OVEC, an electric generating company.
AES Ohio's wholesale sales and SSO utility sales, which are sales to utility customers who use AES Ohio to source their electricity through a competitive bid process, were 3,183 GWh in 2023. AES Ohio owns a 4.9% equity ownership in OVEC, an electric generating company.
Development Strategy — In addition to a large global market for third party projects, we believe there is an addressable market of nearly 5 GW across our development pipeline. As of December 31, 2022, 5B has achieved sales orders of 175 MW.
Development Strategy — In addition to a large global market for third party projects, we believe there is an addressable market of nearly 5 GW across our development pipeline. As of December 31, 2023, 5B has achieved sales orders of over 250 MW.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations—SBU Performance Analysis of this Form 10-K for reconciliation and definitions of Adjusted PTC. 10 | 2022 Annual Report For financial reporting purposes, the Company's corporate activities and certain other investments are reported within "Corporate and Other" because they do not require separate disclosure.
See Item 7.— Management's Discussion and Analysis of Financial Condition and Results of Operations—SBU Performance Analysis of this Form 10-K for reconciliation and definitions of Adjusted EBITDA. 10 | 2023 Annual Report For financial reporting purposes, the Company's corporate activities are reported within "Corporate and Other" because they do not require separate disclosure.
Rubiolo served as Senior Vice President and President of the MCAC SBU from March 2018 to January 2022, as the Chief Executive Officer of AES Mexico from 2014 to March 2018, and as a Vice President of the Commercial team of the MCAC SBU from 2013 to 2014. Mr.
Rubiolo served as Executive Vice President and President of International Businesses from January 2022 to March 2023, Senior Vice President and President of the MCAC SBU from March 2018 to January 2022, as the Chief Executive Officer of AES Mexico from 2014 to March 2018, and as a Vice President of the Commercial team of the MCAC SBU from 2013 to 2014.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are currently evaluating the applicability and effect of the new law and additional guidance issued in the fourth quarter of 2022. With respect to international tax reform, in the fourth quarter of 2022, the European Commission adopted an amended Directive on Pillar 2 establishing a global minimum tax at a 15% rate.
Biggest changeIn the fourth quarter of 2022, the European Commission adopted an amended Directive on Pillar 2 establishing a global minimum tax at a 15% rate. The adoption requires EU Member States to transpose the Directive into their respective national laws by December 31, 2023 for the rules to come into effect as of January 1, 2024.
COVID-19 or another pandemic could have material and adverse effects on our results of operations, financial condition and cash flows due to, among other factors: • further decline in customer demand as a result of general decline in business activity; • further destabilization of the markets and decline in business activity negatively impacting customers’ ability to pay for our services when due or at all, including downstream impacts, whereby the utilities’ customers are unable to pay monthly bills or receiving a moratorium from payment obligations, resulting in inability on the part of utilities to make payments for power supplied by our generation companies; • decline in business activity causing our commercial and industrial customers to experience declining revenues and liquidity difficulties that impede their ability to pay for power that we supply; • government moratoriums or other regulatory or legislative actions that limit changes in pricing, delay or suspend customers’ payment obligations or permit extended payment terms applicable to customers of our utilities or to our offtakers under power purchase agreements, in particular, to the extent that such measures are not mitigated by associated government subsidies or other support to address any shortfall or deficiencies in payments; • claims by our PPA counterparties for delay or relief from payment obligations or other adjustments, including claims based on force majeure or other legal grounds; • further decline in spot electricity prices; • the destabilization of the markets and decline in business activity negatively impacting our customer growth in our service territories at our utilities; • negative impacts on the health of our essential personnel and on our operations as a result of implementing stay-at-home, quarantine, curfew and other social distancing measures; • delays or inability to access, transport and deliver fuel to our generation facilities due to restrictions on business operations or other factors affecting us and our third-party suppliers; • delays or inability to access equipment or the availability of personnel to perform planned and unplanned maintenance or disruptions in supply chain, which can, in turn, lead to disruption in operations; • a deterioration in our ability to ensure business continuity, including increased cybersecurity attacks related to the work-from-home environment; • further delays to our construction projects, including at our renewables projects, and the timing of the completion of renewables projects; • delay or inability to receive the necessary permits for our development projects due to delays or shutdowns of government operations; • delays in achieving our financial goals, strategy and digital transformation; • deterioration of the credit profile of The AES Corporation and/or its subsidiaries and difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; • delays or inability to complete asset sales on anticipated terms or to redeploy capital as set forth in our capital allocation plans; • increased volatility in foreign exchange and commodity markets; • deterioration of economic conditions, demand and other related factors resulting in impairments to long-lived assets; and 64 | 2022 Annual Report • delay or inability in obtaining regulatory actions and outcomes that could be material to our business, including for recovery of COVID-19 related losses and the review and approval of our rates at our U.S. regulated utilities.
COVID-19 or another pandemic could have material and adverse effects on our results of operations, financial condition and cash flows due to, among other factors: • further decline in customer demand as a result of general decline in business activity; • further destabilization of the markets and decline in business activity negatively impacting customers’ ability to pay for our services when due or at all, including downstream impacts, whereby the utilities’ customers are unable to pay monthly bills or receiving a moratorium from payment obligations, resulting in inability on the part of utilities to make payments for power supplied by our generation companies; • decline in business activity causing our commercial and industrial customers to experience declining revenues and liquidity difficulties that impede their ability to pay for power that we supply; • government moratoriums or other regulatory or legislative actions that limit changes in pricing, delay or suspend customers’ payment obligations or permit extended payment terms applicable to customers of our utilities or to our offtakers under power purchase agreements, in particular, to the extent that such measures are not mitigated by associated government subsidies or other support to address any shortfall or deficiencies in payments; • claims by our PPA counterparties for delay or relief from payment obligations or other adjustments, including claims based on force majeure or other legal grounds; • further decline in spot electricity prices; • the destabilization of the markets and decline in business activity negatively impacting our customer growth in our service territories at our utilities; • negative impacts on the health of our essential personnel and on our operations as a result of implementing stay-at-home, quarantine, curfew and other social distancing measures; • delays or inability to access, transport and deliver fuel to our generation facilities due to restrictions on business operations or other factors affecting us and our third-party suppliers; • delays or inability to access equipment or the availability of personnel to perform planned and unplanned maintenance or disruptions in supply chain, which can, in turn, lead to disruption in operations; • a deterioration in our ability to ensure business continuity, including increased cybersecurity attacks related to the work-from-home environment; 60 | 2023 Annual Report • further delays to our construction projects, including at our renewables projects, and the timing of the completion of renewables projects; • delay or inability to receive the necessary permits for our development projects due to delays or shutdowns of government operations; • delays in achieving our financial goals, strategy and digital transformation; • deterioration of the credit profile of The AES Corporation and/or its subsidiaries and difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; • delays or inability to complete asset sales on anticipated terms or to redeploy capital as set forth in our capital allocation plans; • increased volatility in foreign exchange and commodity markets; • deterioration of economic conditions, demand and other related factors resulting in impairments to long-lived assets; and • delay or inability in obtaining regulatory actions and outcomes that could be material to our business, including for recovery of COVID-19 related losses and the review and approval of our rates at our U.S. regulated utilities.
In addition to government regulators, many groups, including politicians, environmentalists, the investor community and other private parties have expressed increasing concern about GHG emissions. New regulation, such as the initiatives in Chile, Hawaii, and the Puerto Rico Energy Public Policy Act, may adversely affect our operations. See Item 7. — Management's Discussion and Analysis—Key Trends and Uncertainties—Decarbonization Initiatives .
In addition to government regulators, many groups, including politicians, environmentalists, the investor community and other private parties have expressed increasing concern about GHG emissions. New regulation, such as the initiatives in Chile and the Puerto Rico Energy Public Policy Act, may adversely affect our operations. See Item 7. — Management's Discussion and Analysis—Key Trends and Uncertainties—Decarbonization Initiatives .
These businesses face the risk of unexpected or adverse regulatory action which could have a material adverse effect on our results of operations, financial condition, and cash flows. See Item 1. — Business—US and Utilities SBU . Our businesses are subject to stringent environmental laws, rules and regulations.
These businesses face the risk of unexpected or adverse regulatory action which could have a material adverse effect on our results of operations, financial condition, and cash flows. See Item 1. — Business— Utilities SBU . Our businesses are subject to stringent environmental laws, rules and regulations.
Pursuant to EPAct 2005, the NERC has been certified by FERC as the ERO to develop mandatory and enforceable electric system reliability standards applicable throughout the U.S. to improve the overall reliability of the electric grid. These standards are subject to FERC review and approval.
Pursuant to EPAct 2005, the NERC has been certified by FERC as the Electric Reliability Organization ("ERO") to develop mandatory and enforceable electric system reliability standards applicable throughout the U.S. to improve the overall reliability of the electric grid. These standards are subject to FERC review and approval.
Furthermore, changes in laws or regulations or changes in the application or interpretation of regulatory provisions in jurisdictions where we operate, particularly at our utilities where electricity tariffs are subject to regulatory review or approval, could adversely affect our business, including: • changes in the determination, definition or classification of costs to be included as reimbursable or pass-through costs to be included in the rates we charge our customers, including but not limited to costs incurred to upgrade our power plants to comply with more stringent environmental regulations; • changes in the determination of an appropriate rate of return on invested capital or that a utility's operating income or the rates it charges customers are too high, resulting in a rate reduction or consumer rebates; • changes in the definition or determination of controllable or non-controllable costs; • changes in tax law; • changes in law or regulation that limit or otherwise affect the ability of our counterparties (including sovereign or private parties) to fulfill their obligations (including payment obligations) to us; 69 | 2022 Annual Report • changes in environmental law that impose additional costs or limit the dispatch of our generating facilities; • changes in the definition of events that qualify as changes in economic equilibrium; • changes in the timing of tariff increases; • other changes in the regulatory determinations under the relevant concessions; • other changes related to licensing or permitting which affect our ability to conduct business; or • other changes that impact the short- or long-term price-setting mechanism in the our markets.
Furthermore, changes in laws or regulations or changes in the application or interpretation of regulatory provisions in jurisdictions where we operate, particularly at our utilities where electricity tariffs are subject to regulatory review or approval, could adversely affect our business, including: • changes in the determination, definition or classification of costs to be included as reimbursable or pass-through costs to be included in the rates we charge our customers, including but not limited to costs incurred to upgrade our power plants to comply with more stringent environmental regulations; • changes in the determination of an appropriate rate of return on invested capital or that a utility's operating income or the rates it charges customers are too high, resulting in a rate reduction or consumer rebates; • changes in the definition or determination of controllable or non-controllable costs; • changes in tax law; • changes in law or regulation that limit or otherwise affect the ability of our counterparties (including sovereign or private parties) to fulfill their obligations (including payment obligations) to us; • changes in environmental law that impose additional costs or limit the dispatch of our generating facilities; • changes in the definition of events that qualify as changes in economic equilibrium; • changes in the timing of tariff increases; • other changes in the regulatory determinations under the relevant concessions; • other changes related to licensing or permitting which affect our ability to conduct business; or • other changes that impact the short- or long-term price-setting mechanism in the our markets.
While actual emissions may vary substantially; the projects under construction or development when completed will increase emissions of our portfolio and therefore could increase the risks associated with regulation of GHG emissions.
While actual emissions may vary substantially; certain projects under construction or development when completed will increase emissions of our portfolio and therefore could increase the risks associated with regulation of GHG emissions.
If these policies and incentives are changed or eliminated, or AES is unable to use them, there could be a material adverse impact on AES’ U.S. renewable growth opportunities, including fewer future PPAs or lower prices in future PPAs, decreased revenues, reduced economic returns on certain project company investments, increased financing costs, and/or difficulty obtaining financing. In addition, the U.S.
If these policies and incentives are changed or eliminated, or AES is unable to use them, there could be a material adverse impact on AES’ U.S. renewable growth opportunities, including fewer future PPAs or lower prices in future PPAs, decreased revenues, reduced economic returns on certain project company investments, increased financing costs, and/or difficulty obtaining financing.
Our ability to arrange for financing on either a recourse or non-recourse basis and the costs of such capital are dependent on numerous factors, some of which are beyond our control, including: general economic and capital market conditions; the availability of bank credit; the availability of tax equity partners; the financial condition, performance and prospects of AES as well as our competitors; and changes in tax and securities laws.
Our ability to arrange for financing on either a recourse or non-recourse basis and the costs of such capital are dependent on numerous factors, some of which are beyond our control, including: general economic and capital market conditions; the availability of bank credit; the availability of tax equity investors; the financial condition, performance and prospects of AES as well as our competitors; and changes in tax and securities laws.
As of December 31, 2022, Fluence continues to report that a material weakness in its internal control over revenue recognition and related inventory has not yet been remediated. Such material weakness can impact the reliability of the Fluence financial information that we may include as part of our financial information.
As of December 31, 2023, Fluence continues to report that a material weakness in its internal control over revenue recognition and related inventory has not yet been remediated. Such material weakness can impact the reliability of the Fluence financial information that we may include as part of our financial information.
Technological changes that could impact our businesses include: 65 | 2022 Annual Report • technologies that change the utilization of electric generation, transmission and distribution assets, including the expanded cost-effective utilization of distributed generation (e.g., rooftop solar and community solar projects), and energy storage technology; • advances in distributed and local power generation and energy storage that reduce demand for large-scale renewable electricity generation or impact our customers’ performance of long-term agreements; and • more cost-effective batteries for energy storage, advances in solar or wind technology, and advances in alternative fuels and other alternative energy sources.
Technological changes that could impact our businesses include: • technologies that change the utilization of electric generation, transmission and distribution assets, including the expanded cost-effective utilization of distributed generation (e.g., rooftop solar and community solar projects), and energy storage technology; • advances in distributed and local power generation and energy storage that reduce demand for large-scale renewable electricity generation or impact our customers’ performance of long-term agreements; and • more cost-effective batteries for energy storage, advances in solar or wind technology, and advances in alternative fuels and other alternative energy sources.
However, as a result of future mix of distributions, write-down of assets, dispositions and other changes to our financial position and results of operations, one or more of these subsidiaries, individually or in the aggregate, could fall within the applicable standard of materiality and thereby upon an acceleration of such subsidiary's debt, trigger an event of default and possible acceleration of Parent Company indebtedness.
However, as a result of future mix of 71 | 2023 Annual Report distributions, write-down of assets, dispositions and other changes to our financial position and results of operations, one or more of these subsidiaries, individually or in the aggregate, could fall within the applicable standard of materiality and thereby upon an acceleration of such subsidiary's debt, trigger an event of default and possible acceleration of Parent Company indebtedness.
Supreme Court ruled that such permitting would only be required if such sources also must obtain a new source review permit for increases in other regulated pollutants. For further discussion of the regulation of GHG emissions, see Item 1. — Business—Environmental and Land-Use Regulations—U.S. Environmental and Land-Use Legislation and Regulations—Greenhouse Gas Emissions above.
Supreme Court ruled that such permitting would only be required if such sources also must obtain a new source review permit for increases in other regulated pollutants. For further discussion of the regulation of GHG 68 | 2023 Annual Report emissions, see Item 1. — Business—Environmental and Land-Use Regulations—U.S. Environmental and Land-Use Legislation and Regulations—Greenhouse Gas Emissions above.
