1

Adjusted EPS is a non-GAAP financial measure.  See attached "Non-GAAP Measures" for definition of Adjusted EPS and a description of the adjustments to reconcile Adjusted EPS to Diluted EPS for the quarter ended June 30, 2020.

THE AES CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

(in millions, except per share amounts)

Revenue:

Regulated

$

624

$

724

$

1,336

$

1,509

Non-Regulated

1,593

1,759

3,219

3,624

Total revenue

2,217

2,483

4,555

5,133

Cost of Sales:

Regulated

(535)

(605)

(1,127)

(1,240)

Non-Regulated

(1,158)

(1,376)

(2,397)

(2,805)

Total cost of sales

(1,693)

(1,981)

(3,524)

(4,045)

Operating margin

524

502

1,031

1,088

General and administrative expenses

(40)

(49)

(78)

(95)

Interest expense

(218)

(273)

(451)

(538)

Interest income

64

82

134

161

Loss on extinguishment of debt

(40)

(51)

(41)

(61)

Other expense

(3)

(14)

(7)

(26)

Other income

9

18

54

48

Loss on disposal and sale of business interests

(27)

(3)

(27)

(7)

Asset impairment expense

—

(116)

(6)

(116)

Foreign currency transaction gains (losses)

(6)

22

18

18

Other non-operating expense

(158)

—

(202)

—

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES

105

118

425

472

Income tax expense

(113)

(57)

(202)

(172)

Net equity in earnings (losses) of affiliates

8

5

6

(1)

INCOME FROM CONTINUING OPERATIONS

—

66

229

299

Gain from disposal of discontinued businesses

3

1

3

1

NET INCOME

3

67

232

300

Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries

(86)

(50)

(171)

(129)

NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION

$

(83)

$

17

$

61

$

171

AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS:

Income (loss) from continuing operations, net of tax

$

(86)

$

16

$

58

$

170

Income from discontinued operations, net of tax

3

1

3

1

NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION

$

(83)

$

17

$

61

$

171

BASIC EARNINGS PER SHARE:

Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax

$

(0.13)

$

0.02

$

0.09

$

0.26

Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax

0.01

—

—

—

NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS

$

(0.12)

$

0.02

$

0.09

$

0.26

DILUTED EARNINGS PER SHARE:

Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax

$

(0.13)

$

0.02

$

0.09

$

0.26

Income from discontinued operations attributable to The AES Corporation common stockholders, net of tax

0.01

—

—

—

NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS

$

(0.12)

$

0.02

$

0.09

$

0.26

DILUTED SHARES OUTSTANDING

665

667

668

667

THE AES CORPORATION

Strategic Business Unit (SBU) Information

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

2020

2019

2020

2019

REVENUE

US and Utilities SBU            

$

913

$

976

$

1,884

$

1,995

South America SBU

711

765

1,423

1,610

MCAC SBU

381

478

813

928

Eurasia SBU

214

265

439

604

Corporate and Other

114

16

142

25

Eliminations

(116)

(17)

(146)

(29)

Total Revenue

$

2,217

$

2,483

$

4,555

$

5,133

THE AES CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

June 30, 2020  

December 31,2019  

(in millions, except shareand per share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

1,417

$

1,029

Restricted cash

364

336

Short-term investments

422

400

Accounts receivable, net of allowance for doubtful accounts of $18 and $20, respectively

1,414

1,479

Inventory

504

487

Prepaid expenses

92

80

Other current assets, net of allowance of $2 and $0, respectively

880

802

Current held-for-sale assets

873

618

Total current assets

5,966

5,231

NONCURRENT ASSETS

Property, Plant and Equipment:

Land

411

447

Electric generation, distribution assets and other

26,925

25,383

Accumulated depreciation

(8,623)

(8,505)

Construction in progress

4,123

5,249

Property, plant and equipment, net

22,836

22,574

Other Assets:

Investments in and advances to affiliates

802

966

Debt service reserves and other deposits

326

207

Goodwill

1,059

1,059

Other intangible assets, net of accumulated amortization of $323 and $307, respectively

566

469

Deferred income taxes

204

156

Loan receivable, net of allowance of $31 and $0, respectively

1,280

1,351

Other noncurrent assets, net of allowance of $27 and $0, respectively

1,527

1,635

Total other assets

5,764

5,843

TOTAL ASSETS

$

34,566

$

33,648

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable

$

1,207

$

1,311

Accrued interest

183

201

Accrued non-income taxes

244

253

Accrued and other liabilities

1,247

1,021

Non-recourse debt, including $340 and $337, respectively, related to variable interest entities

2,041

1,868

Current held-for-sale liabilities

526

442

Total current liabilities

5,448

5,096

NONCURRENT LIABILITIES

Recourse debt

3,693

3,391

Non-recourse debt, including $4,375 and $3,872, respectively, related to variable interest entities

