Earnings call transcript: AES Q2 2025 sees strong renewables growth

AES Corporation (market cap: $10.3 billion) reported robust financial performance in its Q2 2025 earnings call, driven by significant growth in its renewables sector. The company’s adjusted EBITDA increased to $681 million, up from $658 million in the same quarter last year. Meanwhile, adjusted EPS rose by 34% to $0.51. Despite these positive results, AES’s stock saw a slight decline in aftermarket trading, dropping by 1.32% to $14.25. According to InvestingPro analysis, AES is currently trading slightly below its Fair Value, with the stock showing a strong 42% return over the past six months.

Key Takeaways

• AES’s renewables segment experienced a 56% growth in EBITDA, reaching $240 million.
• The company completed a major solar plus storage project and signed substantial new power purchase agreements (PPAs).
• AES reaffirmed its 2025 adjusted EBITDA guidance, projecting $2.65 to $2.85 billion.
• The stock decreased by 1.32% in aftermarket trading, reflecting mixed investor sentiment.

Company Performance

AES Corporation demonstrated solid performance in Q2 2025, with a notable increase in its adjusted EBITDA and EPS. The company continues to capitalize on the growing demand for renewable energy, particularly from data centers and corporate clients. AES’s strategic focus on expanding its renewables portfolio has positioned it as a leader in providing sustainable energy solutions. InvestingPro data reveals the company operates with significant debt (Debt/Equity ratio: 9.17) and faces challenges with cash burn, factors investors should monitor closely.

Financial Highlights

• Q2 Adjusted EBITDA: $681 million, up from $658 million YoY
• Q2 Adjusted EPS: $0.51, a 34% increase from $0.38 YoY
• Renewables SBU EBITDA: $240 million, a 56% increase YoY

Outlook & Guidance

AES reaffirmed its 2025 adjusted EBITDA guidance, estimating between $2.65 billion and $2.85 billion. The company anticipates long-term EBITDA growth of 5-7%, with renewables expected to grow by 19-21% and utilities by 13-15%. AES is confident in maintaining strong growth even after the expiration of tax credits in 2027. Three analysts have recently revised their earnings estimates upward for the upcoming period, and the company maintains an impressive track record of raising its dividend for 14 consecutive years, currently yielding 4.87%.

Get access to detailed financial analysis and 12 more exclusive InvestingPro Tips for AES, along with comprehensive Fair Value calculations and financial health scores.

Executive Commentary

CEO Andrés Gluski emphasized AES’s commitment to providing energy solutions that meet client demands: "We see ourselves as a provider of electric energy and capacity, with the cost, shape, and carbon intensity that our clients demand." CFO Steve Coughlin highlighted the company’s operational efficiency: "Our business has reached a level of scale and maturity that allows us to operate even more effectively and efficiently."

Risks and Challenges

• Regulatory changes could impact project timelines and costs.
• Dependence on tax credits for renewables might affect future profitability.
• Fluctuations in energy demand, especially from data centers, could influence growth.
• Potential supply chain disruptions may delay project completions.

AES Corporation’s Q2 2025 results underscore its strategic focus on renewable energy and infrastructure investment. While the company’s financial performance remains strong, the slight decline in stock price indicates cautious investor sentiment amid broader market conditions. The stock trades at a P/E ratio of 11.2, suggesting relatively modest valuation levels. Discover more detailed insights and access the comprehensive Pro Research Report for AES, along with 1,400+ other stocks, exclusively on InvestingPro.

Full transcript - AES Corporation (AES) Q2 2025:

Emily, Call Coordinator, AES Corporation: Hello everyone and welcome to The AES Corporation second quarter 2025 financial review call. My name is Emily and I’ll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing STAR followed by the number 1 on your telephone keypad. I would now like to turn the call over to Susan Harcourt, Vice President of Investor Relations. Susan, please go ahead. Thank you, operator. Good morning and welcome to our second quarter 2025 financial review call. Our press release, presentation, and related financial information are available on our website at AES.com. Today we will be making forward-looking statements. There are many factors that may cause future results to differ materially from these statements, which are disclosed in our most recent 10-K and 10-Q filed with the SEC.

Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andrés Gluski, our President and Chief Executive Officer, Steve Coughlin, our Chief Financial Officer, Ricardo Manuel Falú, our Chief Operating Officer, and other senior members of our management team. With that, I will turn the call.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Over to Andrés. Good morning everyone and thank you for joining our second quarter 2025 financial review call today. I’m pleased to reaffirm both our 2025 guidance and our long term growth targets. Our business remains resilient and we continue to execute on our strategy, which I will discuss in more detail following my remarks. Steve Coughlin, our CFO, will provide additional color on our financial performance and outlook. Before delving into our second quarter results, allow me to share a few thoughts regarding the state of the electricity market in the U.S. Obviously, the past couple of months have seen major policy announcements which will have a significant impact on the sector. Not to get distracted by some of the noise surrounding these developments, it’s important to keep in mind key market fundamentals. Demand for energy in the U.S. is growing rapidly.

By historical measures, prices are rising and the bulk of new additions over the next five years will be renewables and energy storage. These are the technologies that can be feasibly built given their shorter time to power, advanced development pipeline, existing supply chains, competitive levelized cost of energy, and customer preference. Current government policies aim to increase the amount of future power coming from fossil fuels, nuclear, and enhanced geothermal. While measures can be taken to increase generation from existing thermal plants, new additions will take years to materially come online, some more than others. In the meantime, AES has a mature pipeline of renewables, battery storage, with a substantial safe harbor backlog of signed PPAs positioning us to meet our clients’ growing energy needs.

