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Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
For further information on the Company’s derivative and hedge accounting policies, see Note 1—General and Summary of Significant Accounting Policies—Derivatives and Hedging Activities of Item 8.—Financial Statements and Supplementary Data in the 2023 Form 10-K.
Volume of Activity — The following tables present the Company’s maximum notional (in millions) over the remaining contractual period by type of derivative as of June 30, 2024, and the dates through which the maturities for each type of derivative range:
Interest Rate and Foreign Currency DerivativesMaximum Notional Translated to USDLatest Maturity
Interest rate$8,746 2059
Cross-currency swaps (Brazilian real)404 2026
Foreign currency:
Brazilian real384 2026
Chilean peso169 2027
Mexican peso99 2025
Euro80 2026
Colombian peso34 2026
Argentine peso1 2026
Commodity DerivativesMaximum NotionalLatest Maturity
Natural Gas (in MMBtu)159 2029
Power (in MWhs)50 2040
Coal (in Metric Tons)8 2027
Accounting and Reporting — Assets and Liabilities — The following tables present the fair value of the Company’s derivative assets and liabilities as of the periods indicated (in millions):
Fair ValueJune 30, 2024December 31, 2023
AssetsDesignatedNot DesignatedTotalDesignatedNot DesignatedTotal
Interest rate derivatives$322 $— $322 $184 $— $184 
Cross-currency derivatives12 — 12 — — — 
Foreign currency derivatives21 90 111 23 51 74 
Commodity derivatives— 295 295 — 128 128 
Total assets (1)
$355 $385 $740 $207 $179 $386 
Liabilities
Interest rate derivatives$18 $— $18 $108 $— $108 
Cross-currency derivatives12 — 12 63 — 63 
Foreign currency derivatives16 11 27 5 14 19 
Commodity derivatives79 238 317 107 149 256 
Total liabilities (1)
$125 $249 $374 $283 $163 $446 
June 30, 2024December 31, 2023
Fair ValueAssetsLiabilitiesAssetsLiabilities
Current$450 $193 $216 $152 
Noncurrent290 181 170 294 
Total (1)
$740 $374 $386 $446 
_____________________________
(1)Includes $111 million of derivative assets reported in Current held-for-sale assets and $116 million of derivative liabilities reported in Current held-for-sale liabilities on the Condensed Consolidated Balance Sheets related to AES Brasil as of June 30, 2024
Earnings and Other Comprehensive Income (Loss) — The following table presents the pre-tax gains (losses) recognized in AOCL and earnings on the Company’s derivative instruments for the periods indicated (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives$115 $160 $340 $22 
Foreign currency derivatives(1)4 (10)12 
Commodity derivatives— (4)28 (27)
Total$114 $160 $358 $7 
Gains (losses) reclassified from AOCL into earnings
Interest rate derivatives$(31)$13 $(30)$49 
Foreign currency derivatives1 (3)2 (3)
Commodity derivatives— (1)— 13 
Total$(30)$9 $(28)$59 
Gains (losses) on fair value hedging relationship
Cross-currency derivatives$50 $(33)$(6)$(86)
Hedged items(48)3 (5)53 
Total$2 $(30)$(11)$(33)
Gains reclassified from AOCL to earnings due to change in forecast
$11 $13 $11 $14 
Gains recognized in earnings
Not designated as hedging instruments:
Interest rate derivatives$1 $— $1 $— 
Foreign currency derivatives45 4 58 — 
Commodity derivatives and other2 126 93 191 
Total$48 $130 $152 $191 
Reclassifications from AOCL to earnings are forecasted to decrease pre-tax income from continuing operations for the twelve months ended June 30, 2025 by $16 million.
FAIR VALUE FAIR VALUE
The fair value of current financial assets and liabilities, debt service reserves, and other deposits approximate their reported carrying amounts. The estimated fair values of the Company’s assets and liabilities have been determined using available market information. Because these amounts are estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For further information on our valuation techniques and policies, see Note 5—Fair Value in Item 8.—Financial Statements and Supplementary Data of our 2023 Form 10-K.
