Q1 2024 The AES Corp Earnings Call

Jordan: Hello and welcome to the AES Corporation Q1 2024 Financial Review Call. My name is Jordan, and I'll be coordinating your call today. As a reminder, if you'd like to submit any questions via phone, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Susan Harcourt, Vice President of Investor Relations. Susan, please go ahead.

Hello, and welcome to the Aes Corporation Q1, 'twenty 'twenty four financial review call. My name is Jordan and I'll be coordinating your call today as a reminder, if you'd like to register any questions lifestyle you may do so.

Pressing star followed by one on your telephone keypad.

I'm now going to hand over to Susan <unk>, Vice President of Investor Relations. Susan. Please go ahead.

Susan Pasley Keppelman Harcourt: Thank you, operator. Good morning, and welcome to our first quarter 2024 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 Andres Gluski, our President and Chief Executive Officer, Steve Coughlin, our Chief Financial Officer, and other senior members of our management team. With that, I will turn the call over to Andres.

Susan: Thank you operator, good morning, and welcome to our first quarter 2020 for financial review call our <unk>.

Press release presentation and related financial information are available on our website at <unk> Dot com.

Susan: 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.

Susan: Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation.

Joining me. This morning are Andres Kluski, our president and Chief Executive Officer, Steve Kaufmann, Our Chief Financial Officer, and other senior members of our management team.

With that I will turn the call over to Andreas.

Andres Gluski: Good morning, everyone, and thank you for joining us for our first quarter 2024 financial review. We are very pleased with our progress so far this year. And today, I will discuss our first quarter results and provide key business updates. Steve Coughlin, our CFO, will give more detail on our financial performance and outlook. Beginning on slide three with our first quarter results. We had a strong first quarter that was in line with our expectations, with adjusted EBITDA with tax attributes of $863 million. Adjusted EBITDA of $635 million and Adjusted EPS of 50 Cent.

Andres Ricardo Gluski Weilert: Good morning, everyone and thank you for joining our first quarter 2020 for financial review call.

Andres Ricardo Gluski Weilert: We are very pleased with our progress so far this year and today I will discuss our first quarter results and provide key business updates Steve Hoffman, our CFO will give more detail on our financial performance and outlook.

Beginning on slide three with our first quarter results.

Andres Ricardo Gluski Weilert: We had a strong first quarter that was in line with our expectations with adjusted EBITDA with tax attributes of $863 million.

Adjusted EBITA of $635 million and adjusted EPS.

50.

Andres Gluski: These results demonstrate, once again, our ability to execute on our plans and guidance and our structural resilience to high interest rates and inflation. I am pleased to reaffirm our 2024 guidance for all metrics and growth rates through 2027. Today, I will be discussing the success we have achieved with technology companies and data centers, as well as the significant market opportunity that we see for renewable growth for the foreseeable future. Turning to slide four, I'm happy to announce that this quarter we signed a 15-year contract with Amazon for the second phase of our Belfield project, with an additional 500 megawatts of solar and 500 megawatts of storage.

Andres Ricardo Gluski Weilert: These results demonstrate once again, our ability to execute on our plans and guidance and our structural resilience to high interest rates and inflation.

Andres Ricardo Gluski Weilert: I am pleased to reaffirm our 2024 guidance for all metrics and growth rates through 2027.

Today I will be discussing the success, we have achieved with technology companies and data centers as well as the significant market opportunity that we see for renewable growth for the foreseeable future.

Andres Ricardo Gluski Weilert: Turning to slide four I'm happy to announce that this quarter, we signed a 15 year contract with Amazon with a second phase of our Belfield project with an additional 500 megawatts of solar and 500 megawatts of storage.

Andres Gluski: The entire project, including Belfield One, which we contracted last year, will provide two gigawatts of combined solar and storage for Amazon, making it the biggest solar plus storage project in the U.S. We see the 2 gigawatt Belfield Solar Plus Storage Project as a milestone for AES and a demonstration of the important role that renewables play in delivering new energy. The Significant Energy Storage Component, which includes AES's proprietary AI weather forecasting, ensures the project is able to supply carbon-free energy throughout the day. Turning to slide five.

The entire project, including Belfield, one, which we contracted last year, we will provide two gigawatts of combined solar and storage for Amazon, making it the biggest solar plus storage project in the U S.

Andres Ricardo Gluski Weilert: We see the two gigawatt belfield solar plus storage project as a milestone for Es and the demonstration of the important role that renewables play in delivering new energy.

Andres Ricardo Gluski Weilert: The significant energy storage component, which includes aes's proprietary AI weather forecasting ensures the project is able to supply of carbon free energy throughout the day.

Andres Gluski: With this project, we now have nearly six gigawatts of long-term contracts directly with technology companies, making AES among the largest energy providers to data centers. This does not include more than 500 megawatts of contracts signed with utilities to serve data center customers. We are fully supporting the commitments that Google, Microsoft, Amazon, and others have made to procure not just carbon-free energy but specifically additional renewables. Turning to slide six.

Andres Ricardo Gluski Weilert: Turning to slide five with this project, we now have nearly six gigawatts of long term contracts directly with technology companies, making aes among the largest energy providers to data centers.

Andres Ricardo Gluski Weilert: This does not include more than 500 megawatts of contracts signed with utilities to serve data center customers.

We are fully supporting the commitment that Google, Microsoft Amazon and others have made to procure not just carbon free energy, but specifically additional renewables.

Turning to slide six across the U S power demand is forecasted to increase significantly over the next decade, driven by factors such as data center growth.

Andres Gluski: Across the U.S., power demand is forecasted to increase significantly over the next decade, driven by factors such as data center growth, onshoring of manufacturing, and electrification of mobility. There is no technology better suited to serve this load growth than wind and solar, particularly when combined with energy storage. Turning to slide 7, even using data that is more than a year old, renewables clearly offer the lowest levelized cost of energy, or LCOE, of any new build on an unsubsidized basis. They provide a source of predictable energy that is not impacted by fuel availability or price volatility.

Andres Ricardo Gluski Weilert: Onshoring of manufacturing and electrification of mobility.

Andres Ricardo Gluski Weilert: There is no technology better suited to serve this load growth than wind and solar, particularly when combined with energy storage.

Andres Ricardo Gluski Weilert: Turning to slide seven.

Even using data that is more than a year old renewables clearly offer the lowest liberalized cost of energy or <unk> of any new build on an unsubsidized basis.

Andres Ricardo Gluski Weilert: They provide a source of predictable energy that is not impacted by fuel availability of price volatility.

Andres Gluski: Furthermore, renewables are substantially better placed than any other form of power to actually come online over the next decade, when power shortages are likely to be most acute. Nowhere is this clearer than in the interconnection cube, which is, as you can see on slide eight, dominated by renewable projects. Looking at 2024 as an example, 95% of the capacity additions in the US are expected to come from solar, energy storage, and wind.

Andres Ricardo Gluski Weilert: Furthermore, renewables are substantially better place than any other form of power to actually come online over the next decade, when power shortages are likely to be most acute.

Andres Ricardo Gluski Weilert: Nowhere is this clear then the interconnection queue, which is as you can see on slide eight are dominated by renewable projects.

Andres Ricardo Gluski Weilert: Looking at 2024 as an example, 95% of the capacity additions in the U S are expected to come from solar energy storage and wind.

Andres Gluski: A major part of this growth is coming from energy storage, whose installed capacity is expected to double by the end of the year. Given our role in creating and first commercializing grid-scale lithium-ion-based energy storage, it fills me with great satisfaction to see that the two largest economies in the country, California and Texas, now get more than 10% of their dispatchable capacity from batteries. We are now even seeing periods of the day in California when energy storage is the single largest source of power on the grid. Turning to slide 9.

Andres Ricardo Gluski Weilert: A major part of this growth is coming from energy storage who's installed capacity is expected to double by the end of the year.

Andres Ricardo Gluski Weilert: Given our role in creating and first commercializing grid scale lithium ion based energy storage. It fills me with great satisfaction.