The open market wholesale prices for electricity can be volatile and generally reflect the variable cost of the source generation which could include renewable sources at near zero pricing or 60 | 2022 Annual Report thermal sources subject to fluctuating cost of fuels such as coal, natural gas or oil derivative fuels in addition to other factors described below.
The open market wholesale prices for electricity can be volatile and generally reflect the variable cost of the source generation which could include renewable sources at near zero pricing or thermal sources subject to fluctuating cost of fuels such as coal, natural gas or oil derivative fuels in addition to other factors described below.
The control and management of these risks depend upon adequate development and training of personnel and on operational procedures, preventative maintenance plans, and specific programs supported by quality control systems, which may not prevent the occurrence and impact of these risks. In addition, our battery storage operations also involve risks associated with lithium-ion batteries.
The control and management of these risks depend upon adequate development and training of personnel and on operational procedures, preventative maintenance plans, and specific programs supported by quality control systems, which may not prevent the occurrence and impact of these risks. 55 | 2023 Annual Report In addition, our battery storage operations also involve risks associated with lithium-ion batteries.
Any impairment of long-lived assets could have a material adverse effect on our business, financial condition, results of operations, and prospects. Risks associated with Governmental Regulation and Laws Our operations are subject to significant government regulation and could be adversely affected by changes in the law or regulatory schemes.
Any impairment of long-lived assets could have a material adverse effect on our business, financial condition, results of operations, and prospects. 65 | 2023 Annual Report Risks associated with Governmental Regulation and Laws Our operations are subject to significant government regulation and could be adversely affected by changes in the law or regulatory schemes.
Therefore, The AES Corporation's ability to make payments on its indebtedness and to fund its other obligations is dependent not only on the ability of its subsidiaries to generate cash, but also on the ability of the subsidiaries to distribute cash to it in the form of dividends, fees, interest, tax sharing payments, loans or otherwise.Our subsidiaries face various 74 | 2022 Annual Report restrictions in their ability to distribute cash.
Therefore, The AES Corporation's ability to make payments on its indebtedness and to fund its other obligations is dependent not only on the ability of its subsidiaries to generate cash, but also on the ability of the subsidiaries to distribute cash to it in the form of dividends, fees, interest, tax sharing payments, loans or otherwise.Our subsidiaries face various restrictions in their ability to distribute cash.
Customer growth and customer usage in our utilities businesses are affected by external factors, including mandated energy efficiency measures, demand side management requirements, and economic and demographic 68 | 2022 Annual Report conditions, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.
Customer growth and customer usage in our utilities businesses are affected by external factors, including mandated energy efficiency measures, demand side management requirements, and economic and demographic conditions, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.
For example, our subsidiaries may instruct contractors to begin the construction process or seek to procure equipment without having financing, a PPA or critical permits in place (or enter into a PPA, procurement agreement or other agreement without agreed financing). If the project does not proceed, our subsidiaries may retain certain liabilities.
For example, our subsidiaries may instruct contractors to begin the construction process or seek to procure equipment without having 59 | 2023 Annual Report financing, a PPA or critical permits in place (or enter into a PPA, procurement agreement or other agreement without agreed financing). If the project does not proceed, our subsidiaries may retain certain liabilities.
Typically, when winters are warmer than expected and summers are cooler than expected, demand for energy is lower, resulting in less demand for electricity than forecasted. Significant variations from normal weather where our businesses are located could have a material impact on our results of operations.
Generally, demand for electricity peaks in winter and summer. Typically, when winters are warmer than expected and summers are cooler than expected, demand for energy is lower, resulting in less demand for electricity than forecasted. Significant variations from normal weather where our businesses are located could have a material impact on our results of operations.
To the extent that resources are not available at planned levels, the financial results from these facilities may be less than expected. In addition, 66 | 2022 Annual Report we are dependent upon hydrological conditions prevailing from time to time in the broad geographic regions in which our hydroelectric generation facilities are located.
To the extent that resources are not available at planned levels, the financial results from these facilities may be less than expected. In addition, we are dependent upon hydrological conditions prevailing from time to time in the broad geographic regions in which our hydroelectric generation facilities are located.
The theft, damage or improper disclosure of sensitive electronic data collected by us can subject us to penalties for violation of applicable privacy laws, subject us to claims from third parties, require compliance with notification and monitoring regulations, and harm o ur reputation.
The theft, damage or improper disclosure of sensitive electronic data collected by us can subject us to penalties for 69 | 2023 Annual Report violation of applicable privacy laws, subject us to claims from third parties, require compliance with notification and monitoring regulations, and harm o ur reputation.
Power generation, distribution and transmission involves hazardous activities. We may become exposed to significant liabilities for which we may not have adequate risk mitigation and/or insurance coverage. Furthermore, 61 | 2022 Annual Report through AGIC, AES’ captive insurance company, we take certain insurance risk on our businesses.
Power generation, distribution and transmission involves hazardous activities. We may become exposed to significant liabilities for which we may not have adequate risk mitigation and/or insurance coverage. Furthermore, through AGIC, AES’ captive insurance company, we take certain insurance risk on our businesses.
However, we may not cover the entire exposure of our assets or positions to market price or interest rate volatility, and the coverage will vary over time. Furthermore, the risk management practices we have in place may not always perform as planned.
However, we may not cover the entire exposure of our 64 | 2023 Annual Report assets or positions to market price or interest rate volatility, and the coverage will vary over time. Furthermore, the risk management practices we have in place may not always perform as planned.
Risks Related to our Indebtedness and Financial Condition We have a significant amount of debt. As of December 31, 2022, we had approximately $23 billion of outstanding indebtedness on a consolidated basis. All outstanding borrowings under The AES Corporation's revolving credit facility are unsecured.
Risks Related to our Indebtedness and Financial Condition We have a significant amount of debt. As of December 31, 2023, we had approximately $27 billion of outstanding indebtedness on a consolidated basis. All outstanding borrowings under The AES Corporation's revolving credit facility are unsecured.
However, there can be no assurance that we will effectively pass such costs onto the contract counterparties or 72 | 2022 Annual Report customers, respectively, or that the cost and burden associated with any dispute over which party bears such costs would not be burdensome and costly.
However, there can be no assurance that we will effectively pass such costs onto the contract counterparties or customers, respectively, or that the cost and burden associated with any dispute over which party bears such costs would not be burdensome and costly.
In addition, any actual or perceived failure on the part of one of our equity affiliates could have a material adverse impact on our results of operations and prospects. 73 | 2022 Annual Report Tax legislation initiatives or challenges to our tax positions could adversely affect us.
In addition, any actual or perceived failure on the part of one of our equity affiliates could have a material adverse impact on our results of operations and prospects. Tax legislation initiatives or challenges to our tax positions could adversely affect us.
Certain of our subsidiaries are in default with respect to all or a portion of their outstanding indebtedness. The total debt classified as current in our Consolidated Balance Sheets related to such defaults was $177 million as of December 31, 2022.
Certain of our subsidiaries are in default with respect to all or a portion of their outstanding indebtedness. The total debt classified as current in our Consolidated Balance Sheets related to such defaults was $325 million as of December 31, 2023.
The EPA has brought suit against and obtained settlements with many companies for allegedly making major modifications to a coal-fired generating units without proper permit approvals and without installing best available control technology.
The EPA has brought suit against and obtained settlements with many companies for allegedly making major 67 | 2023 Annual Report modifications to a coal-fired generating units without proper permit approvals and without installing best available control technology.
We also may encounter challenges in integrating and realizing the expected benefits of these acquisitions as well as integration or other one-time costs that are greater 63 | 2022 Annual Report than expected.
We also may encounter challenges in integrating and realizing the expected benefits of these acquisitions as well as integration or other one-time costs that are greater than expected.
Similarly, FERC is encouraging the construction of new transmission 70 | 2022 Annual Report infrastructure in accordance with provisions of EPAct 2005. Although new transmission lines may increase market opportunities, they may also increase the competition in our existing markets.
FERC is also encouraging the construction of new transmission infrastructure in accordance with provisions of EPAct 2005. Although new transmission lines may increase market opportunities, they may also increase the competition in our existing markets.
The levelized cost of electricity from new solar and wind generation sources has decreased substantially in recent years as solar panel costs and wind turbine costs have declined, while wind and solar capacity factors have increased.
The levelized cost of electricity from new solar and wind generation sources has decreased substantially over the past decade as solar panel costs and wind turbine costs have declined, while wind and solar capacity factors have increased.
Counterparties to these agreements may breach or may be unable to perform their obligations, due to bankruptcy, insolvency, financial distress or other factors. Furthermore, in the event of a bankruptcy or similar insolvency-type proceeding, our counterparty can seek to reject our existing PPA under the U.S. Bankruptcy Code or similar bankruptcy laws, including those in Puerto Rico.
Counterparties to these agreements may breach or may be unable to 61 | 2023 Annual Report perform their obligations, due to bankruptcy, insolvency, financial distress or other factors. Furthermore, in the event of a bankruptcy or similar insolvency-type proceeding, our counterparty can seek to reject our existing PPA under the U.S.
On June 30, 2022, Supreme Court reversed the judgment of the D.C. Circuit Court and remanded for further proceedings consistent with its opinion. The opinion held that the “generation shifting” approach in the CPP exceeded the authority granted to EPA by Congress under Section 111(d) of the CAA.
Circuit Court and remanded for further proceedings consistent with its opinion, holding that the “generation shifting” approach in the CPP exceeded the authority granted to the EPA by Congress under Section 111(d) of the CAA. As a result of the June 30, 2022 Supreme Court decision, on October 27, 2022, the D.C.
In addition, if a joint venture partner becomes insolvent or bankrupt or is otherwise unable to meet its obligations to or share of liabilities for the joint venture, we may be responsible for meeting certain obligations of the joint ventures to the extent provided for in our governing documents or applicable law. 67 | 2022 Annual Report Further, we have a significant equity method investment in Fluence.
In addition, if a joint venture partner becomes insolvent or bankrupt or is otherwise unable to meet its obligations to or share of liabilities for the joint venture, we may be responsible for meeting certain obligations of the joint ventures to the extent provided for in our governing documents or applicable law.
As a publicly listed company, Fluence is governed by its own Board of Directors, whose members have fiduciary duties to the Fluence shareholders.
Further, we have a significant equity method investment in Fluence. As a publicly listed company, Fluence is governed by its own Board of Directors, whose members have fiduciary duties to the Fluence shareholders.
This trend of volatility in wholesale prices could continue and could have a material adverse impact on the financial performance of our existing generation assets to the extent they currently sell or buy power into the spot market to serve our contracts or will seek to sell power into the spot market once our contracts expire.
This trend of volatility in wholesale prices could continue and could have a material adverse impact on the financial performance of our existing generation assets to the extent they currently sell or buy power into the spot market to serve our contracts or will seek to sell power into the spot market once our contracts expire. 57 | 2023 Annual Report Adverse economic developments in China could have a negative impact on demand for electricity in many of our markets.
In addition, our cash flow may not be sufficient to repay our debt obligations at maturity and we may have to refinance such 75 | 2022 Annual Report obligations. There can be no assurance that we will be successful in obtaining such refinancing on acceptable terms.
In addition, our cash flow may not be sufficient to repay our debt obligations at maturity and we may have to refinance such obligations. There can be no assurance that we will be successful in obtaining such refinancing on acceptable terms. Our ability to grow our business depends on our ability to raise capital on favorable terms.
Adverse economic developments in China could have a negative impact on demand for electricity in many of our markets. The Chinese market has been driving global materials demand and pricing for commodities over the past decade. Many of these commodities are produced in our key electricity markets.
The Chinese market has been driving global materials demand and pricing for commodities over the past decade. Many of these commodities are produced in our key electricity markets.
As of December 31, 2022, we had approximately $23 billion of outstanding indebtedness on a consolidated basis, of which approximately $3.9 billion was recourse debt of the Parent Company and approximately $19.4 billion was non-recourse debt.
As of December 31, 2023, we had approximately $27 billion of outstanding indebtedness on a consolidated basis, of which approximately $4.5 billion was recourse debt of the Parent Company and approximately $22.1 billion was non-recourse debt.
Further, our operations may experience volatility in revenues and operating margin caused by regulatory and economic difficulties, political instability and currency devaluations, which may increase the uncertainty of cash flows from these businesses. Any of these factors could have a material, adverse effect on our business, results of operations and financial condition.
Further, our operations may experience volatility in revenues and operating margin caused by regulatory and economic difficulties, political instability and currency devaluations, which may increase the uncertainty of cash flows from these businesses.
Any failure of a supplier or customer to fulfill its contractual obligations could have a material adverse effect on our financial results. We may incur significant expenditures to adapt to our businesses to technological changes.
A counterparty's breach by of a PPA or other agreement could also result in the breach of other agreements, including the affected businesses debt agreements. Any failure of a supplier or customer to fulfill its contractual obligations could have a material adverse effect on our financial results. We may incur significant expenditures to adapt our businesses to technological changes.
Our ability to grow our business depends on our ability to raise capital on favorable terms. We rely on the capital markets as a source of liquidity for capital requirements not satisfied by operating cash flows.
We rely on the capital markets as a source of liquidity for capital requirements not satisfied by operating cash flows.
Our renewable energy projects and other initiatives face considerable uncertainties. Wind, solar, and energy storage projects are subject to substantial risks. Some of these business lines are dependent upon favorable regulatory incentives to support continued investment, and there is significant uncertainty about the extent to which such favorable regulatory incentives will be available in the future.
Some of these business lines are dependent upon favorable regulatory incentives to support continued investment, and there is significant uncertainty about the extent to which such favorable regulatory incentives will be available in the future.
The Company uses CO 2 emission estimation methodologies supported by "The Greenhouse Gas Protocol" reporting standard on GHG emissions. For existing power generation plants, CO 2 emissions data are either obtained directly from plant continuous emission monitoring systems or calculated from actual fuel heat inputs and fuel type CO 2 emission factors.
For existing power generation plants, CO 2 emissions data are either obtained directly from plant continuous emission monitoring systems or calculated from actual fuel heat inputs and fuel type CO 2 emission factors.
The AES Corporation is a holding company with no material assets other than the stock of its subsidiaries. Almost all of The AES Corporation's cash flow is generated by the operating activities of its subsidiaries.
The AES Corporation's ability to make payments on its outstanding indebtedness is dependent upon the receipt of funds from our subsidiaries. The AES Corporation is a holding company with no material assets other than the stock of its subsidiaries. Almost all of The AES Corporation's cash flow is generated by the operating activities of its subsidiaries.
Wholesale power prices may experience significant volatility in our markets which could impact our operations and opportunities for future growth. The wholesale prices offered for electricity have been volatile in the markets in which we operate due to a variety of factors, including the increased penetration of renewable generation resources, low-priced natural gas and demand side management.
The wholesale prices offered for electricity have been volatile in the markets in which we operate due to a variety of factors, including the increased penetration of renewable generation and energy storage resources, low-priced natural gas, demand side management, new regulations and market rules.
We cannot guarantee the extent to which our security measures will prevent future cyber-attacks and security breaches or that our insurance coverage will adequately cover any losses we may experience. Further, we do not control certain of joint ventures or our equity method investments and cannot guarantee that their efforts will be effective.
