AES sells electricity to utilities, businesses and households, and develops power projects for customers. Its second quarter of 2026 showed a real improvement in the power business, helped by development work, higher utility rates and stronger sales in wholesale markets. Yet across the first six months, operating cash of $2.25 billion fell short of $3.41 billion spent on construction and equipment. The challenge is turning that expansion into cash AES can retain after paying lenders and project partners.
Analysis period: quarter and six months ended June 30, 2026. Information cutoff: October 14, 2026; later financing and merger developments are identified separately.
Source: AES second-quarter 2026 Form 10-Q, statements of operations and cash flows, pages 4 and 8–9; management discussion, pages 47–48.
1. More profitable power sales and development work lifted the business
AES’s recovery was broader than its gain from selling Fluence shares. Revenue grew faster than the direct costs of supplying electricity and providing services. This left more money to pay central overhead, interest and taxes.
The following comparisons separate the April–June quarter from the January–June first half. AES calls revenue minus cost of sales its “operating margin.” That dollar amount includes plant depreciation—the accounting charge for using long-lived equipment—but excludes central administrative expenses and several separately reported gains and charges. It should not be read as a complete operating-profit subtotal.
| Consolidated results; US$ millions except percentages and EPS | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Revenue | 2,855 | 3,422 | 5,781 | 6,602 |
| Cost of sales | 2,402 | 2,730 | 4,887 | 5,270 |
| Revenue less cost of sales: reported operating margin | 453 | 692 | 894 | 1,332 |
| Operating margin as a share of revenue, calculated | 15.9% | 20.2% | 15.5% | 20.2% |
| Consolidated net income or loss | -150 | 387 | -223 | 662 |
| Net income or loss attributable to AES | -95 | 426 | -49 | 913 |
| Diluted earnings per common share, US$ | -0.15 | 0.60 | -0.08 | 1.28 |
Source: 2026 second-quarter Form 10-Q, page 4 and Note 20, pages 42–44. Percentages are calculated from the reported amounts. The distinction between consolidated profit and profit attributable to AES is explained in section 2.
First-half revenue increased 14.2%, while cost of sales increased 7.8%. The resulting improvement in the operating-margin percentage was 4.7 percentage points. That is evidence of a better mix of revenue and costs, although some of the improvement came from changes in the value of energy contracts rather than additional electricity delivered.
Renewables made the largest contribution. Its first-half operating margin increased from $158 million to $410 million. Development services in the United States contributed $123 million of the increase, and favorable energy-derivative effects contributed $93 million. These contracts help AES manage power-price exposure; their reported gains and losses need to be distinguished from revenue earned by generating electricity. New U.S. and Chilean projects also added $90 million of revenue, although that revenue figure is not a measure of their profit contribution.
Utilities provided a different kind of improvement. Their first-half operating margin increased from $291 million to $391 million. AES Ohio’s approved rate settlement added $84 million, and transmission and other approved customer charges added $31 million. Higher property taxes partly offset those benefits. Here, the mechanism was mainly recovering more revenue through regulated rates, rather than simply selling more electricity.
Energy Infrastructure, which includes gas and coal plants, increased first-half operating margin from $365 million to $442 million. Higher wholesale energy and capacity sales and prices added $127 million. Capacity payments compensate generators for being available when the system needs them. Better market sales, especially in Argentina, helped offset lower contracted sales following the expiration of the Maritza power contract in Bulgaria. Lower contract volumes reduced margin by $65 million, while higher Maritza depreciation reduced it by another $39 million.
These sources of improvement have different staying power. An approved utility rate can support revenue over a rate period. Development fees depend on completing customer work. Wholesale power income depends on prices, available generation and contract coverage. AES therefore has several sources of growth, but the first-half gain should not be projected forward at one uniform rate.
Source: 2026 second-quarter Form 10-Q, revenue analysis, pages 51–52; segment performance, pages 62–63. Segment figures are reported before the corporate and intercompany adjustments used to reach consolidated results.
The recovery also exceeds the weak 2025 comparison on the reported operating-margin measure. First-half operating margin was $1,172 million in 2024, fell to $894 million in 2025 and reached $1,332 million in 2026. This is a comparison of the business owned in each period, not an unchanged portfolio: disposals, including AES Brasil, and new projects altered the mix. It supports a recovery in reported profitability, rather than a claim of steady underlying growth through all three years.
Sources: 2025 second-quarter Form 10-Q, statement of operations and management discussion; 2026 second-quarter Form 10-Q, page 4.
2. The profit rebound also contains sales gains and large accounting changes
Reported profit improved more than the underlying power business alone explains. Several unusually large items changed between the two periods, sometimes in opposite directions.
AES sold part of its Fluence investment in May. It received $207 million after selling expenses and recorded a $186 million pretax gain. Its ownership fell from about 28% to 22%, while it retained significant influence and continued to record its share of Fluence’s results. The sale produced usable cash, but reduced AES’s participation in that business.