Andres Ricardo Gluski Weilert: See that the two largest economies in the country, California, and Texas now get more than 10% of their dispensable capacity from batteries.

Andres Ricardo Gluski Weilert: We are now even seeing periods of the day in California, when energy storage is the single largest source of power on the grid.

Andres Gluski: Among renewable developers, AES is best positioned to address corporate load growth. We have the scale and experience to bring projects to market in the most cost-efficient way. Our flexibility and ability to innovate give us a competitive advantage with our large customers, just as it led to our early partnerships with data center companies. We also have the best track record in the market for supply chain management and bringing projects online on time and on budget.

Turning to slide nine among renewable developers.

Andres Ricardo Gluski Weilert: <unk> is best positioned to address corporate load growth.

Andres Ricardo Gluski Weilert: The scale and experience to bring projects to market in the most cost efficient way.

Andres Ricardo Gluski Weilert: Our flexibility and ability to innovate gives us a competitive advantage with our large customers.

Andres Ricardo Gluski Weilert: Just as it led to our early partnerships with data center companies.

Andres Ricardo Gluski Weilert: We also had the best track record in the market of supply chain management, and bringing projects online on time and on budget.

Andres Gluski: As you can see on slide 10, we have a pipeline of 66 gigawatts, not including prospect, with projects ranging in maturity from early stage to late stage. Let me emphasize that all of the projects in our pipeline include some degree of land control as well as interconnection filing. In addition, rather than pursuing just total megawatts, we have taken a strategic approach to building our pipeline. Focusing on those markets and sites where we see the most significant demand and where we are best positioned to add value, the breadth and maturity of this pipeline, both in terms of market and interconnection to positions, provides us with a meaningful competitive advantage and line of sight into future growth.

Andres Ricardo Gluski Weilert: As you can see on slide 10, we have a pipeline of 66, gigawatts not including prospects with projects ranging in maturity from early stage to late stage.

Andres Ricardo Gluski Weilert: Let me emphasize that all of the projects in our pipeline include some degree of land control as well as interconnection filings.

In addition, rather than pursuing just total megawatts, we have taken a strategic approach to building our pipeline focusing on those markets and sites, where we see the most significant demand and where we are best positioned to add value.

Andres Ricardo Gluski Weilert: The breadth and maturity of this pipeline both in terms of market and interconnection queue positions provides.

Andres Ricardo Gluski Weilert: <unk> provides us with a meaningful competitive advantage and line of sight into future growth.

Andres Gluski: As I mentioned in February, our historical results, combined with accelerating demand for our renewable projects, led us to increase our U.S. project return expectations by 200 basis points, to 12% to 15% on a levered, after-tax, cash-based basis and raise our long-term guidance for both EBITDA and EPS. With 1.2 gigawatts of new contract signings since our Q4 call in February, including Belfield 2, we now have a backlog of signed contracts of 12.7 gigawatts.

Andres Ricardo Gluski Weilert: As I mentioned in February our historical results combined with accelerating demand for our renewable projects led us to increase our U S project return expectations by 200 basis points to 12% to 15% on a levered after tax cash basis.

Andres Ricardo Gluski Weilert: And raise our long term guidance for both EBITDA and EPS.

Andres Ricardo Gluski Weilert: With one two gigawatts of new contract signings since our Q4 call in February including Belfield tube. We now have a backlog of signed contracts of $12 seven gigawatts.

Andres Gluski: We have also added almost 600 megawatts of new projects to our operating portfolio, including the completion of Chevron Butte, which is the largest wind project in the state of Arizona, and Delta, which is the first utility-scaled wind project in the state of Mississippi.

We have also added almost 600 megawatts of new projects to our operating portfolio, including the completion of several of them, which is the largest wind project in the state of Arizona and Delta, which is the first utility scale wind project in the state of Mississippi.

Andres Gluski: With these additions to our operating fleet and the good progress we are making on our projects currently under construction, we remain fully on track to add a total of 3.6 gigawatts of new capacity this year. I should note that for the remaining projects coming online in 2024, we have 92% of the major equipment already on site, including virtually all of our solar modules and more than half of our solar modules for 2025. Our diversified and resilient supply chain has been, and will continue to be, one of our differentiators. Turning to our utilities on slide 11.

Andres Ricardo Gluski Weilert: With these additions to our operating fleet and the good progress we are making on our projects currently under construction, we remain fully on track to add a total of three six gigawatts of new capacity this year.

Andres Ricardo Gluski Weilert: I should note that for the remaining projects coming online in 2024, we have 92% of the major equipment already on site, including virtually all of our solar modules and more than half of our solar modules for 2025.

Andres Ricardo Gluski Weilert: Our diversified and resilient supply chain has been and will continue to be one of our differentiators.

Turning to our utilities on slide 11.

Andres Gluski: In mid-April, AES Indiana achieved a critical milestone with the approval of its rate case by the Indiana Utility Regulatory Commission. Resolving the rate case provides us with a constructive regulatory foundation for investments focused on reliability, resiliency, and customer experience, and allows us to partially recover accumulated inflation since our last rate case in 2017. The $71 million rate case increase includes an ROE of 9.9%, demonstrating the Commission's support for investment that strengthens the overall system reliability and drives value for customers.

Andres Ricardo Gluski Weilert: In mid April Aes, Indiana achieved a critical milestone with the approval of its rate case by the Indiana utility regulatory Commission.

Andres Ricardo Gluski Weilert: Resolving the rate case provides us a constructive regulatory foundation for investments focused on reliability.

Zillionths C and customer experience.

Andres Ricardo Gluski Weilert: It allows us to partially recover accumulated inflation since our last rate case in 2017.

Andres Ricardo Gluski Weilert: The $71 million rate case increase includes an ROE of nine 9% demonstrating the commission's support for investments that strengthen the overall system reliability and drive value for customers.

Andres Gluski: In late February, we also closed on the acquisition of the 106 megawatt Hoosier wind project, providing long-term savings to our customers while also adding to AES Indiana's portfolio of renewable projects. A.S. Indiana's latest Integrated Resource Plan, or IRP, includes a commitment to the addition of 1,300 megawatts of wind, solar, and energy storage over the next five years. At AAS Ohio, we continue to execute on our growth, stemming from our new rate case structure, ESP4, put in place in Q3 of last year, as well as our smart grid program and FERC formula investment in transmission. By the end of the program, AAS Ohio will still maintain the lowest rates in the state across all customer classes.

Andres Ricardo Gluski Weilert: In late February we also closed on the acquisition of 106 megawatt Hoosier wind project, providing long term savings to our customers. While also adding to a S. Indiana's portfolio of renewable projects.

Andres Ricardo Gluski Weilert: A S, Indiana latest integrated resource plan or ERP.

Andres Ricardo Gluski Weilert: Includes a commitment for the addition of 1300 megawatts of wind solar and energy storage over the next five years.

Andres Ricardo Gluski Weilert: Hey, S. Ohio, we continued to execute on our growth plan stems.

Andres Ricardo Gluski Weilert: Stemming from our new rate case structured ESP for put in place in Q3 of last year.

Andres Ricardo Gluski Weilert: As well as our smart grid program and FERC formula investments in transmission.

Andres Ricardo Gluski Weilert: By the end of the program a S, Ohio will still maintain the lowest rates in the state across all customer classes.

Andres Gluski: As a reminder, approximately 80% of A.S. Ohio's planned investments through 2027 are already approved or under the FERC formula rate program. Across our two utilities, our Q1 investment was up nearly 100% from last year, as a result of the new rate structures and investing to improve system resilience and customer experience. Looking ahead, we now have a clear line of sight to $4 billion of our total utility capital program of $5.3 billion through 2027.

Andres Ricardo Gluski Weilert: As a reminder, approximately 80% of a S. Ohio's planned investments through 2020 seven are already approved or under FERC formula rate programs.