We cannot guarantee the extent to which our security measures will prevent future cyber-attacks and security breaches or that our insurance coverage will adequately cover any losses we may experience.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects. We do not control certain aspects of our joint ventures or our equity method investments. We have invested in some joint ventures in which our subsidiaries share operational, management, investment and/or other control rights with our joint venture partners.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects. 63 | 2023 Annual Report We do not control certain aspects of our joint ventures or our equity method investments.
Increased competition may have the effect of lowering our operating margins. Among other steps, FERC has encouraged RTOs and ISOs to develop demand response bidding programs as a mechanism for responding to peak electric demand. These programs may reduce the value of generation assets.
Among other steps, FERC has encouraged RTOs and ISOs to develop demand response bidding programs as a mechanism for responding to peak electric demand and has also encouraged the integration of distributed energy resources. These programs may reduce the value of generation assets, particularly utility-scale projects.
If the final determinations result in additional taxes, tariffs, duties, or other assessments on renewable energy or the equipment necessary to generate or deliver it, such as antidumping and countervailing duty rates, such developments could impede the realization of our U.S. renewables strategy by resulting in, among other items, lack of a satisfactory market for the development and/or financing of our U.S. renewable energy projects, abandoning the development of certain U.S. renewable energy projects, a loss of our investments in the projects, and/or reduced project returns.
Any such developments could impede the realization of our U.S. renewables strategy by resulting in, among other items, lack of a satisfactory market for the development and/or financing of our U.S. renewable energy projects, abandoning the development of certain U.S. renewable energy projects, a loss of our investments in the projects, and/or reduced project returns.
While we also consider possible variations in normal weather patterns and potential impacts on our facilities and our businesses, there can be no assurance that such planning can prevent these impacts, which can adversely affect our business. Generally, demand for electricity peaks in winter and summer.
Our businesses forecast electric sales based on best available information and expectations for weather, which represents a long-term historical average. While we also consider possible variations in normal weather patterns and potential impacts on our facilities and our businesses, there can be no assurance that such planning can prevent these impacts, which can adversely affect our business.
There can be no assurance that we would be able to recover all or any increased environmental costs from our customers or that our business, financial condition, including recorded asset values or results of operations, would not be materially and adversely affected. 71 | 2022 Annual Report Concerns about GHG emissions and the potential risks associated with climate change have led to increased regulation and other actions that could impact our businesses.
There can be no assurance that we would be able to recover all or any increased environmental costs from our customers or that our business, financial condition, including recorded asset values or results of operations, would not be materially and adversely affected.
While more recent design developments for our storage projects seek to minimize the impact of such events, these events are inherent risks of our battery storage operations. 59 | 2022 Annual Report The hazards described above, along with other safety hazards associated with our operations, can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment, contamination of, or damage to, the environment and suspension of operations.
The hazards described above, along with other safety hazards associated with our operations, can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment, contamination of, or damage to, the environment and suspension of operations.
Further, our actual cash requirements may be greater than expected and our cash flows may not be sufficient to repay all of the outstanding debt as it becomes due. In that event, we may not be able to borrow money, sell assets, raise equity or otherwise raise funds on acceptable terms to refinance our debt as it becomes due.
Further, our actual cash requirements may be greater than expected and our cash flows may not be sufficient to repay all of the outstanding debt as it becomes due.
Our businesses may incur substantial costs and liabilities and be exposed to price volatility as a result of risks associated with the wholesale electricity markets.
Any of these factors could have a material, adverse effect on our business, results of operations and financial condition. 56 | 2023 Annual Report Our businesses may incur substantial costs and liabilities and be exposed to price volatility as a result of risks associated with the wholesale electricity markets.
As a result, FERC is authorized to assess a maximum penalty authority established by statute and such penalty authority has been and will continue to be adjusted periodically to account for inflation. With this expanded enforcement authority, violations of the FPA and FERC's regulations could potentially have more serious consequences than in the past.
The FPA also provides for the assessment of criminal fines and imprisonment for violations under the FPA. This penalty authority was enhanced in EPAct 2005. As a result, FERC is authorized to assess a maximum penalty authority established by statute and such penalty authority has been and will continue to be adjusted periodically to account for inflation.
On rare occasions, lithium-ion batteries can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion batteries.
On rare occasions, lithium-ion batteries can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion batteries. While more recent design developments for our storage projects seek to minimize the impact of such events, these events are inherent risks of our battery storage operations.
PUHCA 2005 eliminated many of the restrictions that had been in place under the U.S. Public Utility Holding Company Act of 1935, while continuing to provide FERC and state utility commissions with enhanced access to the books and records of certain utility holding companies. PUHCA 2005 also creates additional potential challenges and opportunities.
Public Utility Holding Company Act of 1935, while continuing to provide FERC and state utility commissions with enhanced access to the books and records of certain utility holding companies. PUHCA 2005 also creates additional potential challenges and opportunities. By removing some barriers to mergers and other potential combinations, the creation of large, geographically dispersed utility holding companies is more likely.
We may not be able to enter into replacement agreements on terms as favorable as our existing agreements, and may have to sell power at market prices. A counterparty's breach by of a PPA or other agreement could also result in the breach of other agreements, including the affected businesses debt agreements.
Bankruptcy Code or similar bankruptcy laws, including those in Puerto Rico. We may not be able to enter into replacement agreements on terms as favorable as our existing agreements, and may have to sell power at market prices.
Some of our U.S. businesses are subject to the provisions of various laws and regulations administered by FERC, NERC and by state utility commissions that can have a material effect on our operations. The AES Corporation is a registered electric holding company under the PUHCA 2005 as enacted as part of the EPAct 2005.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects. 66 | 2023 Annual Report Some of our U.S. businesses are subject to the provisions of various laws and regulations administered by FERC, NERC and by state utility commissions that can have a material effect on our operations.
The direct and indirect effects of such media attention, and the demands of responding to and addressing it, may divert management time and attention. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects.
The direct and indirect effects of such media attention, and the demands of responding to and addressing it, may divert management time and attention.
FERC has civil penalty authority over violations of any provision of Part II of the FPA, which concerns wholesale generation or transmission, as well as any rule or order issued thereunder. The FPA also provides for the assessment of criminal fines and imprisonment for violations under the FPA. This penalty authority was enhanced in EPAct 2005.
These changes could result in lower resource adequacy or capacity attribute revenues for our renewable generating facilities in these regions. FERC has civil penalty authority over violations of any provision of Part II of the FPA, which concerns wholesale generation or transmission, as well as any rule or order issued thereunder.
Objections of or challenges by local communities or interest groups may delay or impede permitting for our development projects. In certain cases, our subsidiaries may enter into obligations in the development process even though they have not yet secured financing, PPAs, or other important elements for a successful project.
There are also severe bottlenecks in the transmission system and the build-out of renewables to meet policy goals for renewable deployment will require substantial upgrades to the transmission network. In certain cases, our subsidiaries may enter into obligations in the development process even though they have not yet secured financing, PPAs, or other important elements for a successful project.
International, federal and various regional and state authorities regulate GHG emissions and have created financial incentives to reduce them. In 2022, the Company's subsidiaries operated businesses that had total CO 2 emissions of approximately 40 million metric tonnes, approximately 15 million of which were emitted by our U.S. businesses (both figures are ownership adjusted).
In 2023, the Company's subsidiaries operated businesses that had total CO 2 emissions of approximately 34 million metric tonnes, approximately 11 million of which were emitted by our U.S. businesses (both figures are ownership adjusted). The Company uses CO 2 emission estimation methodologies supported by "The Greenhouse Gas Protocol" reporting standard on GHG emissions.
Our generation businesses cannot always obtain government guarantees and if they do, the government may not have an investment grade credit rating. We have also located our plants in different geographic areas in order to mitigate the effects of regional economic downturns; however, there can be no assurance that our efforts will be effective.
We have also located our plants in different geographic areas in order to mitigate the effects of regional economic downturns; however, there can be no assurance that our efforts will be effective. 58 | 2023 Annual Report Our renewable energy projects and other initiatives face considerable uncertainties. Wind, solar, hydrogen, and energy storage projects are subject to substantial risks.
The adoption requires EU Member States to transpose the Directive into their respective national laws by December 31, 2023, for the rules to come into effect as of January 1, 2024. We will continue to monitor issuance of draft legislation in Bulgaria and other relevant EU Member States. The Impact to the Company remains unknown but may be material.
During 2023, the Netherlands, Bulgaria, and Vietnam adopted legislation to implement Pillar 2 effective as of January 1, 2024. We will continue to monitor the issuance of draft legislation in other non-EU countries where the Company operates that are considering Pillar 2 amendments. The impact to the Company remains unknown but may be material.
Further, China's Zero COVID strategy contributed to a significant decrease in GDP growth in 2022. The impact of the recent loosening of that strategy is uncertain at this time.
Further, China's Zero COVID strategy contributed to a significant decrease in GDP growth in 2022 and its GDP growth in 2023 was below growth rates in the years preceding the pandemic.
In addition, our ability to refinance existing or future indebtedness will depend on the capital markets and our financial condition at that time. Any refinancing of our debt could result in higher interest rates or more onerous covenants that restrict our business operations.
Any refinancing of our debt could result in higher interest rates or more onerous covenants that restrict our business operations. See Note 11 — Debt included in Item 8. — Financial Statements and Supplementary Data for a schedule of our debt maturities.
The impact of the results of further proceedings and potential future greenhouse gas emissions regulations remains uncertain, but it could be material. The impact of the results of such litigation and potential future greenhouse gas emissions regulations remains uncertain, but it could be material.
Depending on various EGU-specific factors, the bases of proposed emissions guidelines range from routine methods of operation to carbon capture and sequestration or co-firing low-GHG hydrogen starting in the 2030s. The impact of the results of further proceedings and potential future greenhouse gas emissions regulations remains uncertain, but it could be material.
By removing some barriers to mergers and other potential combinations, the creation of large, geographically dispersed utility holding companies is more likely. These entities may have enhanced financial strength and therefore an increased ability to compete with us in the U.S.
These entities may have enhanced financial strength and therefore an increased ability to compete with us in the U.S. FERC strongly encourages competition in wholesale electric markets. Increased market participation may have the effect of lowering our operating margins.
As a result of the June 30, 2022 Supreme Court decision, on October 27, 2022, the D.C. Circuit recalled its March 5, 2021 partial mandate and issued a new partial mandate holding pending challenges to the ACE Rule in abeyance while EPA develops a replacement rule.
Circuit issued a partial mandate, holding pending challenges to the ACE Rule in abeyance.
Removed
A lso, in many markets, new PPAs have been awarded for renewable generation at prices significantly lower than those awarded just a few years ago.
Added
Wholesale power prices may experience significant volatility in our markets which could impact our operations and opportunities for future growth.
Removed
Department of Commerce’s investigation into the antidumping and countervailing duties circumvention claim on solar cells and panels supplied from Malaysia, Vietnam, Thailand, and Cambodia has reached a preliminary determination that circumvention occurred.
Added
Changing weather conditions can also directly impact electricity supply, demand, and generations sources, leading to price volatility .
Removed
Additionally, Commerce issued a preliminary determination that circumvention would not be deemed to occur for any solar cells and panels imported from the four countries if the wafers were manufactured outside of China or if no more than two out of six specifically 62 | 2022 Annual Report identified components were produced in China.
Added
Our generation businesses cannot always obtain government guarantees and if they do, the government may not have an investment grade credit rating.
Removed
These preliminary determinations could be modified and final determinations from Commerce are expected in May 2023.
Added
In addition,new tariffs, duties or other assessments could be imposed on the imports of solar cells, modules, batteries or other equipment utilized in our renewable energy projects.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIf the third-party appeal is successful or if the SMA determines there is an unsatisfactory execution of this compliance program, fines are possible. AES Andes believes that it has meritorious defenses to the third-party challenge and will defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.
Biggest changeAES Andes plans to vigorously defend itself through the administrative process, but there are no guarantees that it will be successful. Fines are possible if AES Andes is unsuccessful in its defense of the April 2023 resolution and/or if the SMA determines there is an unsatisfactory execution of the Compliance Program approved in connection with the October 2019 sanctioning process.
The CCC has asserted that AES Redondo Beach has improperly installed and operated water pumps affecting the alleged wetlands in violation of the California Coastal Act and Redondo Beach Local Coastal Program. Potential outcomes of the CCC determination could include an order requiring AES Redondo Beach to perform a restoration and/or pay fines or penalties.
The CCC has asserted that AES Redondo Beach has improperly installed and operated water pumps affecting the alleged wetlands in violation of the California Coastal Act and Redondo Beach Local Coastal Program ("LCP"). Potential outcomes of the CCC determination could include an order requiring AES Redondo Beach to perform a restoration and/or pay fines or penalties.
District Court for the Southern District of Indiana on March 23, 2021, and includes, among other items, the following requirements: annual caps on NO x and SO 2 emissions and more stringent emissions limits than AES Indiana's current Title V air permit; payment of civil penalties totaling $1.5 million; a $5 million environmental mitigation project consisting of the construction and operation of a new, non-emitting source of generation at the site; expenditure of $0.3 million on a state-only environmentally beneficial project to preserve 77 | 2022 Annual Report local, ecologically-significant lands; and retirement of Units 1 and 2 prior to July 1, 2023.
District Court for the Southern District of Indiana on March 23, 2021, and includes, among other items, the following requirements: annual caps on NO x and SO 2 emissions and more stringent emissions limits than AES Indiana's current Title V air permit; payment of civil penalties totaling $1.5 million; a $5 million environmental mitigation project consisting of the construction and operation of a new, non-emitting source of generation at the site; expenditure of $0.3 million on a state-only environmentally beneficial project to preserve local, ecologically-significant lands; and retirement of Units 1 and 2 prior to July 1, 2023.
It is reasonably possible, however, that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material, but cannot be estimated as of December 31, 2022.
It is reasonably possible, however, that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material, but cannot be estimated as of December 31, 2023.
The case is now awaiting judgment. The removal and remediation costs are estimated to be approximately R$15 million to R$60 million ($3 million to $11 million), and there could be additional costs which cannot be estimated at this time.
The case is now awaiting judgment. The removal and remediation costs are estimated to be approximately R$15 million to R$60 million ($3 million to $12 million), and there could be additional costs which cannot be estimated at this time.
The lawsuit purports to be brought on behalf of over 425 Dominican claimants, living and deceased, and appears to seek relief relating to CCRs that were delivered to the Dominican Republic in 2003 and 2004. The lawsuit generally alleges that the CCRs caused personal injuries and deaths and demands over $600 million in alleged damages.
The lawsuit purports to be brought on behalf of over 425 Dominican claimants, living and deceased, and appears to seek relief 76 | 2023 Annual Report relating to CCRs that were delivered to the Dominican Republic in 2003 and 2004. The lawsuit generally alleges that the CCRs caused personal injuries and deaths and demands over $600 million in alleged damages.
