AES(US:AES)2025-08-01 20:16Part I Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025, show a decrease in total revenue and a shift from net income to a net loss compared to the same period in 2024 Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $48.54 billion, a slight increase from $47.41 billion at December 31, 2024 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $6,320 | $6,831 | | Total Noncurrent Assets | $42,222 | $40,575 | | Total Assets | $48,542 | $47,406 | | Total Current Liabilities | $7,679 | $8,571 | | Total Noncurrent Liabilities | $31,001 | $30,193 | | Total Liabilities | $38,680 | $38,764 | | Total Equity | $7,683 | $7,704 | | Total Liabilities and Equity | $48,542 | $47,406 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported a net loss of $150 million, a significant downturn from a net income of $153 million in the same period of 2024 Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,855 | $2,942 | $5,781 | $6,027 | | Operating Margin | $453 | $553 | $894 | $1,172 | | Net Income (Loss) | $(150) | $153 | $(223) | $431 | | Net Income (Loss) Attributable to AES | $(95) | $276 | $(49) | $708 | | Diluted EPS | $(0.15) | $0.39 | $(0.08) | $0.99 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities significantly increased to $1.52 billion from $679 million in the prior year Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,521 | $679 | | Net cash used in investing activities | $(2,882) | $(4,224) | | Net cash provided by financing activities | $1,462 | $3,759 | | Total increase in cash | $162 | $158 | Notes to Condensed Consolidated Financial Statements The notes detail key accounting policies and transactions, including a restructuring program, debt financing, asset impairments, and segment reporting updates - The company initiated a restructuring program in February 2025 to streamline its organization, resulting in pre-tax charges of $52 million for the first six months of 2025190 - A significant asset impairment reversal of $243 million was recorded for the Mong Duong asset group after it was reclassified from held-for-sale to held-and-used. Conversely, impairment expenses of $117 million were recognized for AES Clean Energy Development projects162163166 - The company sold 50% of its interest in Dominican Republic Renewables in June 2025 for $103 million, resulting in a pre-tax gain of $70 million174 - The company changed its segment reporting in Q1 2025, moving the results of its businesses in Chile (excluding two coal plants) from the Energy Infrastructure SBU to the Renewables SBU130 Management's Discussion and Analysis (MD&A) Management discusses a decrease in net income for Q2 and H1 2025 compared to 2024, primarily due to higher income tax expense, losses on sales-type leases, and lower earnings from the Energy Infrastructure SBU Executive Summary In Q2 2025, net income decreased by $303 million year-over-year to a loss of $150 million, while Adjusted EBITDA rose by $23 million to $681 million Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Loss) | ($150M) | $153M | ($303M) | | Diluted EPS | ($0.15) | $0.39 | ($0.54) | | Adjusted EBITDA (Non-GAAP) | $681M | $658M | +$23M | | Adjusted EPS (Non-GAAP) | $0.51 | $0.38 | +$0.13 | H1 2025 vs H1 2024 Performance | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Loss) | ($223M) | $431M | ($654M) | | Diluted EPS | ($0.08) | $0.99 | ($1.07) | | Adjusted EBITDA (Non-GAAP) | $1,272M | $1,298M | ($26M) | | Adjusted EPS (Non-GAAP) | $0.78 | $0.89 | ($0.11) | Review of Consolidated Results of Operations Consolidated revenue for Q2 2025 decreased by 3% to $2.86 billion, and operating margin fell 18% to $453 million compared to Q2 2024 - Q2 2025 revenue decreased by $87 million (3%) YoY, largely due to a $156 million decline in the Energy Infrastructure SBU, partially offset by a $58 million increase in Utilities and a $25 million increase in Renewables224 - Q2 2025 operating margin decreased by $100 million (18%) YoY, with declines of $82 million in Energy Infrastructure, $20 million in Utilities, and $15 million in Renewables226 - A significant driver for the decline in Energy Infrastructure results was the prior year revenue of $64 million from the monetization of the Warrior Run coal plant PPA224229 - Asset impairment reversals of $154 million in Q2 2025, compared to an expense of $38 million in Q2 2024, were primarily due to a $243 million reversal for the Mong Duong asset group254 SBU Performance Analysis In Q2 2025, the Renewables SBU showed strong growth with Adjusted EBITDA increasing 56% to $240 million, while Utilities and Energy Infrastructure SBUs saw declines Adjusted EBITDA by SBU (in millions) | SBU | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Renewables | $240 | $154 | 56% | $401 | $265 | 51% | | Utilities | $196 | $214 | -8% | $419 | $396 | 6% | | Energy Infrastructure | $254 | $303 | -16% | $508 | $659 | -23% | | New Energy Technologies | ($17) | ($14) | -21% | ($42) | ($31) | -35% | - Renewables SBU growth was driven by new projects coming online and lower costs after restructuring, partially offset by the sale of AES Brasil301302 - Utilities SBU performance was impacted by planned outages and the selldown of AES Ohio, though H1 results were boosted by higher