As an all of the above energy company, we have the capabilities to deliver those technologies that are most cost competitive and demanded by our customers. We see our business model as supplying not a specific technology but the electric energy and capacity in the shape, cost, and reliability the market demands. Over many years, AES has demonstrated its flexibility and innovation time and again. Now turning to our results, beginning on slide 4, we’re executing well and on track to achieve all of our financial metrics. Our performance was in line with our expectations, with adjusted EBITDA of $681 million and adjusted EPS of $0.51. We are seeing significant growth in our renewables SBU, with adjusted EBITDA for the second quarter of $240 million, representing overall growth of 56% versus Q2 last year.

This growth is directly related to the 3.2 GW of new projects that we have added to our portfolio over the last four quarters. We are also seeing the benefits of more projects with higher returns, which we forecasted earlier last year and are now hitting our results as these projects come online. We’re on track to add a total of 3.2 GW of new projects in operation in 2025. Year to date, we have completed construction of 1.9 GW and we are approximately 80% complete on the remaining 1.3 GW. I am pleased to report that our progress so far this year includes the completion of the 1 GW Belfield 1 solar plus storage project, which is the first phase in the largest project of its kind in the country.

As part of our construction efforts, we utilized our Maximo AI Robotic Solar Installation Technology, which makes construction significantly faster, less labor intensive, and more cost effective. Since our last call, we have signed PPAs for an additional 1.6 GW of new projects, including 650 MW with Meta, bringing our backlog to 12 GW. The 1.6 GW of new PPAs is entirely with data center customers, further solidifying our position as the leading provider of renewables to this customer segment. Now turning to Slide 5, our business is resilient to changes in renewables policy, whether it’s the new legislation signed by Congress, the prospect of additional tariffs, or changes to IRS tax credit guidelines. We have significant protections due to the actions we have taken over the last several years, including safe harbor protections, ensuring a U.S. supply chain, and avoiding projects on federal land.

Let me also emphasize that for the majority of our business, any of the recent changes in U.S. policy are largely inconsequential. This includes our entire operating portfolio, our utilities, and our international business. Turning to Slide 6, we feel very confident in the strength of our backlog of renewables and energy storage projects, which have signed contracts but are not yet operational. Of this 12 GW backlog, 4.1 GW are international, selling primarily to mining companies and data centers with no exposure to U.S. policy. Looking at our 7.9 GW U.S. backlog, we plan to place in service 6 GW before year end 2027, all of which qualify for existing tax credits under recent legislation. Of the remaining 1.9 gigawatts coming online after 2027, nearly all is safe harbored under the current Treasury guidance.

Even looking out to 2028 and beyond, our pipeline includes an additional 4 gigawatts of projects that are expected to be added to our backlog over the coming year. I should add that 35% of our U.S. pipeline is energy storage, which will be supported by tax credits from start of construction through 2033. In short, our backlog is well protected and we have a long runway of projects that we expect to bring online with tax incentives. Turning to Slide 7, our supply chain strategy also provides us with strong protection from changes in U.S. policy or potential future tariffs. All of our major equipment is now either on site or coming from U.S.-based suppliers with their own supply chains diversified outside of China. We have essentially eliminated any potential impact from previously announced tariffs and our projects comply with the restrictions on Foreign Entities of Concern or FEOC.

Now turning to Slide 8 and our future growth. Even as tax credits expire, we expect strong demand which will enable us to maintain or improve our existing project returns and continue to rapidly grow our EBITDA. We are uniquely positioned as the top provider of renewables to data center companies, with over 11 gigawatts of agreements signed to date and we are confident in our ability to deliver on our financial objectives for the following three reasons. First, we’re seeing robust demand for electricity driven primarily by the rapid growth of data centers. Meeting this demand in the U.S. will require over 600 TWh of additional power generated by the end of the decade, which is roughly equivalent to the current ERCOT system.

With this backdrop, as you can see on Slide 9, the corporate PPA market for renewables has a long history of adjusting to account for changes in market conditions, with average contract prices moving as the underlying cost of building new projects has evolved. It is worth noting that for data centers, electricity represents less than 10% of total lifetime cost on average. Second, turning to Slide 10, renewables offer a competitive levelized cost of energy or LCOE for new generations even without tax credits. Over the past year, the cost of a new gas turbine has more than doubled and lead times have stretched to four years or more. Additionally, new gas pipelines have yet to be approved, permitted, and built. As a result, a surge in new gas plants coming online will likely take time. Third, our strategy remains centered on meeting our customer needs.

Today, customers are asking for renewables and storage because they can be deployed quickly and at scale. I should add that AES has extensive gas development capabilities and we are focused on delivering those solutions that our large data center customers are requesting. Finally, turning to Slide 11 and the robust growth program we’re undertaking at our U.S. utilities, we are executing on the largest investment program in the history of both AES Indiana and AES Ohio to improve customer reliability and support economic development in 2025. Across these utilities, we’re on track to invest approximately $1.4 billion in areas such as hardening the distribution network, smart grid, new generation, and transmission build out for data centers. At AES Indiana, we’re making significant progress on our generation build out.

