Contingencies and Commitments

9 Months Ended

Sep. 30, 2025

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Parent Guarantees, Letters of Credit, and Commitments — In connection with certain project financings (including tax equity transactions), acquisitions and dispositions, power purchases, EPC contracts, and other agreements, the Parent Company has expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events. In the normal course of business, the Parent Company has entered into various agreements, mainly guarantees and letters of credit, to provide financial or performance assurance to third parties on behalf of AES businesses. It is unlikely that the Parent Company would be required to perform or otherwise incur any material losses associated with guarantees of its subsidiaries’ obligations. These agreements are entered into primarily to support or enhance the creditworthiness otherwise achieved by a business on a stand-alone basis, thereby facilitating the availability of sufficient credit to accomplish their intended business purposes. Most of the contingent obligations relate to future performance commitments which the Company or its businesses expect to fulfill within the normal course of business. Our tax equity and tax credit transfer guarantees typically consist of standard indemnifications of tax equity partners or tax credit purchasers in the event that an adverse determination arises due to a recapture event, tax controversy, or any breach by the AES project company of the representations in the shared equity agreement. The expiration dates of these guarantees vary from less than 1 year to no more than 33 years.

The following table summarizes the Parent Company’s contingent contractual obligations as of September 30, 2025. Amounts presented in the following table represent the Parent Company’s current undiscounted exposure to guarantees and the range of maximum undiscounted potential exposure per individual agreement. The maximum exposure is not reduced by the amounts, if any, that could be recovered under the recourse or collateralization provisions in the guarantees.


Contingent Contractual Obligations	Maximum Exposure (in millions)		Number of Agreements	Maximum Exposure Range for Each Agreement (in millions)
Guarantees and commitments	$	5,149	87	<$1 — 1,110
Letters of credit under bilateral agreements	317		6	$25 — 92
Letters of credit under the unsecured credit facilities	158		9	<$1 — 60
Letters of credit under the revolving credit facilities	38		23	<$1 — 10
Surety bonds	1		1	<$1

Total	$	5,663	126

Subsidiary Guarantees and Letters of Credit — In connection with certain project financings (including tax equity transactions), acquisitions and dispositions, power purchases, EPC contracts, and other agreements, certain of the Company's subsidiaries have expressly undertaken limited obligations and commitments, most of which will only be effective or will be terminated upon the occurrence of future events, or are customary payment guarantees for amounts due under existing contracts in the normal course of business. These contingent contractual obligations are issued at the subsidiary level and are non-recourse to the Parent Company. It is unlikely that a subsidiary would be required to perform or otherwise incur any material losses associated with guarantees of another subsidiary’s obligations. As of September 30, 2025, the maximum undiscounted potential exposure to guarantees and letters of credit issued by our subsidiaries was $6.1 billion, including $2 billion of customary payment guarantees under EPC contracts and other agreements, $1.8 billion of letters of credit outstanding, $1.3 billion of surety bonds and other guarantees issued by insurance companies, and $949 million of tax equity financing related guarantees. Similar to the Parent Company, subsidiary tax equity guarantees typically consist of standard indemnifications of tax equity partners in the event that an adverse determination arises due to a recapture event, tax controversy, or any breach by the AES project company of the representations in the shared equity agreement.

Contingencies

Environmental — The Company periodically reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. For the periods ended September 30, 2025 and December 31, 2024, the Company recognized liabilities of $1 million and $2 million for projected environmental remediation costs, respectively. These amounts are reported on the Condensed Consolidated Balance Sheets within Accrued and other liabilities and Other noncurrent liabilities. Due to the uncertainties associated with environmental assessment and remediation activities, future costs of compliance or remediation could be higher or lower than the amount currently accrued. Moreover, where no liability has been recognized, it is reasonably possible that the Company may be required to incur remediation costs or make expenditures in amounts that could be material but could not be estimated as of September 30, 2025. Unasserted claims are not included in the range of potential losses related to environmental matters until it is probable that a claim will be asserted and there is a reasonable possibility that the outcome will be unfavorable. In aggregate, the Company estimates the range of potential losses related to environmental matters, where estimable, to be between $1 million and $5 million. The amounts considered reasonably possible do not include amounts accrued as discussed above.

Litigation — The Company is involved in certain claims, suits, and legal proceedings in the normal course of business. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company has recognized aggregate liabilities for all claims of approximately $52 million and $5 million as of September 30, 2025 and December 31, 2024, respectively. These amounts are reported on the Condensed Consolidated Balance Sheets within Accrued and other liabilities and Other noncurrent liabilities. A significant portion of these accrued liabilities relate to regulatory matters and commercial disputes in international jurisdictions. Included in the amount as of September 30, 2025 is a liability for alleged damages plus interest, as well as potential future damages, under an SPA dispute related to Sul, a business the Company disposed of in 2016. See Note 22—Discontinued Operations for further information. There can be no assurance that these accrued liabilities will be adequate to cover all existing and future claims or that we will have the liquidity to pay such claims as they arise.

Where no accrued liability has been recognized, it is reasonably possible that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material but could not be estimated as of September 30, 2025. The material contingencies where a loss is reasonably possible primarily include disputes with offtakers, suppliers and EPC contractors; alleged breaches of contract; alleged violation of laws and regulations; income tax and non-income tax matters with tax authorities; and regulatory matters. In aggregate, the Company estimates the range of potential losses, where estimable, related to these reasonably possible material contingencies to be between $180 million and $213 million. Included in this range is a reasonably possible legal contingency for environmental remediation costs related to Sul, estimated to be approximately R$15 million to R$60 million ($3 million to $11 million). The amounts considered reasonably possible

do not include the amounts accrued, as discussed above. These material contingencies do not include income tax-related contingencies which are considered part of our uncertain tax positions.