RISKS AND UNCERTAINTIES

AES is a diversified power generation and utility company organized into six market-oriented SBUs. See additional discussion of the Company’s principal markets in Note 17—Segment and Geographic Information. Within our six SBUs, we have two primary lines of business: Generation and Utilities. The Generation line of business uses a wide range of fuels and technologies to generate electricity such as coal, gas, hydro, wind, solar and biomass. Our Utilities business is comprised of businesses that transmit, distribute, and in certain circumstances, generate power. In addition, the Company has operations in the renewables area. These efforts include projects primarily in wind and solar.

Operating and Economic Risks—The Company operates in several developing economies where macroeconomic conditions are usually more volatile than developed economies. Deteriorating market conditions often expose the Company to the risk of decreased earnings and cash flows due to, among other factors, adverse fluctuations in the commodities and foreign currency spot markets. Additionally, credit markets around the globe continue to tighten their standards, which could impact our ability to finance growth projects through access to capital markets. Currently, the Company has a below-investment grade rating from Standard & Poor’s of BB-. This could affect the Company's ability to finance new and/or existing development projects at competitive interest rates. As of December 31, 2014, the Company had $1.5 billion of unrestricted cash and cash equivalents.

During 2014, approximately 78% of our revenue, and 99% of our revenue from discontinued businesses, was generated outside the United States and a significant portion of our international operations is conducted in developing countries. We continue to invest in several developing countries to expand our existing platform and operations. International operations, particularly the operation, financing and development of projects in developing countries, entail significant risks and uncertainties, including, without limitation:


•	economic, social and political instability in any particular country or region;


•	inability to economically hedge energy prices;


•	volatility in commodity prices;


•	adverse changes in currency exchange rates;


•	government restrictions on converting currencies or repatriating funds;


•	unexpected changes in foreign laws, regulatory framework, or in trade, monetary or fiscal policies;


•	high inflation and monetary fluctuations;


•	restrictions on imports of coal, oil, gas or other raw materials required by our generation businesses to operate;


•	threatened or consummated expropriation or nationalization of our assets by foreign governments;


•	unwillingness of governments, government agencies, similar organizations or other counterparties to honor their commitments;


•	unwillingness of governments, government agencies, courts or similar bodies to enforce contracts that are economically advantageous to subsidiaries of the Company and economically unfavorable to counterparties, against such counterparties, whether such counterparties are governments or private parties;


•	inability to obtain access to fair and equitable political, regulatory, administrative and legal systems;


•	adverse changes in government tax policy;


•	difficulties in enforcing our contractual rights, enforcing judgments, or obtaining a just result in local jurisdictions; and


•	potentially adverse tax consequences of operating in multiple jurisdictions.

Any of these factors, individually or in combination with others, could materially and adversely affect our business, results of operations and financial condition. In addition, our Latin American operations experience volatility in revenue and earnings which have caused and are expected to cause significant volatility in our results of operations and cash flows. The volatility is caused by regulatory and economic difficulties, political instability, indexation of certain PPAs to fuel prices, and currency fluctuations being experienced in many of these countries particularly Argentina. This volatility reduces the predictability and enhances the uncertainty associated with cash flows from these businesses.

Our inability to predict, influence or respond appropriately to changes in law or regulatory schemes, including any inability to obtain reasonable increases in tariffs or tariff adjustments for increased expenses, could adversely impact our results of operations or our ability to meet publicly announced projections or analysts’ expectations. Furthermore, changes in laws or regulations or changes in the application or interpretation of regulatory provisions in jurisdictions where we operate, particularly our Utility businesses where electricity tariffs are subject to regulatory review or approval, could adversely affect our business, including, but not limited to:


•	changes in the determination, definition or classification of costs to be included as reimbursable or pass-through costs;


•	changes in the definition or determination of controllable or noncontrollable costs;


•	adverse changes in tax law;


•	changes in the definition of events which may or may not qualify as changes in economic equilibrium;


•	changes in the timing of tariff increases;


•	other changes in the regulatory determinations under the relevant concessions; or


•	changes in environmental regulations, including regulations relating to GHG emissions in any of our businesses.

Any of the above events may result in lower margins for the affected businesses, which can adversely affect our results of operations.

Foreign Currency Risks—AES operates businesses in many foreign countries and such operations could be impacted by significant fluctuations in foreign currency exchange rates. Fluctuations in currency exchange rate between U. S. Dollar and the following currencies could create significant fluctuations to earnings and cash flows: the Argentine peso, the Brazilian real, the Dominican Republic peso, the Euro, the Chilean peso, the Colombian peso, the Philippine peso and the Kazakhstan tenge.

Concentrations—Due to the geographical diversity of its operations, the Company does not have any significant concentration of customers or sources of fuel supply. Several of the Company’s generation businesses rely on PPAs with one or a limited number of customers for the majority of, and in some cases all of, the relevant businesses' output over the term of the PPAs. However, no single customer accounted for 10% or more of total revenue in 2014, 2013 or 2012.

The cash flows and results of operations of our businesses depend on the credit quality of their customers and the continued ability of their customers and suppliers to meet their obligations under PPAs and fuel supply agreements. If a substantial portion of the Company’s long-term PPAs and/or fuel supply were modified or terminated, the Company would be adversely affected to the extent that it would be unable to replace such contracts at equally favorable terms.

Bulgaria— Maritza, the Company's generation facility in Bulgaria, has experienced ongoing delays in the collection of outstanding receivables as a result of liquidity issues faced by our offtaker, NEK. As of December 31, 2014, Maritza’s outstanding accounts receivable were $262 million, of which $205 million were overdue. No allowance has been recognized on the receivables as the Company continues to assert that collection is probable.

The newly elected Bulgarian government has undertaken an initiative to reform its energy sector, which is necessary to restore NEK’s liquidity. NEK’s credit rating was downgraded and its transmission license was revoked by the Bulgarian Regulator, which are events of default under the PPA and triggered additional events of default by Maritza under the project debt agreements.

Although Maritza continued to collect overdue receivables during the fourth quarter of 2014 and thereafter, collections continue to be at risk, which could result in an allowance to be recorded against the remaining receivables and exacerbate liquidity problems at Maritza if the situation were to deteriorate significantly.