15,639

14,914

Deferred income taxes

1,166

1,213

Other noncurrent liabilities

3,103

2,917

Total noncurrent liabilities

23,601

22,435

Commitments and Contingencies

Redeemable stock of subsidiaries

875

888

EQUITY

THE AES CORPORATION STOCKHOLDERS' EQUITY

Common stock ($0.01 par value, 1,200,000,000 shares authorized; 817,964,353 issued and 664,935,827 outstanding at June 30, 2020 and 817,843,916 issued and 663,952,656 outstanding at December 31, 2019)

8

8

Additional paid-in capital

7,670

7,776

Accumulated deficit

(665)

(692)

Accumulated other comprehensive loss

(2,693)

(2,229)

Treasury stock, at cost (153,028,526 and 153,891,260 shares at June 30, 2020 and December 31, 2019, respectively)

(1,858)

(1,867)

Total AES Corporation stockholders' equity

2,462

2,996

NONCONTROLLING INTERESTS

2,180

2,233

Total equity

4,642

5,229

TOTAL LIABILITIES AND EQUITY

$

34,566

$

33,648

THE AES CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended June 30,  

Six Months Ended June 30,  

2020

2019

2020

2019

(in millions)  

(in millions)  

OPERATING ACTIVITIES:

Net income

$

3

$

67

$

232

$

300

Adjustments to net income:

Depreciation and amortization

271

266

539

512

Loss on disposal and sale of business interests

27

3

27

7

Impairment expense

158

116

208

116

Deferred income taxes

52

(47)

54

15

Loss on extinguishment of debt

40

51

41

61

Loss (gain) on sale and disposal of assets

2

9

(40)

16

Other

17

44

25

143

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

10

1

(30)

10

(Increase) decrease in inventory

(69)

43

(46)

25

(Increase) decrease in prepaid expenses and other current assets

56

(21)

33

26

(Increase) decrease in other assets

4

9

(75)

11

Increase (decrease) in accounts payable and other current liabilities

18

(54)

(81)

(29)

Increase (decrease) in income tax payables, net and other tax payables

(103)

(140)

(67)

(175)

Increase (decrease) in other liabilities

(39)

(23)

—

(24)

Net cash provided by operating activities

447

324

820

1,014

INVESTING ACTIVITIES:

Capital expenditures

(386)

(566)

(962)

(1,070)

Acquisitions of business interests, net of cash and restricted cash acquired

(74)

—

(84)

—

Proceeds from the sale of business interests, net of cash and restricted cash sold

44

229

44

229

Proceeds from the sale of assets

2

17

17

17

Sale of short-term investments

87

180

341

330

Purchase of short-term investments

(186)

(204)

(463)

(424)

Contributions and loans to equity affiliates

(63)

(83)

(178)

(173)

Other investing

(50)

(23)

(76)

(22)

Net cash used in investing activities

(626)

(450)

(1,361)

(1,113)

FINANCING ACTIVITIES:

Borrowings under the revolving credit facilities

124

393

1,318

897

Repayments under the revolving credit facilities

(643)

(324)

(958)

(598)

Issuance of recourse debt

1,597

—

1,597

—

Repayments of recourse debt

(1,578)

(2)

(1,596)

(3)

Issuance of non-recourse debt

1,507

1,715

1,913

2,581

Repayments of non-recourse debt

(671)

(1,853)

(763)

(2,281)

Payments for financing fees

(41)

(33)

(46)

(37)

Distributions to noncontrolling interests

(77)

(96)

(99)

(146)

Contributions from noncontrolling interests and redeemable security holders

—

6

—

16

Dividends paid on AES common stock

(95)

(91)

(190)

(181)

Payments for financed capital expenditures

(29)

(14)

(39)

(110)

Other financing

34

5

21

(30)

Net cash provided by financing activities

128

(294)

1,158

108

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(5)

2

(37)

(2)

Increase in cash, cash equivalents and restricted cash of held-for-sale businesses

(47)

(4)

(45)

(57)

Total increase (decrease) in cash, cash equivalents and restricted cash

(103)

(422)

535

(50)

Cash, cash equivalents and restricted cash, beginning

2,210

2,375

1,572

2,003

Cash, cash equivalents and restricted cash, ending

$

2,107

$

1,953

$

2,107

$

1,953

SUPPLEMENTAL DISCLOSURES:

Cash payments for interest, net of amounts capitalized

$

295

$

309

$

458

$

478

Cash payments for income taxes, net of refunds

124

171

176

236

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Partial reinvestment of consideration from the sPower transaction

—

58

—

58

THE AES CORPORATIONNON-GAAP FINANCIAL MEASURES(Unaudited)RECONCILIATION OF ADJUSTED PRE-TAX CONTRIBUTION (PTC) AND ADJUSTED EPS

Adjusted PTC is defined as pre-tax income from continuing operations attributable to The AES Corporation excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; and (f) costs directly associated with a major restructuring program, including, but not limited to, workforce reduction efforts, relocations, and office consolidation.  Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis adjusted for the same gains or losses excluded from consolidated entities.