If a compliance program is not agreed or executed to the satisfaction of the SMA , fines, revocation of the facility’s RCA environmental permit approved by the SMA, or closure are possible outcomes for such alleged serious violations under applicable regulations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 80 | 2022 Annual Report PART II
If a compliance program is not approved by or executed to the satisfaction of the SMA, fines, revocation of the facility’s RCA environmental permit approved by the SMA, or closure are possible outcomes for such alleged serious violations under applicable regulations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 77 | 2023 Annual Report PART II
GRIDCO appeared to be seeking approximately $189 million in damages, plus 76 | 2022 Annual Report undisclosed penalties and interest, but a detailed alleged damage analysis was not filed by GRIDCO. The Company counterclaimed against GRIDCO for damages.
GRIDCO appeared to be seeking approximately $189 million in damages, plus undisclosed penalties and interest, but a detailed alleged damage analysis was not filed by GRIDCO. The Company counterclaimed against GRIDCO for damages.
In June 2016, the Company sold AES Sul to CPFL Energia S.A. and as part of the sale, AES Guaiba, a holding company of AES Sul, retained the potential liability relating to this matter.
In June 2016, the Company sold AES Sul to CPFL Energia S.A. and as part of the 74 | 2023 Annual Report sale, AES Guaiba, a holding company of AES Sul, retained the potential liability relating to this matter.
The lawsuit does not identify or provide any supporting information concerning the alleged injuries of the claimants individually. Nor does the lawsuit provide any information supporting the demand for damages or explaining how the quantum was derived.
The lawsuit does not identify, or provide any supporting information concerning, the alleged injuries of the claimants individually, nor does the lawsuit provide any 75 | 2023 Annual Report information supporting the demand for damages or explaining how the quantum was derived.
On December 30, 2021, the Compliance Program was approved by the SMA. However an ex officio action was brought by the SMA due to alleged exceedances of generation limits, which would require the Company to reduce SO2, NOx and PM emissions in order to achieve the emissions offset established in the Compliance Program.
On December 30, 2021, the Compliance Program was approved by the SMA. However an ex officio action was brought by the SMA due to alleged exceedances of generation limits, which would require the Company to reduce SO 2 , NO X and PM emissions in order to achieve the emissions offset established in the Compliance Program.
Preliminary hearings have taken place and are ongoing. The relevant AES companies believe that they have meritorious defenses to the claims asserted against them and will defend themselves vigorously in this proceeding; however, there can be no assurances that they will be successful in their efforts.
The AES Defendants believe that they have meritorious defenses to the claims asserted against them and will defend themselves vigorously in this proceeding; however, there can be no assurances that they will be successful in their efforts.
The NOV also directed AES to submit technical analysis regarding additional water pumps located within onsite electrical vaults and a CDP application for their continued operation. AES has responded to the CCC, providing the requested analysis and seeking further discussion with the agency regarding the CDP.
The NOV also directed AES to submit technical analysis regarding additional water pumps located within onsite electrical vaults and, if necessary, a CDP application for their continued operation. With respect to the vault pumps, AES provided the CCC with the requested analysis, and the CCC has not required further action.
In February 2019, a separate lawsuit was filed in Dominican Republic civil court against the Company, AES Puerto Rico, two other AES affiliates, and an unaffiliated company and its principal.
In February 2019, a separate lawsuit was filed in Dominican Republic civil court against the Company, AES Puerto Rico, two other AES affiliates, and an unaffiliated company and its principal. Subsequently, the claimants withdrew the lawsuit with respect to AES Puerto Rico. The lawsuit remains pending against the other AES defendants (“AES Defendants”) and the unaffiliated defendants.
On May 12, 2021, the Mexican Federal Attorney for Environmental Protection (the “Authority”) initiated an environmental audit at the Termoelectrica del Golfo (“TEG”) and Termoelectrica del Peñoles (“TEP”) thermal generating facilities. On July 15, 2022, TEG was notified of the resolution issued by the Authority, which alleges breaches of air emission regulations, including failure to submit reports.
On May 12, 2021, the Mexican Federal Attorney for Environmental Protection (the “Authority”) initiated an environmental audit at the TEP thermal generating facility. On January 20, 2023 TEP was notified of the resolution issued by the Authority, which alleges breaches of air emission regulations, including the failure to submit reports.
CFE makes allegations that AES Mérida III is in breach of its obligations under a power and capacity purchase agreement (“Contract”) between the two parties, which allegations related to CFE’s own failure to provide fuel within the specifications of the Contract.
In March 2020, Mexico’s Comisión Federal de Electricidad (“CFE”) served an arbitration demand upon AES Mérida III. CFE made allegations that AES Mérida III was in breach of its obligations under a power and capacity purchase agreement (“Contract”) between the two parties, which allegations related to CFE’s own failure to provide fuel within the specifications of the Contract.
AES Mérida believes that it has meritorious defenses and claims and will assert them vigorously in this dispute; however, there can be no assurances that it will be successful in its efforts.
There are ongoing proceedings in the Mexican courts concerning AES Mérida's attempt to enforce the Award and CFE's attempt to challenge the Award. AES Mérida believes that it has meritorious claims and defenses and will assert them vigorously in this dispute; however, there can be no assurances that it will be successful in its efforts.
CFE seeks to recover approximately $200 million in payments made to AES Mérida under the Contract as well as approximately $480 million in alleged damages for having to acquire 78 | 2022 Annual Report power from alternative sources in the Yucatan Peninsula.
CFE sought to recover approximately $200 million in payments made to AES Mérida under the Contract as well as approximately $480 million in alleged damages for having to acquire power from alternative sources in the Yucatan Peninsula. AES Mérida filed an answer denying liability to CFE and asserted a counterclaim for damages due to CFE’s breach of its obligations.
On May 26, 2020, CCC staff sent AES a NOV directing AES to submit a Coastal Development Permit (“CDP”) application for the removal of the water pumps within the alleged wetlands. AES has submitted the CDP to the permitting authority, the City of Redondo Beach (“the City”), with respect to AES’ plans to disable or remove the pumps.
On May 26, 2020, CCC staff sent AES a NOV directing AES to discontinue any operation of the water pumps in the alleged wetlands and to submit a Coastal Development Permit (“CDP”) application for the removal of the water pumps within the alleged wetlands.
In November 2022, the arbitration Tribunal issued its decision in the case, rejecting CFE’s claims for damages and granting AES Mérida a net amount of damages on AES Mérida’s counterclaims. It is unclear whether CFE will comply with the decision or will attempt to challenge it.
The evidentiary hearing took place in November 2021. Closing arguments were heard in May 2022. In November 2022, the arbitration Tribunal issued its decision in the case, rejecting CFE’s claims for damages and granting AES Mérida a net amount of damages on AES Mérida’s counterclaims ("Award").
The lawsuit does not identify, or provide any supporting information concerning, the alleged injuries of the claimants individually, nor does the lawsuit provide any information supporting the demand for damages or explaining how the quantum was derived. In August 2020, at the request of the relevant AES companies, the case was transferred to a different civil court.
The lawsuit generally alleges that the CCRs caused personal injuries and deaths and demands $476 million in alleged damages. The lawsuit does not identify, or provide any supporting information concerning, the alleged injuries of the claimants individually. Nor does the lawsuit provide any information supporting the demand for damages or explaining how the quantum was derived.
The lawsuit purports to be brought on behalf of over 100 Dominican claimants, living and deceased, and appears to seek relief relating to CCRs that were delivered to the Dominican Republic in 2004. The lawsuit generally alleges that the CCRs caused personal injuries and deaths and demands $476 million in alleged damages.
In December 2018, a lawsuit was filed in Dominican Republic civil court against the Company, AES Puerto Rico, and three other AES affiliates. The lawsuit purports to be brought on behalf of over 100 Dominican claimants, living and deceased, and appears to seek relief relating to CCRs that were delivered to the Dominican Republic in 2004.
On October 14, 2020, the City deemed the CDP application to be complete and indicated a public hearing will be required, at which time AES must present additional information and analysis on the pumps within the alleged wetlands and the onsite electrical vaults.
On October 14, 2020, the City deemed the CDP application to be complete and indicated a public hearing will be required. AES submitted all required information and waited for the City to continue processing the application. In December 2023, the City indicated it would continue processing the CDP application.
The Alto Maipo project intends to submit a compliance program for consideration by the SMA. The costs of any such compliance program are uncertain.
In December 2023, Alto Maipo submitted responses to the opponents' latest observations. Review by the SMA is still pending. The costs of any such compliance program are uncertain.
Removed
If AES Indiana does not meet the retirement obligation, it must install a Selective Non-Catalytic Reduction System ("SNCR") on Unit 4. In October 2017, the Maritime Prosecution Office from Valparaíso issued a ruling alleging responsibility by AES Andes for the presence of coal waste on Ventanas beach, and proposed a fine before the Maritime Governor, of approximately $395,000.
Added
Pursuant to SEC amendments Item 103 of SEC Regulation S-K, AES’ policy is to disclose environmental legal proceedings to which a governmental authority is a party if such proceedings are reasonably expected to result in monetary sanctions of greater than or equal to $1 million.
Removed
AES Andes submitted its statement of defense, denying the allegations. In May 2021, AES Andes was notified of an amended Opinion of the Maritime Prosecution Office which extends the alleged liability to a third party and reduces the proposed fine to AES Andes to approximately $372,000.
Added
With respect to the pumps in the alleged wetlands, AES locked out those pumps to prevent further operation and submitted the CDP to the permitting authority, the City of Redondo Beach (the "City"), with respect to AES' plans to disable or remove the pumps.
Removed
On August 18, the Maritime Governor issued a resolution affirming the proposed fine, and on September 8, AES Andes filed an administrative action with the Maritime Governor requesting reconsideration of the fine. On December 28, 2021 the resolution rejecting the reinstatement appeal was notified and on January 17, 2022 AES Andes filed an appeal against that ruling.
Added
AES will vigorously defend its interests with regard to the NOV, but we cannot predict the outcome of the matter at this time. However, settlements and litigated outcomes of Coastal Act and LCP claims alleged against other companies have required them to pay significant civil penalties and undertake remedial measures.
Removed
In April 2022, Puerto Ventanas requested that the Maritime Authority join this proceeding with a parallel proceeding; however, the request was rejected. In May 2022, the General Director of the Maritime Territory and Merchant Marine of the Chilean Navy rejected AES Andes’ appeal and imposed a fine of $341,363. AES Andes will continue with administrative appeals.
Added
In August 2020, at the request of the relevant AES companies, the case was transferred to a different civil court ("Civil Court"). Preliminary hearings have taken place. The parties are awaiting the Civil Court's ruling on the AES Defendants' motions to dismiss the lawsuit.
Removed
AES Andes believes that it has meritorious defenses to the allegations; however, there are no assurances it will be successful. In December 2018, a lawsuit was filed in Dominican Republic civil court against the Company, AES Puerto Rico, and three other AES affiliates.
Added
The cost of proposed Compliance Program is approximately $10.8 million USD. On April 21, 2023, the SMA notified AES Andes of a resolution alleging an additional “serious” non-compliance of the Ventanas Complex failing to reduce emissions during episodes of poor air quality. On May 24, 2023, AES Andes submitted disclaimers to the SMA in response to this resolution.
Removed
Fines are possible if the SMA determines there is an unsatisfactory execution of the Compliance Program. The cost of proposed Compliance Program is approximately $10.8 million. In March 2020, Mexico’s Comisión Federal de Electricidad (“CFE”) served an arbitration demand upon AES Mérida III.
Added
The resolution imposes a fine of $27,615,140 pesos (approximately USD $1.6 million). On March 3, 2023, the facility filed a nullity judgment to challenge such resolution, which has been admitted by the local judge with an injunction granted against execution of the proposed fine during the course of the underlying proceedings.
Removed
AES Mérida has filed an answer denying liability to CFE and asserting a counterclaim for damages due to CFE’s breach of its obligations. The parties submitted their respective initial briefs and supporting evidence in December 2020. After additional briefing, the evidentiary hearing took place in November 2021. Closing arguments were heard in May 2022.
Added
However, the local tax authority rejected receiving the bond that is required to guarantee the injunction, and as a result, on September 18, 2023 TEP filed a complaint seeking to compel the tax authority to accept the bond and recognize the validity of the injunction.
Removed
The resolution imposes a fine of $8,467,360 pesos (approximately USD $400,000). The facility filed a nullity judgment to challenge the resolution, and on September 8, 2022, a provisional injunction was granted by the Tribunal, subject to TEG’s presentation of a warranty, which could include a corporate guaranty or bail.
Added
The Specialized Chamber has not issued a response to the complaint, and therefore on January 12, 2024, TEP filed a request for the Specialized Chamber to rule on the admission of the complaint.
Removed
The provisional injunction temporarily suspends the obligation to pay the fine while the Tribunal considers a definitive injunction, and potentially, a sentence dismissing the fine. On December 2, 2022, TEG presented a bail as guarantee for the injunction, which was rejected by the local tax authority. TEG challenged the tax authority's denial through an amparo claim on January 10, 2023.
Added
On February 2, 2024, TEP filed an amparo lawsuit on the basis that no resolution has been issued regarding TEP's May 2023 filing with the Chamber to inform if the Authority had submitted its response to the nullity lawsuit, and if not, to declare that the Authority's right precluded.
Removed
No resolution for TEP’s audit has been issued, and on September 9, 2022, TEP filed an amparo claim challenging the inaction of the Authority on the environmental audit. The amparo claim was admitted on October 17, 2022.
Added
On March 7, 2023, the Third Environmental Court rejected the third-party judicial action against the Compliance Program. The deadline to appeal the decision has passed and no appeals were submitted. The Company has fulfilled the required actions of the Compliance Program; however, opponents to project have submitted claims before the SMA challenging the fulfillment of the Compliance Program.
Removed
In September 2022, the SMA initiated sanctioning proceedings against the Cochrane Power Station on four alleged charges, including one instance of noncompliance categorized as “serious” with the Environmental Qualification Resolution (RCA). The allegations included structural and monitoring deficiencies, as well as an unauthorized underwater outfall discharging from the facility.
Added
If the SMA determines there is an unsatisfactory execution of the compliance program, fines are possible. In June 2020, the Energy Regulatory Commission of Mexico passed resolution RES/894/2020 ("Resolution 894"), which attempts to increase the wheeling tariffs that are paid by TEG and TEP to CFE.
Removed
On December 12, 2022, AES Andes submitted a 79 | 2022 Annual Report proposed compliance program to the SMA, with an estimated cost of approximately $340,000, which is currently under review. Fines are possible if the SMA does not approve the compliance program or if the SMA determines that the compliance program was not executed to its satisfaction.
Added
The increase for the relevant period (July 2020 through March 2024) would have been over $90 million according to current estimates. In October 2022, TEG and TEP initiated a challenge of the constitutionality of the resolution.
Added
In February 2024, the relevant First Collegiate Court of Mexico ruled in favor of TEG and TEP and determined that they do not need to pay increased wheeling tariffs under Resolution 894.
Added
If TEG and TEP are ever required to pay increased wheeling tariffs in the future, they will seek to enforce their respective contractual rights to pass-through the tariff increases to their respective offtakers.
Added
On February 16, 2023, the Alto Maipo project submitted a compliance program to which the SMA provided observations. On June 6, 2023, Alto Maipo responded to the SMA's observations by submitting a revised compliance program, which is currently under consideration by the SMA.