Andres Ricardo Gluski Weilert: Across our two utilities, our Q1 investment was up nearly 100% from last year.

Andres Ricardo Gluski Weilert: As a result of the new rate structures and investing to improve system resilience and customer experience.

Looking ahead, we now have a clear line of sight to $4 billion of our total utility capital program of $5 3 billion through 2027.

Andres Gluski: We are also seeing the potential for further upside from the growing interest from data center providers who see our service territory as a desirable location for growth. With double-digit rate-based growth throughout our planned horizon, we believe they represent one of the fastest-growing utility investment opportunities in the country. With that, I now would like to turn the call over to our CFO, Steve Coughlin.

Andres Ricardo Gluski Weilert: We are also seeing the potential for further upside from the growing interest from datacenter providers, who see our service territory as a desirable location for growth.

Andres Ricardo Gluski Weilert: With double digit rate base growth throughout our planning horizon, we believe they represent one of the fastest growing utility investment opportunities in the country.

Andres Ricardo Gluski Weilert: With that I now would like to turn the call over to our CFO Steve Crawford.

Stephen Coughlin: Thank you, Andres, and good morning, everyone. Today I will discuss our first quarter results and our 2024 Guidance and Parent Capital Allocation. After that, I will provide a deeper dive into our low risk, highly efficient capital structure, which is important for everyone to understand. Turning to slide 13, adjusted EBITDA with tax attributes was $863 million in the first quarter versus $641 million a year ago. This was driven primarily by contributions from the roughly 600 megawatts of new renewable energy we brought online.

Unknown Executive: Thank you Andres and good morning, everyone today, I will discuss our first quarter results and our 2024 guidance and parent capital allocation.

Stephen Coughlin: Turning to slide 14, adjusted EPS for the quarter was $0.50 versus $0.22 last year and in line with our expectations. Drivers were similar to those of adjusted EBITDA with tax attributes, but they also included higher parent interest expense and a lower adjusted tax rate. These results include approximately $0.08 of tax benefits, consistent with our expectations, which were associated with steps we took this quarter to transition to a more U.S.-oriented holding company structure that is better aligned with our significant U.S. growth. In the future, we may recognize further benefits from a revised simpler structure, although likely of a smaller magnitude.

Following that I will provide a deeper dive into our low risk highly efficient capital structure, which is important for everyone to understand.

Unknown Executive: Turning to slide 13.

Unknown Executive: Adjusted EBITDA with tax attributes was $863 million in the first quarter versus $641 million a year ago.

Unknown Executive: This was driven primarily by contributions from the roughly 600 megawatts of new renewables, we brought online.

Unknown Executive: Turning to slide 14, adjusted EPS for the quarter was 50 cents per.

Unknown Executive: <unk> 22 cents last year and in line with our expectations.

Unknown Executive: Drivers were similar to those of adjusted EBITDA with tax attributes, but also included higher parent interest expense and a lower adjusted tax rate.

Unknown Executive: These results include approximately eight <unk> of tax benefit consistent with our expectations, which were associated with steps. We took this quarter to transition to a more U S oriented holding company structure that is better aligned with our significant U S growth.

Unknown Executive: In the future we may recognize further benefits from our revised simpler structure, although likely of a smaller magnitude.

Stephen Coughlin: We continue to expect an adjusted tax rate of 23 to 25% for the full year, excluding the impact of tax credit transfers, which we are showing at the SPU level for simplicity. I'll cover the performance of our SBUs, or Strategic Business Units, on the next four slides. Beginning with our Renewables SBU on slide 15, higher EBITDA with tax attributes was driven primarily by contributions from new businesses, but was partially offset by lower renewable resources in Panama and Brazil. Higher-adjusted TTC at our Utilities SBU was mostly driven by favorable weather in the U.S., as well as higher revenues from investments in our rate-dividing system.

Unknown Executive: We continue to expect an adjusted tax rate of 23% to 25% for the full year, excluding the impact of tax credit transfers, which we are showing at the SBU level for simplicity all.

Unknown Executive: Cover the performance of our SP use or strategic business units on the next four slides.

Beginning with our renewables SBU on slide 15, higher EBITDA with tax attributes was driven primarily by contributions from new businesses, but was partially offset by lower renewable resource in Panama and Brazil.

Unknown Executive: Higher adjusted PTC at our utilities SBU was mostly driven by favorable weather in the U S as well as higher revenues from investments in our rate base.

Unknown Executive: This was partially offset by interest expense on new borrowings to fund future growth.

Stephen Coughlin: This was partially offset by interest expense on new borrowings to fund future growth. Relatively flat EBITDA at our energy infrastructure business, SBU, primarily reflects prior year higher LNG transaction margins and the selldown of our gas and LNG businesses in Panama and the Dominican Republic. This was partially offset by higher revenues recognized from the accelerated monetization of the PPA at our Warrior Run plant. Finally, higher EBITDA at our New Energy Technologies SPU reflects continued margin improvement at Fluence.

Unknown Executive: Relatively flat EBITDA at our energy infrastructure SBU, primarily reflects prior year higher LNG transaction margins and the sell down of our gas and LNG businesses in Panama and the Dominican Republic.

Unknown Executive: This was partially offset by higher revenues recognized from the accelerated monetization of the PPA at our warrior run plant.

Unknown Executive: Finally, higher EBITDA at our new energy technologies SBU reflects continued margin improvement at fluids.

Stephen Coughlin: Now turning to our guidance on slide 19. We are reaffirming our 2024 adjusted EBITDA with tax attributes guidance of $3.6 to $4 billion and 2024 adjusted EBITDA guidance of $2.6 to $2.9 billion. We expect to continue to see strong growth in our renewables and utilities business, partially offset by short-term dilution from continued execution on our $3.5 billion asset sale target through 2027. We are also reaffirming our 2024 adjusted EPS guidance of $1.87 to $1.96.

Now turning to our guidance on slide 19.

Unknown Executive: We are reaffirming our 2024 adjusted EBITDA with tax attributes guidance of three $6 billion to $4 billion and 2024 adjusted EBITDA guidance of two six to $2 9 billion.

We expect to continue to see strong growth in our renewables and utilities businesses, partially offset by short term dilution from continued execution on our three and a half billion asset sale target through 2027.

Unknown Executive: We are also reaffirming our 2024 adjusted EPS guidance of $1 87 to $1 97.

Stephen Coughlin: Our earnings will have similar drivers to adjusted EBITDA with tax attributes but will also be impacted by a lower adjusted tax rate and higher parent interest. We anticipate a more even distribution of cash and earnings throughout the year, with nearly half of earnings expected to come in the first half versus only 25% in 2023. Now to our 2024 Parent Capital Allocation Plan on slide 20. Sources reflect approximately $3 billion of total discretionary cash, including $1.1 billion of parent-free cash flow, $900 million to $1.1 billion of proceeds from asset sales, and $900 million to $1 billion of planned parent debt issuance.

Unknown Executive: Our earnings will have similar drivers to adjusted EBITDA with tax attributes, but will also be impacted by a lower adjusted tax rate and higher parent interest.

Unknown Executive: We anticipate a more even distribution of cash and earnings throughout the year with nearly half of earnings expected to come in the first half versus only 25% in 2023.

Unknown Executive: Now to our 2020 for parent capital allocation plan on slide 20.

Unknown Executive: Sources reflect approximately $3 billion of total discretionary cash, including $1 $1 billion of parent free cash flow $900 million to $1 1 billion of proceeds from asset sales.

Unknown Executive: $900 million to $1 billion of planned parent debt issuance.

Stephen Coughlin: As a reminder, we limit any parent debt issuance to a level consistent with our investment grade credit metric. We continue to be very pleased with the great progress toward our three and a half billion asset sale program, which will limit and may eliminate any need for future parent equity issuance throughout our long-term guidance period. On the right-hand side, you can see our planned use of capital. We will return approximately $500 million to shareholders this year, reflecting the previously announced 4% dividend increase.

