AES CORPAES
AES CORP Stock Compensation Disclosure
SHARE-BASED COMPENSATION
RESTRICTED STOCK
Restricted Stock Units — The Company issues RSUs under its long-term compensation plan. The RSUs are generally granted based upon a percentage of the participant's base salary. Most RSUs have a three-year vesting period and vest evenly in annual increments over that period. In all circumstances, RSUs granted by AES do not entitle the holder the right, or obligate AES, to settle the RSU in cash or other assets of AES.
For the years ended December 31, 2025, 2024, and 2023, RSUs issued had a grant date fair value equal to the closing price of the Company's stock on the grant date. The Company does not discount the grant date fair values to reflect any post-vesting restrictions. RSUs granted to employees during the years ended December 31, 2025, 2024, and 2023 had grant date weighted average fair values per RSU of $10.59, $16.01, and $22.33, respectively.
The 2023 RSUs awarded to certain executives have a performance condition related to the achievement of environmental and social goals for the three-year period ending December 31, 2025. This performance condition can adjust the final number of units that vest to increase or decrease by up to 15% of the total units for all three years. The adjustment will be reflected in the number of units that vest at the end of the three-year performance period.
The following table summarizes the components of the Company's stock-based compensation related to its employee RSUs recognized in the Company's consolidated financial statements (in millions):
| December 31, | 2025 | 2024 | 2023 | |||||||||||||||||
| RSU expense before income tax | $ | 20 | $ | 22 | $ | 16 | ||||||||||||||
| Tax benefit | (3) | (5) | (3) | |||||||||||||||||
| RSU expense, net of tax | $ | 17 | $ | 17 | $ | 13 | ||||||||||||||
Total value of RSUs converted (1) | $ | 8 | $ | 9 | $ | 10 | ||||||||||||||
| Total fair value of RSUs vested | $ | 23 | $ | 19 | $ | 15 | ||||||||||||||
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(1)Amount represents fair market value on the date of conversion.
Cash was not used to settle RSUs in the years ended December 31, 2025, 2024, and 2023. Compensation
costs of $3 million, $2 million, and $1 million were capitalized as part of the cost of an asset in the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2025, total unrecognized compensation cost related to RSUs of $20 million is expected to be recognized over a weighted average period of approximately 1.6 years. There were no modifications to RSU awards during the year ended December 31, 2025.
A summary of the activity of RSUs for the year ended December 31, 2025 follows (RSUs in thousands):
| RSUs | Weighted Average Grant Date Fair Values | Weighted Average Remaining Vesting Term (in years) | ||||||||||||||||||
| Nonvested at December 31, 2024 | 2,611 | $ | 18.64 | |||||||||||||||||
| Vested | (1,157) | 19.71 | ||||||||||||||||||
| Forfeited and expired | (388) | 16.45 | ||||||||||||||||||
| Granted | 1,645 | 10.59 | ||||||||||||||||||
| Nonvested at December 31, 2025 | 2,711 | $ | 13.60 | 1.6 | ||||||||||||||||
| Expected to vest at December 31, 2025 | 36,666 | $ | 13.68 | |||||||||||||||||
The Company initially recognizes compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. In 2025, AES has estimated a weighted average forfeiture rate of 4.08% for RSUs granted in 2025. This estimate will be revised if subsequent information indicates that the actual number of instruments forfeited is likely to differ from previous estimates. Based on the estimated forfeiture rate, the Company expects to expense $17 million on a straight-line basis over a weighted average period of 3 years.
The following table summarizes the RSUs that vested and were converted during the periods indicated (RSUs in thousands):
| Year Ended December 31, | 2025 | 2024 | 2023 | |||||||||||||||||
| RSUs vested during the year | 1,157 | 811 | 632 | |||||||||||||||||
| RSUs converted during the year, net of shares withheld for taxes | 737 | 514 | 407 | |||||||||||||||||
| Shares withheld for taxes | 420 | 297 | 225 | |||||||||||||||||
OTHER SHARE BASED COMPENSATION
The Company has three other share-based award programs. The Company has recorded expense of $14 million, $12 million, and $2 million for 2025, 2024, and 2023, respectively, related to these programs.
Performance Stock Units — In 2023, 2024, and 2025, the Company issued PSUs to officers under its long-term compensation plan. PSUs are stock units which include performance conditions based on the Company’s Parent Free Cash Flow target. The performance conditions determine the vesting and final share equivalent per PSU and can result in earning an award payout range of 0% to 200%, depending on the achievement. The Company believes it is probable that the performance condition will be met and will continue to be evaluated throughout the performance period. In all circumstances, PSUs granted by AES do not entitle the holder the right, or obligate AES, to settle the stock units in cash or other assets of AES.
Performance Cash Units — In 2023, 2024, and 2025, the Company issued PCUs to its officers under its long-term compensation plan. The value for the 2023 units is dependent on the market condition of total stockholder return on AES common stock as compared to the total stockholder return of the Standard and Poor's 500 Utilities Sector Index, Standard and Poor's 500 Index, and MSCI Emerging Markets Latin America Index over a three-year measurement period. The value for the 2024 and 2025 units is dependent on the market condition of total stockholder return on AES common stock as compared to the total stockholder return of the Standard and Poor's 500 Utilities Sector Index, Standard and Poor's 500 Index, and a Clean Energy peer group over a three-year measurement period. Since PCUs are settled in cash, they qualify for liability accounting and periodic measurement is required.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 24, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.