Added
In late June and early July 2023, third-party opponents submitted observations to the compliance program, claiming that the proposal to address the intake works charges is inadequate. Alto Maipo completed its submission of responses to these third-party observations in August 2023, and subsequently, new, additional observations were submitted by opponents to the project.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

3 edited+0 added−0 removed0 unchanged
Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 124 Consolidated Balance Sheets 128 Consolidated Statements of Operations 129 Consolidated Statements of Comprehensive Income (Loss) 130 Consolidated Statements of Changes in Equity 131 Consolidated Statements of Cash Flows 132 Note 1 - General and Summary of Significant Accounting Policies 133 Note 2 - Inventory 145 Note 3 - Property, Plant and Equipment 145 Note 4 - Asset Retirement Obligation s 146 Note 5 - Fair Value 147 Note 6 - Derivative Instruments and Hedging Activities 152 Note 7 - Financing Receivables 153 Note 8 - Investments in and Advances to Affiliates 154 Note 9 - Goodwill and Other Intangible Assets 156 Note 10 - Regulatory Assets and Liabilities 158 Note 11 - Debt 159 Note 12 - Commitments 164 Note 13 - Contingencies 164 Note 14 - Leases 165 Note 15 - Benefit Plans 167 Note 16 - Redeemable Stock of Subsidiaries 171 Note 17 - Equity 172 Note 18 - Segments and Geographic Information 177 Note 19 - Share-Based Compensation 179 Note 20 - Revenue 181 Note 21 - Other Income and Expense 182 Note 22 - Asset Impairment Expense 183 Note 23 - Income Taxes 185 Note 24 - Held-for-Sale and Dispositions 189 Note 25 - Acquisitions 190 Note 26 - Earnings Per Share 193 Note 27 - Risks and Uncertainties 194 Note 28 - Related Party Transactions 196 Note 29 - Selected Quarterly Financial Data (Unaudited) 197 Note 30 - Subsequent Events 198
Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 114 Consolidated Balance Sheets 119 Consolidated Statements of Operations 120 Consolidated Statements of Comprehensive Income (Loss) 121 Consolidated Statements of Changes in Equity 122 Consolidated Statements of Cash Flows 123 Note 1 - General and Summary of Significant Accounting Policies 125 Note 2 - Inventory 137 Note 3 - Property, Plant and Equipment 137 Note 4 - Asset Retirement Obligation s 138 Note 5 - Fair Value 139 Note 6 - Derivative Instruments and Hedging Activities 145 Note 7 - Financing Receivables 146 Note 8 - Investments in and Advances to Affiliates 147 Note 9 - Goodwill and Other Intangible Assets 149 Note 10 - Regulatory Assets and Liabilities 151 Note 11 - Debt 152 Note 12 - Commitments 156 Note 13 - Contingencies 156 Note 14 - Leases 157 Note 15 - Benefit Plans 159 Note 16 - Redeemable Stock of Subsidiaries 163 Note 17 - Equity 164 Note 18 - Segments and Geographic Information 169 Note 19 - Share-Based Compensation 172 Note 20 - Revenue 173 Note 21 - Other Income and Expense 174 Note 22 - Asset Impairment Expense 175 Note 23 - Income Taxes 178 Note 24 - Held-for-Sale and Dispositions 182 Note 25 - Acquisitions 183 Note 26 - Earnings Per Share 187 Note 27 - Risks and Uncertainties 188 Note 28 - Related Party Transactions 190 Note 29 - Subsequent Events 190
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 83 Executive Summary 83 Review of Consolidated Results of Operations 84 SBU Performance Analysis 93 Key Trends and Uncertainties 101 Capital Resources and Liquidity 105 Critical Accounting Policies and Estimates 117 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 121 ITEM 8.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 79 Executive Summary 79 Review of Consolidated Results of Operations 80 SBU Performance Analysis 86 Key Trends and Uncertainties 92 Capital Resources and Liquidity 97 Critical Accounting Policies and Estimates 106 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 110 ITEM 8.
ITEM 4. MINE SAFETY DISCLOSURES 79 PART II 80 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 80 ITEM 6. SELECTED FINANCIAL DATA 81 ITEM 7.
ITEM 4. MINE SAFETY DISCLOSURES 76 PART II 77 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 77 ITEM 6. [RESERVED] 78 ITEM 7.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed7 unchanged
Biggest changeThe Parent Company has increased this dividend annually and the quarterly per-share cash dividends for the last three years are displayed below. Commencing the fourth quarter of 2022 2021 2020 Cash dividend $0.1659 $0.1580 $0.1505 The fourth quarter 2022 cash dividend is to be paid in the first quarter of 2023 .
Biggest changeThe Parent Company has increased this dividend annually and the quarterly per-share cash dividends for the last three years are displayed below. Commencing the fourth quarter of 2023 2022 2021 Cash dividend $0.1725 $0.1659 $0.1580 The fourth quarter 2023 cash dividend is to be paid in the first quarter of 2024 .
The cumulative repurchases from the commencement of the Stock Repurchase Program in July 2010 through December 31, 2022 totaled 154.3 million shares for a total cost of $1.9 billion, at an average price per share of $12.12 (including a nominal amount of commissions). As of December 31, 2022, $264 million remained available for repurchase under the Stock Repurchase Program.
The cumulative repurchases from the commencement of the Stock Repurchase Program in July 2010 through December 31, 2023 totaled 154.3 million shares for a total cost of $1.9 billion, at an average price per share of $12.12 (including a nominal amount of commissions). As of December 31, 2023, $264 million remained available for repurchase under the Stock Repurchase Program.
No repurchases were made by The AES Corporation of its common stock in 2022, 2021, and 2020. Market Information Our common stock is traded on the New York Stock Exchange under the symbol "AES." Dividends The Parent Company commenced a quarterly cash dividend in the fourth quarter of 2012.
No repurchases were made by The AES Corporation of its common stock in 2023, 2022, and 2021. Market Information Our common stock is traded on the New York Stock Exchange under the symbol "AES." Dividends The Parent Company commenced a quarterly cash dividend in the fourth quarter of 2012.
The S&P 500 Utilities Index is a published sector index comprising the 28 electric and gas utilities included in the S&P 500. The five year total return chart assumes $100 invested on December 31, 2016 in AES Common Stock, the S&P 500 Index and the S&P 500 Utilities Index.
The S&P 500 Utilities Index is a published sector index comprising the 30 electric and gas utilities included in the S&P 500. The five year total return chart assumes $100 invested on December 31, 2018 in AES Common Stock, the S&P 500 Index and the S&P 500 Utilities Index.
Holders As of February 27, 2023, there were approximately 3,508 record holders of our common stock. 81 | 2022 Annual Report Performance Graph THE AES CORPORATION PEER GROUP INDEX/STOCK PRICE PERFORMANCE Source: Bloomberg We have selected the Standard and Poor's ("S&P") 500 Utilities Index as our peer group index.
Holders As of February 22, 2024, there were approximately 3,395 record holders of our common stock. 78 | 2023 Annual Report Performance Graph THE AES CORPORATION PEER GROUP INDEX/STOCK PRICE PERFORMANCE Source: Bloomberg We have selected the Standard and Poor's ("S&P") 500 Utilities Index as our peer group index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

163 edited+105 added−105 removed98 unchanged
Biggest changeAdjusted EPS, a non-GAAP measure, increased $0.15, from $1.52 to $1.67, mainly driven by higher contributions from our MCAC SBU due to favorable LNG transactions and from our South America SBU due to higher margins and increased ownership in AES Andes, partially offset by lower contributions from our US and Utilities SBU due to the recognition of previously deferred power purchase costs and impacts of outages, the prior year impact of realized gains on de-designated interest rate swaps at the Parent Company, and higher interest expense. 84 | 2022 Annual Report Review of Consolidated Results of Operations Years Ended December 31, 2022 2021 2020 % Change 2022 vs. 2021 % Change 2021 vs. 2020 (in millions, except per share amounts) Revenue: US and Utilities SBU $ 5,013 $ 4,335 $ 3,918 16 % 11 % South America SBU 3,539 3,541 3,159 — % 12 % MCAC SBU 2,868 2,157 1,766 33 % 22 % Eurasia SBU 1,217 1,123 828 8 % 36 % Corporate and Other 119 116 231 3 % -50 % Eliminations (139) (131) (242) 6 % -46 % Total Revenue 12,617 11,141 9,660 13 % 15 % Operating Margin: US and Utilities SBU 564 792 638 -29 % 24 % South America SBU 823 1,069 1,243 -23 % -14 % MCAC SBU 820 521 559 57 % -7 % Eurasia SBU 236 216 186 9 % 16 % Corporate and Other 175 158 120 11 % 32 % Eliminations (70) (45) (53) 56 % -15 % Total Operating Margin 2,548 2,711 2,693 -6 % 1 % General and administrative expenses (207) (166) (165) 25 % 1 % Interest expense (1,117) (911) (1,038) 23 % -12 % Interest income 389 298 268 31 % 11 % Loss on extinguishment of debt (15) (78) (186) -81 % -58 % Other expense (68) (60) (53) 13 % 13 % Other income 102 410 75 -75 % NM Loss on disposal and sale of business interests (9) (1,683) (95) -99 % NM Goodwill impairment expense (777) — — NM — % Asset impairment expense (763) (1,575) (864) -52 % 82 % Foreign currency transaction gains (losses) (77) (10) 55 NM NM Other non-operating expense (175) — (202) NM -100 % Income tax benefit (expense) (265) 133 (216) NM NM Net equity in losses of affiliates (71) (24) (123) NM -80 % INCOME (LOSS) FROM CONTINUING OPERATIONS (505) (955) 149 -47 % NM Gain from disposal of discontinued businesses, net of income tax expense of $0, $1, and $0, respectively — 4 3 -100 % 33 % NET INCOME (LOSS) (505) (951) 152 -47 % NM Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries (41) 542 (106) NM NM NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ (546) $ (409) $ 46 33 % NM AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS: Income (loss) from continuing operations, net of tax $ (546) $ (413) $ 43 32 % NM Income from discontinued operations, net of tax — 4 3 -100 % 33 % NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ (546) $ (409) $ 46 33 % NM Net cash provided by operating activities $ 2,715 $ 1,902 $ 2,755 43 % -31 % 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.
Biggest changeAdjusted EPS, a non-GAAP measure, increased $0.09 from $1.67 to $1.76, mainly driven by higher contributions from renewables projects placed in service in the current year, higher contributions at the Utilities SBU, and lower losses of affiliates at the New Energy Technologies SBU; partially offset by lower contributions from the Energy Infrastructure SBU and higher Parent Company interest. 80 | 2023 Annual Report Review of Consolidated Results of Operations Years Ended December 31, 2023 2022 $ Change % Change (in millions, except per share amounts) Revenue: Renewables SBU $ 2,339 $ 1,893 $ 446 24 % Utilities SBU 3,495 3,617 (122) -3 % Energy Infrastructure SBU 6,836 7,204 (368) -5 % New Energy Technologies SBU 76 3 73 NM Corporate and Other 138 116 22 19 % Eliminations (216) (216) — — % Total Revenue 12,668 12,617 51 — % Operating Margin: Renewables SBU 492 528 (36) -7 % Utilities SBU 433 379 54 14 % Energy Infrastructure SBU 1,418 1,535 (117) -8 % New Energy Technologies SBU (9) (7) (2) 29 % Corporate and Other 239 182 57 31 % Eliminations (69) (69) — — % Total Operating Margin 2,504 2,548 (44) -2 % General and administrative expenses (255) (207) (48) 23 % Interest expense (1,319) (1,117) (202) 18 % Interest income 551 389 162 42 % Loss on extinguishment of debt (63) (15) (48) NM Other expense (99) (68) (31) 46 % Other income 89 102 (13) -13 % Gain (loss) on disposal and sale of business interests 134 (9) 143 NM Goodwill impairment expense (12) (777) 765 -98 % Asset impairment expense (1,067) (763) (304) 40 % Foreign currency transaction losses (359) (77) (282) NM Other non-operating expense — (175) 175 -100 % Income tax benefit (expense) (261) (265) 4 -2 % Net equity in losses of affiliates (32) (71) 39 -55 % LOSS FROM CONTINUING OPERATIONS (189) (505) 316 -63 % Gain from disposal of discontinued businesses, net of income tax benefit (expense) of $7, $0, and $-1, respectively 7 — 7 NM NET LOSS (182) (505) 323 -64 % Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries 431 (41) 472 NM NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ 249 $ (546) $ 795 NM AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS: — % Income (loss) from continuing operations, net of tax $ 242 $ (546) $ 788 NM Income from discontinued operations, net of tax 7 — 7 NM NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ 249 $ (546) $ 795 NM Net cash provided by operating activities $ 3,034 $ 2,715 $ 319 12 % 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.
Other non-operating expense Other non-operating expense was $175 million in 2022 due to the other-than-temporary impairment of the sPower equity method investment. The impairment analysis was triggered by the signing of a purchase and sale agreement which, at the time, implied an expected loss upon sale of the Company's indirect interest in a portfolio of sPower's operating assets ("OpCo B").
Other non-operating expense was $175 million in 2022 due to the other-than-temporary impairment of the sPower equity method investment. The impairment analysis was triggered by the signing of a purchase and sale agreement which, at the time, implied an expected loss upon sale of the Company's indirect interest in a portfolio of sPower's operating assets ("OpCo B").
(6) Amount primarily relates to goodwill impairments at AES Andes of $644 million, or $0.91 per share, and at AES El Salvador of $133 million, or $0.19 per share, other-than-temporary impairment at sPower of $175 million, or $0.25, as well as long-lived asset impairments at Maritza of $468 million, or $0.66 per share, at TEG TEP of $191 million, or $0.27 per share, and in Jordan of $28 million, or $0.04 per share.
(8) Amount primarily relates to goodwill impairments at AES Andes of $644 million, or $0.91 per share, and at AES El Salvador of $133 million, or $0.19 per share, other-than-temporary impairment at sPower of $175 million, or $0.25, as well as long-lived asset impairments at Maritza of $468 million, or $0.66 per share, at TEG TEP of $191 million, or $0.27 per share, and in Jordan of $28 million, or $0.04 per share.
For available-for-sale debt securities with unrealized losses, the Company continues to measure credit losses as it was done under previous GAAP, except that unrealized losses due to credit-related factors are now recognized as an allowance on the Consolidated Balance Sheet with a corresponding adjustment to earnings in the Consolidated Statements of Operations.
For available-for-sale debt securities with unrealized losses, the Company continues to measure impairments of available-for-sale securities as was done under previous GAAP, except that unrealized losses due to credit-related factors are now recognized as an allowance on the Consolidated Balance Sheet with a corresponding adjustment to earnings in the Consolidated Statements of Operations.
The transaction closed on February 28, 2023. sPower primarily holds operating assets where the tax credits associated with underlying projects have already been allocated to tax equity partners. The application of HLBV accounting increases the carrying value of these investments, as earnings are initially disproportionately allocated to the sponsor entity.
The transaction closed on February 28, 2023. 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.
(15) Amount primarily relates to the income tax benefits associated with the impairment at Maritza of $48 million, or $0.07 per share, the income tax benefits associated with the other-than-temporary impairment at sPower of $39 million, or $0.06 per share, the income tax benefits associated with the impairment at TEG TEP of $34 million, or $0.05, and the income tax benefits associated with the unrealized losses on power swaps at Southland Energy of $24 million, or $0.03 per share.