Unknown Executive: As a reminder, we limit any parent debt issuance to a level consistent with our investment grade credit metrics.

We continue to be very pleased with the great progress toward our $3 5 billion asset sale program, which will limit and may eliminate any need for future parent equity issuance throughout our long term guidance period.

Unknown Executive: On the right hand side, you can see our planned use of capital.

Unknown Executive: We will return approximately $500 million to shareholders. This year, reflecting the previously announced 4% dividend increase.

Stephen Coughlin: We also plan to invest approximately $2.6 billion toward new growth, of which 85% will go to renewables and utilities. One of our strengths is the flexibility we maintain in our capital plan across both sources and uses. As we have for many years, we will continue to execute on opportunities to rotate capital across the portfolio in a manner that creates shareholder value. Next, I want to take a moment to discuss how we manage our balance sheet on slide 21.

Unknown Executive: We also plan to invest approximately $2 6 billion towards new growth of which 85% will go to renewables and utilities.

Unknown Executive: One of our strengths is the flexibility we maintain in our capital plan across both sources and uses.

Unknown Executive: As we have for many years, we will continue to execute on opportunities to rotate capital across the portfolio in a manner that creates shareholder value.

Unknown Executive: Yeah.

Unknown Executive: Next I want to take a moment to discuss how we manage our balance sheet on slide 21.

Stephen Coughlin: First, we utilize non-recourse debt to fund our growth. Approximately 82% of the debt on our balance sheet is non-recourse to AES Corp, meaning it is only secured at the relevant subsidiary level. This important structural component limits our risk at the parent company to the equity we invest in our subsidiaries. We further insulate our financials from interest rate movements, with nearly 90% of our long-term debt being fixed rate or hedged.

Unknown Executive: First we utilize non recourse debt to fund our growth.

Stephen Coughlin: In addition, nearly $4 billion of the debt on our balance sheet is under designated construction facilities, which are also non-recourse to the parent company, but are backed by projects that don't yet generate earnings or cash. When a project reaches commercial operations, approximately half of this construction debt will be repaid with cash generated from the monetization of tax attributes, leading to a significantly lower long-term leverage profile on projects in operation. As a result, recourse debt to the AES parent is only 18% of total leverage. Using an example of a typical U.S. solar plus battery project on slide 22,

Unknown Executive: Approximately 82% of the debt on our balance sheet is nonrecourse to Aes Corp, meaning it is only secured at the relevant subsidiary level.

Unknown Executive: This important structural component limits, our risk at the parent company to the equity we invest in our subsidiaries.

Unknown Executive: We further insulate our financials from interest rate movements with nearly 90% of our long term debt being fixed rate or hedged.

Unknown Executive: In addition, nearly $4 billion of the debt on our balance sheet is under designated construction facilities, which are also non recourse to the parent company.

Unknown Executive: But are backed by projects that don't yet generate earnings or cash.

Unknown Executive: When the project reaches commercial operations approximately half of this construction debt will be repaid with cash generated from the monetization of tax attributes leading to a significantly lower long term leverage profile on projects in operation.

Unknown Executive: As a result recourse debt to the Aes parent is only 18% of total leverage.

Unknown Executive: Using an example of a typical U S solar plus battery projects on slide 22, we.

Stephen Coughlin: We've centered our strategy around a capital efficient model, which quickly recycles cash, enabling the rapid growth we've achieved in recent years. First, when we place a project in service, we pay down at least 40% of a project's capital cost with tax equity partnerships and tax credit transfers. Our projects typically benefit from the investment tax credit, which provides an attractive upfront cash return on our investment and significantly reduces net parent cash requirements.

Unknown Executive: We've centered our strategy around our capital efficient model, which quickly recycles cash, enabling the rapid growth we've achieved in recent years.

Unknown Executive: When we place a project in service, we pay down at least 40% of our project's capital cost with tax equity partnerships and tax credit transfers.

Unknown Executive: Our projects typically benefit from the investment tax credit, which provides an attractive upfront cash return on our investment and significantly reduces net parent cash requirements.

Stephen Coughlin: We fund an additional approximately 40% using fixed-rate, amortizing, non-recourse debt, which is investment-grade rated. In order to insulate project returns from changes in interest rates, we pre-hedge this expected debt issuance when we sign a PPA. We currently have nearly $9 billion of outstanding interest rate hedges on our balance sheet, most of which relate to our U.S. renewables business. With respect to equity requirements for U.S. renewables, our development partner, Alberta Investment Management, or AIMCO, contributes 25 percent of equity capital needs.

Unknown Executive: We funded an additional approximately 40% using fixed rate amortizing nonrecourse debt, which is investment grade rated.

In order to insulate project returns from changes in interest rates, we pre hedged this expected debt issuance when we sign a PPA.

Unknown Executive: We currently have nearly $9 billion of outstanding interest rate hedges on our balance sheet.

Unknown Executive: Most of which relate to our U S renewables business.

Unknown Executive: With respect to equity requirements for U S renewables, our development partner, Alberta investment management or aimed co contributes 25% of equity capital needs.

Stephen Coughlin: Once a project is completed, we typically bundle it into an operating portfolio and sell down a large minority stake at an attractive premium and recover most, if not all, of the upfront parent equity investment in the project. The end result is a material ownership in a high-quality, long-term renewables project with little net cash invested and de minimis risk to our balance sheet. This model allows us to grow rapidly while maintaining an investment-grade credit rating and ensuring that our financial results are not sensitive to changes in interest rates.

Unknown Executive: Once a project is completed we typically bundle it into an operating portfolio and sell down a large minority stake at an attractive premium and recover most if not all of the upfront parent equity investment in the project.

Unknown Executive: The end result is a material ownership in a high quality long term renewables project with little net cash invested and de minimis risk to our balance sheet.

Unknown Executive: This model allows us to pro rapidly, while maintaining an investment grade credit rating and ensures our financial results are not sensitive to changes in interest rates.

Stephen Coughlin: Now, turning back to our first quarter results, we've had a tremendous start to the year, making significant progress toward all of our financial targets. We expect to continue the momentum in the year ahead as we complete our remaining three gigawatts of new projects and continue growing the rate base at our U.S. utilities while maintaining a low risk, highly efficient capital structure and funding plan. With that, I'll turn the call back over to Andres.

Unknown Executive: Now turning back to our first quarter results, we've had a tremendous start to the year, making significant progress towards all of our financial targets. We expect to continue the momentum in the year to go as we complete our remaining three gigawatts of new projects and continue growing the rate base at our U S utilities.

While maintaining a low risk highly efficient capital structure and funding plan.

Unknown Executive: With that I'll turn the call back over to Andreas.

Andres Gluski: Thank you, Steve. Before we open up the call for questions, I would like to sum up the highlights of the quarter. We had a strong first quarter, in line with our expectations. Our earnings and cash flow are now more evenly balanced throughout the year as our U.S. renewable business matures. Our performance demonstrates, yet again, our ability to execute and that our financial results are not sensitive to higher interest rates. Our financial model is proving very resilient as we see ample supply of non-recourse project-financed debt, as well as strong demand for tax attributes and project equity from minority partners.

Andreas: Thank you Steve before we open up the call for questions I would like to sum up the highlights of the quarter.

Andreas: We had a strong first quarter in line with our expectations our earnings and cash flow are now more evenly balanced throughout the year as our U S renewable business matures.

Andreas: Our performance demonstrates yet again, our ability to execute and then our financial results are not sensitive to higher interest rates.

Andreas: Our financial model is proving very resilient as we see ample supply of nonrecourse project finance debt.

Andreas: As well as strong demand for tax attributes and project equity from minority partners.

Andres Gluski: In addition, our asset sales program is on track, representing an important component of our capital efficient growth model, which may even eliminate our need for issuing corporate equity through our long-term guidance period. Our stock would have to reach a much higher valuation before new parent equity would even be considered several years in the future.

Andreas: In addition, our asset sales program is on track representing an important component of our capital efficient growth model, which may even eliminates our need for issuing corporate equity.