The tax effect made the gain larger after tax. AES recorded $42 million of tax expense on the sale, alongside a $54 million benefit because AES now expected to use capital-loss tax benefits it had previously treated as unusable. The combined disclosed earnings contribution was therefore approximately $198 million after those two tax effects. That is a calculation for this transaction, not an estimate of recurring profit or of its cash tax payment.
Source: 2026 second-quarter Form 10-Q, Note 7, page 21, and Note 17, page 41. Calculation: $186 million gain − $42 million tax expense + $54 million tax benefit = $198 million.
Battery projects created another large comparison effect. Some customers control when a battery charges and discharges. AES accounts for those arrangements as sales-type leases, recording a receivable for future payments when the arrangement starts. The calculation excludes investment tax credits from the battery asset’s fair value and can produce an immediate accounting loss. Those commencement losses fell from $208 million in the first half of 2025 to $44 million in 2026. Their decline lifted pretax profit by $164 million; it was not an equivalent increase in electricity-sale cash.
There was also a favorable item in the older comparison. In 2025, a delayed sale of the Mong Duong business in Vietnam led AES to move it out of the held-for-sale category. Remeasuring the assets increased their carrying value by $243 million, principally by reversing a valuation allowance on the construction loan receivable. The sale agreement later expired without closing. That prior-year accounting benefit did not recur in 2026, partly offsetting the other favorable comparisons.
Source: 2026 second-quarter Form 10-Q, Notes 10, 16 and 18, pages 27–28 and 40–42. Lease losses and the Mong Duong remeasurement above are consolidated pretax amounts; they are not directly interchangeable with after-tax profit attributable to AES.
Taxes and project ownership further explain why AES’s $913 million first-half profit exceeded the entire consolidated group’s $662 million profit. Other investors were allocated $251 million of losses. Subtracting their negative share increases the amount attributable to AES. Tax-equity partners—investors who finance projects in exchange for tax benefits and other economic rights—are an important part of this structure. The attribution is an allocation among owners, not extra cash generated by the group.
The consolidated income statement recorded a $13 million first-half tax benefit, compared with $184 million of tax expense a year earlier, despite higher pretax earnings. Investment tax credits and transaction-specific tax benefits helped produce that outcome. Cash taxes nevertheless increased from $134 million to $200 million. A low accounting tax charge and low cash taxes are different things.
Source: 2026 second-quarter Form 10-Q, pages 4 and 9; Notes 11 and 17; attribution discussion, pages 55–57.
Management’s adjusted EBITDA, a measure outside standard accounting rules, provides a useful second check. It rose from $1,272 million to $1,725 million in the first half, or 35.6%. This measure removes interest, taxes, depreciation and specified gains and charges, and adjusts for project partners and affiliates. The improvement therefore survives removal of major disposal and lease-start effects. However, the measure still includes development services and exposure to power-market conditions, and excludes financing and asset-use costs.
AES stopped reporting adjusted EPS and “adjusted EBITDA with tax attributes” in 2026 because tax credits and allocations to project investors made those measures highly variable. It also began excluding merger costs from its remaining adjusted measures. The full reconciliation below preserves those choices rather than treating the adjusted result as recurring net profit.
Source: 2026 second-quarter Form 10-Q, non-GAAP definitions and reconciliation, pages 57–61; see Calculation notes, A.
3. Customer contracts support construction, while development work offers another source of income
AES is building assets for identifiable customers, but different projects consume very different amounts of capital. Owning a plant requires AES and its partners to finance construction before collecting years of electricity payments. Developing a project for another owner allows AES to earn fees without necessarily financing the completed plant itself.
The company’s 2025 annual report describes both approaches: developing and retaining generation assets, and preparing projects or powered land for transfer to customers. Its contracted project backlog was 12.0 gigawatts at year-end 2025, including 5.7 gigawatts under construction. These were capacity measures, not promised revenue or profit.
Source: AES 2025 Form 10-K, Business—Our Strategy, Development and Construction, and AES Clean Energy—Development Strategy, pages 5–6, 9 and 17. Backlog means signed projects not yet operating; the figures are the year-end 2025 snapshot.
Bellefield illustrates the scale and customer link. AES’s fact sheet, dated August 3, 2026, lists both Bellefield phases as operating, with Amazon as customer. Each phase has 500 megawatts of solar capacity and 500 megawatts of battery power capacity; the listed contracts run through 2040 and 2041. Battery power capacity describes how quickly electricity can be supplied, not how much energy the battery can store. AES lists a 75% equity interest in each phase, with tax-equity arrangements also affecting the economics.
Amazon has independently described its support for Bellefield and its work with AES on solar and storage. These are established customer relationships with physical projects behind them. They do not mean AES receives all of the cash or profit from the listed capacity.