Recurring Measurements
The following table presents, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of the dates indicated (in millions). For the Company’s investments in marketable debt securities, the security classes presented were determined based on the nature and risk of the security and are consistent with how the Company manages, monitors, and measures its marketable securities:
 June 30, 2024December 31, 2023
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
DEBT SECURITIES:
Available-for-sale:
Certificates of deposit (1)
$— $364 $— $364 $— $360 $— $360 
Government debt securities— 4 — 4 — — — — 
Total debt securities— 368 — 368 — 360 — 360 
EQUITY SECURITIES:
Mutual funds48 — — 48 46 — — 46 
Common stock
5 — — 5 — — — — 
Total equity securities53 — — 53 46 — — 46 
DERIVATIVES:
Interest rate derivatives— 322 — 322 — 182 2 184 
Cross-currency derivatives— 12 — 12 — — — — 
Foreign currency derivatives— 51 60 111 — 15 59 74 
Commodity derivatives— 291 4 295 — 127 1 128 
Total derivatives — assets (2)
— 676 64 740 — 324 62 386 
TOTAL ASSETS$53 $1,044 $64 $1,161 $46 $684 $62 $792 
Liabilities
Contingent consideration$— $— $162 $162 $— $— $165 $165 
DERIVATIVES:
Interest rate derivatives— 16 2 18 — 102 6 108 
Cross-currency derivatives— 12 — 12 — 63 — 63 
Foreign currency derivatives— 27 — 27 — 19 — 19 
Commodity derivatives— 242 75 317 — 145 111 256 
Total derivatives — liabilities (2)
— 297 77 374 — 329 117 446 
TOTAL LIABILITIES$— $297 $239 $536 $— $329 $282 $611 
_____________________________
(1)Includes $360 million reported in Current held-for-sale assets on the Condensed Consolidated Balance Sheets related to AES Brasil as of June 30, 2024.
(2)Includes $111 million of derivative assets reported in Current held-for-sale assets and $116 million of derivative liabilities reported in Current held-for-sale liabilities on the Condensed Consolidated Balance Sheets related to AES Brasil as of June 30, 2024.
As of June 30, 2024, all available-for-sale debt securities had stated maturities within one year. There were no other-than-temporary impairments of marketable securities during the three and six months ended June 30, 2024. The level 3 contingent consideration relates mainly to the acquisition of Bellefield in June 2023. Credit-related impairments are recognized in earnings under ASC 326. Gains and losses on the sale of investments are determined using the specific-identification method. The following table presents gross proceeds from the sale of available-for-sale securities during the periods indicated (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Gross proceeds from sale of available-for-sale securities$375 $370 $494 $739 
The following tables present a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2024 and 2023 (derivative balances are presented net), in millions. Transfers between Level 3 and Level 2 principally result from changes in the significance of unobservable inputs used to calculate the credit valuation adjustment.