retail rates from the 2024 Base Rate Order309310312 - Energy Infrastructure SBU decline was mainly due to higher prior-year revenues from the monetization of the Warrior Run PPA and prior-year derivative gains315317 Key Trends and Uncertainties The company faces key trends and uncertainties including supply chain issues, U.S. tax law changes, decarbonization initiatives, and regulatory matters - Supply Chain: The company has managed risks from tariffs and trade restrictions by contracting and importing all solar panels and batteries needed for 2025 U.S. projects and has secured U.S. or allied-sourced supply for its 2026-2027 backlog335336337338 - U.S. Tax Law: The 2025 Act amends and phases out certain renewable energy tax credits (ITC/PTC). While the company expects its project backlog to qualify, new Treasury guidance and restrictions on foreign entities of concern (FEOC) create uncertainty348350351353 - Decarbonization: AES intends to exit the substantial majority of its coal facilities by year-end 2025, but efforts in some markets will continue beyond 2027 due to grid and market dynamics378 - Regulatory: AES Ohio withdrew its Smart Grid Phase 2 application due to new legislation (H.B. 15) and has a distribution rate case pending. AES Indiana filed a new rate case in June 2025 seeking a phased revenue increase385386388 Capital Resources and Liquidity As of June 30, 2025, AES had $1.4 billion in unrestricted cash and total Parent Company Liquidity of $2.2 billion, with total debt outstanding of $29.7 billion Parent Company Liquidity (in millions) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Parent Co. & qualified holding co. cash | $9 | $265 | | Available borrowings under credit facilities | $2,185 | $1,782 | | Total Parent Company Liquidity | $2,194 | $2,047 | - As of June 30, 2025, total outstanding debt was approximately $29.7 billion, comprising $23.9 billion in non-recourse debt and $5.8 billion in recourse debt414 - Primary cash uses in H1 2025 were capital expenditures ($2.6B), repayments under revolving credit facilities ($2.4B), and repayments of non-recourse debt ($1.5B)425427 - $175 million of subsidiary non-recourse debt is in default as of June 30, 2025, primarily related to AES Puerto Rico (payment default) and technical defaults at AES Ilumina and AES Jordan Solar. These defaults do not currently trigger cross-defaults at the Parent Company level414449450 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from commodity prices, interest rates, and foreign currency exchange rates, which are managed through hedging strategies - Primary market risks are commodity prices, interest rates, and foreign currency exchange rates453 - As of June 30, 2025, a 10% increase in commodity prices is projected to result in a pre-tax earnings gain of less than $5 million for power and gas, and a loss of less than $5 million for coal457 - The company has material unhedged forward-looking earnings exposure to the Argentine peso. A 10% USD appreciation against other key currencies (Colombian peso, Euro, Argentine peso) would result in a potential loss of less than $5 million on cash distributions464 - A one-time 100-basis-point increase in interest rates would result in less than a $5 million pre-tax earnings impact on interest expense for 2025468 Controls and Procedures The company's CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a previously disclosed material weakness - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025470 - The ineffectiveness is due to a previously identified material weakness related to the impairment calculation for the AES Brasil disposition in Q2 2024471 - Remediation actions, including policy updates and training, have been implemented but are pending testing to confirm operating effectiveness473474475 Part II Legal Proceedings The company is involved in several legal proceedings, including arbitration in India, environmental actions in Brazil, and lawsuits in the Dominican Republic - A lawsuit in the Dominican Republic alleges personal injuries from CCRs delivered in 2003-2004 and demands over $900 million in damages. A lower court dismissed the case, but the claimants have appealed484 - Another lawsuit in the Dominican Republic related to CCRs demands over $600 million. The company's motion to dismiss is under consideration487 - In Brazil, AES faces a public civil action related to contamination at a former pole factory, with estimated remediation costs of $3 million to $11 million480 - The company and its subsidiary are named as defendants in a putative securities class action lawsuit against Fluence Energy, Inc., alleging violations of the Securities Exchange Act. The company has filed a motion to dismiss491 Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its 2024 Form 10-K - There have been no material changes to the risk factors disclosed in the 2024 Form 10-K494 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any of its common stock during the second quarter of 2025, with $264 million remaining available for future repurchases - No shares of AES Common Stock were repurchased during the second quarter of 2025495 - As of June 30, 2025, $264 million remained available for future repurchases under the company's stock buyback program495