(12) Amount primarily relates to income tax benefits associated with the impairment at Maritza of $48 million, or $0.07 per share, income tax benefits associated with the other-than-temporary impairment at sPower of $39 million, or $0.06 per share, income tax benefits associated with the impairment at TEG TEP of $34 million, or $0.05 per share, and income tax benefits associated with unrealized losses on power swaps at Southland Energy of $24 million, or $0.03 per share.
(3) Amount primarily relates to costs on disposition of AES Gilbert, including the recognition of an allowance on the sales-type lease receivable, of $13 million, or $0.02 per share, and a day-one loss recognized at commencement of a sales-type lease at AES Waikoloa Solar of $5 million, or $0.01 per share.
(6) Amount primarily relates to costs on disposition of AES Gilbert, including the recognition of an allowance on the sales-type lease receivable, of $13 million, or $0.02 per share, and a day-one loss recognized at commencement of a sales-type lease at AES Waikoloa Solar of $5 million, or $0.01 per share.
Management applies considerable judgment in selecting several input assumptions during the development of our cash flow forecasts. Examples of the input assumptions that our forecasts are sensitive to include macroeconomic factors such as growth rates, industry demand, inflation, exchange rates, power prices, rising interest rates, and commodity prices.
Management applies considerable judgment in selecting several input assumptions during the development of our cash flow forecasts. Examples of the input assumptions that our forecasts are sensitive to include macroeconomic factors such as growth rates, industry demand, inflation, exchange rates, power prices, changes in interest rates, and commodity prices.
Nevertheless, the PPA Discussions involve a range of potential outcomes, including but not limited to the termination of the PPA and payment of some level of compensation to AES Maritza. Any negotiated resolution would be subject to mutually acceptable terms, lender consent, and DG Comp approval.
Nevertheless, the PPA Discussions involved a range of potential outcomes, including but not limited to the termination of the PPA and payment of some level of compensation to AES Maritza. Any negotiated resolution would be subject to mutually acceptable terms, lender consent, and DG Comp approval.
New Accounting Pronouncements See Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information about new accounting pronouncements adopted during 2022 and accounting pronouncements issued, but not yet effective.
New Accounting Pronouncements See Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information about new accounting pronouncements adopted during 2023 and accounting pronouncements issued, but not yet effective.
(3) Interest payments are estimated based on final maturity dates of debt securities outstanding at December 31, 2022 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, 2022.
(3) Interest payments are estimated based on final maturity dates of debt securities outstanding at December 31, 2023 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, 2023.
(9) Amount primarily relates to losses on early retirement of debt due to refinancing at AES Renewable Holdings of $12 million, or $0.02 per share, at AES Clean Energy of $5 million, or $0.01 per share, at Mong Duong of $4 million, or $0.01 per share, and at TEG TEP of $4 million, or $0.01 per share.
(10) Amount primarily relates to losses on early retirement of debt due to refinancing at AES Renewable Holdings of $12 million, or $0.02 per share, at AES Clean Energy of $5 million, or $0.01 per share, at Mong Duong of $4 million, or $0.01 per share, and at TEG TEP of $4 million, or $0.01 per share.
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, 2022, in order for such defaults to trigger an event of default or permit acceleration under the Parent Company's indebtedness.
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, 2023, in order for such defaults to trigger an event of default or permit acceleration under the Parent Company's indebtedness.
We have met our interim needs for shorter-term and working capital financing at the Parent Company level with our revolving credit facility. 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.
We have met our interim needs for shorter-term and working capital financing at the Parent Company level with our revolving credit facility and commercial paper program. See Item 1A.— Risk Factors — The AES Corporation's ability to make payments on its outstanding indebtedness is dependent upon the receipt of funds from our subsidiaries , of this Form 10-K.
While we do not expect that we will be required to fund any material amounts under these contingent contractual obligations beyond 2022, many of the events which would give rise to such obligations are beyond our control.
While we do not expect that we will be required to fund any material amounts under these contingent contractual obligations beyond 2023, many of the events which would give rise to such obligations are beyond our control.
(2) Amount primarily relates to unrealized foreign currency losses in Argentina of $39 million, or $0.05 per share, mainly associated with the devaluation of long-term receivables denominated in Argentine pesos.
(4) Amount primarily relates to unrealized foreign currency losses in Argentina of $39 million, or $0.05 per share, mainly associated with the devaluation of long-term receivables denominated in Argentine pesos.
As of December 31, 2022, 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 $2.4 billion in aggregate (excluding those collateralized by letters of credit and other obligations discussed below).
As of December 31, 2023, the Parent Company had provided outstanding financial and performance-related guarantees or other credit support commitments to or for the benefit of our businesses, which were limited by the terms of the agreements, of approximately $4 billion in aggregate (excluding those collateralized by letters of credit and other obligations discussed below).
These amounts exclude finance lease liabilities which are included in the finance lease category. (2) Excludes any businesses classified as held-for-sale. See Note 24— 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.
These amounts exclude finance lease liabilities which are included in the finance lease category. (2) Excludes any businesses classified as held-for-sale. See Note 24— Held-for-Sa l e and Dispositions in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for additional information related to held-for-sale businesses.
Pension and Other Postretirement Plans — The Company recognizes a net 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.
Pension and Other Postretirement Plans — The Company recognizes a net asset or liability reflecting 110 | 2023 Annual Report 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.
Refer to Note 1— General and Summary of Significant Accounting Policies included in Item 8 of this Form 10-K for further information. Revenue Recognition — The Company recognizes revenue to depict the transfer of energy, capacity, and other services to customers in an amount that reflects the consideration to which we expect to be entitled.
Refer to Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information. Revenue Recognition — The Company recognizes revenue to depict the transfer of energy, capacity, and other services to customers in an amount that reflects the consideration to which we expect to be entitled.
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, 2022, the Company had approximately $303 million of gross accounts receivable classified as Other noncurrent assets .
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, 2023, the Company had approximately $193 million of gross accounts receivable classified as Other noncurrent assets .
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 facility, and proceeds from asset sales.
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 facility and commercial paper program; and proceeds from asset sales.
Our worldwide income tax provision requires significant judgment and is based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other taxing authorities. Certain of the Company's subsidiaries are under examination by relevant taxing authorities for various tax years.
Our worldwide income tax provision requires significant judgment and is based on calculations and assumptions that are 107 | 2023 Annual Report subject to examination by the Internal Revenue Service and other taxing authorities. Certain of the Company's subsidiaries are under examination by relevant taxing authorities for various tax years.
Additional discussion regarding the nature of these financial instruments and valuation techniques can be found in Note 5— Fair Value included in Item 8 of this Form 10-K.
Additional discussion regarding the nature of these financial instruments and valuation techniques can be found in Note 5— Fair Value included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
See Note 6— Derivative Instruments and Hedging Activities included in Item 8 of this Form 10-K for further information on the classification. The fair value measurement standard requires the Company to consider and reflect the assumptions of market participants in the fair value calculation.
See Note 6— Derivative Instruments and Hedging Activities included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information on the classification. The fair value measurement standard requires the Company to consider and reflect the assumptions of market participants in the fair value calculation.
It may also increase the costs of some of our development projects that could negatively impact their competitiveness. Our utility businesses do allow for recovering of operations and maintenance costs through the regulatory process, which may have timing impacts on recovery.
It may also increase the costs of some of our development 95 | 2023 Annual Report projects that could negatively impact their competitiveness. Our utility businesses do allow for recovering of operations and maintenance costs through the regulatory process, which may have timing impacts on recovery.
Impairments — Our accounting policies on goodwill and long-lived assets, including events that lead to possible impairment, are described in detail in Note 1— General and Summary of Significant Accounting Policies , included in Item 8 of this Form 10-K.
Impairments — Our accounting policies on goodwill and long-lived assets, including events that lead to possible impairment, are described in detail in Note 1— General and Summary of Significant Accounting Policies , included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
Accounting for Derivative Instruments and Hedging Activities — We enter into various derivative transactions in order to hedge our exposure to certain market risks. We primarily use derivative instruments to manage our interest rate, commodity, and foreign currency exposures. We do not enter into derivative transactions for trading purposes.
Accounting for Derivative Instruments and Hedging Activities — We enter into various derivative transactions in order to hedge our exposure to certain market risks. We primarily use derivative instruments to manage our interest rate, commodity, and foreign currency exposures. We do not enter into derivative transactions 109 | 2023 Annual Report for trading purposes.
As of December 31, 2022, the Company had approximately $1 billion of loans receivable primarily related to a facility constructed under a BOT contract in Vietnam. This loan receivable represents contract consideration related to the construction of the facility, which was substantially completed in 2015, and will be collected over the 25-year term of the plant's PPA.
As of December 31, 2023, the Company had approximately $1.1 billion of loans receivable related to the Mong Duong facility in Vietnam, which was constructed under a BOT contract. This loan receivable represents contract consideration related to the construction of the facility, which was substantially completed in 2015, and will be collected over the 25-year term of the plant's PPA.
For example, our revolving credit facility and outstanding debt securities at the Parent Company include events of default for certain bankruptcy-related events involving material subsidiaries. In addition, our revolving 116 | 2022 Annual Report credit agreement at the Parent Company includes events of default related to payment defaults and accelerations of outstanding debt of material subsidiaries.
For example, our revolving credit facility and outstanding debt securities at the Parent Company include events of default for certain bankruptcy-related events involving material subsidiaries. In addition, our revolving credit agreement at the Parent Company includes events of default related to payment defaults and accelerations of outstanding debt of material subsidiaries.
Some of our subsidiaries are currently in default with respect to all or a portion of their outstanding indebtedness. The total non-recourse debt classified as current in the accompanying Consolidated Balance Sheets amounts to $1.8 billion.
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 $3.9 billion.
In such circumstances, if a business defaults on its payment or supply obligation or other obligation under the terms of the relevant agreement, the Parent Company will be responsible for the business' obligations up to the amount provided for in the relevant guarantee or other credit support.
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.
Cash Sources and Uses The primary sources of cash for the Company in the year ended December 31, 2022 were debt financings and supplier financing arrangements, cash flows from operating activities, sales of short-term investments, and sales to noncontrolling interests.
Cash Sources and Uses The primary sources of cash for the Company in the year ended December 31, 2023 were debt financings, cash flows from operating activities, sales to noncontrolling interests, purchases under supplier financing arrangements, and sales of short-term investments.
These letters of credit operate to guarantee performance relating to certain project development and construction activities and 107 | 2022 Annual Report business operations. During the year ended December 31, 2022, the Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts.
These letters of 99 | 2023 Annual Report credit operate to guarantee performance relating to certain project development and construction activities and business operations. During the year ended December 31, 2023, the Parent Company paid letter of credit fees ranging from 1% to 3% per annum on the outstanding amounts.
The Company defines Parent Company Liquidity as cash available to the Parent Company, including cash at qualified holding companies, plus available borrowings under our existing credit facility. The cash held at qualified holding companies represents cash sent to subsidiaries of the Company domiciled outside of the U.S.
The Company defines Parent Company Liquidity as cash available to the Parent Company, including cash at qualified holding companies, plus available borrowings under our existing credit facility and commercial paper program. The cash held at qualified holding companies represents cash sent to subsidiaries of the Company domiciled outside of the U.S.
For further information regarding the nature of our revenue streams and our critical accounting policies affecting revenue recognition, see Note 1— General and Summary of Significant Accounting Policies included in Item 8 of this Form 10-K.
For further information regarding the nature of our revenue streams and our critical accounting policies affecting revenue recognition, see Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
Fair Value of Nonfinancial Assets and Liabilities — Significant estimates are made in determining the fair value of long-lived tangible and intangible assets (i.e., property, plant and equipment, intangible assets and 119 | 2022 Annual Report goodwill) during the impairment evaluation process.
Fair Value of Nonfinancial Assets and Liabilities — Significant estimates are made in determining the fair value of long-lived tangible and intangible assets (i.e., property, plant and equipment, intangible assets and goodwill) during the impairment evaluation process.
Based on construction schedules, a significant portion of these earnings will be realized in the fourth quarter. The implementation of the IRA is expected to require substantial guidance from the U.S. Department of Treasury and other government agencies. While that guidance is pending, there will be uncertainty with respect to the implementation of certain provisions of the IRA.
Based on construction schedules, a significant portion of these earnings will be realized in the fourth quarter. The implementation of the IRA requires substantial guidance from the U.S. Department of Treasury and other government agencies. While some of that guidance remains pending, there will be uncertainty with respect to the implementation of certain provisions of the IRA.
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.
As of December 31, 2023, we were in compliance with these covenants at the Parent Company level. 105 | 2023 Annual Report 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.
Fair Value — For information regarding the fair value hierarchy, see Note 1— General and Summary of Significant Accounting Policies included in Item 8 of this Form 10-K.
Fair Value — For information regarding the fair value hierarchy, see Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
Adjusted EPS should not be construed as an alternative to diluted earnings per share from continuing operations, which is determined in accordance with GAAP. The Company reported a loss from continuing operations of $0.82 and $0.62 for the years ended December 31, 2022 and 2021, respectively.
Adjusted EPS should not be construed as an alternative to diluted earnings per share from continuing operations, which is determined in accordance with GAAP. The Company reported a loss from continuing operations of $0.82 for the year ended December 31, 2022.
For further information regarding credit losses, see Note 1— General and Summary of Significant Accounting Policies included in Item 8 of this Form 10-K.
For further information regarding credit losses, see Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
This method recognizes the tax-credit value that is transferred to tax equity partners at the time of its creation, which for projects utilizing the investment tax credit is in the quarter the project begins commercial operation. For projects utilizing the production tax credit, this value is recognized over 10 years as the facility produces energy.
This method recognizes the tax-credit value that is transferred to tax equity investors at the time of its creation, which for projects utilizing the investment tax credit begins in the quarter the project is placed in service. For projects utilizing the production tax credit, this value is recognized over 10 years as the facility produces energy.
See Note 24— Held-for-Sale and Dispositions and Note 8 — Investments in and Advances to Affiliates included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
See Note 8— Investments in and Advances to Affiliates included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
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 $3.9 billion and $3.8 billion at December 31, 2022 and 2021, respectively.
While we intend to continue payment of dividends and believe we will have sufficient liquidity to do so, we can provide no assurance that we will continue to pay dividends, or if continued, the amount of such dividends. Recourse Debt Our total recourse debt was $4.5 billion and $3.9 billion as of December 31, 2023 and 2022, respectively.
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.
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.
Investing Activities Fiscal Year 2022 versus 2021 Net cash used in investing activities increased $2.8 billion for the year ended December 31, 2022 compared to December 31, 2021.
Investing Activities Fiscal Year 2023 versus 2022 Net cash used in investing activities increased $2.4 billion for the year ended December 31, 2023 compared to December 31, 2022.
The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $19.4 billion and $3.9 billion, respectively. Of the $1.8 billion of our current non-recourse debt, $1.6 billion was presented as such because it is due in the next twelve months and $177 million relates to debt considered in default due to covenant violations.
The Company also had non-recourse and recourse aggregate principal amounts of debt outstanding of $22.1 billion and $4.5 billion, respectively. Of the $3.9 billion of our current non-recourse debt, $3.6 billion was presented as such because it is due in the next twelve months and $325 million relates to debt considered in default.