Adjusted EPS is defined as diluted earnings per share from continuing operations excluding gains or losses of both consolidated entities and entities accounted for under the equity method due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and the tax impact from the repatriation of sales proceeds, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; (f) costs directly associated with a major restructuring program, including, but not limited to, workforce reduction efforts, relocations, and office consolidation; and (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.

The GAAP measure most comparable to Adjusted PTC is income from continuing operations attributable to AES. The GAAP measure most comparable to Adjusted EPS is diluted earnings per share from continuing operations. We believe that Adjusted PTC and Adjusted EPS better reflect the underlying business performance of the Company and are considered in the Company's internal evaluation of financial performance. 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 and strategic decisions to dispose of or acquire business interests, retire debt or implement restructuring activities, which affect results in a given period or periods. In addition, for Adjusted PTC, earnings before tax represents the business performance of the Company before the application of statutory income tax rates and tax adjustments, including the effects of tax planning, corresponding to the various jurisdictions in which the Company operates. Adjusted PTC and Adjusted EPS should not be construed as alternatives to income from continuing operations attributable to AES and diluted earnings per share from continuing operations, which are determined in accordance with GAAP.

Three Months EndedJune 30, 2020

Three Months EndedJune 30, 2019

Six Months EndedJune 30, 2020

Six Months EndedJune 30, 2019

Net of NCI (1)

Per Share(Diluted) Netof NCI (1)

Net of NCI (1)

Per Share(Diluted) Netof NCI (1)

Net of NCI (1)

Per Share(Diluted) Netof NCI (1)

Net of NCI (1)

Per Share(Diluted) Netof NCI (1)

(in millions, except per share amounts)

Income (loss) from continuing operations, net of tax, attributable to AES and Diluted EPS

$

(86)

$

(0.13)

$

16

$

0.02

$

58

$

0.09

$

170

$

0.26

Add: Income tax expense (benefit) from continuing operations attributable to AES

81

36

136

121

Pre-tax contribution

$

(5)

$

52

$

194

$

291

Adjustments

Unrealized derivative and equity securities losses (gains)

$

14

$

0.02

$

6

$

0.01

$

(2)

$

—

$

9

$

0.01

Unrealized foreign currency losses (gains)

(12)

(0.01)

7

0.02

(3)

—

18

0.02

Disposition/acquisition losses

29

0.04

(2)

5

0.01

(3)

30

0.04

(2)

14

0.02

(3)

Impairment expense

168

0.25

(4)

121

0.18

(5)

221

0.33

(6)

123

0.18

(5)

Loss on extinguishment of debt

44

0.07

(7)

49

0.07

(8)

48

0.07

(7)

57

0.09

(8)

U.S. Tax Law Reform Impact

0.02

(9)

—

0.02

(9)

0.01

Less: Net income tax benefit

(0.01)

(10)

(0.05)

(11)

(0.01)

(10)

(0.06)

(11)

Adjusted PTC and Adjusted EPS

$

238

$

0.25

$

240

$

0.26

$

488

$

0.54

$

512

$

0.53

_____________________________

(1)

NCI is defined as Noncontrolling Interests.

(2)

Amount primarily relates to loss on sale of the Kazakhstan HPPs of $30 million, or $0.05 per share, as result of the final arbitration decision.

(3)

Amount primarily relates to loss on sale of Kilroot and Ballylumford of $31 million, or $0.05 per share, partially offset by gain on sale of a portion of our interest in sPower's operating assets of $28 million, or $0.04 per share.

(4)

Amount primarily relates to other-than-temporary impairment of OPGC of $158 million, or $0.24 per share, and impairments at our sPower equity affiliate, impacting equity earnings by $10 million, or $0.01 per share.

(5)

Amount primarily relates to asset impairments at Kilroot and Ballylumford of $115 million, or $0.17 per share.

(6)

Amount primarily relates to other-than-temporary impairment of OPGC of $201 million, or $0.30 per share, and impairments at our sPower equity affiliate, impacting equity earnings by $15 million, or $0.02 per share.

(7)

Amount primarily relates to loss on early retirement of debt at the Parent Company of $37 million, or $0.06 per share.

(8)

Amount primarily relates to loss on early retirement of debt at DPL of $45 million, or $0.07 per share.

(9)

Amount represents adjustment to tax law reform remeasurement due to incremental deferred taxes related to DPL of $16 million, or $0.02 per share.

(10)

Amount primarily relates to income tax benefits associated with the loss on early retirement of debt at the Parent Company of $11 million, or $0.02 per share.

(11)

Amount primarily relates to income tax benefits associated with the impairments at Kilroot and Ballylumford of $23 million, or $0.03 per share, and income tax benefits associated with the loss on early retirement of debt at DPL of $11 million, or $0.02 per share.