Sources: AES second-quarter 2026 fact sheet, as of August 3, pages 6 and 20–22; Amazon’s account of AES solar projects, accessed October 14, 2026. The fact-sheet operating status is after June 30 and is not treated as a full quarter of operation.
For development services, the filing provides a nearer-term revenue measure. At June 30, AES had $258 million of revenue still to recognize under the disclosed remaining performance obligations, mainly U.S. development-service contracts. It had already collected $120 million. Management expected to recognize about $127 million of revenue in the rest of 2026 and another $127 million in 2027. Delivering the work will support reported revenue, but part of the associated cash has already arrived. This disclosure is separate from the capacity backlog of power projects and is not a complete forecast of future electricity sales.
Source: 2026 second-quarter Form 10-Q, Note 14, page 39.
Competition is substantial. NextEra Energy Resources reported adding 3.6 gigawatts of renewables and storage projects to its backlog in the second quarter of 2026. That confirms active demand, but also shows that major customers have other large suppliers. The relevant test for AES is whether its customer relationships, development sites and construction capability produce projects it can finance and deliver profitably—not the size of the market alone.
Source: NextEra Energy second-quarter 2026 results, July 24, 2026, NextEra Energy Resources discussion. This is evidence of competing supply; no like-for-like market-share or profit-margin comparison is assumed.
4. Better operating cash did not cover the expanded construction program
Operating cash increased, but construction spending and payments to project partners absorbed the improvement. The cash gap reflects an expanding asset base and the way AES finances projects, rather than simply weak collection of electricity bills.
| Cash allocation; consolidated US$ millions | First half 2025 | First half 2026 |
|---|---|---|
| Cash generated by operating activities | 1,521 | 2,247 |
| Construction and equipment spending in investing cash flow | 2,586 | 3,409 |
| Operating cash less that spending, calculated free cash flow | -1,065 | -1,162 |
| Cash distributions to project and other noncontrolling investors | 338 | 1,238 |
| Cash dividends paid on AES common shares | 250 | 251 |
| Cash remaining after the above uses, calculated | -1,653 | -2,651 |
Source: 2026 second-quarter Form 10-Q, pages 8–9 and 78–80. Spending and distributions are shown as positive uses of cash. The final line is a subtotal for these selected uses, not the total change in cash. Free cash flow uses the statement’s capital-expenditure line; separate financed-equipment payments and other investing uses are addressed in Calculation notes, B.
Operating cash grew 47.7%, and construction spending grew 31.8%. Although cash generation covered a larger share of construction—65.9%, compared with 58.8%—the dollar shortfall still widened. Management attributed $799 million of the $823 million spending increase to growth projects, primarily U.S. and Chilean renewables and U.S. utility transmission and distribution investments. Maintenance spending increased $24 million. AES classifies these amounts by their disclosed investment purpose.
Cash collections had mixed effects. Customers owed more for sales already billed, and the cash-flow statement records a $206 million use of cash from receivables, compared with a $26 million release a year earlier. Collecting tax-credit transfer proceeds helped reduce other current assets. At the same time, tax-payment timing used more cash. Taken together, the disclosed movements in operating assets and liabilities contributed $105 million of cash, down from $155 million. Thus payment timing slightly reduced, rather than explained, the year-over-year improvement in operating cash.
Source: 2026 second-quarter Form 10-Q, cash-flow statement, page 8, and explanations, pages 79–80. The $105 million and $155 million totals are calculated from all seven disclosed operating asset and liability movements.
The partner payments are especially important. AES can receive proceeds from transferring project tax credits, with some benefits belonging to outside project investors. The cash-flow reconciliation includes $496 million of tax-credit transfers allocated to those investors, compared with $212 million in 2025. That line is an accounting adjustment, not a standalone measure of cash received during the period. Cash distributions to the investors appear separately in financing activities.
Management says the $900 million increase in total cash distributions to noncontrolling investors included $633 million more distributions of transferred tax-credit proceeds and a $220 million distribution at AES Puerto Rico Solar. Consequently, consolidated operating cash should not be treated as cash wholly available to AES’s parent company. The increase in partner distributions exceeded the increase in operating cash.
Source: 2026 second-quarter Form 10-Q, pages 8–10 and financing discussion, page 80.
Borrowing filled a substantial part of the funding need. Net cash raised through loans, bonds, short-term borrowing and bank-financed supplier purchases totaled $2,190 million. Contributions from other owners, sales of ownership stakes and subsidiary preferred-share issuances supplied another $716 million. After partner distributions, common dividends and the other financing payments, net financing cash was $1,241 million. Cash from selling business interests also helped pay for investment.
These sources allowed cash, including restricted balances, to rise by $221 million. The improvement in the cash balance therefore does not show that construction had become self-funding.
Source: 2026 second-quarter Form 10-Q, pages 8–9; calculations and the complete cash reconciliation appear in Calculation notes, B.
5. The larger asset base brings more debt and more claims on future cash
Most of AES’s balance-sheet expansion sits in physical power assets, financed largely by additional borrowing. Property, plant and equipment rose by $2.84 billion in six months. These assets can generate future electricity revenue, but the funding costs start before their full operating contribution arrives.
The financing categories matter. The parent must repay recourse debt. Non-recourse lenders generally rely on an individual subsidiary’s assets and cash. Under supplier financing, a bank pays the supplier and AES later repays the bank. Redeemable subsidiary interests give outside owners rights that could require AES’s subsidiaries to repay their capital under specified conditions.
| Consolidated financial position; US$ millions | December 31, 2025 | June 30, 2026 |
|---|---|---|
| Unrestricted cash and cash equivalents | 1,382 | 1,800 |
| Restricted cash and debt-service deposits | 780 | 583 |
| Accounts receivable, net | 1,683 | 1,934 |
| Inventory | 612 | 618 |
| Property, plant and equipment, net | 37,818 | 40,657 |
| Other intangible assets, net | 2,040 | 2,033 |
| Accounts payable | 1,980 | 2,170 |
| Accrued and other current liabilities | 2,223 | 1,523 |
| Recourse debt, current and noncurrent | 5,984 | 6,100 |
| Non-recourse debt, including finance leases | 23,913 | 26,017 |
| Supplier financing | 616 | 826 |
| Redeemable interests in subsidiaries | 2,824 | 3,052 |
| Equity attributable to AES | 4,063 | 4,942 |
| Other investors’ equity within consolidated equity | 5,042 | 4,830 |
Source: 2026 second-quarter Form 10-Q, balance sheet, page 3; Notes 1, 8, 11 and 12. Restricted cash and debt-service deposits are combined here. Debt amounts are carrying values, not contractual principal. Redeemable subsidiary interests are reported separately from both liabilities and permanent equity.
The rise in receivables agrees with management’s explanation of higher billings and collection timing. Inventory changed little: spare parts and supplies increased by $11 million, while fuel and raw materials decreased by $5 million. Intangible assets—rights and other nonphysical assets—were also nearly unchanged overall, declining by $7 million. Note 16 reports $38 million of combined write-offs of intangible assets and capitalized development costs for U.S. development projects that AES no longer considered viable, without allocating the amount between the two categories. These write-offs show that part of a development pipeline can fail before producing a usable plant.
Construction, acquisition, depreciation and other noncash movements all affect the physical-asset balance. The $3.41 billion cash-spending line cannot by itself reconcile its change. AES also reported $761 million of capital-expenditure accruals—amounts recognized for equipment or construction before the associated cash payment.
Sources: 2026 second-quarter Form 10-Q, pages 3 and 9; Note 2, page 15, and Note 16, page 40.
Ordinary supplier bills and other liabilities did not all move in the same direction. Accounts payable rose, while accrued and other current liabilities fell by $700 million and other noncurrent liabilities fell by $403 million. The filing does not provide a complete account-by-account explanation of those broader balances. Its cash statement gives the relevant payment result: accounts payable and other current operating liabilities together used $34 million of cash. The increase in trade payables alone therefore does not establish an equivalent cash benefit.
Equity attributable to AES increased mainly because of reported earnings. Retained earnings rose by $788 million, reflecting $913 million of profit less $125 million of dividends declared during the half. Cash dividends paid were higher because they also included a dividend declared in December 2025. Hedge and currency movements improved accumulated other comprehensive income, which records certain valuation changes outside current profit.
The share count made little difference to the earnings rebound. Diluted weighted-average shares increased from 712 million to 715 million; 2025 loss-period calculations excluded potentially dilutive awards. Actual common shares outstanding rose by about 956,000 between year-end and June, mostly through the release of treasury shares. AES reported no purchases under its public repurchase program in the second quarter. The slight increase in shares did not drive the earnings rebound.
Source: 2026 second-quarter Form 10-Q, pages 3, 6, 8 and 81; Note 20; Part II, Item 2, pages 92–93. The equity and share reconciliations are in Calculation notes, C.
6. Refinancing access matters more than the consolidated cash balance suggests
AES has financing capacity, but most of its cash is held below the parent company. Of the $1.8 billion unrestricted consolidated cash balance at June 30, only $43 million was at the parent and qualified holding companies. The rest was held by operating subsidiaries, whose lenders, regulators and partners can restrict transfers.
AES’s parent liquidity, a company-defined non-GAAP measure, was $1,834 million: the $43 million cash balance plus $1,791 million of available credit facilities. This is a useful measure of funding access, but almost all of it represented capacity to borrow. Commercial paper—short-term borrowing from money-market lenders—uses the same revolving bank facilities as backup and is not an additional pool of liquidity. Although no commercial paper remained outstanding at June 30, average daily borrowing under the program was $891 million during the half, showing the importance of short-term funding between cash receipts.
Source: 2026 second-quarter Form 10-Q, Note 8, pages 23–25, and Parent Company Liquidity, pages 80–82.
Current liabilities exceeded current assets by a calculated $2,175 million at June 30 ($8,578 million due versus $6,403 million of current assets). That makes collections, continued borrowing and refinancing important to meeting near-term payments. The nearest funding obligations are concentrated at projects and suppliers. Some project borrowing is a bridge loan: AES borrows temporarily until expected project-investor payments, tax-credit proceeds or longer-term financing arrive.
| Obligation or facility | Amount at June 30, 2026, US$ millions | Relevant timing |
|---|---|---|
| Parent recourse term loan | 300 | December 2026 |
| Current non-recourse debt, including finance leases | 3,162 | Principally the following 12 months; includes technical defaults |
| Supplier financing | 826 | All due within one year |
| Bellefield 2 construction and tax-equity bridge borrowing, included in non-recourse debt | 1,400 | 2026 and 2027 |
| Marahu tax-credit bridge loan, included in non-recourse debt | 212 | April 2027 |
Source: 2026 second-quarter Form 10-Q, Note 8 and liquidity discussion, pages 22–25 and 75–76. The last two rows identify concentrations within debt, not extra amounts to add to the first three rows. The filing rounds Bellefield borrowing to $1.4 billion.
AES took action to spread the parent’s repayments. In June it issued $600 million of notes due in 2029 at 5.20% and $400 million due in 2033 at 5.75%. Proceeds included repayment of a separate $500 million term loan. Together, the new notes carry $54.2 million of annual contractual coupon interest, calculated before issuance costs and any other financing effects. The company extended maturities, but still must pay for that capital.
A subsequent event improved the revolving-facility timetable. On August 5, AES extended the $1.5 billion facility from August 2027 to August 2028. Its other $300 million facility was to extend from December 2026 to December 2027, subject to customary closing conditions. These extensions support funding access; they do not turn unused credit into cash or cancel the separate December 2026 term-loan repayment.
Sources: 2026 second-quarter Form 10-Q, Note 8; August 5, 2026 Form 8-K, Item 1.01. Coupon calculation: $600 million × 5.20% + $400 million × 5.75% = $54.2 million annually.
Financing is already a substantial cost. First-half interest expense increased from $694 million to $721 million. Another $227 million of interest was capitalized into construction rather than charged immediately against profit. Supplier financing carried a 6.37% weighted-average rate at June 30. About $9.9 billion of gross debt carried variable interest rates. AES had hedging contracts covering up to $9.5 billion of current and expected project borrowing, but some protection starts later. Those contracts therefore do not all protect today’s interest payments.
AES complied with the conditions in its parent borrowing agreements at June 30. Subsidiaries had $19 million of debt in technical default, meaning they had breached other loan requirements rather than missed payments. Those breaches did not put the parent’s debt into default. Even so, a troubled project can lose the ability to send cash to the parent, require promised financial support or reduce the value of AES’s investment.
The parent had $4.37 billion of guarantees and commitments, excluding separately reported letters of credit, and some consolidated project entities could require another $3.1 billion of equity contributions when specified milestones are reached. These are contingent exposures, not current debt to add mechanically to the balance sheet. They explain why continued project execution and access to capital remain central even with lenders largely confined to individual subsidiaries.
Source: 2026 second-quarter Form 10-Q, Notes 1, 8 and 9; pages 53, 76, 78 and 81–82. Lease obligations are discussed in Calculation notes, D.
7. New owners could support expansion, while project economics remain the decisive test
The proposed acquisition addresses a funding problem that stronger earnings have not eliminated. In announcing the transaction, management explicitly linked the choice to capital needed for growth beyond 2027. It said the alternative would likely involve reducing or eliminating the dividend and/or issuing substantial new equity.
The consortium led by Global Infrastructure Partners and EQT agreed to acquire AES, with CalPERS and Qatar Investment Authority participating. Its stated plan was to fund the purchase entirely with equity and issue no incremental debt as part of the acquisition. Buying existing shares is not itself cash injected into AES’s construction program. The intended business benefit is a new ownership base able to support future funding decisions.
Sources: AES acquisition announcement, March 2, 2026; transaction presentation filed with the SEC, Transaction Summary. These are stated purposes and financing intentions, not completed operating outcomes.
The approval process has advanced. Shareholders approved the transaction on June 26. After the quarterly filing, AES disclosed U.S. foreign-investment clearance on August 27 and Ohio utility-regulator approval on September 17. The September filing still identified additional regulatory approvals and other closing conditions. The 10-Q’s expected closing window was late 2026 or early 2027; this report does not treat the deal as completed.
Until closing, certain acquisitions, disposals and additional borrowing require the buyer’s consent, subject to exceptions. AES also excluded $27 million of first-half merger costs from adjusted EBITDA. While the deal is pending, these restrictions narrow AES’s options. If it fails, many transaction expenses remain payable and the construction program still needs funding. Under specified termination circumstances, AES could owe about $321 million; that is a conditional contractual fee, not a booked loss.
Sources: 2026 second-quarter Form 10-Q, Note 1 and merger risk factors, pages 11 and 91–92; August 27 Form 8-K, Item 8.01; September 17 Form 8-K, Item 8.01.
New ownership would not remove the operating conditions behind project returns. Tax credits reduce the amount of capital that must ultimately be supported by customer electricity payments. Eligibility now depends more heavily on construction dates and equipment sourcing. IRS instructions say wind and solar facilities beginning construction after July 4, 2026 must enter service before 2028 to qualify for the relevant clean-electricity investment credit. Separate restrictions address material assistance from prohibited foreign entities; Treasury and the IRS issued interim calculation guidance in February 2026.
AES says it has used qualifying construction-start arrangements to protect its backlog. It has also contracted all battery needs for U.S. storage projects scheduled to become operational in 2026–2027, almost entirely from U.S. or South Korean suppliers. Those are concrete defenses. Their value depends on projects meeting the applicable timing, sourcing and other eligibility requirements. Losing a credit or delaying its transfer could increase the cash that AES or its partners must supply and extend the life of bridge borrowing.
Sources: 2026 second-quarter Form 10-Q, supply-chain and tax discussion, pages 65–68; IRS Form 3468 instructions, clean-electricity investment credit; IRS guidance announcement, February 12, 2026. The IRS guidance is interim; AES’s filing says comprehensive guidance remained outstanding.
Weather can also turn a favorable power-price environment into a cost problem. AES’s Colombian hydro business benefited from higher spot sales and prices, while its Chivor reservoir remained elevated in the first half. If it cannot generate enough electricity to satisfy customer contracts, it may have to buy replacement power at those higher prices. AES’s thermal, solar and wind assets provide some offset, but the relevant measure is generation available relative to contracted deliveries, not whether regional electricity prices rise.
Source: 2026 second-quarter Form 10-Q, hydrology discussion, pages 66–67, and commodity risk, pages 83–84.
Legal and regulatory exposure remains larger than the amount already recorded. AES had $16 million of accrued claims and separately disclosed $96 million–$170 million of additional reasonably possible losses where it could estimate them. That range excludes the accrued amounts and uncertain income-tax positions. Environmental remediation had a separate $1 million accrual and a $1 million–$5 million additional estimable range. These disclosures are not a ceiling on all possible losses, because some matters could not be estimated.
There is also a potential source of cash that should not be used to balance the funding plan: AES’s approximately $733 million arbitration award against Argentina, plus accrued interest. Argentina is seeking annulment, with a hearing scheduled for March 2027. Although a conditional enforcement stay was lifted after Argentina failed to provide a bank guarantee, AES disclosed uncertainty over collection timing and recoverability. An award is not cash available for current construction.
Source: 2026 second-quarter Form 10-Q, Note 9, pages 26–27, and Legal Proceedings, pages 89–90.
8. AES’s next test is retaining cash from the assets it is building
AES has a stronger operating business, but its expansion still depends on financing and successful project delivery. Utility rate recovery and development services contributed meaningful earnings improvements. Operating projects and named customers give the construction program a commercial foundation. The remaining constraint is the amount of cash needed before, and shared with others after, those projects begin operating.
The proposed owners could make that funding easier to sustain. Even so, the business case rests on finishing projects, preserving tax-credit eligibility, collecting customer and tax-credit payments, and refinancing bridge loans on workable terms. More cash reaching AES after partner payments would strengthen the case that expansion is improving the company’s financial position. Delayed completions, lost tax benefits or weaker contracted and wholesale margins would push funding needs in the opposite direction.
Reporting basis and calculation notes
Reporting basis: The selected filing is The AES Corporation’s unaudited consolidated Form 10-Q for the quarter ended June 30, 2026, filed August 4, 2026; CIK 0000874761; accession 0000874761-26-000144. Second-quarter comparisons cover April 1–June 30; first-half comparisons cover January 1–June 30. Financial-position comparisons use December 31, 2025 and June 30, 2026. Later developments are limited to identified primary sources through October 14, 2026. Dollar figures are U.S. dollars, generally rounded by the company to millions.
Controlled subsidiaries are consolidated, with transactions within the group eliminated. Investments over which AES has significant influence without control generally contribute AES’s share of their earnings rather than their full revenue. Shareholder profit, consolidated profit and parent-company liquidity retain their separate meanings throughout. The supplied filing was checked against SEC filing metadata and the original filing’s embedded XBRL facts, including units, dates and consolidated versus segment contexts.
Source: SEC filing header and accession record; 2026 second-quarter Form 10-Q, cover and Note 1.
Calculation notes: A. How reported profit becomes management’s adjusted EBITDA.
The table starts with consolidated net income, then follows AES’s published reconciliation. Positive adjustments add to the starting amount; negative adjustments subtract. EBITDA removes financing, tax and asset-use charges. The subsequent adjustments change both ownership scope and which gains or costs remain included. This is a pretax performance measure, not adjusted after-tax profit.
| First-half reconciliation; US$ millions | 2025 | 2026 |
|---|---|---|
| Reported consolidated net income or loss | -223 | 662 |
| Add income tax expense; subtract tax benefit | 184 | -13 |
| Add interest expense, less interest income | 555 | 591 |
| Add depreciation, amortization and the passage-of-time charge on future asset-retirement costs | 691 | 867 |
| EBITDA subtotal | 1,207 | 2,107 |
| Remove the share assigned to other subsidiary owners | -387 | -431 |
| Adjust affiliates for their interest, tax and depreciation | 81 | 85 |
| Restore interest earned under service-concession arrangements | 29 | 27 |
| Remove unrealized financial-instrument losses | 132 | 20 |
| Remove unrealized currency gains | -3 | -8 |
| Disposition and acquisition adjustments, including lease commencement | 167 | -156 |
| Impairment adjustments | -54 | 34 |
| Debt-extinguishment and restructuring-of-debt adjustments | 12 | 20 |
| Organizational restructuring costs | 88 | 0 |
| Merger costs | 0 | 27 |
| Management’s adjusted EBITDA | 1,272 | 1,725 |
A service-concession arrangement can include interest earned on money owed for building a facility. AES keeps that interest in its adjusted performance measure. “Unrealized” means a value change recorded before the underlying position is settled. Development-service earnings and realized power-market effects remain included.
Source: 2026 second-quarter Form 10-Q, adjusted EBITDA reconciliation, pages 59–60.
Calculation notes: B. How profit, construction and financing reconcile to cash.
The following bridge checks the cash-flow statement using consolidated profit. “Other adjustments” combines the remaining disclosed noncash or classification adjustments, without counting tax-credit proceeds twice.
| Operating-cash reconciliation; US$ millions | First half 2025 | First half 2026 |
|---|---|---|
| Consolidated net income or loss | -223 | 662 |
| Depreciation, amortization and asset-retirement obligation adjustment | 691 | 867 |
| Remove gains on business-interest sales | -69 | -209 |
| Tax-credit transfers allocated to outside project investors | 212 | 496 |
| Other disclosed profit-to-cash adjustments | 755 | 326 |
| Net movement in operating assets and liabilities | 155 | 105 |
| Operating cash | 1,521 | 2,247 |
The supporting inputs below show what was added back to profit or removed from it. A plus sign in the cash-timing rows means the movement released cash; a minus sign means it used cash.
| Supporting operating-cash inputs; US$ millions | First half 2025 | First half 2026 |
|---|---|---|
| Expense for using emissions allowances | 178 | 94 |
| Derivative losses | 71 | 23 |
| Battery-lease commencement losses | 208 | 44 |
| Impairment expense or reversal | -95 | 42 |
| Currency losses or gains | 24 | -4 |
| Deferred tax adjustment, net of credit transfers allocated to AES | 149 | 26 |
| Other adjustments reported by AES | 220 | 101 |
| Total other profit-to-cash adjustments | 755 | 326 |
| Cash timing: customer receivables | 26 | -206 |
| Cash timing: inventory | -29 | -36 |
| Cash timing: prepayments and other current assets | 198 | 578 |
| Cash timing: other assets | 75 | 81 |
| Cash timing: accounts payable and other current liabilities | -116 | -34 |
| Cash timing: tax payables | -82 | -264 |
| Cash timing: other liabilities | 83 | -14 |
| Total cash from operating asset and liability movements | 155 | 105 |
Free cash flow here means operating cash minus capital expenditures shown in investing activities: $2,247 million − $3,409 million = -$1,162 million in 2026, versus $1,521 million − $2,586 million = -$1,065 million in 2025. It excludes separate payments for financed capital expenditures of $58 million and $21 million, respectively, which appear in financing activities. Deducting those payments as well would leave -$1,220 million and -$1,086 million. It also excludes acquisitions and emissions-allowance purchases; it is not a complete measure of all investment needs.
The financing calculation is shown separately because these cash movements do not pass through operating cash flow.
| Financing cash reconciliation; first half 2026, US$ millions | Cash effect |
|---|---|
| Revolving borrowing, net of repayments | 844 |
| Commercial-paper repayments, net | -79 |
| Recourse debt issued, net of repayments | 500 |
| Non-recourse debt issued, net of repayments | 704 |
| Supplier financing, net of repayments | 221 |
| Net borrowing and supplier funding subtotal | 2,190 |
| Contributions, ownership sales and preferred shares from other investors | 716 |
| Cash distributions to other investors | -1,238 |
| Common dividends | -251 |
| Financing fees | -65 |
| Financed-equipment payments | -58 |
| Other financing | -53 |
| Net financing inflow | 1,241 |
The $716 million of other-investor funding comprises $128 million of contributions, $306 million of ownership-interest sales and $282 million of preferred-share issuance.
| Complete cash movement; first half 2026, US$ millions | Amount |
|---|---|
| Opening cash, including restricted balances | 2,162 |
| Operating inflow | 2,247 |
| Investing outflow | -3,263 |
| Financing inflow | 1,241 |
| Currency effects | -4 |
| Closing cash, including restricted balances | 2,383 |
Closing cash comprises $1,800 million of unrestricted cash, $530 million of restricted cash and $53 million of debt-service reserves and other deposits. The corresponding opening amounts were $1,382 million, $691 million and $89 million.
Source: 2026 second-quarter Form 10-Q, pages 8–9 and Note 1, page 12.
Calculation notes: C. Balance-sheet and ownership checks.
At June 30, total assets of $54,238 million equal liabilities of $41,414 million, plus redeemable subsidiary interests of $3,052 million, plus equity of $9,772 million. At December 31, the same check is $51,768 million = $39,839 million + $2,824 million + $9,105 million. Redeemable subsidiary interests must be included separately to make the accounting equation complete.
| AES shareholders’ equity reconciliation; US$ millions | December 31, 2025 | First-half change | June 30, 2026 |
|---|---|---|---|
| Common-stock account | 9 | 0 | 9 |
| Paid-in capital: owner contributions and related adjustments | 5,904 | -16 | 5,888 |
| Retained earnings: accumulated profit after declared dividends | 641 | 788 | 1,429 |
| Accumulated other comprehensive loss | -698 | 95 | -603 |
| Treasury shares: AES shares held by the company, at cost | -1,793 | 12 | -1,781 |
| Total equity attributable to AES | 4,063 | 879 | 4,942 |
Paid-in capital declined by $7 million from transactions with other subsidiary owners and a net $9 million from share-based benefit-plan entries. Retained earnings increased by $913 million profit less $125 million of dividends declared. Other comprehensive income contributed $94 million, mainly hedge movements, and a $1 million ownership-related transfer produced the $95 million change in the accumulated balance.
The two categories of other owners’ capital reconcile below. These entries include noncash movements. Their distributions and contributions therefore differ from cash paid and received in the cash-flow statement.
| Other owners’ capital; first half 2026, US$ millions | Permanent equity | Redeemable interests |
|---|---|---|
| Opening balance | 5,042 | 2,824 |
| Allocated losses | -214 | -37 |
| Other comprehensive income | 21 | 0 |
| Distributions | -841 | -103 |
| AES acquisitions of others’ interests | -29 | -1 |
| Contributions | 561 | 63 |
| Sales of ownership interests | 120 | 194 |
| Preferred-share entries | 170 | 112 |
| Closing balance | 4,830 | 3,052 |
Issued common shares increased by 1,140, while treasury shares decreased by 954,796. Together they explain the 955,936 increase in shares outstanding, from 712,201,777 to 713,157,713. The reduction in treasury shares represents shares returning to circulation. For 2025 EPS, an additional $10 million redemption-value adjustment increased the first-half loss available to common shareholders from $49 million to $59 million; there was no corresponding adjustment in 2026.
Source: 2026 second-quarter Form 10-Q, pages 3 and 6; Notes 11, 12 and 20.
Calculation notes: D. Lease obligations and arithmetic conventions.
AES is both a lessee, paying for assets it uses, and a lessor, receiving payments for capacity or batteries. The future lease receipts in the quarterly lease note are not obligations AES must pay. The latest full annual payment schedule, at December 31, 2025, showed $735 million of finance-lease liabilities included in non-recourse debt and $430 million of operating-lease liabilities included in other liabilities. Scheduled 2026 payments were $36 million and $50 million, respectively. These are year-end schedule amounts, not an updated June 30 maturity forecast. The 10-Q disclosed $120 million of new operating and finance leases recognized without an initial cash payment during the first half.
Sources: 2025 Form 10-K, Note 15, lessee balances and maturity table; 2026 second-quarter Form 10-Q, page 9 and Note 10.
Growth percentages use the change divided by the comparable prior-period amount. Margin percentages divide the indicated profit subtotal by revenue; percentage-point changes subtract those percentages. For example, first-half operating-margin improvement is $1,332 million ÷ $6,602 million minus $894 million ÷ $5,781 million, or 4.7 percentage points after rounding. Amounts described as calculated are derived from reported rounded figures and may differ slightly from calculations using unrounded company records.
This report is for general information and business analysis. It is not investment advice.