Earlier this year, we completed the Pike County Energy Storage project, which includes 200 megawatts of installed capacity and 800 megawatt hours of dispatchable energy, the largest operational battery project in MISO. We’re also on track to bring online the Petersburg Energy Center, a 250 megawatt solar and 180 megawatt hour energy storage facility by the end of the year. Furthermore, we’re on schedule with repowering two of the Petersburg units from coal to natural gas. We expect this project to be completed in 2026. This quarter, we also filed a petition for a regulatory rate review with the Indiana Utility Regulatory Commission. This rate case represents our first using a forward-looking test year, which will reduce regulatory lag and enable a more efficient investment program as we work to best serve our customers with cost-effective and reliable electricity service.

At AES Ohio, our current regulatory rate review with the Public Utilities Commission of Ohio is on track for a timely order and we’re optimistic that we will be able to reach a settlement agreement in the third quarter. In addition, with the passage of House Bill 15 this spring, we are working towards a new regulatory framework that will incorporate three forward-looking test years, significantly reducing regulatory lag in Ohio. With our current ESP regulatory structure in place until early 2027, we expect to file for new rates later this year, which will include 2027 to 2029 as the test years. With that, I would now like to turn the call over to our CFO Steve Coughlin.

Steve Coughlin, Chief Financial Officer, AES Corporation: Thank you, Andrés, and good morning, everyone. I am very pleased to share that AES had a great second quarter, keeping us well on track toward our full year 2025 guidance targets. First, turning to adjusted EBITDA on slide 13, second quarter adjusted EBITDA was $681 million versus $658 million a year ago. This was driven by significant growth from new renewables projects and the positive impact from cost reductions we announced on our fourth quarter call. These were partially offset by several portfolio changes, including the prior year Warrior Run Coal PPA monetization, the sale of AES Brazil, and the 30% sell down of AES Ohio. Turning to slide 14, second quarter adjusted EPS increased 34% to $0.51 per share versus $0.38 in the prior year. In addition to the EBITDA growth drivers, EPS also increased as a result of $185 million of higher U.S. renewable tax attributes.

This strong growth was partially offset by higher parent interest expense and a higher adjusted tax rate. Next, I’ll cover the performance drivers within each of our strategic business units on the next four slides, beginning with our renewables SBU on slide 15. The 56% increase in EBITDA was as expected and puts us well on our way to achieving our full year guidance of $890 million to $960 million. This was primarily driven by 3.2 GW of new capacity brought online since Q2 2024, as well as the positive impacts from the cost reductions and scaling down of our development spending that we discussed on our fourth quarter call this year. Hydrology has normalized in Colombia, improving results versus the prior year.

The net effect of moving Chile renewables to the renewables SBU this year was offset by the sale of our 5 GW AES Brazil business in the utilities SBU. Lower adjusted pretax contribution, or PTC, in the quarter was mostly driven by planned outages and the sell down of AES Ohio that closed in April. These results were fully anticipated in our guidance, and we expect significant growth in the utilities SBU in the year to go, driven by new investments in the rate base. Turning to our energy infrastructure SBU on slide 17, lower EBITDA versus Q2 2024 primarily reflects the prior year recognition of the Warrior Run Coal PPA monetization and Chile renewable assets, moving to our renewables segment in 2025, partially offset by our acquisition of the remaining ownership in the Cochrane Coal plant.

Excluding these portfolio changes, energy infrastructure EBITDA would have increased by $23 million as a result of higher availability across the fleet. Finally, lower EBITDA at our New Energy Technologies SBU primarily reflects AES’s share of the lower results reported by Fluence in their fiscal second quarter. Turning to Slide 19, we are reaffirming our 2025 adjusted EBITDA guidance of $2.65 to $2.85 billion, driven by the robust 51% growth in our renewables business year to date and our strong position heading into the second half of this year. Growth in the year to go will be driven by the 3.7 GW of projects brought online in 2024, the 1.9 GW already brought online year to date, and the additional 1.3 GW we will bring online through the end of the year.

Our business has reached a level of scale and maturity that allows us to operate even more effectively and efficiently, which is improving EBITDA margins. As I mentioned, hydrology conditions in Colombia have normalized and we see our hydro plants well positioned to hit their targets through the end of the year. We expect 7% year over year growth at our utilities SBU driven by the $1.3 billion of rate based investment we’ve made over the last 12 months. We have already locked in the cost savings actions implemented during the first quarter, which will yield at least the $150 million savings target we discussed on our fourth quarter call. To put this year into context, when adjusted to exclude the impacts of asset sales year over year, adjusted EBITDA growth will be approximately 11%.

Looking beyond 2025, asset sales will be less of a driver due to the substantial progress we’ve already made. This means that adjusted EBITDA growth will significantly accelerate in 2026 as the strong growth in our renewables and utilities businesses will not be offset by significant asset sales. As a result, we still expect at least low teens EBITDA growth in 2026, putting us well on track to achieve our long term growth rate through 2027. Now, looking at our 2025 adjusted earnings per share on Slide 20, we are reaffirming our guidance of $2.10 to $2.26, which exceeds the midpoint of the 7% to 9% long term growth rate we introduced back in 2021. In addition to the drivers of adjusted EBITDA, we expect higher interest expense as a result of new debt for our growth investments and a slightly higher adjusted tax rate.

