AES CORP

Decarbonization Initiatives

Our strategy involves shifting towards clean energy platforms, including renewable energy, energy storage, LNG, and modernized grids. It is designed to position us for continued growth while reducing our carbon intensity and in support of our mission of accelerating the future of energy, together. We have made significant progress on our exit of coal generation, and by year-end 2025 we intend to have exited the substantial majority of our coal facilities that we owned in 2022. Due to a number of factors, including grid and market dynamics, we will continue to work towards exiting coal in the limited markets where we maintain coal generation. We currently anticipate these efforts will continue beyond 2027. We expect to further reduce the carbon intensity of our operations as we add more long-term contracted renewables to the grid each year.

In addition, initiatives have been announced by regulators, including in Chile, Puerto Rico, and Bulgaria, and offtakers in recent years, with the intention of reducing GHG emissions generated by the energy industry. In parallel, the shift towards renewables has caused certain customers to migrate to other low-carbon energy solutions and this trend may continue.

Although we cannot currently estimate the financial impact of these decarbonization initiatives, new legislative or regulatory programs further restricting carbon emissions or other initiatives to voluntarily exit coal generation could require material capital expenditures, resulting in a reduction of the estimated useful life of certain coal facilities, or have other material adverse effects on our financial results.

For further information about the risks associated with decarbonization initiatives, see Item 1A.—Risk Factors—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 included in this Form 10-K.

Regulatory

FERC, RTOs and Interconnection Prioritization— On February 11, 2025, FERC approved PJM's request for a one-time change in its interconnection process to expedite the interconnection of a limited number of high-capacity resources to support near-term resource adequacy and grid reliability. This change to PJM's interconnection process is not expected to impact the PJM projects already in our backlog since they have received interconnection approvals. However, it will likely create uncertainty and delays in the time for interconnection approvals for our development pipeline of renewables projects in PJM. Other RTOs are considering similar proposals to expedite interconnection approvals for certain high-capacity resources. See Item 1A.—Risk Factors - Our development projects are subject to substantial uncertainties of this Form 10-K for further details.

U.S. Executive Orders — A recent Executive Order has required a review of all federal onshore wind leasing and federal permitting practices. In executing this order, the Department of Interior and other agencies have paused federal permitting for all wind projects on federal lands and private lands with a federal nexus, and have also paused federal permitting for solar, storage, and other renewables for 60-days. Our U.S. renewables projects are developed primarily on private land and are designed in a manner that minimizes the potential of a federal nexus. At this time, we do not expect this Order to have a significant impact on our business.

AES Maritza PPA Review — DG Comp is conducting a preliminary review of whether AES Maritza’s PPA with NEK is compliant with the European Union's State Aid rules. No formal investigation has been launched by DG Comp to date. AES Maritza has previously engaged in discussions with the DG Comp case team and the

Government of Bulgaria to attempt to reach a negotiated resolution of the DG Comp’s review ("PPA Discussions"). There are no active PPA Discussions at present but those discussions could resume at any time. The PPA continues to remain in place. 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. 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. 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. AES Maritza believes that its PPA is legal and in compliance with all applicable laws, and it will take all actions necessary to protect its interests, whether through negotiated agreement or otherwise. 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, 2024, the carrying value of our long-lived assets at Maritza is $309 million.

Foreign Exchange Rates

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 overall economic climate in Argentina has deteriorated, resulting in volatility and increased the risk that a further significant devaluation of the Argentine peso against the USD, similar to the devaluations experienced by the country in 2018, 2019, and 2023, may occur. A continued trend of peso devaluation could result in increased inflation, a deterioration of the country’s risk profile, and other adverse macroeconomic effects that could significantly impact our results of operations. For additional information, refer to Item 7A.—Quantitative and Qualitative Disclosures About Market Risk.

Impairments and Realizability

Long-lived Assets and Current Assets Held-for-Sale — During the year ended December 31, 2024, the Company recognized asset impairment expense of $374 million. See Note 23—Asset Impairment Expense included in Item 8.—Financial Statements and Supplementary Data of this Form 10-K for further information. 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 2024 totaled $124 million at December 31, 2024.

Events or changes in circumstances that may necessitate recoverability tests and potential impairments of long-lived assets may include, but are not limited to, adverse changes in the regulatory environment, unfavorable changes in power prices or fuel costs, increased competition due to additional capacity in the grid, technological advancements, declining trends in demand, evolving industry expectations to transition away from fossil fuel sources for generation, or an expectation it is more likely than not the asset will be disposed of before the end of its estimated useful life.

Tax Asset Realizability —Certain AES Chilean businesses have recorded net deferred tax assets ("DTA") of $232 million relating primarily to net operating loss carryforwards, which are not subject to expiration. Their realization is dependent on generating sufficient taxable income. At this time, management believes it is more likely than not that all of the DTA will be realized; however, it could be reduced by way of valuation allowance in the near term if estimates of future taxable income are reduced.