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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2025
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 2024 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 March 31, 2025, and the dates through which the maturities for each type of derivative range:
Interest Rate and Foreign Currency DerivativesMaximum Notional Translated to USD
Latest Maturity(1)
Interest rate$10,020 2058
Foreign currency:
Chilean peso105 2027
Euro97 2026
Colombian peso83 2027
Mexican peso70 2026
Commodity DerivativesMaximum NotionalLatest Maturity
Natural Gas (in MMBtu)221 2029
Power (in MWhs) (2)
62 2040
Coal (in Metric Tons)8 2028
_____________________________
(1)Maturity dates are consistent for both designated and non-designated positions.
(2)Includes one contract designated as a cash flow hedge with a final maturity date in 2038.
Accounting and Reporting — Assets and Liabilities — The following tables present the fair value of the Company’s derivative assets and liabilities as of the dates indicated (in millions):
Fair ValueMarch 31, 2025December 31, 2024
AssetsDesignatedNot DesignatedTotalDesignatedNot DesignatedTotal
Interest rate derivatives$202 $— $202 $349 $— $349 
Foreign currency derivatives12 37 49 16 45 61 
Commodity derivatives4 300 304 4 274 278 
Total assets (1)
$218 $337 $555 $369 $319 $688 
Liabilities
Interest rate derivatives$64 $— $64 $15 $— $15 
Foreign currency derivatives6 9 15 10 8 18 
Commodity derivatives3 238 241 29 226 255 
Total liabilities (1)
$73 $247 $320 $54 $234 $288 
March 31, 2025December 31, 2024
Fair ValueAssetsLiabilitiesAssetsLiabilities
Current$344 $206 $369 $170 
Noncurrent211 114 319 118 
Total (1)
$555 $320 $688 $288 
_____________________________
(1)Includes $1 million and $3 million of derivative assets reported in Current held-for-sale assets and $8 million and $3 million of derivative liabilities reported in Current held-for-sale liabilities on the Condensed Consolidated Balance Sheets related to Dominican Republic Renewables as of March 31, 2025 and December 31, 2024, respectively.
Earnings and Other Comprehensive Income (Loss) — The following table presents the pre-tax gains (losses) recognized in AOCL and earnings related to all derivative instruments for the periods indicated (in millions):
Three Months Ended March 31,
20252024
Cash flow hedges
Gains (losses) recognized in AOCL
Interest rate derivatives$(166)$225 
Foreign currency derivatives4 (9)
Commodity derivatives30 28 
Total$(132)$244 
Gains reclassified from AOCL into earnings
Interest rate derivatives — Interest expense
$15 $1 
Foreign currency derivatives — Foreign currency transaction gains (losses)
3 1 
Commodity derivatives — Cost of sales—Non-Regulated
2 — 
Total$20 $2 
Gains (losses) on fair value hedging relationships
Cross-currency derivatives
Derivatives designated as hedging instruments$— $(56)
Hedged items— 43 
Total$— $(13)
Gains reclassified from AOCL to earnings due to change in forecast
$8 $— 
Gain (losses) recognized in earnings related to
Not designated as hedging instruments:
Foreign currency derivatives — Foreign currency transaction gains (losses)$(2)$13 
Commodity derivatives — Revenue—Non-Regulated23 95 
Commodity derivatives — Cost of sales—Non-Regulated(5)(4)
Total$16 $104 
Reclassifications from AOCL to earnings are forecasted to increase pre-tax income from continuing operations by $2 million for the twelve months ended March 31, 2026, primarily related to interest rate derivatives.
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 2024 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:
 March 31, 2025December 31, 2024
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
DEBT SECURITIES:
Available-for-sale:
Certificates of deposit
$— $3 $— $3 $— $4 $— $4 
Government debt securities— 4 — 4 — 4 — 4 
Total debt securities— 7 — 7 — 8 — 8 
EQUITY SECURITIES:
Mutual funds49 — — 49 51 — — 51 
Common stock
2 — — 2 4 — — 4 
Total equity securities51 — — 51 55 — — 55 
DERIVATIVES:
Interest rate derivatives— 202 — 202 — 349 — 349 
Foreign currency derivatives— 6 43 49 — 9 52 61 
Commodity derivatives207 92 5 304 193 80 5 278 
Total derivatives — assets (1)
207 300 48 555 193 438 57 688 
TOTAL ASSETS$258 $307 $48 $613 $248 $446 $57 $751 
Liabilities
Contingent consideration (2)
$— $— $173 $173 $— $— $145 $145 
DERIVATIVES:
Interest rate derivatives— 62 2 64 — 14 1 15 
Foreign currency derivatives— 15 — 15 — 18 — 18 
Commodity derivatives199 39 3 241 185 44 26 255 
Total derivatives — liabilities (1)
199 116 5 320 185 76 27 288 
TOTAL LIABILITIES$199 $116 $178 $493 $185 $76 $172 $433 
_____________________________
(1)Includes $1 million and $3 million of derivative assets reported in Current held-for-sale assets and $8 million and $3 million of derivative liabilities reported in Current held-for-sale liabilities on the Condensed Consolidated Balance Sheets related to Dominican Republic Renewables as of March 31, 2025 and December 31, 2024, respectively.
(2)The level 3 contingent consideration is mainly related to the acquisition of Bellefield in June 2023.