We expect to benefit from higher tax credit monetization in the year to go as we complete an additional 600 megawatts of projects in the U.S. and expect these tax attributes to be weighted approximately equally between the third and fourth quarter orders. Now let’s turn to our 2025 parent capital allocation plan on slide 21. Sources reflect approximately $2.7 billion of total discretionary cash, including achieving the upper half of our $1.15 to $1.25 billion of parent free cash flow target, reflecting double-digit year-over-year growth. Additional sources include the sell down of our global insurance business that closed in the second quarter, and we expect to borrow an additional $500 million at the parent to support our attractive growth investment plan. On the right-hand side, you can see our planned use of capital.

We will return approximately $500 million to shareholders this year with our $0.70 per share annual dividend while investing approximately $1.8 billion toward new growth, primarily in the renewables and utilities businesses. We have also repaid approximately $400 million of subsidiary debt in line with our balance sheet optimization objectives. Turning to slide 22, we are reaffirming our long-term growth rate for adjusted EBITDA of 5% to 7%, driven by renewables growth of 19% to 21% and utilities growth of 13% to 15%. We are also reaffirming our long-term growth rates for adjusted EPS and parent free cash flow. I want to emphasize that the recently passed reconciliation bill does not impact the growth plan included in our long-term guidance. As Andrés Gluski discussed, all projects coming online through year-end 2027 qualify to receive existing tax credits under the recently passed legislation.

Additionally, we have either already taken delivery of key components for our backlog projects or we have secured domestic supply chains, which mitigate impacts of new tariffs. These actions give us clear line of sight to achieving our long-term guidance. As a reminder, AES’s adjusted EBITDA does not include renewables tax credits. As a result, we do not expect any reduction in adjusted EBITDA from the eventual sunsetting of renewable tax credits. I would also like to share a few thoughts on our balance sheet. Our parent free cash flow to parent debt metric in the second quarter improved versus a year ago from 19% to 25%, and we remain on track to reach our 12% FFO to debt target with Moody’s by the end of next year.

Our plan through 2027 is fully self-funded with internally generated cash flow, tax capital, partner capital, and incremental debt capacity as we consider how the business will evolve with the step down of tax credits toward the end of the decade and beyond. We feel confident in the resilience of our business due to our industry-leading position with data centers. Data center customers have an incredible need for new power and future expirations of renewables. Incentives are unlikely to slow this down. Our expectation is that PPA prices will adjust to fully remunerate invested capital at attractive returns. In other words, while future projects without tax incentives would require additional debt and equity to replace tax value monetization, those projects will also earn higher cash and EBITDA to remunerate that additional capital and achieve our target returns.

This also means that we could generate similar EBITDA and cash growth with less megawatts and without increasing capital needs. We will maintain this flexibility to scale our growth investments to be in line with available capital sources within AES and our partners. Looking beyond 2027, our growth will continue to be funded primarily with internally generated cash, partner capital, and debt capacity in line with our investment grade credit rating. AES’s future growth rates will be strong as declines we’ve seen in our energy infrastructure SBU related to asset sales and coal retirements will be largely behind us, allowing the high growth rates of renewables and utilities to dominate AES’s overall rate of growth. In summary, I am very pleased with the progress we’ve made toward our financial objectives for 2025 and beyond as our business strategy and execution continue to prove resilient and successful.

With more than half of the year behind us, I am confident we will achieve our 2025 objectives and look forward to providing an update on next quarter’s call. With that, I’ll turn the call back over to Andrés.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Thank you, Steve. Before opening up the call to questions, I will share some closing thoughts. AES’s business is resilient and we are reaffirming all of our 2025 and longer term financial and business objectives. We’re on track to complete 3.2 GW of construction in full year 2025 and have signed 2 GW of new PPAs so far this year. Our backlog of 12 GW of signed PPAs is either international or safe harbor and a majority will be completed by 2027. AES’s renewables adjusted EBITDA grew by 56% in the quarter as we delivered on our construction projects. At the same time, our balance sheet metrics are on track to meet all requirements to maintain our triple investment grade.

Our resilience is the result of years of preparation, of creating a domestic supply chain, a safe harbor, backlog and pipeline, and being the preferred provider of the fastest growing market segment, namely data centers and corporate clients. AES has earned the reputation as the most reliable developer and builder of renewable projects, as well as the most innovative company in our sector. We see ourselves as a provider of electric energy and capacity, with the cost, shape and carbon intensity that our clients demand. AES will continue to deliver the solutions our customers need as we always have done in the past. For all of these reasons, we feel confident in our ability to deliver on our financial commitments through our guidance period and continue to show strong growth beyond. With that, I would ask the operator to open up the call for questions.

Emily, Call Coordinator, AES Corporation: Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by 2 to withdraw yourself from the queue. Our first question today comes from Nick Campanella with Barclays. Please go ahead, Nick.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Hi, good morning team. This is Fae for Nick today and thanks for taking my questions first. Just wanted to touch on financial execution drivers. On new project construction timeline, seeing 80% of the projects completed for the remaining 1.3 GW, can you talk about the project online timing for the rest of the year, and how does that affect EPS and EBITDA recognition? Also, looking at longer term guidance into a post OBBB world, what are your latest thoughts and potential timing to roll forward into 2028 or even further as part of the multi-year guidance.

Emily, Call Coordinator, AES Corporation: Thanks.