For the year ended December 31, 2021, the Company updated the definition of Adjusted EPS item (g) tax benefit or expense related to the enactment effects of 2017 U.S. tax law reform and related regulations and any subsequent period adjustments related to enactment effects to include the 2021 tax benefit on reversal of uncertain tax positions effectively settled upon the closure of the Company's 2017 U.S. tax return exam.
For the year ended December 31, 2023, the Company changed the definition of Adjusted EPS to remove the adjustment for tax benefit or expense related to the enactment effects of 2017 U.S. tax law reform and related regulations and any subsequent period adjustments related to enactment effects, including the 2021 tax benefit on reversal of uncertain tax positions effectively settled upon the closure of the Company's U.S. tax return exam .
Capital Resources and Liquidity Overview As of December 31, 2022, the Company had unrestricted cash and cash equivalents of $1.4 billion, of which $24 million was held at the Parent Company and qualified holding companies. The Company had $730 million in short-term investments, held primarily at subsidiaries, and restricted cash and debt service reserves of $713 million.
Capital Resources and Liquidity Overview As of December 31, 2023, the Company had unrestricted cash and cash equivalents of $1.4 billion, of which $33 million was held at the Parent Company and qualified holding companies. The Company had $395 million in short-term investments, held primarily at subsidiaries, and restricted cash and debt service reserves of $564 million.
The fair value determination is typically the most judgmental part in an impairment evaluation. Please see Fair Value below for further detail. As part of the impairment evaluation process, management analyzes the sensitivity of fair value to various underlying assumptions. The level of scrutiny increases as the gap between fair value and carrying amount decreases.
The fair value determination is typically the most judgmental part in an impairment evaluation. Please see Fair Value below for further detail. As part of the impairment evaluation process, management analyzes the sensitivity of fair value to various underlying assumptions. The level of scrutiny increases as the surplus of fair value above carrying amount decreases or becomes negative.
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.
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.
Factors in this determination include the variability due to unrealized gains or losses related to derivative transactions or equity securities remeasurement, unrealized foreign currency gains or losses, losses due to impairments, strategic decisions to dispose of or acquire business interests or retire debt, the one-time impact of the 2017 U.S. tax law reform and subsequent period adjustments related to enactment effects, and the non-recurring nature of the impact of the early contract terminations at Angamos, which affect results in a given period or periods.
Factors in this determination include the variability due to unrealized gains or losses related to derivative transactions or equity securities remeasurement, unrealized foreign currency gains or losses, losses due to impairments, strategic decisions to dispose of or acquire business interests or retire debt, and the non-recurring nature of the impact of the early contract terminations at Angamos, which affect results in a given period or periods.
The Company recognized net foreign currency transaction losses of $77 million in 2022, primarily driven by the depreciation of the Argentine peso, partially offset by realized foreign currency derivative gains in South America due to the depreciating Colombian peso.
The Company recognized net foreign currency transaction losses of $77 million in 2022, primarily driven by the depreciation of the Argentine peso, partially offset by realized foreign currency derivative gains in South America due to the depreciating Colombian peso. Other non-operating expense There was no other non-operating expense in 2023.
However, there can be no assurance that, in the context of the PPA Discussions, the other parties will not seek a prompt termination of the PPA. We do not believe termination of the PPA is justified.
However, there can be no assurance that, in the context of DG Comp's preliminary review or any future PPA Discussions, the other parties will not seek a prompt termination of the PPA. We do not believe termination of the PPA is justified.
As of December 31, 2021, Mong Duong met the held-for-sale criteria and the loan receivable balance, net of CECL reserve, was classified in held-for-sale assets. Of the loan receivable balance, $91 million was classified as Current held-for-sale assets , and $1 billion was classified as Noncurrent held-for-sale assets .
As of December 31, 2023, Mong Duong met the held-for-sale criteria and the loan receivable balance, net of CECL reserve, was classified in held-for-sale assets. Of the loan receivable balance, $108 million was classified as Current held-for-sale assets , and $962 million was classified as Noncurrent held-for-sale assets .
For further information regarding the nature of our leases and our critical accounting policies affecting leases, see Note 1— General and Summary of 121 | 2022 Annual Report Significant Accounting Policies included in Item 8 of this Form 10-K.
For further information regarding the nature of our leases and our critical accounting policies affecting leases, see Note 1— General and Summary of Significant Accounting Policies included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K.
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): December 31, 2022 December 31, 2021 Consolidated cash and cash equivalents $ 1,374 $ 943 Less: Cash and cash equivalents at subsidiaries (1,350) (902) Parent Company and qualified holding companies' cash and cash equivalents 24 41 Commitments under the Parent Company credit facility 1,500 1,250 Less: Letters of credit under the credit facility (34) (48) Less: Borrowings under the credit facility (325) (365) Borrowings available under the Parent Company credit facility 1,141 837 Total Parent Company Liquidity $ 1,165 $ 878 The Parent Company paid dividends of $0.63 per outstanding share to its common stockholders during the year ended December 31, 2022.
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): December 31, 2023 December 31, 2022 Consolidated cash and cash equivalents $ 1,426 $ 1,374 Less: Cash and cash equivalents at subsidiaries (1,393) (1,350) Parent Company and qualified holding companies' cash and cash equivalents 33 24 Commitments under the Parent Company credit facility 1,500 1,500 Less: Letters of credit under the credit facility (124) (34) Less: Borrowings under the credit facility — (325) Borrowings available under the Parent Company credit facility 1,376 1,141 Total Parent Company Liquidity $ 1,409 $ 1,165 The Parent Company paid dividends of $0.66 per outstanding share to its common stockholders during the year ended December 31, 2023.
This was partially offset by the $468 million impairment of Maritza's coal-fired plant due to Bulgaria's commitment to cease electricity generation using coal as a fuel source beyond 2038, the $193 million impairment at TEG TEP in Mexico, and a $76 million impairment of Amman East and IPP4 in Jordan.
This increase was partially offset by the $468 million impairment of Maritza's coal-fired plant in 2022 due to Bulgaria's commitment to cease electricity generation using coal as a fuel-source beyond 2038 and lower impairments at TEG and TEP in Mexico.
At this time, we cannot predict the outcome of the PPA Discussions or when those discussions will conclude. Nor can we predict how DG Comp might resolve its review if the PPA Discussions fail to result in an agreement concerning the agency's review.
At this time, we cannot predict whether and when the PPA Discussions might resume or the outcome of any such discussions. Nor can we predict how DG Comp might resolve its review if the PPA Discussions do not resume or if any such discussions fail to result in an agreement concerning the agency's review.
These noncurrent receivables mostly consist of accounts receivable in Chile and in the U.S. that, pursuant to amended agreements or government resolutions, have collection periods that extend beyond December 31, 2023, or one year from the latest balance sheet date.
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, 2024, or one year from the latest balance sheet date. Noncurrent receivables in the U.S. pertain to the Warrior Run PPA termination agreement and the sale of the Redondo Beach land.
PROMESA also expedites the approval of key energy projects and other critical projects in Puerto Rico. PROMESA allowed for the establishment of an Oversight Board with broad powers of budgetary and financial control over Puerto Rico.
PROMESA also expedites the approval of key energy projects and other critical projects in Puerto Rico. PROMESA allowed for the establishment of an Oversight Board with broad powers of budgetary and financial control over Puerto Rico. The Oversight Board filed for bankruptcy on behalf of PREPA under Title III in July 2017.
See Note 24— Held-for-Sale and Dispositions included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for details of the sale of the Company's entire interest of AES Uruguaiana. 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.
See Note 22— Asset Impairment Expense included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for details of the asset impairments. 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.
Impairments Long-lived Assets and Equity Affiliates — During the year ended December 31, 2022, the Company recognized asset and other-than-temporary impairment expenses of $938 million. See Note 8— Investments and Advances to Affiliates and Note 22— Asset Impairment Expense included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
Impairments Long-lived Assets and Current Assets Held-for-Sale — During the year ended December 31, 2023, the Company recognized asset impairment expense of $1.1 billion. See Note 8— Investments and Advances to Affiliates and Note 22— Asset Impairment Expense included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
We expect current maturities of non-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.
As of December 31, 2023, the Company also had $974 million outstanding related to supplier financing arrangements . 98 | 2023 Annual Report 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.
As of December 31, 2022, we had $128 million in letters of credit outstanding provided under our unsecured credit facilities, $123 million in letters of credit under bilateral agreements, and $34 million in letters of credit outstanding provided under our revolving credit facility.
As of December 31, 2023, we had $235 million in letters of credit under bilateral agreements, $188 million in letters of credit outstanding provided under our unsecured credit facilities, and $124 million in letters of credit outstanding provided under our revolving credit facility.
These efforts apply to the notional amount of the swaps compared to the amount of related underlying debt. Presently, the Parent Company's only material unhedged exposure to variable interest rate debt relates to drawings of $325 million under its revolving credit facility and a $200 million senior unsecured term loan.
These efforts apply to the notional amount of the swaps compared to the amount of related underlying debt. Presently, the Parent Company's only material unhedged exposure to variable interest rate debt relates to $200 million in senior unsecured term loans.
Department of Commerce (“Commerce”) announced the initiation of an investigation into whether imports into the U.S. of solar cells and panels imported from Cambodia, Malaysia, Thailand, and Vietnam are circumventing antidumping and countervailing duty orders on solar cells and panels from China. This investigation resulted in significant systemic disruptions to the import of solar cells and panels from Southeast Asia.
Department of Commerce (“Commerce”) announced the initiation of an investigation into whether imports into the U.S. of solar cells and panels imported from Cambodia, Malaysia, Thailand, and Vietnam (“Southeast Asia”) are circumventing antidumping and countervailing duty (“AD/CVD”) orders on solar cells and panels from China.
However, there can be no assurance that this matter will be resolved favorably; if it is not, there could be a material adverse effect on the Company’s financial condition, results of operation, and cash flows. As of December 31, 2022, the carrying value of our long-lived assets at Maritza is $427 million.
However, there can be no assurance that this matter will be resolved favorably; if it is not, there could be a material adverse effect on the Company’s financial condition, results of operation, and cash flows.
See S BU Performance Analysis—Non-GAAP Measures for definition and Item 1. — Business for the respective ownership interest for key businesses.
See S BU Performance Analysis—Non-GAAP Measures for definition and Item 1. — Business for the respective ownership interest for key businesses. Operating Margin decreased $2 million, with no material drivers.
The portion of current debt related to such defaults was $177 million at December 31, 2022, all of which was non-recourse debt related to three subsidiaries — AES Puerto Rico, AES Ilumina, and AES Jordan Solar.
The portion of current debt related to such defaults was $325 million at December 31, 2023, all of which was non-recourse debt related to four subsidiaries — AES Mexico Generation Holdings, AES Puerto Rico, AES Ilumina, and AES Jordan Solar. Defaults at AES Puerto Rico are covenant and payment defaults.
Further disruptions may impact our suppliers’ ability or willingness to meet their contractual agreements or to cont inue to supply cells or panels into the U.S. market on terms that we deem satisfactory.
While this has impacted the U.S. market, AES has managed this issue without significant impact to our projects. Further disruptions may impact our suppliers’ ability or willingness to meet their contractual agreements or to continue to supply cells or panels into the U.S. market on terms that we deem satisfactory.
The IRA includes provisions that are expected to benefit the U.S. clean energy industry, including increases, extensions and/or new tax credits for onshore and offshore wind, solar, storage and hydrogen projects.
Renewable Energy Tax Credits — The Inflation Reduction Act (the “IRA”) was signed into law in the United States. The IRA includes provisions that are expected to benefit the U.S. clean energy industry, including increases, extensions, direct transfers and/or new tax credits for onshore and offshore wind, solar, storage and hydrogen projects.
See Item 1. — Business—South America SBU and Note 17 — Equity included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information.
See Note 11— Debt included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
See Note 9— Goodwill and Other Intangible Assets included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for details of the goodwill impairments. See Note 22— Asset Impairment Expense included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for details of the asset impairments.
See Note 22— Asset Impairment Expense included in Item 8.— Financial Statements and Supplementary Data of this Form 10-K for further information.
We will continue to monitor issuance of draft legislation in Bulgaria and other relevant EU Member States. The impact to the Company remains unknown but may be material. Inflation — In the markets in which we operate, there have been higher rates of inflation recently.
We will continue to monitor the issuance of draft legislation in other non-EU countries where the Company operates that are considering Pillar 2 amendments. The impact to the Company remains unknown but may be material. Inflation — In the markets in which we operate, there have been higher rates of inflation recently.
The primary uses of cash in the year ended December 31, 2021 were repayments of debt, capital expenditures, acquisitions of business interests, and purchases of short-term investments. 108 | 2022 Annual Report The primary sources of cash for the Company in the year ended December 31, 2020 were debt financings, cash flows from operating activities, sales of short-term investments, and sales to noncontrolling interests.
The primary sources of cash for the Company in the year ended December 31, 2022 were debt financings, cash flows from operating activities, sales of short-term investments, purchases under supplier financing 100 | 2023 Annual Report arrangements, and sales to noncontrolling interests.
After recognizing these impairment expenses, the carrying value of our investments in equity affiliates and long-lived assets that were assessed for impairment in 2022 totaled $1.5 billion at December 31, 2022.
After recognizing these impairment expenses, the carrying value of our investments in long-lived assets and current assets held-for-sale that were assessed for impairment following a triggering event in 2023 totaled $1.3 billion at December 31, 2023.
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.
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.
The primary uses of cash in the year ended December 31, 2020 were repayments of debt, capital expenditures, and purchases of short-term investments.
The primary uses of cash in the year ended December 31, 2023 were repayments of debt, capital expenditures, repayments of obligations under supplier financing arrangements, purchases of short-term investments, and acquisitions of business interests.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThese businesses subject our operational results to the volatility of prices for electricity, fuels, and environmental credits in competitive markets. We employ risk management strategies to hedge our financial performance against the effects of fluctuations in energy commodity prices. The implementation of these strategies can involve the use of physical and financial commodity contracts, futures, swaps, and options.
Biggest changeWe employ risk management strategies to hedge our financial performance against these effects. The implementation of these strategies can involve the use of physical and financial commodity contracts, futures, swaps, and options. We have some natural offsets across our businesses such that low commodity prices may benefit certain businesses and be a cost to others.
For further information regarding market risk, see Item 1A.— Risk Factors , Fluctuations in currency exchange rates may impact our financial results and position ; Wholesale power prices may experience significant volatility in our markets which could impact our operations and opportunities for future growth; We may not be adequately hedged against our exposure to changes in commodity prices or interest rates; and Certain of our businesses are sensitive to variations in weather and hydrology of this 2022 Form 10-K.
For further information regarding market risk, see Item 1A.— Risk Factors , Fluctuations in currency exchange rates may impact our financial results and position ; Wholesale power prices may experience significant volatility in our markets which could impact our operations and opportunities for future growth; We may not be adequately hedged against our exposure to changes in commodity prices or interest rates; and Certain of our businesses are sensitive to variations in weather and hydrology of this 2023 Form 10-K.
Foreign Exchange Rate Risk In the normal course of business, we are exposed to foreign currency risk and other foreign operations risks that arise from investments in foreign subsidiaries and affiliates. A key component of these risks stems from the fact that some of our foreign subsidiaries and affiliates utilize currencies other than our consolidated reporting currency, the USD.
