2019 Annual Report 2019 Annual Report | Executive Summary Leading the transition to the future of energy Energy fuels life, powers business and sustains growth. At AES, we believe it’s our responsibility to create solutions that are both economically and environmentally viable. We partner with our customers to strategically transition to the future while continuing to meet their energy needs today. Working together with you, we’re improving lives by delivering greener, smarter energy solutions the world needs. AES Targets Reducing Its Coal Generation to Less Than 30% by 2020 FUEL SOURCE BY CAPACITY Targeting to reduce generation (MWh) from coal Capacity by Renewables 32% technology as of Target December 31, Gas 31% Year-End 2020 < 30% 2019 Coal 34% 2030 <10% Other 3% Backlog of projects under construction or under signed long-term contracts As of December 31, 2019 Capacity by MW Under construction 3,009 Signed long-term PPAs 3,136 2 2019 AES ANNUAL REPORT 2019 Annual Report | Executive Summary Delivering Superior Results 2019 Adjusted EPS1 of $1.36 vs. guidance 2019 Parent Free Cash Flow2 of $726 million vs. of $1.28-$1.40 expectation of $700-$750 million $1.28 $1.40 $700M $750M $1.36 $726M Upgraded to an investment Shareholder returns grade rating in 2019 2018-2019 Total Shareholder Returns 2016 2019 Adjusted EPS by year 97.6% Fitch BB- BBB- 2017 $1.08 Moody’s BA3 BA1 2018 $1.24 25.7% 31.5% S&P BB BB+ 2019 $1.36 AES S&P 500 S&P Utilities Our leadership is recognized 1 A non-GAAP measure. See Fianancial Notes on page 9 for definition and reconciliation to the nearest GAAP number. 2 Parent Free Cash Flow (a non-GAAP financial measure) should not be construed as an alternate to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Parent Free Cash Flow is equal to Subsidiary Distribution less cash used for interest costs, general and administrative activities, and tax payments by the parent company. Parent Free Cash Flow is used for dividends, share repurchases, growth investments, recourse debt repayments, and other uses by the parent company. 2019 AES ANNUAL REPORT 3 2019 Annual Report | Letter to AES Shareholders Chairman and CEO Letter to AES Shareholders Energy fuels life, powers business and sustains growth. We Sustainable Growth need to ensure our energy solutions are both economically and Through our presence in key growth markets, we are well- environmentally sustainable as we continue to electrify more of positioned to lead the global transition toward a more sustainable our lives. At AES, we’ve been partnering with our customers power generation mix. We are taking advantage of favorable to strategically transition to new solutions for the future while trends in clean power generation, where we see the opportunity continuing to meet their energy needs today. for 30 GW of annual new capacity additions in our markets. Our robust backlog of projects with signed Power Purchase In 2019, we achieved important strategic and financial goals Agreements (PPA), which includes projects under construction, and laid the foundation for strong growth in the coming decade. continues to increase as we capitalize on the growth across these We are leading the energy transition by investing in sustainable markets. In 2019, we signed long-term PPAs for 2.8 GW, bringing growth and innovative solutions to deliver superior results. our backlog to 6.1 GW. This pace puts us on track to nearly triple our portfolio of renewables to 22 GW by the end of 2024 versus 2016. Some key highlights for 2019 included: • Earning Adjusted EPS of $1.36 for the full year, which was As we are growing our backlog of renewable projects, we are 10% higher than 2018; making substantial progress on our large-scale projects under construction. Our 1.3 GW Southland Repowering project • Reaffirming our 7% to 9% average annual growth target for achieved commercial operations in February 2020. Completed both Adjusted EPS and Parent Free Cash Flow through 2022; ahead of time and slightly under budget, the project is helping to • Reducing our Parent debt by almost half compared to support the reliability of the grid in Southern California. 2011, and as a result, for the first time in AES’ history, being upgraded to an investment grade rating; The remaining 1.7 GW under construction are hydro, wind, solar and energy storage. The majority of this capacity is expected to • Completing construction of 2.2 GW of new projects and come on-line in 2020. signing 2.8 GW of renewable contracts, bringing our backlog to 6.1 GW; AES Gener, which is one of our most important businesses, is transforming its portfolio by growing its wind and solar businesses • Achieving critical milestones toward expanding our LNG infrastructure in the Dominican Republic, Panama and Vietnam; • Helping accelerate a broader adoption of clean energy, through innovative energy solutions delivered through Fluence, Uplight, and our strategic alliance with Google; and, • Announcing our target to reduce our coal-fired generation to below 30%, measured by MWh, by year-end 2020, and to less than 10% by 2030. 