Ricardo Manuel Falú, Chief Operating Officer, AES Corporation: Hi, good morning Nick, this is Ricardo. I’ll take the first part of your question with respect to the timing of the commissioning. Most of it will be, you know, I would say third quarter and a small portion in the fourth quarter of this year. I think it’s important to highlight that 80% progress completion. We have all the equipment that we need on site, so we can provide full confidence in the remaining 1.3 GW being commissioned by the end of the year.

Steve Coughlin, Chief Financial Officer, AES Corporation: Yeah, and hey, this is Steve. Just on the second part, I would also add that most of our growth this year is coming from capacity that’s already come online through last year and the first half of this year, and the tax attributes related to what Ricardo mentioned will be roughly split between the third and fourth quarters. In terms of the longer term guidance, we feel very good. You know, we’re in our planning cycle, but based on what’s come out in the new bill, and as Andrés highlighted, we’re very well positioned beyond 2027, given our safe harboring, given our domestic supply chain, so we see ourselves well on track in that period. We will give an update and expect to extend guidance in the February 25th call as we normally do. You know, we feel very good about the company even beyond the 2027 timeframe.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Nick, this is Andrés. I would also add that we’ve always hit our construction targets that we’ve given and other things like we have avoided public lands for our projects, and there’s a high component of energy storage on this. Overall, we feel very good about hitting our target. Got it. Thanks very much. That’s very helpful. I guess maybe switching gears, I understand we’ve all seen the headlines about a potential acquisition of the company. While I know you can’t really opine directly on that, could you maybe talk about how you are seeing the value of your underlying business currently versus where you traded two, three years ago? Obviously, the renewables backdrop has changed significantly, but do you see private markets would still value your business higher than where the public market is currently?

If you were to pursue something for the whole company, what can be the regulatory hurdles required? Thanks. Yes. Look, Nick, what I would say is we have seen over the last couple of years, we feel our company has been undervalued, consistently undervalued. Just looking at today’s call, look at the strength of our backlog, look at our execution, look at the clients that we have, and also look at the flexibility that the company has. We really are an all of the above company. I mean, we always had a foot in gas as well. Over the last five years, we’ve done about 2 GW of new gas plants, and we’re doing a conversion from coal to gas, a 1 GW conversion from coal to gas now. We have the possibility of doing gas as well. We have other sites, we have other things in development.

What I would say is that if you look at all those factors, we really are a company that’s oriented to serving our customers, and we’re not just a single technology company. We’ll combine the technologies with the tax incentives, with the customer preferences that make sense. Our primary aim is financial, to really do the very best, create the most shareholder value that we can from this portfolio. We’ve been executing and therefore if you look at what the company consists of and our performance, we feel that, yes, we’ve been undervalued over the last couple of years. Understood, that’s helpful. Color? Thanks a lot. I’ll leave it there. Thank you.

Emily, Call Coordinator, AES Corporation: Thank you. Our next question comes from Richard Sunderland with J.P. Morgan. Please go ahead. Richard.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Hi, good morning, can you hear me? Yes, Richard, good morning.

Steve Coughlin, Chief Financial Officer, AES Corporation: Great, thank you for the time today. You know, looking at slide six here, I’m wondering how you think about the risk to safe harbor protections from the executive order and potential changes to IRS tax credit guidelines.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Is there anything specific to your safe harbor protections.

Steve Coughlin, Chief Financial Officer, AES Corporation: Harbor activities that give you confidence in that outlook?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: I’ll give a high-level answer, then I’ll pass it to Ricardo. I would say that, look, overall, we’ve been very focused on how to have a robust position, and this is sort of a philosophy we’ve had. When you think about COVID, we’re the only large developer that didn’t postpone or even abandon any big projects as a result of COVID. Thinking about what potential changes could come, we have been very careful, avoiding any public lands, for example. If you think of our pipeline, a high component of that is energy storage or batteries plus energy storage. Overall, we’re in a pretty robust position going into this. On the specifics, I’m going to go ahead and pass it to Ricardo.

Ricardo Manuel Falú, Chief Operating Officer, AES Corporation: Good morning, Richard. Let me start by saying that out of the 7.9 GW of U.S. backlog, and just to repeat what we have in the slide, 16.6 GW will be placed in service by the end of 2027, by December 31, 2027. These projects, the 6 GW, are not exposed or subject to any modification by the new treasury guidance because by the law they have access to the tax attributes. We can provide full confidence that we can bring and where these projects are in construction, we will bring them online or place them in service before December 31, 2027. For the remaining 1.9, as Andrés mentioned, nearly all already have safe harbor protections under the treasury or existing treasury guidance. In no event do we expect the new treasury guidance to be applied retroactively with respect to the executive order.

There is another element there, which relates to FIAC, which applies for projects that start construction on or after January 1, 2026. As all our projects already started construction, or nearly all, we have no exposure to this FIAC potential changes as part of this treasury guidance. I should also say that as a first mover in terms of securing and supporting domestic or U.S. manufacturing for solar, wind, and storage, we can comply even with the highest requirement or restriction for FIAC, even though they will not apply for the projects in our backlog.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Got it.

Steve Coughlin, Chief Financial Officer, AES Corporation: Thank you for the commentary there.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Turning to the utility side, we’ve seen sort of across the space.

Steve Coughlin, Chief Financial Officer, AES Corporation: A lot of load updates on the quarter.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Seems like, you know, pockets of the.