In the normal course of business, we are exposed to foreign currency risk and other foreign operations risks that arise from investments in foreign subsidiaries and affiliates. A key component of these risks stems from the fact that some of our foreign subsidiaries and affiliates utilize currencies other than our consolidated reporting currency, the USD.
These numbers have been produced by applying a one-time 10% USD appreciation to forecasted exposed cash distributions for 2023 coming from the respective subsidiaries exposed to the currencies listed above, net of the impact of outstanding hedges and holding all other variables constant. The numbers presented above are net of any transactional gains/losses.
These numbers have been produced by applying a one-time 10% USD appreciation to forecasted exposed cash distributions for 2024 coming from the respective subsidiaries exposed to the currencies listed above, net of the impact of outstanding hedges and holding all other variables constant. The numbers presented above are net of any transactional gains or losses.
As of December 31, 2022, the portfolio's pre-tax earnings exposure for 2023 to a one-time 100-basis-point increase in interest rates for our Argentine peso, Brazilian real, Chilean peso, Colombian peso, Euro, and USD denominated debt would be less than $55 million on interest expense for the debt denominated in these currencies.
As of December 31, 2023, the portfolio’s pre-tax earnings exposure to a one-time 100-basis-point increase in interest rates for our Argentine peso, Brazilian real, Chilean peso, Colombian peso, Euro, and USD denominated debt would be less than $35 million on interest expense for the debt denominated in these currencies.
These subsidiaries and affiliates have attempted to limit potential foreign exchange exposure by entering into revenue contracts that adjust to changes in foreign exchange rates. We also use foreign currency forwards, swaps, and options where possible to manage our risk related to certain foreign currency fluctuations.
These subsidiaries and affiliates attempt to limit potential foreign exchange exposure by entering into revenue contracts that adjust to changes in foreign exchange rates. We also use foreign currency forwards, swaps, and options where possible to manage our risk related to certain foreign currency fluctuations.
Panama is highly contracted under financial and load-following PPA type structures, exposing the business to hydrology-based variance. To the extent hydrological inflows are greater than or less than the contract volumes, the business will be sensitive to changes in spot power prices which may be driven by oil and natural gas prices in some time periods.
Our Renewables businesses in Panama are highly contracted under financial and load-following PPA type structures, exposing the business to hydrology-based variance. To the extent hydrological inflows are greater than or less than the contract volumes, the business will be sensitive to changes in spot power prices which may be driven by oil and natural gas prices in some time periods.
Commodity Price Risk Although we prefer to hedge our exposure to the impact of market fluctuations in the price of electricity, fuels, and environmental credits, some of our generation businesses operate under short-term sales, have contracted electricity obligations greater than supply or operate under contract sales that leave an unhedged exposure on some of our capacity or through imperfect fuel pass-throughs.
Commodity Price Risk Although we prefer to hedge our exposure to the impact of market fluctuations in the price of commodities, some of our generation businesses operate under short-term sales, have contracted electricity obligations greater than supply, or operate under contract sales that leave an unhedged exposure on some of our capacity or through imperfect fuel pass-throughs.
As of December 31, 2022, assuming a 10% USD appreciation, cash distributions attributable to foreign subsidiaries exposed to movement in the exchange rate of the Brazilian real are projected to be impacted by less than a $10 million gain, a less than $5 million gain for the Colombian peso and a less than $5 million loss for the Euro.
Additionally, as of December 31, 2023, assuming a 10% USD appreciation, cash distributions attributable to foreign subsidiaries in the Brazilian real, Colombian peso, and Euro, individually, may be exposed to exchange rate movement of less than a $5 million gain.
We operate in multiple countries and as such are subject to volatility in exchange rates at varying degrees at the subsidiary level and between our functional currency, the USD, and currencies of the countries in which we operate. We are also exposed to interest rate fluctuations due to our issuance of debt and related financial instruments.
Foreign Exchange Rate Risk We operate in multiple countries and as such are subject to volatility in exchange rates at varying degrees at the subsidiary level and between our functional currency, the USD, and currencies of the countries in which we operate.
The sensitivities are affected by a number of local or indirect market factors. Examples of these factors include hydrology, local energy market supply/demand balances, regional fuel supply issues, regional competition, bidding strategies, and regulatory interventions such as price caps. Operational flexibility changes the shape of our sensitivities.
Exposures are not perfectly linear or symmetric. The sensitivities are affected by a number of local or indirect market factors. Examples of these factors include hydrology, local energy market supply/demand balances, regional fuel supply issues, regional competition, bidding strategies, and regulatory interventions such as price caps. Volume variation also affects our commodity exposure.
Interest Rate Risks We are exposed to risk resulting from changes in interest rates as a result of our issuance of variable and fixed-rate debt, as well as interest rate swap, cap, floor, and option agreements. Decisions on the fixed-floating debt mix are made to be consistent with the risk factors faced by individual businesses or plants.
Interest Rate Risks We are exposed to risk resulting from changes in interest rates primarily because of our current and expected future issuance of debt and borrowing. Decisions on the fixed-floating debt mix are made to be consistent with the risk factors faced by individual businesses or plants.
Additionally, the contract levels do not always match our generation availability and our assets may be sellers of spot prices in excess of contract levels or a net buyer in the spot market to satisfy contract obligations.
Contract levels do not always match our generation availability or needs, and our assets may be sellers of spot prices in excess of contract levels 112 | 2023 Annual Report or a net buyer in the spot market to satisfy contract obligations, which could impact existing fuel supply commitments.
The disclosures presented in this Item 7A are based upon a number of assumptions; actual effects may differ. The safe harbor provided in Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act shall apply to the disclosures contained in this Item 7A.
The safe harbor provided in Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act shall apply to the disclosures contained in this Item 7A.
Exposures at individual businesses will change as new contracts or financial hedges are executed, and our sensitivity to changes in commodity prices generally increases in later years with reduced hedge levels at some of our businesses. 122 | 2022 Annual Report Commodity prices affect our businesses differently depending on the local market characteristics and risk management strategies.
Prices and volatilities are predominantly based on observable market prices. Exposures at individual businesses will change as new contracts or financial hedges are executed, and our sensitivity to changes in commodity prices generally increases in later years with reduced hedge levels at some of our businesses.
In addition, our businesses are exposed to lower electricity prices due to increased competition, including from renewable sources such as wind and solar, as a result of lower costs of entry and lower variable costs.
These businesses subject our operational results to the volatility of prices for electricity, fuels, and environmental credits in competitive markets. In addition, our businesses are exposed to lower electricity prices due to increased competition, including from renewable sources such as wind and solar, because of lower costs of entry and lower variable costs.
These amounts do not take into account the historical correlation between these interest rates. 124 | 2022 Annual Report
These amounts represent 2024 full year exposure and do not take into account the historical correlation between these interest rates. 114 | 2023 Annual Report
In the Eurasia SBU, our assets operating in Vietnam and Bulgaria have minimal exposure to commodity price risk as it has no or minor merchant exposure and fuel is subject to a pass-through mechanism.
Our assets operating in Vietnam and Bulgaria have minimal exposure to commodity price risk as they have no or minor merchant exposure and fuel is subject to a pass-through mechanism. In the Renewables SBU, our businesses have commodity exposure on unhedged volumes and resource volatility and benefit from higher power prices, where generation exceeds contracted levels.
Depending on whether a plant's capacity payments or revenue stream is fixed or varies with inflation, we partially hedge against interest rate fluctuations by arranging fixed-rate or variable-rate financing. In certain cases, particularly for non-recourse financing, we execute interest rate swap, cap, and floor agreements to effectively fix or limit the interest rate exposure on the underlying financing.
Depending on whether a plant’s capacity payments or revenue stream is fixed or varies with inflation, we partially hedge against interest rate fluctuations by arranging fixed-rate or variable-rate financing.
Under drier conditions, the sharing mechanism may not be sufficient to cover the business' contract position, and therefore it may have to purchase power at spot prices driven by the cost of thermal generation. In the MCAC SBU, our businesses have commodity exposure on unhedged volumes.
Under normal hydrological volatility, spot price risk is mitigated through a regulated sharing mechanism across all hydroelectric generators in the country. Under drier conditions, the sharing mechanism may not be sufficient to cover the business' contract position, and therefore it may have to purchase power at spot prices driven by the cost of thermal generation.
Due to variation of timing and amount between cash distributions and earnings exposure, the hedge impact may not fully cover the earnings exposure on 123 | 2022 Annual Report a realized basis, which could result in greater volatility in earnings. The largest foreign exchange risks for 2023 stem from the following currencies: Brazilian real and Euro.
Due to variation of timing and amount between cash distributions and earnings exposure, the hedge impact may not fully cover the earnings exposure on a realized basis, which could result in greater volatility in earnings. AES has unhedged forward-looking earnings foreign exchange deterioration risk from the Argentine peso that could be material.
For 2023, we project pre-tax earnings exposure on a 10% (uncorrelated) move in commodity prices to be approximately a $5 million gain for power, a $10 million loss for oil, and a $5 million loss for coal and natural gas. Our estimates exclude correlation of oil with coal or natural gas.
As of December 31, 2023, we project pre-tax earnings exposure on a 10% increase in commodity prices to be less than a $30 million gain for power, less than $15 million loss for gas, and less than $10 million loss for coal.
For the portion of our contracts not indexed to the price of coal, we have implemented a hedging strategy based on international coal financial instruments for up to 3 years. In Colombia, we operate under a shorter-term sales strategy with spot market exposure for uncontracted volumes. Because we own hydroelectric assets there, contracts are not indexed to fuel.
In Colombia, we operate under a shorter-term sales strategy with spot market exposure for uncontracted volumes. Because we own hydroelectric assets there, contracts are not indexed to fuel. In Brazil, the majority of the hydroelectric and other renewable generating facility volumes are covered by contract sales.
Thermal unit availability and hydrology can affect the generation output available for sale and can affect the marginal unit setting power prices. In the US and Utilities SBU, the generation businesses are largely contracted but may have residual risk to the extent contracts are not perfectly indexed to the business drivers.
In the Energy Infrastructure SBU, the generation businesses are largely contracted, but may have residual risk to the extent contracts are not perfectly indexed to the business drivers.
The significant portion of our PPAs include mechanisms of indexation that adjust the price of energy based on fluctuations in the price of coal, with the specific indices and timing varying by contract, in order to mitigate changes in the price of fuel.
A significant portion of our PPAs through 2024 include mechanisms of indexation that adjust the price of energy based on fluctuations in the price of coal, with an index defined by the National Energy Commission based on the physical coal imports for the energy system. This mechanism mitigates exposures to changes in the price of fuel.
In the Dominican Republic, we own natural gas plants contracted under a portfolio of contract sales, and both contract and spot prices may move with commodity prices.
The increasing share of renewable energy in Chile's power market may reduce reliance on thermal units and impact power price volatility, which could impact our cost to serve certain unregulated PPAs. In the Dominican Republic, we own natural gas plants contracted under a portfolio of contract sales, and both contract and spot prices may move with commodity prices through 2024.
For instance, certain power plants may limit downside exposure by reducing dispatch in low market environments. Volume variation also affects our commodity exposure. The volume sold under contracts or retail concessions can vary based on weather and economic conditions, resulting in a higher or lower volume of sales in spot markets.
The volume sold under contracts or retail concessions can vary based on weather and economic conditions, resulting in a higher or lower volume of sales in spot markets. Thermal unit availability and hydrology can affect the generation output available for sale and can affect the marginal unit setting power prices.
In the South America SBU, our business in Chile owns assets in the central and northern regions of the country and has a portfolio of contract sales in both.
Our Southland combined cycle gas turbine (Southland Energy) units benefit from higher power and lower gas prices, depending on the contracted or hedge position. The AES Andes business in Chile owns assets in the central and northern regions of the country and has a portfolio of contract sales in both.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Overview Regarding Market Risks Our businesses are exposed to and proactively manage market risk. Our primary market risk exposure is to the price of commodities, particularly electricity, oil, natural gas, coal, and environmental credits.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Overview Regarding Market Risks Our businesses are exposed to, and proactively manage market risk. Market risk is the potential loss that may result from market changes associated with AES power generation or with existing or forecasted financial or commodity transactions.
Most of our interest rate risk is related to non-recourse financings at our businesses.
In 113 | 2023 Annual Report certain cases, particularly for non-recourse financing, we execute interest rate swap, cap, and floor agreements to effectively fix or limit the interest rate exposure on the underlying financing. Most of our interest rate risk is related to non-recourse financings at our businesses.
Removed
The portion of our sales and purchases that are not subject to such agreements or contracted businesses where indexation is not perfectly matched to business drivers will be exposed to commodity price risk.
Added
Our primary market risk exposure is to the price of commodities, particularly electricity, natural gas, coal, and environmental credits. AES is also exposed to fluctuations in interest rates and foreign currency exchange rates associated primarily with outstanding and expected future issuances and borrowing, and from investments in foreign subsidiaries and affiliates.
Removed
When hedging the output of our generation assets, we utilize contract sales that lock in the spread per MWh between variable costs and the price at which the electricity can be sold. AES businesses will see changes in variable margin performance as global commodity prices shift.
Added
We enter into various transactions, including derivatives, in order to hedge our exposure to these market risks. 111 | 2023 Annual Report The disclosures presented in this Item 7A are based upon a number of assumptions; actual effects may differ.
Removed
For example, a decline in oil or natural gas prices can be accompanied by a decline in coal price if commodity prices are correlated. In aggregate, the Company's downside exposure occurs with lower power, lower oil, higher natural gas, and higher coal prices.
Added
The sensitivities are calculated using industry-standard valuation techniques to revalue all transactions (physical and financial commodity transactions) in the portfolio for a change in the underlying prices the transactions are exposed to and excludes correlation effects, including those due to renewable resource availability. The models reference market prices of commodities across future periods and associated volatility of these market prices.
Removed
Spot power prices, contract indexation provisions, and generation costs can be directly or indirectly affected by movements in the price of natural gas, oil, and coal. We have some natural offsets across our businesses such that low commodity prices may benefit certain businesses and be a cost to others. Exposures are not perfectly linear or symmetric.
Added
In California, our Southland once-through cooling generation units (“Legacy Assets”) in Long Beach and Huntington Beach have been extended to operate through 2026 under capacity contracts with the State as part of the Strategic Reserve program. Our facility in Redondo Beach has been retired effective January 1, 2024.
Removed
At Southland, our existing once-through cooling generation units (“Legacy Assets”) are permitted to operate through the end of 2023. These assets have contracts in capacity and have seen incremental value in energy revenues.
Added
Our ability to operate the Long Beach facility at full capacity through 2025 was approved under Tentative Time Schedule Order coverage in November 2023. Approval to operate Long Beach through 2026 will be subject to review with State Agencies.
Removed
Additionally, in Brazil, the hydroelectric generating facility is covered by contract sales. Under normal hydrological volatility, spot price risk is mitigated through a regulated sharing mechanism across all hydroelectric generators in the country.
Added
Our thermal asset in Panama has PPAs with distribution companies which matches the term of the LNG supply agreement of such thermal assets. New entrants into the Panama thermal generation market could impact the dispatch of existing generation, requiring purchases in the spot market to satisfy the PPA obligations.

Other AES 10-K year-over-year comparisons