Andreas: Through our long term guidance period.

Andreas: Our stock would have to reach much higher valuation before new parent equity would even be considered several years in the future.

Andres Gluski: We see strong and accelerating demand for renewable energy in our core markets and are pleased to be in a leading position with the largest segment of growth data centers. We're also executing well on our construction program and have virtually all of the major equipment we need for 2024 on site and the majority of what we need for 2025 as well. Our supply chain management continues to support our best-in-class track record of delivering new renewable projects on time and on budget. In closing, we are once again delivering on our strategic objectives and financial guidance and are uniquely well-placed to be one of the winners of the energy transition. Operator, please open up the line for questions.

Andreas: We see strong and accelerating demand for renewables in our core markets and are pleased to be in a leading position with the largest segment of growth data centers.

Andreas: We're also executing well on our construction program and have virtually all of the major equipment, we need for 2024 onsite.

And the majority of what we need for 2025 as well.

Andreas: Our supply chain management continues to support our best in class track record of delivering new renewable projects on time and on budget.

Andreas: In closing we are once again delivering on our strategic objectives and financial guidance and are uniquely well placed to be one of the winners of the energy transition.

Speaker Change: Operator, please open up the line for questions.

Jordan: Thank you. As a reminder, if you'd like to register any audio questions, please press the star followed by one on your telephone keypad. If you change your mind, please press the star followed by two.

Speaker Change: Thank you as a reminder, if you'd like to register any audio questions. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two and please ensure you're on mute when speaking.

Jordan: And please ensure you're unmuted when speaking. Our first question comes from Nick Campanella of Barclays. Nick, the line is yours. Hey, good morning. Happy Friday.

Our first question comes from Nick Campanella of Barclays make the law issues.

Nicholas Joseph Campanella: Hey, good morning Happy Friday.

Nicholas Joseph Campanella: Happy Friday, Nick. Yeah. Hey, so thanks for the comments on the asset sale programs, and I was just hoping you could maybe expand a little on your commentary about, you know, Eliminating future planned equity issuance. Is that something that we should have kind of a view on through this year because you do have asset sales penciled into 2024? Or is that statement more of a multi-year effort?

Nicholas Joseph Campanella: Happy Friday.

Nicholas Joseph Campanella: Yeah, Hey, so.

Nicholas Joseph Campanella: For the comments on the asset sale programs and I was just hoping you could maybe expand a little on your commentary about you know <unk>.

Andres Gluski: I'm just trying to get a sense of the size and magnitude of what you guys have visibility into here. Thank you. Yeah, no, thanks.

Nicholas Joseph Campanella: Eliminating future planned equity issuance is that something that we should have kind of a view on through this year. Because you do have asset sales penciled into 2024 or is that statement more kind of a multiyear effort I'm just trying to get a sense of the size and magnitude of what you guys have visibility to into.

Speaker Change: And to this year. Thank you.

Andres Gluski: Yeah, well, thanks for the question. Look, historically, I believe we've always overachieved our asset sale target. So, you know, last year we overachieved by about 600 million, so we're coming into this year with some, you know, tailwinds. So, you know, we don't comment on any specific asset sale until they're closed, but we feel good. What has been disclosed is, for example, we have already sold the Vietnam asset and are just waiting for government approval, so that's quite a large sale, but we're, it's already, you know, let's say. It's not closed, but the sale is done.

Speaker Change: Yes, no. Thanks for the question look historically I believe we've always overachieve, our asset sale targets.

Speaker Change: So last year, we overachieve by about 600 million so we're coming into this year.

Year with some tailwind.

Speaker Change: We don't comment on any specific asset sale until they are closed.

Speaker Change: But we feel good.

Speaker Change: It has been disclosed as for example, we are already.

Speaker Change: Sold.

Speaker Change: Vietnam asset and are just waiting government approval. So that's a quite a large sale that where it's already.

Speaker Change: Let's see.

Speaker Change: It's not closed but the sale is done we just have the final government approval. So we feel good about it so the general statement is that.

Andres Gluski: We just got the final government approval, so we feel good about it. So the general statement is that, you know, if you look over our tenure of the last decade, we've been very frugal about issuing new equity. We've actually, on the net, bought back shares. We've also paid $3 billion worth of debt. So we've been able to do this transformation, being very, very stringent about issuing any new equity. So, depending on how the asset sale goes and on our growth programs and our partnerships, we feel that we may be able to do this without any additional equity issuance.

Speaker Change: If you look over our 10 year over the last decade, we've been very frugal about issuing new equity we've actually in the net bought back shares.

Speaker Change: We've also paid $3 billion worth of debt. So we've been able to do this transformation being very very.

Speaker Change: Stringent about issuing any new equity so depending on how the asset sales goes and.

Speaker Change: Our growth programs and our partnerships, we feel that we.

Speaker Change: We may be able to do this without any additional equity issuance.

Andres Gluski: We've always talked about it being in the later years of our guidance period, and we've also mentioned that we would never do it at current valuations. So I hope that provides as much color as we can, but I think it gives you a clear notion of what our intent is.

Speaker Change: Always talked about it being in the later years of our guidance period.

Speaker Change: And we've also mentioned that we would never do it at current valuations so I hope that.

Speaker Change: As much color as we as we can but I think it gives you a call.

Speaker Change: Clear notion of what our incentives.

Speaker Change: Yeah.

Nicholas Joseph Campanella: All right, that's helpful. Um, and then I guess just, you know, with the data center opportunity, you've established yourself pretty early as, you know, doing some of these deals with hyperscalers. And I'm just wondering, with some of your peers kind of announcing a wider framework with Microsoft earlier this week, is that something that is an opportunity to do on the AES side as well with a large customer? And how would that fit into your overall strategy? Or is that just not the focus at this point? I'm just wondering if you can make some kind of comment about that framework and

Speaker Change: Alright, that's helpful.

And then I guess, just you have just for the data center opportunity.

Speaker Change: You've established yourself pretty early is.

Speaker Change: Doing some of these deals with Hyperscale.

And I'm just wondering what some of your peers kind of announcing a wider framework with Microsoft earlier this week.

Speaker Change: Is that something that is an opportunity to do on the aaas side as well with a large customer.

Speaker Change: And how would that fit into your overall strategy or is that just not a focus at this point I'm. Just wondering if you can kind of comment about that framework and what you think.

Andres Gluski: Look, I think that we identified several things some years ago. First, just looking out, as I've said many times in our meetings or calls, that we would, we saw a shortage, eventually a shortage of renewable projects, given the increase in demand. So we had somewhat of a lag, you know, in 2020, due to tariff issues, but that there was, you know, basically going to catch up. So what we were seeing is that there was going to be more demand, quite frankly, than supply for renewables, number one.

Speaker Change: Look I think that we identified several things.

Speaker Change: Some years ago. So first just looking out as I've said, many times and in our meetings or calls that we saw a shortage eventually a shortage of renewable projects, giving the increase in demand. So we had somewhat of a.

Speaker Change: Lag in 2020 due to tariff issues.

Speaker Change: But there was basically going to catch up so what we're seeing is that there was going to be a more of the more demand quite frankly than supply for renewables number one number two we very early on identify data centers and technology companies as our really our sweet spot in terms of.

Andres Gluski: Number two, we very early on identified data centers and technology companies as our really sweet spot in terms of future deals. And we've been working with them. So we have innovated, you know, coming up with things like, you know, hourly matched carbon-free energy with the data. So we've already done, you know, six gigawatts. So, you know, we're out ahead. These are actual projects that have been done.

Future deals and we've been working with them. So we have innovated coming up with things like.

Speaker Change: No.

Speaker Change: Hourly matched carbon free energy with the data centers. So we've already done six gigawatts. So we're out ahead. These are actual projects that have been done. So we have very close relationships with them.