4 2019 AES ANNUAL REPORT 2019 Annual Report | Letter to AES Shareholders and strengthening its balance sheet. Under its “Green Blend more cost-effective energy for their people today, and tomorrow and Extend” strategy, AES Gener is negotiating new long-term while providing 20-year, US Dollar-denominated contracts with no renewable PPAs with existing customers, which preserves the commodity exposure. value of its thermal contracts and creates incremental value with long-term contracted renewables. Customers receive We’re also helping the Dominican Republic continue to transform carbon-free energy at less than the marginal cost of thermal its energy matrix through a joint venture with other local power, enabling them to meet their sustainability goals and generators in the country to build a second LNG storage tank, affordable energy needs. expanding our capacity in the Dominican Republic by 80%, or an additional 50 TBTU. We have already signed, or are in advanced In 2018, AES Gener announced its “Green Blend and Extend” negotiations for, 30 TBTU of this additional storage capacity under strategy, and since then, it has executed 2.5 GW of long-term long-term, US Dollar-denominated contracts. renewable contracts, the majority of which were signed in the last 12 months. As a result, AES Gener has significantly diversified In addition to our 6.1 GW backlog, the 2 to 3 GW of annual its generation mix and has positioned itself to deliver attractive renewables PPAs we expect to sign, and our expanding LNG long-term growth. Specifically, these new contracts will more infrastructure, we see opportunities for attractive investments than double its renewable capacity and largely offset the roll-off of that are not currently in our forecast, including potential rate legacy contracts in Chile through 2024. In Colombia, AES Gener base growth at our US utilities, DPL and IPL, as well as more is successfully expanding from a single hydro asset to a broader renewables and energy storage. portfolio which will include wind and solar. Innovative Solutions AES Gener will primarily serve its “Green Blend and Extend” At AES we work to find better ways of serving the energy sector. contracts through a combination of 1.6 GW of new renewable Throughout our history, we’ve connected proven technologies capacity and its existing portfolio. In addition to this new capacity, with innovative commercial models to bring dependable, cost- the Alto Maipo hydroelectric complex is on track to come on-line effective energy to more people. We are developing new solutions by the end of this year, and will help to supply these new PPAs. that meet increasing customer demand for 24/7 renewable power and greater energy efficiency. Our focus is on solutions that are Our LNG infrastructure business is complementary to our scalable, relatively capital-light, and allow us to work with our renewables growth strategy as it brings cleaner, predictable and customers to co-create applications that meet their most critical low-cost fuel that offers capacity and flexibility to the system. We energy needs. are focusing our LNG business in three markets: the Caribbean, Central America, and Southeast Asia. In all these markets, we Today, we are seeing that nearly half of all solar projects in the US see rapidly growing demand for natural gas as it replaces higher- include a storage component. AES’ success as a leader in solar cost and more carbon intensive diesel and fuel oil generation. plus storage was recognized in 2019, when we were awarded our industry’s top honor – the Edison Electric Institute’s (EEI) Edison In 2019, we received approval from the Government of Vietnam Award. We were honored for our innovation in advancing round- to develop and build the 2.2 GW Son My 2 Combined Cycle the-clock renewables at our Lāwa’i project in Hawaii. We have Gas Turbine (CCGT) project, alongside our previously approved several other solar plus storage projects under construction or 480 TBTU LNG regasification and storage terminal. The new signed PPAs that we expect to complete in the next few years. project brings Vietnam closer to its goals of more sustainable, 2019 AES ANNUAL REPORT 5 2019 Annual Report | Letter to AES Shareholders A key innovation platform for us is our energy storage business, Superior Results Fluence, which continues to be the global market leader. Through As we invest in sustainable growth and offer innovative solutions this partnership with Siemens, we are well-positioned to benefit to our customers, we are transforming our portfolio to be resilient from the expected 15 to 20 GW of annual growth in energy and to continue achieving superior financial results.