Steve Coughlin, Chief Financial Officer, AES Corporation: Country and even broadly where there’s a lot of acceleration of activity.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Curious, you know, given you’ve already picked up some benefits on that side, how?

Steve Coughlin, Chief Financial Officer, AES Corporation: You’re seeing overall inbounds and interest into your service territories. Anything notable either on the quarter or on the horizon here on the load?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Thank you. Look, you know, there’s strong interest and especially in our two utilities. I believe they’re among the fastest growing in the country. We’ve signed about 2 GW of data center, additional data center demand, and we would expect more. Yes, we’re having inbounds and yes, the demand continues to be strong. Again, across the board we have positioned ourselves with that sector that’s most robust and most rapidly growing. Great.

Steve Coughlin, Chief Financial Officer, AES Corporation: Thanks for the time today.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Thanks, Richard.

Emily, Call Coordinator, AES Corporation: Thank you. Our next question comes from Michael Sullivan with Wolfe Research. Please go ahead, Michael.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Hey, good morning. Morning, Michael. Maybe I missed this, but just.

Steve Coughlin, Chief Financial Officer, AES Corporation: Any more detail you can give us on the PPAs that you signed in the quarter, whether it be or resource?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: The information that we’ve given is that $650 million was with Meta. All of the $1.6 billion that we’ve signed, and again this is since the last call, are with data center customers and we’ll provide more information going into the future. In general, we’re somewhat skewed towards solar plus batteries overall. That’s the technologies we’re strongest in.

Steve Coughlin, Chief Financial Officer, AES Corporation: Okay, fair enough. Yeah, I mean we’ve talked.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: about this a bit I think on some of the calls. Any further evolution in your view?

Steve Coughlin, Chief Financial Officer, AES Corporation: Thoughts in terms of new gas plant.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Build for data centers?

Steve Coughlin, Chief Financial Officer, AES Corporation: Have conversations progressed there at all, or is there still mostly a skew towards?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Renewable storage at least for the near term. Your question is if there’s a conversation about gas built to back up data centers. Look, as I sort of indicated, we will use all the technologies that best meet our customers’ needs. If our customers would want gas as part of the package, absolutely. You know we have the capabilities, as I said, we’ve always been building gas plants. We have 10 GW under operation today. We feel very comfortable with that. We’re going to react to what our customers require. Okay, great.

Steve Coughlin, Chief Financial Officer, AES Corporation: Just a quick one on the utilities.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Can you give us a sense of?

Steve Coughlin, Chief Financial Officer, AES Corporation: How much lag you’re seeing in Ohio.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Today, what that can move to in a three year forward test year world?

Steve Coughlin, Chief Financial Officer, AES Corporation: Yeah, this is Steve. Look, we’re very happy with the new regulatory framework allowing the three-year forward rate cases. We have an existing rate case under the prior framework pending, and we’re expecting that settlement in the relatively near term, the coming months, and new rates to be in place Q1 of next year. We’re also moving forward with our plans to file under the new three-year forward-looking rate structure likely later this year and would expect rates in 2027 under the new rate structure. This is a really attractive structure for a utility with three-year forward-looking; it significantly, you know, largely eliminates regulatory lag on our investment. I think it’s good for utility, good for investing to provide the best service for our customers and to support the rapid load growth that Andrés mentioned that is coming and to have very regular and quick return on those investments.

That’s the timing and we’re looking forward to it.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Okay, thank you very much. Thank you.

Emily, Call Coordinator, AES Corporation: Thank you. Our next question comes from Julian Demoulin-Smith with Jefferies. Please go ahead, Julian.

Steve Coughlin, Chief Financial Officer, AES Corporation: Hey, good morning team.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Thank you guys very much for the time. Good morning, Julian. Can you guys hear me? Absolutely.

Steve Coughlin, Chief Financial Officer, AES Corporation: Excellent.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Hey, so wonderful. I just wanted to follow up on these articles in recent weeks. Can you elaborate a little bit about the situation? It was a bit ambiguous as to understand the strategic developments here. What actions has the board taken? Did you all initiate this or has there been sort of an inbound formal bid from a third party? I get that it might be difficult to speak to specifically at times, but just in terms of what actions has the board taken at this point with regards to reviewing the strategic direction of the company? Then separately there’s also been some.

Steve Coughlin, Chief Financial Officer, AES Corporation: Articles out there about revisiting the stable of unicorns, as you like to call it.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Andrés, I suppose Uplight specifically here, can you speak a little bit more to.

Steve Coughlin, Chief Financial Officer, AES Corporation: Asset sales within the plan and within that, how that might fit against the broader strategic undertaking at hand too?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Sure. Julian, as you know, regarding the first, AES never comments on rumors in public markets, so I won’t. Regarding the second and Uplight specifically, we also don’t comment about any potential sales that may be in progress. As you know, we’ve had some of the next unicorns as part of our portfolio of potential asset sales. We would only do them when we feel the price is right. We monetized some affluence when we thought the price was right and we will do so with some of the other ones. I think that some of the current developments make things like Maximo potentially much more valuable because if there is a, let’s say, rush to complete projects by the 2027 end of year guideline, if you can build a solar farm in half the time, that certainly becomes much more attractive.