Andres Gluski: So we have very close relationships with them, and I would say that, you know, coming up with various ways of us helping them meet their needs is certainly something that we have been discussing for some time. So our real focus is on meeting their needs. And what we see is that things like pipelines, and we started building up this pipeline again several years ago, really thinking about what they would need. So finding the sites and, you know, I'd say the most strict when we talk about backlog: it's a signed contract. It's not something we expect to sign.

Speaker Change: And I would say that coming.

Speaker Change: Coming up with the <unk>.

Speaker Change: Various ways of us helping them meet their needs.

Speaker Change: Things that we have been discussing for some time so our real focus is on meeting their needs and what we see is that things like pipeline and.

Speaker Change: We started building up this pipeline against several years ago really thinking about what they would need so finding the sites and where we are.

Speaker Change: Say the most strict about when we talk about backlog, it's a signed contract it's not something we expect decide when we talk about pipeline. It's actual having some degree of land control and it's being in the interconnection queue. It's not we're prospecting in this area. We've had some discussions so we feel very good about our ability.

Andres Gluski: When we talk about pipeline, it's actually having, you know, some degree of land control, and it's being in the interconnection queue. It's not we're prospecting in this area. We've had some discussions. So, you know, we feel very good about our ability to meet these clients' needs, and I think we understand very well what those needs are. So, you know, I don't see this really just as a zero

Speaker Change: To meet these clients needs and I think understanding very well what those needs are.

Speaker Change: I don't see it as really just as a zero sum game.

Andres Gluski: You know, what we see is that, you know, the deal that was announced last week, an international deal, is good. It's good because there's a lot of demand out there, and we're not going to be able to satisfy it all by ourselves. And second of all, I think it shows the value of having an international presence and the value of being in diversified markets to be able to satisfy customers' needs.

Speaker Change: What we see is that.

Speaker Change: The deal that was announced in the last week and international deal.

Speaker Change: Is good that's good because there's a lot of demand out there and we're not going to be able to satisfy all by ourselves and second of all I think it shows the.

Value of having an international presence and the value of being in diversified markets.

Speaker Change: To be able to satisfy their needs. So I think there's been a lot of focus on the specific technology not enough focus on how do you satisfy the needs of those clients. So that's what we've been focused on but quite frankly. This is nothing new to us we've been doing this almost five years.

Andres Gluski: So I think there's been a lot of focus on the specific technology, but not enough focus on how you satisfy the needs of those clients. So that's what we've been focused on. But quite frankly, this is nothing new to us. We've been doing it, you know, for almost five years.

Nicholas Joseph Campanella: Thanks for all those thoughts. Have a great day. Thank you.

Speaker Change: Thanks for all the thoughts have a great day.

Speaker Change: Thank you.

Jordan: Our next question comes from Durgesh Chopra of Evercore.

Speaker Change: Our next question comes from Doug <unk>.

Doug: Evercore ISI.

Doug: Okay.

Durgesh Chopra: Hey, good morning, Andres and Steve. Thank you for your questions. Just, maybe, can I get your thoughts on potential tariffs? Um, you know, there's been talk of, uh, some anti-dumping tariffs and just how you would position yourself there if something were to, uh, take place.

Doug: Hey, good morning, Andreas and Steve.

Doug: And I think I did ask questions.

Doug: Hey, so.

Doug: Just.

Doug: Maybe can I get your thoughts on potential tariffs.

Doug: You know there has been talks of some anti dumping tariffs and just how are you positioned there if something works too.

Doug: Take place.

Andres Gluski: Yeah, great question. Quite frankly, I'm not concerned at all about the AD-CBT, which is the anti-dumping, compensating tariff. I would say for the following reasons. First, you know, we already have pretty much everything we need on site for the remainder of this year and the majority of what we need for next year. And before any tariffs could come in place, I would expect to have everything on site for 2025. So that's the first thing.

Speaker Change: Yes look great question.

Speaker Change: Quite frankly, I'm not concerned at all about the CVT, which is the etsy dumping.

Speaker Change: Compensating.

Speaker Change: Tariffs.

Speaker Change: I would say for the following reasons first we already have pretty much everything we need on site.

The remainder of this year and the majority of what we need for next year and before any tariffs come in place I would expect to have everything onsite for 2025.

So that's the first thing so.

Andres Gluski: So, and then when we think about 2026, we expect to have domestic content, you know, domestically made solar modules. So quite frankly, you know, I'm not, you know, concerned about this. And I think that, you know, the most important thing is to look at our track record.

Speaker Change: And then when we think about 2026, we expect to have domestic content.

Speaker Change: Domestically made solar module, so quite frankly.

Speaker Change: Not concerned.

Speaker Change: Concerned about this.

Speaker Change: And I think that.

Speaker Change: Most important thing is look at our track record.

Andres Gluski: You know, when there was uncertainty about tariffs coming out in 2020, we didn't abandon or significantly delay any single U.S. solar project. So whether these countervailing duties come into place, we'll monitor it. I think the effects on the sector as a whole will be much less than the prior tariff circumvention case because the level of the duties should be significantly smaller. But I think the important thing is to have clarity so that people can sign PPAs.

Speaker Change: When there was the uncertainty about tariffs.

Speaker Change: Coming out in 2020.

Speaker Change: We didn't abandon or significant delay any single use solar project.

Speaker Change: Whether these countervailing duties come into place.

Speaker Change: We will monitor it I think.

Speaker Change: I think the effects on the sector as a whole will be much less than the prior.

Speaker Change: Tariff circumvention case.

Speaker Change: Because the level of the duties would be significantly smaller, but I think the important thing is to have clarity so that people can sign ppas.

Andres Gluski: But specifically about AES, I am not concerned because, you know, we've always been concerned about any possibility like this and moving ahead. So, you know, we, of course, like others, have strategic relationships with suppliers, but, you know, the proof of the pudding is in the eating. So, you know, we have everything on site for this year. And before these tariffs come into place, we'll have all our solar modules for next.

Speaker Change: But.

Speaker Change: Specifically about Aes I am not concerned because we've always been concerned about any possibility like this and moving ahead. So.

Speaker Change: We of course like others have strategic relationships with suppliers, but the proof of the pudding doesn't eating so we have everything on site for this year and before these tariffs come in place we will have all of our solar module for next.

Durgesh Chopra: That is very clear, Andres, thank you. And then, maybe, can I just follow up on Nick's question regarding asset sales? Just as we think about the cadence of announcements here for the rest of the year and into 2025, do you see potential for a large deal, a large asset sale, or maybe a large one buyer or a large buyer in place of, you know, multiple small buyers or multiple small deals that you've done in the past? Maybe just, can you discuss that?

Speaker Change: That is very clear Andrea. Thank you and then maybe can I just follow up on Nick's question.

Mining asset sales.

Speaker Change: As we think about the cadence of announcements here for the rest of the year and into 2025.

Speaker Change: Do you see potential for large deal a large asset sale or maybe a large one buyer or a large buyer.

Speaker Change: In place of like multiple small buyers or multiple small deals that you've done in the past maybe just can you can you discuss that.

Andres Gluski: Yes, again, we don't typically comment on this, you know, but something like, for example, the Vietnam sale or others, you know, these would be large sales, hundreds of millions of dollars. So what I would say to you is that we will do these over time. We'll also continue to do the smaller ones, selling down specific assets when we think that we've maximized the value that we could add. And we continue to sell down, of course, our renewable projects, as Steve explained.

Speaker Change: Again.

Speaker Change: <unk>.

Speaker Change: We don't typically comment on this but something like for example, the Vietnam sale or others. These would be large sales.

Speaker Change: As of millions of dollars so.

Speaker Change: What I would say.

Speaker Change: We will do these overtime.

Speaker Change: We will also continue to do the smaller ones.

Speaker Change: <unk> down on specific assets when we think.

Speaker Change: That we've maximized the value that we could add and we continued to sell down of course, our renewable projects as Steve explained. So this will be multiple sources of us getting additional financing. So again, we don't comment until the deal is closed.