Derivative Assets and Liabilities
Three Months Ended June 30, 2024Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at April 1, 2024
$(2)$64 $(79)$(158)$(175)
Total realized and unrealized gains (losses):
Included in earnings— 4 — (1)3 
Included in other comprehensive income (loss) — derivative activity— 2 4 — 6 
Included in other comprehensive income (loss) — foreign currency translation activity— — — 1 1 
Included in regulatory (assets) liabilities— — 5 — 5 
Acquisitions— — — (5)(5)
Settlements— (10)(1)1 (10)
Balance at June 30, 2024$(2)$60 $(71)$(162)$(175)
Total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period
$— $(3)$— $(1)$(4)
Derivative Assets and Liabilities
Three Months Ended June 30, 2023Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at April 1, 2023
$(5)$62 $(69)$(55)$(67)
Total realized and unrealized gains (losses):
Included in earnings— 7 (1)(1)5 
Included in other comprehensive income (loss) — derivative activity16 3 (10)— 9 
Included in regulatory (assets) liabilities— — 3 — 3 
Acquisitions— — — (218)(218)
Settlements(2)(9)(2)— (13)
Transfers of assets, net out of Level 3
(10)— 1 — (9)
Balance at June 30, 2023$(1)$63 $(78)$(274)$(290)
Total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period
$— $— $(2)$(1)$(3)
Derivative Assets and Liabilities
Six Months Ended June 30, 2024Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1, 2024
$(4)$59 $(110)$(165)$(220)
Total realized and unrealized gains (losses):
Included in earnings— 14 4 5 23 
Included in other comprehensive income (loss) — derivative activity2 5 32 — 39 
Included in regulatory (assets) liabilities— — 5 — 5 
Acquisitions— — — (14)(14)
Settlements— (18)(2)12 (8)
Balance at June 30, 2024$(2)$60 $(71)$(162)$(175)
Total gains for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period
$— $— $6 $5 $11 
Derivative Assets and Liabilities
Six Months Ended June 30, 2023Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1, 2023
$— $64 $(47)$(48)$(31)
Total realized and unrealized gains (losses):
Included in earnings— 6 (1)(7)(2)
Included in other comprehensive income (loss) — derivative activity— 2 (27)— (25)
Included in other comprehensive income (loss) — foreign currency translation activity— — — (1)(1)
Included in regulatory (assets) liabilities— — (2)— (2)
Acquisitions— — — (218)(218)
Settlements— (9)(2)— (11)
Transfers of assets (liabilities), net into Level 3
(1)— — — (1)
Transfers of (assets) liabilities, net out of Level 3
— — 1 — 1 
Balance at June 30, 2023$(1)$63 $(78)$(274)$(290)
Total losses for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities held at the end of the period
$— $(1)$(1)$(8)$(10)
The following table summarizes the significant unobservable inputs used for Level 3 derivative assets (liabilities) as of June 30, 2024 (in millions, except range amounts):
Type of DerivativeFair ValueUnobservable Input
Amount or Range (Average)
Interest rate$(2)Subsidiary credit spread
0.8% to 3.1% (2.2%)
Foreign currency:
Argentine peso60 Argentine peso to U.S. dollar currency exchange rate after one year
1,187 to 1,592 (1,376)
Commodity:
CAISO energy swap(75)Forward energy prices per MWh after 2030
$12.39 to $121.53 ($62.15)
Other4 
Total$(13)
For the Argentine peso foreign currency derivatives, increases in the estimate of the above exchange rate would increase the value of the derivative. For the CAISO energy swap, increases in the estimate above would decrease the value of the derivative.
Contingent consideration is primarily related to future milestone payments associated with acquisitions of renewables development projects. The estimated fair value of contingent consideration is determined using probability-weighted discounted cash flows based on internal forecasts, which are considered Level 3 inputs. Changes in Level 3 inputs, particularly changes in the probability of achieving development milestones, could result in material changes to the fair value of the contingent consideration and could materially impact the amount of expense or income recorded each reporting period. Contingent consideration is updated quarterly with any prospective changes in fair value recorded through earnings.