That’s the one that we have a lot of interest in. We’re very pleased by how it performed in the Belfield one and now it has a bigger role in Belfield two. That’s about all I can say because, as you well know, we can’t comment on any potential asset sale until it actually occurs. You can’t confirm necessarily that the board.

Steve Coughlin, Chief Financial Officer, AES Corporation: Is elected to do anything either.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: As I said, we don’t comment on any public market transactions and we never have. If I can pivot just quickly back to the other side of this.

Steve Coughlin, Chief Financial Officer, AES Corporation: You’ve made allusion to it on these, the EO backdrop.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: What are your expectations? I mean, I get that whatever you can say on this thus far, but how would you set expectations about the EO specifically here, and then related, how are you thinking about the cadence of your development business? I know you already alluded that you provide specific targets at year end here.

Steve Coughlin, Chief Financial Officer, AES Corporation: How do you think about the.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Overall trajectory of the business when you think about the back half of the.

Steve Coughlin, Chief Financial Officer, AES Corporation: Decade and the implications that might come from said EO or otherwise? Right.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Yeah. Look, what I can, you know, we don’t really speculate too much on sort of what’s going to come out of an executive order. What we expect is there’s a number of competing, let’s say, desires here. One is the need to power data centers. What can be provided in the timeframes needed to sort of win this competition, international competition for AI dominance. I think that’s one. Second, there’s a lot of jobs involved with building renewables. Obviously, they’re indicating that they want a transition, but that transition has to be done in a feasible, orderly fashion that meets all of the various needs for more energy, for AI dominance, for jobs, for growth, et cetera. That’s what I would expect, is that all these factors are taken into consideration. Regarding the second question was how that fits in.

Steve Coughlin, Chief Financial Officer, AES Corporation: Right.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Regardless of the timing and cadence, how would you broadly set expectations about.

Steve Coughlin, Chief Financial Officer, AES Corporation: The back half of this decade, given.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: That sort of whatever the timing is of that phase out? Given that phase out, how would you frame expectations initially? Look, as we indicated, we continue to expect strong growth because it’s not a question of the technology, it’s a question of the ability to put together and supply clients with what they want. As you know, we are not going after like megawatt goals, we’re going after financial goals. We have the constraint that we’re going to remain triple investment grade and we’re going to continue to pay a dividend. Within those confines, we will grow in an orderly fashion. I must also say that if you have sort of continuous growth and steady growth, it’s much more cost efficient than if you have sort of spurts and valleys, so that’s what we’re going to do. I don’t expect any, you know, post.

When these credits burn off, they will continue to grow at strong rates. I would also add that we’re the only large company which has international experience. 30% of our new growth is outside of the U.S. and we have no tax credits. Quite frankly, we have higher margins. It will basically be, as we said in the past, our U.S. business should look more like our international business. It’s very likely that it will also add a component of gas as well, and that’s fine with us. We’re capable of doing that. As Steve also mentioned, the profile of cash, et cetera, is actually somewhat more favorable than using the tax credit. Of course, you have to use the tax credit because that’s what makes the projects competitive for your clients.

In the absence of them, we’ve shown over the years we’re perfectly capable of making a very good business without tax credits. Of course, absolutely. But you think you can continue to.

Steve Coughlin, Chief Financial Officer, AES Corporation: Compound at higher levels than what you’re.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Doing for the time being. When you said growth earlier, we’re not going to give, you know, guidance outside of the period. As we said on the call, we feel very confident that this company is going to continue to grow at strong rates and that, you know, as the circumstances change, you know, we will adapt to them. I guess, you know, our experience in developing markets gives us an advantage because those markets’ regulations have tended to be much more volatile than in the U.S. For us, you know, again, we feel we’re in a very good position and we have all the technologies we need. You know, as new technologies become available, say something like enhanced geothermal, you know, we’ve been dabbling in that and we’ll be ready to provide that for our customers, even SMRs, although I think that’s quite a ways off.

I think that’s probably a decade off.

Steve Coughlin, Chief Financial Officer, AES Corporation: Yeah, I would just add that, you know, Julian, our backlog, as we showed in the slides, is well protected even beyond 2027. We see that growth continuing to be strong, and even then the demand is so robust, technology will evolve, as Andrés said, pricing will adapt in terms of what the net cost of projects becomes. As we described, we always maintain flexibility here. We don’t necessarily need to build as many megawatts if investments are more concentrated without tax attributes in the renewable piece of the business. We also maintain the ability to sell down as we’ve done in the past. Because the EBITDA and cash yield will actually go up on a per megawatt basis, we can generate similar returns with, in fact, fewer megawatts. We will adapt, but we feel very good about how well positioned we are through the very long term.

Thank you guys very much.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Thank you, Julian.

Emily, Call Coordinator, AES Corporation: Thank you. Our next question today comes from Ryan Levine with Citi. Please go ahead, Ryan.

Steve Coughlin, Chief Financial Officer, AES Corporation: Good morning.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Good morning. Ryan, how much cash flow is associated?

Steve Coughlin, Chief Financial Officer, AES Corporation: With Maximo and the AES plan, is there any color you can share around the financial metrics or commercial interest you’re seeing with that asset in your portfolio?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Look, at this point, there’s nothing in the plan for Maximo in terms of commercial, you know, we’ve had a considerable amount of inbound, but our plan is this, right? Currently we’re going to have about four of these operating, and we are, I guess you would call it beta testing. We’re getting more and more efficient. We’re using union crews. Its main advantage is it can go faster with the same amount of people, two to three times faster. I think what’s very important is that in desert settings where you have limitations on the hours worked, and again, picking up 65 pound solar panels, it requires very strong people to do that. With Maximo, anybody can do this job. You can work not six hours, you can work 18 hours. It has the advantage of being more efficient, but also getting the projects done faster.