Andres Gluski: So these will be multiple sources of us getting additional financing. So again, we don't comment until a deal is closed, but I think it's very clear. We have a very good track record of doing this, and we're not just starting. We have some wind in our sails, so I feel very good about it.

Speaker Change: But I think it's very clear we have a very good track record of doing this.

Speaker Change: We're not just starting we have some wind at our sails. So I feel very good about it.

Stephen Coughlin: Yeah, and I would just add, Durgesh, as Andres said, we have a long track record, so it's not just about the goal, it's also about securing the best value and exiting properly. So we have a lot of pathways to do that. We have $3.5 billion as a conservative number, and it's a combination of our coal exit, our simplification of our international portfolio, monetizing some of our technology businesses, and renewables recycling.

Speaker Change: Yeah, and I would just add that our guests are salaries that we have a long track record. So it's not just about the goal. It's also about.

Speaker Change: Securing the best value and exiting properly. So we have a lot of pathway to do that we have $3 5 billion is a conservative number.

Speaker Change: And it's a combination of our coal exit our simplification of our international portfolio.

Speaker Change: Monetizing some of our technology businesses.

Speaker Change: The renewables for cycling, so theres, a number of ways and so.

Stephen Coughlin: So there are a number of ways, and so it allows us the luxury of ensuring that we get the appropriate value, and we're looking out in the market for all of these, and transacting when we see that appropriate valuation. And we were ahead, as Andres said, by over $600 million last year, so we feel great.

It allows us the luxury of ensuring that we get the appropriate value and we're looking out in the market on all of these and transacting when we see that appropriate valuation and.

Speaker Change: We were ahead as Andre said by over $600 million last year, So we feel great.

Durgesh Chopra: Indeed, guys, thank you. And I apologize, but I just want to ask a quick question on the pace of deployment given your leadership in the renewable industry. Andres, just as you think about all the data center demand projections, are you concerned with the pace at which the deployment might happen? I mean, you mentioned demand exceeding supply, but are we going too fast? And could you see yourself, you know, in the position to be able to provide all the renewable power given the demand? Let's see, I think that the

Speaker Change: And do you guys. Thank you.

Speaker Change: I apologize, but just I wanted to ask a quick question.

Speaker Change: On just the pace of deployment given your leadership.

Speaker Change: Naval industry under just as we think about all the do you guys send her demand projections.

Speaker Change: Do you are you concerned with the pace at which the deployment might happen I mean, you mentioned that the demand exceeding.

Speaker Change: The supply, but are we going too fast and and do you could you see yourself.

Speaker Change: In the position to be able to provide all the renewable power given the demand.

Andres Gluski: Let's see. I think that what we're seeing is they're very concerned about getting power. They're talking about time to power, you know, how fast your renewable projects can come online. I think that the market is beginning to realize that this growth in data center demand will be mostly powered by renewables. They are the cheapest energy, and they're going to be the fastest time to power. You know, there was a lot of talk about, say, something like nuclear. So while existing nuclear plants can be recontracted and, you know, provide power, they aren't additional, you know, they aren't decreasing the total carbon footprint of the system, number one.

Speaker Change: Let's see I think that the.

Speaker Change: What we're seeing is they're very concerned about getting power. They are talking about time to power how fast your renewable projects can come online.

Speaker Change: I think that the market is beginning to realize it.

Speaker Change: Growth in data center demand will be mostly powered by renewables. They are the cheapest energy and theyre going to be the fastest time to power. There was a lot of talk about say something like nuclear so while existing nuclear plants can be re contracted.

Speaker Change: And provide power.

Speaker Change: Alright additional.

Speaker Change: Decreasing the total carbon footprint of the system number one and it takes years to bring new nuclear online so while im a believer in nuclear in the long run it's like Okay time to power I'm, bringing data centers on it in the next three years, how am I going to power them and Thats really where renewables will play a key role now what do I.

Andres Gluski: And it takes years to bring new nuclear plants online. So, you know, while I'm a believer in nuclear energy in the long run, it's like, okay, time to power. I'm bringing data centers online in the next three years. How am I going to power them?

Andres Gluski: And that's really where renewables will play a key role. Now, what do I think? I think those people who have advanced pipelines are going to be in the best position, who have the supply chain, you know, and have the projects. And the other thing that I find very interesting is that... I think pipelines are extremely valuable, and I don't think people are valuing them enough.

Speaker Change: I think those people who have advanced pipelines are going to be in the best position, who have the supply chain.

Speaker Change: And have the projects.

Speaker Change: The other thing that I find very interesting is that I.

Andres Gluski: You know, and I would say, just think about if you were coming in from zero to create a pipeline of, say, 50 gigawatts in the US. How much would that cost? And those pipelines aren't just for projects in the next two to three years. Those pipelines are going to be serving projects certainly within the next five and beyond that. So I think that, you know, to answer your question, there are a lot of pipelines in the States.

Speaker Change: I think pipelines are extremely valuable and I don't think people are evaluating them enough.

And I would say just think about if you were coming in from zero to create a pipeline of say 50 gigawatts in the U S. How much would that cost you.

Speaker Change: And those pipelines are just four projects in the next two to three years those pipelines are going to be serving project certainly within the next five and beyond that.

Speaker Change: I think that.

Speaker Change: To answer your question there is a lot of pipeline in the states. There's a lot of interconnection. The question will be those developers, who will be able to bring them on in time for the data centers and I think it will require flexibility.

Andres Gluski: There's a lot of interconnection. The question will be those developers who will be able to bring them on in time for the data centers. And I think it will require flexibility. So I hope that answers your question. And this view has not changed. And, you know, what we have seen, I would say, is that. You know, data center growth, certainly in the last year, has accelerated, but we saw a huge wave of corporate demand coming, and data centers being part of

Speaker Change: So I hope that answers your question.

Speaker Change: This view has not changed.

Speaker Change: What we have seen I would say is that.

Speaker Change: Data center growth certainly in the last year.

Speaker Change: Accelerated but we saw a huge corporate demand coming and data centers being part of it.

Speaker Change: Thank you very much.

Speaker Change: Thank you Lucas.

Jordan: Our next question comes from Richard Sunderland of J.P. Morgan.

Speaker Change: Our next question comes from Richard Sunderland of J P. Morgan.

Richard Wallace Sunderland: Hi, good morning. And thank you for your time today.

Richard Wallace Sunderland: Hi, good morning, and thank you for the time today.

Maybe picking up on that last question from <unk> cash.

Richard Wallace Sunderland: Picking up on that last question from Durgesh, I'm curious if you could speak a little bit more about transmission constraints and how that's being impacted by this accelerating pace. You obviously have an interesting perspective, both on the commercial side and on the utility side. Curious, again, how you've positioned, from an interconnection perspective, the pipeline for value there, and if there are ways to maybe realize even more of that value through unlocking transmission.

Richard Wallace Sunderland: I'm curious if you could speak a little bit more to transmission constraints and how that's being impacted by this accelerating pace. You. Obviously are interesting perspective, both on the commercial side and on the utility side.

Richard Wallace Sunderland: Curious.

Richard Wallace Sunderland: How you've positioned from an interconnection perspective.

Richard Wallace Sunderland: Pipeline for value there and if there are ways to maybe realize even more of that through unlocking transmission.

Richard Wallace Sunderland: Sure.

Andres Gluski: Look, again, that's something we've also been working on for some time. So I think here in the States.

Richard Wallace Sunderland: But again, that's something we've also been working on for some time. So I think here in the states. The most specific projects I could talk about is our use of dynamic line rating.

Andres Gluski: The most specific project I could talk about is our use of dynamic line rating. And this allowed us to place a 400 megawatt-hour battery project in Indianapolis that otherwise would not have been possible. So dynamic line rating, very simply, it actually takes into account and monitors the actual state of transmission lines because transmission lines are rated at a capacity for usually the worst possible conditions, which thankfully don't always exist.

Richard Wallace Sunderland: And this allowed us to place a 400 megawatt hour.

Richard Wallace Sunderland: Battery project.