As of March 31, 2025, all available-for-sale debt securities had stated maturities within one year. For the three months ended March 31, 2025, no impairments of marketable securities were recognized in earnings or other comprehensive income (loss). Credit-related impairments are recognized as an allowance with a corresponding impact recognized as a credit loss in Other expense. Gains and losses on sales of investments are determined using the specific identification method. The following table presents gross proceeds from the sale of available-for-sale securities for the periods indicated (in millions):
Three Months Ended March 31,
20252024
Gross proceeds from sale of available-for-sale securities$3 $119 
The Company accounts for equity securities without readily determinable fair values using the measurement alternative in accordance with ASC 321. These securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. As of both March 31, 2025 and December 31, 2024, the carrying amount of equity securities accounted for using the measurement alternative was $62 million, inclusive of $22 million of cumulative upward adjustments recorded in Other income in prior years to reflect observable price changes.
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 months ended March 31, 2025 and 2024 (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 March 31, 2025Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1, 2025
$(1)$52 $(21)$(145)$(115)
Total realized and unrealized gains (losses):
Included in earnings— 1 — (38)(37)
Included in other comprehensive income (loss) — derivative activity(1)— 26 — 25 
Settlements— (10)(1)10 (1)
Transfers of assets (liabilities), net into Level 3— — (2)— (2)
Balance at March 31, 2025$(2)$43 $2 $(173)$(130)
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
$— $(6)$— $(38)$(44)
Derivative Assets and Liabilities
Three Months Ended March 31, 2024Interest RateForeign CurrencyCommodityContingent ConsiderationTotal
Balance at January 1, 2024
$(4)$59 $(110)$(165)$(220)
Total realized and unrealized gains (losses):
Included in earnings— 10 4 6 20 
Included in other comprehensive income (loss) — derivative activity8 4 28 — 40 
Included in other comprehensive income (loss) — foreign currency translation activity— — — (1)(1)
Acquisitions— — — (9)(9)
Settlements(1)(9)(1)11 — 
Transfers of (assets) liabilities, net out of Level 3
(5)— — — (5)
Balance at March 31, 2024$(2)$64 $(79)$(158)$(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
$— $3 $6 $6 $15 
The following table summarizes the significant unobservable inputs used to value Level 3 derivative assets (liabilities) as of March 31, 2025 (in millions, except range amounts):
Type of DerivativeFair ValueUnobservable Input
Amount or Range (Average)
Interest rate$(2)
Subsidiary credit spread
0.5% to 3.2% (1.9%)
Foreign currency:
Argentine peso43 
Argentine peso to USD currency exchange rate after one year
1,328 to 1,342 (1,335)
Commodity:
CAISO energy swap4 
Forward CAISO energy prices per MWh after 2031
$7.89 to $132.30 ($65.53)
MISO energy swap(2)
Forward MISO energy prices per MWh after 2031
$23.83 to $75.68 ($43.19)
Total$43 
For the Argentine peso foreign currency derivatives, increases (decreases) in the estimate of the above exchange rate would increase (decrease) the value of the derivative. For the CAISO and MISO energy swap, increases (decreases) in the estimate above would decrease (increase) 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. Gains and losses on the remeasurement of contingent consideration are recognized in Other income and Other expense, respectively, on the Condensed Consolidated Statements of Operations.
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
Three Months Ended March 31, 2025Level 1Level 2Level 3
Held-for-sale businesses: (2)
Mong Duong (3)
3/31/2025$383 $— $371 $— $17 
Measurement Date
Carrying Amount (1)
Fair Value
Three Months Ended March 31, 2024Level 1Level 2Level 3Pre-tax Loss
Held-for-sale businesses: (2)
Mong Duong3/31/2024$450 $— $413 $— $37 
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(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 fair value of the Mong Duong disposal group less costs to sell of $5 million.
AES Clean Energy Development Projects — On a quarterly basis, the Company reviews the status of development projects to identify projects that are no longer viable and will be abandoned. The fair value of each abandoned project with no salvage value is determined to be zero as there are no future projected cash flows, resulting in a full write-off of the carrying value of project development intangibles and capitalized development costs incurred.
The Company recognized $31 million and $7 million of pre-tax asset impairment expense related to AES Clean Energy Development Projects during the three months ended March 31, 2025 and 2024, respectively. See Note 16—Asset Impairment Expense for further information.
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 dates indicated, but for which fair value is disclosed:
March 31, 2025
Carrying
Amount
Fair Value
TotalLevel 1Level 2Level 3
Assets:
Accounts receivable — noncurrent (1)
$90 $197 $— $— $197 
Liabilities:Non-recourse debt24,007 24,559 — 22,073 2,486 
Recourse debt5,978 4,871 — 4,871 — 
December 31, 2024
Carrying
Amount
Fair Value
TotalLevel 1Level 2Level 3
Assets:
Accounts receivable — noncurrent (1)
$87 $171 $— $— $171 
Liabilities:Non-recourse debt22,743 23,066 — 20,981 2,085 
Recourse debt5,704 4,538 — 4,538 — 
_____________________________
(1)These amounts primarily relate to the sale of the Redondo Beach land, payment deferrals granted to mining customers as part of our green blend agreements in Chile, and fair value of the Argentine FONINVEMEM receivables. These are included in Other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. See Note 5—Financing Receivables for further information.