It would have a multiple of the efficiency of getting these things done, which means less working capital. Very important with the current guidelines, where you have a deadline that the project has to be in service, could be very advantageous. We should go to four to a couple dozen next year, and we will use those internally. In terms of selling them to third parties, that’s probably 2027 or beyond when we have that. To give you sort of a time frame which is similar to what we did with batteries, you know, for several years, we put them on our own fleet, and only after that did we start to commercialize them. There was a lot of learning, but we’ll get a much better price once this product is perfected.

Steve Coughlin, Chief Financial Officer, AES Corporation: Thanks. In the prepared remarks, the company’s gas generation build capability was highlighted. Just to clarify, is the effort that you were speaking to more around backup generation for data center build out, or was that a more broad effort that the company is pursuing?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Okay, we are converting a coal plant right now to gas. That’s about 1.1 GW. That’s in Indiana. We just completed a 670 MW combined cycle plant in Panama. In 2020, we brought online Southland, which was 1.2 GW of combined cycle gas plants. We’ve always been continually building gas plants. What I did mention is that if data centers request them, we’re capable of building them. We have the capability of expanding sites, for example, to do it very quickly. The point is, we don’t count it as part of our pipeline. We don’t count, for example, the 1.1 GW conversion as part of our pipeline. We’ve basically centered that on renewables. We have the capabilities of doing more gas, for example, in other places as well, even the Dominican Republic, there’s possibilities of doing more gas. We have that in our arsenal.

It’s a question of what our clients demand. Okay.

Steve Coughlin, Chief Financial Officer, AES Corporation: In terms of renewable industry from a higher level, do you see consolidation given the policy uncertainty at the U.S. federal level? Does that create opportunity for your standalone business to acquire some assets or high grade your portfolio?

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Sure. I mean obviously I think it will be more difficult for the smaller, less capitalized developers in this environment. I certainly think that there will be, you know, opportunities. We have been doing this, you know, if you think of over the past five years we’ve been rolling up smaller developers into AES. I think there’ll be continued opportunities like that. We’ll also have the opportunity to buy advanced stage development projects and we’ll have to weigh whether it’s more profitable to develop a particular project we have in our pipeline or acquire it and then finish it. Bellfield is a good example of that. It’s one of our best projects and it was 2 GW, which was a, let’s say, medium stage acquisition. Appreciate the caller. Thank you, Ryan.

Emily, Call Coordinator, AES Corporation: Thank you. Our next question comes from David Arcaro with Morgan Stanley. Please go ahead, David.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Hey, thanks so much. Good morning. I was wondering what has the bookings trajectory been in July post the IRA? I’m just wondering if there’s any evidence of a pickup in activity now that the level of clarity has improved for the industry.

Ricardo Manuel Falú, Chief Operating Officer, AES Corporation: Thank you, David, for the question. What we are seeing is, as Andrés Gluski and also Steve Coughlin mentioned, the demand is extremely strong. We see our customers, of course, trying to lock in PPAs as fast as they can possibly do it. Why is that? Because there is an intent of still getting some benefits from the tax incentives. We do have 4 GW of projects in our pipeline, so not yet contracted. That, of course, are very attractive for our customers. Also, as Sandra mentioned, we’re very, very focused on the big tech customer segment, large and profitable PPAs.

We are, of course, balancing between the desire of our customers to move these projects along and sign PPAs fast to make sure that we are disciplined in terms of having all the permits, all the equipment, and also ensuring that we can capitalize on the great work that we have done safeguarding these projects and the fact that they are very unique in a market that will adjust for the removal of the tax incentives going forward. We are seeing strong demand. They are trying to lock PPAs prices as soon as possible. I think we feel very confident in our ability to sign more PPAs in the year to go. Stay tuned and we will be sharing more as we sign those contracts.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Great. Thank you for that. It was solid bookings obviously from data center customers. Great to see that acceleration. I was wondering if there’s any inflection in those data center, in that data center renewables demand, anything that might have kind of sparked the industry recently. Is that an inflection that you saw in the quarter specifically with that customer set?

Ricardo Manuel Falú, Chief Operating Officer, AES Corporation: Not at all. I think what Andrés Gluski mentioned is very, very important. Renewables offer the faster time to power price certainty because even though, of course, it will adjust for the removal of the tax incentive, this is a fixed price for 20 years. Our customers, of course, appreciate they don’t have the volatility of any fuel associated to that generation. Third, renewables on a megawatt hour basis are still more competitive even without tax incentives than any other source of electricity. There is no, we don’t see any drop in demand or the interest of our customers. Quite the opposite.

Andrés Gluski, President and Chief Executive Officer, AES Corporation: Excellent. Thank you so much. Thank you, David.

Emily, Call Coordinator, AES Corporation: Thank you. At this time we have no further questions. I’ll turn the call back over to Susan Harcourt for closing comments. We thank everybody for joining us on today’s call. As always, the IR team will be available to answer any follow up questions you may have. Thank you and have a nice day. Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.

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