Nonrecurring Measurements
The Company measures fair value using the applicable fair value measurement guidance. Impairment expense, shown as pre-tax loss below, is measured by comparing the fair value at the evaluation date to the then-latest available carrying amount and is included in Asset impairment expense on the Condensed Consolidated Statements of Operations. The following table summarizes our major categories of asset groups measured at fair value on a nonrecurring basis and their level within the fair value hierarchy (in millions):
Measurement Date
Carrying Amount (1)
Fair ValuePre-tax Loss
Six Months Ended June 30, 2024Level 1Level 2Level 3
Held-for-sale businesses: (2)
Mong Duong
3/31/2024$450 $— $413 $— $37 
AES Brasil (3)
5/15/20241,556 — 1,352 — 217 
Mong Duong (4)
6/30/2024390 — 389 — 6 
Measurement Date
Carrying Amount (1)
Fair Value
Six Months Ended June 30, 2023Level 1Level 2Level 3Pre-tax Loss
Long-lived asset groups held and used:
Norgener (5)
5/1/2023$196 $— $— $24 $137 
GAF Projects (AES Renewable Holdings)5/31/202329 — — 11 18 
Held-for-sale businesses: (2)
Jordan (6)
3/31/2023$179 $— $170 $— $14 
Jordan (6)
6/30/2023179 — 170 — 15 
_____________________________
(1)Represents the carrying values of the asset groups at the dates of measurement, before fair value adjustment.
(2)See Note 18—Held-for-Sale and Dispositions for further information.
(3)The pre-tax loss recognized was calculated using the $1,352 million fair value of the AES Brasil disposal group less costs to sell of $13 million. For purposes of the impairment analysis, the Company used the carrying value of the disposal group as of April 30, 2024. A subsequent impairment analysis was performed as of June 30, 2024 and no additional impairment was identified.
(4)The pre-tax loss recognized was calculated using the $389 million fair value of the Mong Duong disposal group less costs to sell of $5 million.
(5)The Norgener asset group includes long-lived assets, inventory, land, and other working capital, however per ASC 360-10, the pre-tax impairment expense is limited to the carrying amount of the long-lived assets. See Note 16—Asset Impairment Expense for further information. The Company evaluated the carrying amount of the assets outside the scope of ASC 360-10 and determined that the carrying value of the other assets should not be reduced.
(6)The pre-tax loss recognized was calculated using the $170 million fair value of the Jordan disposal group less costs to sell of $5 million and $6 million for the March 31, 2023 and June 30, 2023 measurement dates, respectively.
The following table summarizes the significant unobservable inputs used in the Level 3 measurement of long-lived assets held and used measured on a nonrecurring basis during the six months ended June 30, 2023 (in millions, except range amounts):
Six Months Ended June 30, 2023Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
Long-lived asset groups held and used:
Norgener (1)
$24 Discounted cash flowAnnual revenue growth
(90)% to 994% (85%)
Annual variable margin
(75)% to 276% (16%)
GAF Projects (AES Renewable Holdings)11 Discounted cash flowAnnual revenue growth
(42)% to 44% (1%)
Discount rate
9%
Total$35 
_____________________________
(1)The fair value of the Norgener asset group is mainly related to existing coal inventory not subject to impairment under ASC 360-10.
Financial Instruments Not Measured at Fair Value in the Condensed Consolidated Balance Sheets
The following table presents (in millions) the carrying amount, fair value, and fair value hierarchy of the Company’s financial assets and liabilities that are not measured at fair value in the Condensed Consolidated Balance Sheets as of the periods indicated, but for which fair value is disclosed:
June 30, 2024
Carrying
Amount
Fair Value
TotalLevel 1Level 2Level 3
Assets:
Accounts receivable — noncurrent (1)
$96 $157 $— $— $157 
Liabilities:Non-recourse debt22,004 22,294 — 20,241 2,053 
Recourse debt6,146 5,896 — 5,896 — 
December 31, 2023
Carrying
Amount
Fair Value
TotalLevel 1Level 2Level 3
Assets:
Accounts receivable — noncurrent (1)
$193 $239 $— $— $239 
Liabilities:Non-recourse debt22,144 22,174 — 20,676 1,498 
Recourse debt4,464 4,210 — 4,210 — 
_____________________________
(1)These amounts primarily relate to the sale of the Redondo Beach land, the amounts impacted by the Stabilization Funds enacted by the Chilean government, and for December 31, 2023 only, the receivables under the Warrior Run PPA termination agreement. These are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets.