The condensed consolidated financial statements included in Item 1.-Financial
Statements of this Form 10-Q and the discussions contained herein should be read
in conjunction with our 2020 Form 10-K.
Forward-Looking Information
The following discussion may contain forward-looking statements regarding us,
our business, prospects and our results of operations, including our
expectations regarding the impact of the COVID-19 pandemic on our business, that
are subject to certain risks and uncertainties posed by many factors and events
that could cause our actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. These statements include, but are not limited to, statements
regarding management's intents, beliefs, and current expectations and typically
contain, but are not limited to, the terms "anticipate," "potential," "expect,"
"forecast," "target," "will," "would," "intend," "believe," "project,"
"estimate," "plan," and similar words. Forward-looking statements are not
intended to be a guarantee of future results, but instead constitute current
expectations based on reasonable assumptions. Factors that could cause or
contribute to such differences include, but are not limited to, those described
in Item 1A.-Risk Factors of this Form 10-Q, Item 1A.-Risk Factors and Item
7.-Management's Discussion and Analysis of Financial Condition and Results of
Operations of our 2020 Form 10-K and subsequent filings with the SEC.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date of this report. We undertake no
obligation to revise any forward-looking statements in order to reflect events
or circumstances that may subsequently arise. If we do update one or more
forward-looking statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the SEC that advise of
the risks and factors that may affect our business.
Overview of Our Business
We are a diversified power generation and utility company organized into the
following four market-oriented SBUs: US and Utilities (United States, Puerto
Rico and El Salvador); South America (Chile, Colombia, Argentina and Brazil);
MCAC (Mexico, Central America and the Caribbean); and Eurasia (Europe and Asia).
For additional information regarding our business, see Item 1.-Business of our
2020 Form 10-K.
We have two lines of business: generation and utilities. Each of our SBUs
participates in our first business line, generation, in which we own and/or
operate power plants to generate and sell power to customers, such as utilities,
industrial users, and other intermediaries. Our US and Utilities SBU
participates in our second business line, utilities, in which we own and/or
operate utilities to generate or purchase, distribute, transmit and sell
electricity to end-user customers in the residential, commercial, industrial,
and governmental sectors within a defined service area. In certain
circumstances, our utilities also generate and sell electricity on the wholesale
market.
Executive Summary
Compared with last year, second quarter diluted earnings per share from
continuing operations increased $0.16 to income of $0.03. This increase reflects
higher margins at our South America SBU largely due to net gains from early
contract terminations at Angamos, a gain on remeasurement of our interest in
sPower's development platform, a gain due to the issuance of new shares by
Fluence, our equity method investment, which was accounted for as a partial
disposition, and lower income tax expense; partially offset by higher coal-fired
plants impairments in the current period.
Adjusted EPS, a non-GAAP measure, increased $0.06 to $0.31, mainly reflecting
higher contributions from new businesses, including U.S. renewables and
Southland Energy, higher generation at Chivor due to better hydrology, and lower
Parent Company interest expense; partially offset by prior year impacts in Chile
due to incremental capitalized interest and recovery of previously expensed
payments from customers.
Compared with last year, diluted earnings per share from continuing operations
for the six months ended June 30, 2021 decreased $0.28 to a loss of $0.19. This
decrease is mainly driven by higher coal-fired plants impairments in the current
period; partially offset by higher margins at our South America SBU largely due
to net gains from early contract terminations at Angamos and higher generation
at Chivor due to the life extension project completed in the prior year and
better hydrology, lower Parent Company interest expense due to realized gains on
de-designated interest rate swaps and lower interest rates, a gain on
remeasurement of our interest in sPower's development platform, a gain due to
the issuance of new shares by Fluence, our equity method investment, which was
accounted

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32 | The AES Corporation | June 30, 2021 Form 10-Q for as a partial disposition, and lower income tax expense. Adjusted EPS, a non-GAAP measure, increased $0.05 to $0.59, mainly due to the commencement of operations of Southland Energy, higher generation at Chivor due to the life extension project completed in the prior year and better hydrology, and lower Parent Company interest expense due to realized gains on de-designated interest rate swaps and lower interest rates; partially offset by a higher adjusted tax rate and prior year impacts of a gain on sale of land in the U.S., incremental capitalized interest in Chile and recovery of previously expensed payments from customers in Chile.

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33 | The AES Corporation | June 30, 2021 Form 10-Q


                     [[Image Removed: aes-20210630_g2.jpg]]

(1) See Item 2.-Management's Discussion and Analysis of Financial Condition and Results of Operations-SBU Performance Analysis-Non-GAAP Measures for reconciliation and definition. (2) GWh sold in 2020.

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34 | The AES Corporation | June 30, 2021 Form 10-Q
Overview of Strategic Performance
AES is leading the industry's transition to clean energy by investing in
sustainable growth and innovative solutions. The Company is taking advantage of
favorable trends in clean power generation, transmission and distribution, and
LNG infrastructure to deliver superior results.
Through its presence in key growth markets, AES is well-positioned to benefit
from the global transition toward a more sustainable power generation mix.
•During the second quarter of 2021, the Company's US utilities, AES Indiana and
AES Ohio, received regulatory approval further enabling the planned new
investments of more than $2 billion, to deliver 9% annual rate base growth
through 2025, including:
•Transmission, Distribution, Storage Improvement Charge (TDSIC) plan update and
the 195 MW Hardy Hills solar project at AES Indiana; and
•Smart Grid and FERC-regulated transmission rate at AES Ohio.
•In year-to-date 2021, the Company completed construction or the acquisition of
315 MW of renewables and energy storage, including:
•159 MW Mandacaru and Salinas wind facility in Brazil;
•75 MW of solar and solar plus energy storage in the U.S. at AES Clean Energy;
•50 MW Bayasol solar facility in the Dominican Republic;
•21 MW of solar capacity in Panama; and
•10 MW Cuscatlan solar facility in El Salvador.
•Since the Company's first quarter 2021 earnings call in May, the Company has
signed 1,824 MW of renewables and energy storage under long-term Power Purchase
Agreements (PPA), including:
•757 MW of solar and energy storage at AES Clean Energy in the US;
•Agreeing to acquire 612 MW of operating wind assets with near-term repowering
plans to help New York State meet its aggressive renewables targets;
•295 MW of solar and energy storage at AES Indiana; and
•160 MW of wind in Brazil.
•In year-to-date 2021, the Company signed or agreed to acquire 2,912 MW of
renewables and energy storage under long-term PPAs, bringing the Company's
backlog to 8,471 MW, including:
•2,549 MW under construction and expected on-line through 2023; and
•5,922 MW of renewables signed under long-term PPAs, including a 10-year
agreement to supply Google's data centers in Virginia with 500 MW of 24/7
carbon-free energy.
•The Company is making substantial progress toward achieving its aggressive coal
reduction targets, including reducing coal generation to below 10% by year-end
2025.
•In July 2021, AES Andes announced the retirement of 1.1 GW of coal-fired
generation, bringing the Company's generation from coal to approximately 20% of
total generation volume (proforma for announced asset sales and retirements).
•Grupo Energía Gas Panamá, a joint venture between AES and InterEnergy Power &
Gas Limited, completed the acquisition of a 670 MW combined cycle natural gas
development project. After completing the development of the project, AES
intends to sell its interest to AES Panama SRL, resulting in a joint venture
expected to be beneficially owned by InterEnergy (51%), the Republic of Panama
(25%) and AES (24%), approximately.

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35 | The AES Corporation | June 30, 2021 Form 10-Q Review of Consolidated Results of Operations (Unaudited)

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