AES Corporation Annual Report 2020 Form 10-K (NYSE:AES) Published: February 28th, 2020 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________________________ FORM 10-K _____________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2019 -OR- ☐ TRANSITION REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-12291 THE AES CORPORATION (Exact name of registrant as specified in its charter) Delaware 54-1163725 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 4300 Wilson Boulevard Arlington, Virginia 22203 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (703) 522-1315 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.01 per share AES New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ Non-accelerated filer ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity held by non-affiliates on June 28, 2019, the last business day of the Registrant's most recently completed second fiscal quarter (based on the adjusted closing sale price of $16.38 of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately $10.87 billion. The number of shares outstanding of Registrant's Common Stock, par value $0.01 per share, on February 20, 2020 was 664,036,935. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Proxy Statement for its 2020 annual meeting of stockholders are incorporated by reference in Parts II and III The AES Corporation Fiscal Year 2019 Form 10-K Table of Contents Glossary of Terms 1 PART I 3 ITEM 1. BUSINESS 4 ITEM 1A. RISK FACTORS 51 ITEM 1B. UNRESOLVED STAFF COMMENTS 70 ITEM 2. PROPERTIES 70 ITEM 3. LEGAL PROCEEDINGS 71 ITEM 4. MINE SAFETY DISCLOSURES 74 PART II 75 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 75 ITEM 6. SELECTED FINANCIAL DATA 76 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 78 Executive Summary 78 Review of Consolidated Results of Operations 79 SBU Performance Analysis 87 Key Trends and Uncertainties 95 Capital Resources and Liquidity 98 Critical Accounting Policies and Estimates 109 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 113 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 116 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 124 Note 2 - Inventory 136 Note 3 - Property, Plant and Equipment 136 Note 4 - Asset Retirement Obligation s 137 Note 5 - Fair Value 138 Note 6 - Derivative Instruments and Hedging Activities 143 Note 7 - Financing Receivables 144 Note 8 - Investments in and Advances to Affiliates 145 Note 9 - Goodwill and Other Intangible Assets 147 Note 10 - Regulatory Assets and Liabilities 149 Note 11 - Debt 150 Note 12 - Commitments 153 Note 13 - Contingencies 154 Note 14 - Leases 155 Note 15 - Benefit Plans 156 Note 16 - Redeemable Stock of Subsidiaries 160 Note 17 - Equity 160 Note 18 - Segments and Geographic Information 162 Note 19 - Share-Based Compensation 165 Note 20 - Revenue 166 Note 21 - Other Income and Expense 167 Note 22 - Asset Impairment Expense 167 Note 23 - Income Taxes 169 Note 24 - Discontinued Operations 173 Note 25 - Held-for-Sale and Dispositions 174 Note 26 - Acquisitions 176 Note 27 - Earnings Per Share 177 Note 28 - Risks and Uncertainties 177 Note 29 - Related Party Transactions 179 Note 30 - Selected Quarterly Financial Data (Unaudited) 180 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 181 ITEM 9A. CONTROLS AND PROCEDURES 181 ITEM 9B. OTHER INFORMATION 184 PART III 185 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 185 ITEM 11. EXECUTIVE COMPENSATION 185 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 185 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE 186 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 186 PART IV - ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE 187 SIGNATURES 190 1 | 2019 Annual Report Glossary of Terms The following terms and abbreviations appear in the text of this report and have the definitions indicated below: Adjusted EPS Adjusted Earnings Per Share, a non-GAAP measure Adjusted PTC Adjusted Pre-tax Contribution, a non-GAAP measure of operating performance AES The Parent Company and its subsidiaries and affiliates AFUDC Allowance for Funds Used During Construction AOCL Accumulated Other Comprehensive Loss ASC Accounting Standards Codification ASEP National Authority of Public Services in Panama BACT Best Available Control Technology BART Best Available Retrofit Technology BOT Build, Operate and Transfer BTA Best Technology Available CAA U.S. Clean Air Act CAMMESA Wholesale Electric Market Administrator in Argentina CCGT Combined Cycle Gas Turbine CCR Coal Combustion Residuals, which includes bottom ash, fly ash and air pollution control wastes generated at coal-fired generation plant sites CDPQ La Caisse de dépôt et placement du Quebéc CEN Coordinador Electrico Nacional in Chile CEO Chief Executive Officer CFE Federal Electricity Commission in Mexico CHP Combined Heat and Power CO2 Carbon Dioxide COSO Committee of Sponsoring Organizations of the Treadway Commission CPI U.S. Consumer Price Index CPP U.S. Clean Power Plan CREG Regulatory commission of energy and gas in Colombia CRES Competitive Retail Electric Service CSAPR U.S. Cross-State Air Pollution Rule CTNG Compañia Transmisora del Norte Grande CWA U.S. Clean Water Act DG Comp Directorate-General for Competition of the European Commission DMR Distribution Modernization Rider DP&L The Dayton Power & Light Company DPL DPL Inc. DPP Dominican Power Partners EPA U.S. Environmental Protection Agency EPC Engineering, Procurement, and Construction ERCOT Electric Reliability Council of Texas ESP Electric Security Plan EU European Union EURIBOR Euro Inter Bank Offered Rate EUSGU Electric Utility Steam Generating Unit EVN Electricity of Vietnam FERC U.S. Federal Energy Regulatory Commission FGD Flue gas desulphurization FONINVEMEM Fund for the Investment Needed to Increase the Supply of Electricity in the Wholesale Market in Argentina FPA U.S. Federal Power Act FX Foreign Exchange GAAP Generally Accepted Accounting Principles in the United States GDPR EU General Data Protection Regulation GHG Greenhouse Gas GILTI Global Intangible Low Taxed Income GRIDCO Grid Corporation of Odisha Ltd. GWh Gigawatt Hours HLBV Hypothetical Liquidation Book Value IDEM Indiana Department of Environmental Management ITC Imputed Tax Credit IPALCO IPALCO Enterprises, Inc. IPL Indianapolis Power & Light Company IPP Independent Power Producers I-SEM Integrated Single Electricity Market in Ireland ISO Independent System Operator IURC Indiana Utility Regulatory Commission LIBOR London Inter Bank Offered Rate 2 | 2019 Annual Report LNG Liquefied Natural Gas MISO Midcontinent Independent System Operator, Inc. MRE Energy Reallocation Mechanism MW Megawatts MWh Megawatt Hours NAAQS U.S. National Ambient Air Quality Standards NCI Noncontrolling Interest NCRE Non-Conventional Renewable Energy NEK Natsionalna