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Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
EQUITY EQUITY
Equity Units
In March 2021, the Company issued 10,430,500 Equity Units with a total notional value of $1,043 million. Each Equity Unit had a stated amount of $100 and was initially issued as a Corporate Unit, consisting of a forward stock purchase contract (“2024 Purchase Contracts”) and a 10% undivided beneficial ownership interest in one share of 0% Series A Cumulative Perpetual Convertible Preferred Stock, issued without par and with a liquidation preference of $1,000 per share (“Series A Preferred Stock”).
The Company concluded that the Equity Units should be accounted for as one unit of account based on the economic linkage between the 2024 Purchase Contracts and the Series A Preferred Stock, as well as the Company's assessment of the applicable accounting guidance relating to combining freestanding instruments. The Equity Units represent mandatorily convertible preferred stock. Accordingly, the shares associated with the combined instrument were reflected in diluted earnings per share using the if-converted method.
In conjunction with the issuance of the Equity Units, the Company received approximately $1 billion in proceeds, net of underwriting costs and commissions, before offering expenses. The proceeds for the issuance of 1,043,050 shares were attributed to the Series A Preferred Stock for $838 million and $205 million for the present value of the quarterly payments due to holders of the 2024 Purchase Contracts ("Contract Adjustment Payments"). The proceeds were used for the development of the AES renewables businesses, U.S. utility businesses, LNG infrastructure, and for other developments determined by management.
The Series A Preferred Stock did not bear any dividends and the liquidation preference of the convertible preferred stock did not accrete. The Series A Preferred Stock had no maturity date and would remain outstanding unless converted by holders or redeemed by the Company. Holders of the preferred shares had limited voting rights. The Series A Preferred Stock was pledged as collateral to support holders’ purchase obligations under the 2024 Purchase Contracts, which obligated the holders to purchase, on February 15, 2024, for a price of $100 in cash, a maximum number of 57,467,883 shares of the Company’s common stock (subject to customary anti-dilution adjustments). The initial settlement rate determining the number of shares that each holder must purchase could not exceed the maximum settlement rate and was determined over a market value averaging period preceding February 15, 2024. The initial maximum settlement rate of 3.864 was calculated using an initial reference price of $25.88, equal to the last reported sale price of the Company’s common stock on March 4, 2021. On February 15, 2024, the Series A Preferred Stock was tendered to satisfy the 2024 Purchase Contract’s settlement price and the Corporate Units were converted into shares of the Company’s common stock at the maximum settlement rate of 3.8859, equivalent to a reference price of $25.73. The Series A Preferred Stock was canceled and 40,531,845 shares of AES common stock were issued upon conversion.
The Company paid Contract Adjustment Payments to the holders of the 2024 Purchase Contracts at a rate of 6.875% per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15, commencing on May 15, 2021. The $205 million present value of the Contract Adjustment Payments at inception reduced the Series A Preferred Stock. As each quarterly Contract Adjustment Payment was made, the related liability was reduced and the difference between the cash payment and the present value accreted to interest expense, approximately $5 million over the three-year term. The final Contract Adjustment Payments were made on February 15, 2024.
Equity Transactions with Noncontrolling Interests
AES Clean Energy Tax Equity Partnerships — The majority of solar projects in the U.S. have been financed with tax equity structures, in which tax equity investors receive a portion of the economic attributes of the facilities, including tax attributes, that vary over the life of the projects.
During the nine months ended September 30, 2024 and 2023, AES Clean Energy Development and AES Renewable Holdings, through multiple transactions, sold noncontrolling interests in project companies to tax equity investors, resulting in increases to NCI of $599 million and $292 million, respectively.
In the third quarter of 2023, AES Renewable Holdings completed buyouts of tax equity partners at Buffalo Gap I, Buffalo Gap II and six other project companies, resulting in a decrease to NCI of $45 million and an increase to additional paid-in capital of $34 million. AES Clean Energy Development and AES Renewable Holdings are reported in the Renewables SBU reportable segment.
