The company will invest $1.2bn to double the capacity of its 600MW coal-fired power plant, located in Masinloc, Zambales province.
The project is anticipated to be completed in three years and the company is also in negotiations to install energy storage facilities through lithium ion batteries in the central Visayas region.
AES president and chief executive Andres Gluski was quoted by Reuters as saying that "Masinloc is very, very advanced."
"We’ve got the environmental permits and we are now in the final commercial aspects," Gluski added.
"We are willing to expand more in the Philippines. We want to expand more."
AES spent $1bn in refurbishing a 630MW thermal power plant it purchased in 2008.