Hardy Hills Solar — In May 2024, the Hardy Hills solar project reached commercial operations and AES Indiana received an additional $47 million from the tax equity investor, resulting in an increase to NCI. AES Indiana is reported in the Utilities SBU reportable segment.
AES Puerto Rico Solar — In May 2024, AES CFE Holding II entered into an agreement for the sale of a 30% ownership interest in the Marahu project for $35 million, resulting in an increase to NCI. As the Company maintained control after this transaction, AES Puerto Rico Solar continues to be consolidated by the Company within the Renewables SBU reportable segment.
Chile Renovables — Under its renewables partnership agreement with Global Infrastructure Management, LLC (“GIP”), AES Andes will contribute a specified pipeline of renewables development projects to Chile Renovables as the projects reach commercial operations, and GIP may make additional contributions to maintain its 49% ownership interest. During the nine months ended September 30, 2023 and 2024, AES Andes completed the sale of the following projects to Chile Renovables (in millions):
Business
Transaction Period
Sale Price
Increase to Noncontrolling Interests
Decrease to Additional Paid-In Capital
Mesamávida
February 2024$40 $51 $(11)
Campo Lindo
September 202350 59 (9)
As the Company maintained control after these transactions, Chile Renovables continues to be consolidated by the Company within the Energy Infrastructure SBU reportable segment.
AES Panama — In September 2023, AES Latin America completed the sale of its interest in the Grupo Energía Gas Panamá joint venture to AES Panama, a 49%-owned consolidated subsidiary. See Note 7—Investments in and Advances to Affiliates for further information. As a result of the transaction, AES Panama received $42 million from noncontrolling interest holders and the Company reclassified accumulated other comprehensive income from AOCL to NCI of $23 million. AES Panama is reported in the Renewables SBU reportable segment however the investment in Grupo Energía Gas Panamá is reported in the Energy Infrastructure SBU reportable segment.
Accumulated Other Comprehensive Loss — The following table summarizes the changes in AOCL by component, net of tax and NCI, for the nine months ended September 30, 2024 (in millions):
Foreign currency translation adjustments, net
Change in fair value of derivatives, net
Pension adjustments, net
Change in fair value option liabilities, net
Total
Balance at the beginning of the period $(1,692)$204 $(26)$— $(1,514)
Other comprehensive income (loss) before reclassifications(102)4 — 3 (95)
Amount reclassified to earnings— 14 — — 14 
Other comprehensive income (loss)(102)18 — 3 (81)
Balance at the end of the period$(1,794)$222 $(26)$3 $(1,595)
Reclassifications out of AOCL are presented in the following table. The Company’s accounting policy for releasing the income tax effects from AOCL occurs on a portfolio basis. Amounts for the periods indicated are in millions and those in parentheses indicate debits to the Condensed Consolidated Statements of Operations:
AOCL ComponentsThree Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Derivative gains (losses), net
Non-regulated revenue$— $— $— $(8)
Non-regulated cost of sales(1)(1)(2)(2)
Interest expense3 (3)(27)13 
Gain (loss) on disposal and sale of business interests— — — 33 
Foreign currency transaction gains (losses)1 — 3 (3)
Income from continuing operations before taxes and equity in earnings of affiliates3 (4)(26)33 
Income tax expense— — 7 (11)
Net equity in losses of affiliates— 5 1 27 
Net income (loss)3 1 (18)49 
Less: Net loss (income) attributable to noncontrolling interests and redeemable stock of subsidiaries— 1 4 (4)
Net income (loss) attributable to The AES Corporation$3 $2 $(14)$45 
Common Stock Dividends — The Parent Company paid dividends of $0.1725 per outstanding share to its common stockholders during the first, second, and third quarters of 2024 for dividends declared in December 2023, February 2024, and July 2024, respectively.
On October 11, 2024, the Board of Directors declared a quarterly common stock dividend of $0.1725 per share payable on November 15, 2024, to shareholders of record at the close of business on November 1, 2024.