Indianapolis that otherwise would or not but it's possible. So dynamic line rating very simply is.

Richard Wallace Sunderland: It actually takes into account monitors the actual state of transmission lines because transmission lines are rated added capacity for usually it's like the worst possible conditions, which thankfully don't always exists.

Andres Gluski: Next is, you know, the grid booster, which Fluence has been doing, for example, in Germany, where you actually, again, use existing transmission lines with banks of batteries to transmit energy on those times when they're underutilized. And look, the typical transmission line is utilized at 50% of capacity. So you have a lot of excess capacity there. You know, so definitely batteries is a way of using them on those off-peak hours.

Richard Wallace Sunderland: Next is we have the grid booster, which fluent has been doing.

Richard Wallace Sunderland: For example, in Germany, where you actually again use existing transmission lines with banks of batteries to transmit energy when those times when they are underutilized and.

Richard Wallace Sunderland: Typically transmission line is utilized 50% of capacity. So you have a lot of excess capacity there.

So definitely batteries is a way of using them on those off peak hours now look there is no one silver bullet, but this can avoid billy.

Andres Gluski: Look, there is no silver bullet, but this can avoid, you know, billions in costs and decades of permitting. And, you know, so they have a massive project in Germany to get this done. And that's not unique to Germany.

Richard Wallace Sunderland: Billions in cost and decades of permitting.

Richard Wallace Sunderland: So they have a massive project in Germany to get this done.

Richard Wallace Sunderland: That's not unique to Germany, there are places, where we could do that in the states. So the question is why isn't this being more discussed and really it's not a technical issue, we had very solid growth, but what I'm, saying here. The issue is who gets the owned the batteries who determines the dispatch and how did you remunerate that dispatch and look at some of the business model.

Andres Gluski: There are places where we could do that in the States. So the question is, why isn't this being discussed more? And really, it's not a technical issue. You know, we're on very solid ground on what I'm saying here. The issue is, who gets to own the battery? Who determines the dispatch? And how do you remunerate that dispatch?

Richard Wallace Sunderland: Actually.

Andres Gluski: You can make more money if you invest more. So avoiding costs, you know, is not necessarily what everybody wants. But that is one way. Again, we're looking at a big project in Chile. So, again, I think that could be more applicable in the States. It's really a regulatory issue.

Richard Wallace Sunderland: You can make more money if you invest more so avoiding cost.

Richard Wallace Sunderland: It is not necessary everybody's well.

Richard Wallace Sunderland: What everybody wants but that is one way again, we're looking at a big project in Chile.

So again I think that could be more applicable in the states, it's really a regulatory issue.

Richard Wallace Sunderland: Other things is.

Richard Wallace Sunderland: Quite frankly getting sites, where you have the interconnections that also would be easy for people to put data centers in that same region is something again.

Andres Gluski: Other things are, quite frankly, getting sites where you have interconnections that also would be easy for people to put data centers in that same region. That is something, again, that we have been working on from day one. So those are all the ways. There will be others, but the ones I'm mentioning are those that are technically known today. But then, look, we also have Uplight, our investment in Uplight, which just merged with Autogroup, for virtual power plants and really the orchestration of grid-scale energy resources.

Richard Wallace Sunderland: From day, one that we have been working on so those are all the ways.

Richard Wallace Sunderland: There will be others, but the ones I mentioned are those that are technically known today.

Richard Wallace Sunderland: But then look there's also we have uplight are investment in Uplight.

Richard Wallace Sunderland: Rich just merged with out of it.

Richard Wallace Sunderland: For virtual power plants, and really the orchestration of grid scale.

Richard Wallace Sunderland: Energy resources.

Andres Gluski: So, those are other ways; it's also a question of, you know, more advanced software and better understanding. Things like what we talked about, our proprietary AI systems for predicting next-day wind, bidding engines, all those things help make better use of existing. So, I think you correctly identify that transmission, you know, will be one of the bottlenecks. We'll have to be creative about it. Not only the suppliers of energy but also the consumers.

Richard Wallace Sunderland: So those are other ways. It's also a question of more advanced software and better understanding.

Richard Wallace Sunderland: Things like what we talked about our proprietary.

Richard Wallace Sunderland: AI systems for predicting next day wind.

Richard Wallace Sunderland: Bidding engines, all those things help make better use out of existing transmission. So I think it correctly identify the transmission.

Richard Wallace Sunderland: It will be one of the bottlenecks will have to be creative about it not only the suppliers of the energy, but also the consumers.

Richard Wallace Sunderland: No, that's a very helpful color, and I appreciate all the context to that. Maybe switching gears, you know, hydrogen overall has been an active focus area for you, featured heavily in some of your updates last year. Just curious to get a temperature check on that front, what you're focused on now, and what we should be watching in terms of updates on the hydrogen front over the balance of the year. Thank you.

Speaker Change: No that's very helpful color and I appreciate all the context to that maybe.

Speaker Change: Maybe switching gears.

Speaker Change: Hydrogen overall and an active focus area for you featured heavily in some of your updates last year. Just curious if you can attempt check on that front, what you're focused on now what we should be watching in terms of updates on the hydrogen front over the balance of the year. Thank you.

Andres Gluski: Yeah, look, we have the big project in Texas, a joint venture with Air Products, which is the largest seller of hydrogen in the world, that continues to progress. But we're still waiting for the final Treasury regulations in terms of, you know, what qualifies as green hydrogen, what is the carbon intensity, and what is the degree of, you know, tax credits you get on the different factors. So, you know, once that comes out, we continue to make progress, and we feel good about it. And also, that is, quite frankly, the most advanced green hydrogen project in the US with a real offtake.

Andres Gluski: Yeah, look, we had some.

Speaker Change: Yeah look we had the big project in Texas.

Speaker Change: Venture with air products, which is the largest seller of hydrogen in the world.

Speaker Change: That continues to progress, but we're still waiting for the final treasury regulations in terms of what qualifies as green hydrogen what is the carbon intensity.

Speaker Change: One is the degree of.

Speaker Change: Tax credits you get on the different factors. So once that comes out and we continue to make progress and we feel good about it and also that is quite frankly, the most advanced green hydrogen project.

Speaker Change: In the U S with a real off taker.

Richard Wallace Sunderland: Perfect. I'll leave it there. Thank you very much. Thank you, Rich.

Speaker Change: Perfect I'll leave it there thank you very much.

Speaker Change: Thank you rich.

Jordan: Our next question comes from David Arcaro of Morgan Stanley.

Speaker Change: Our next question comes from David Arcaro of Morgan Stanley.

Speaker Change: Yeah.

David Keith Arcaro: Oh, hey, good morning. Thanks so much for taking my question. Let's see, it looks like a bit of a smaller addition in terms of renewables origination this quarter than you had in the last few. I was wondering if you could speak to that and maybe describe the trends you're seeing near term in terms of renewables origination.

David Keith Arcaro: Hey, good morning, Thanks, so much for taking my question.

And then lets see it looks like a bit of a smaller.

David Keith Arcaro: Michigan in terms of renewables origination this quarter than you had in the last few I'm I was wondering if you could speak to that and maybe describe the trends you're seeing near term in terms of renewables origination.

Stephen Coughlin: Yeah, yeah, I'm not sure what data you're looking at, but we had actually quite a very good quarter. I think it was 1.2 gigawatts contracted in the quarter, David. So we're very, very pleased. And also very pleased that we were able to announce Amazon as our Belfield customer, which is really a total of two gigawatts with Amazon, including the first phase from last year and then the second phase. And so that's an example of the things we've been doing with data centers on a very large scale. So, we've done a lot in the first quarter.

Speaker Change: Yeah, Yeah, I'm not sure what the data Youre looking at but we have actually quite a very good quarter. I think was one two gigawatts signed in the quarter.

Speaker Change: David So we're very very pleased.

Also very pleased that we were able to announced Amazon as our belfield customer, which is really a total of two gigawatts with Amazon, including the first phase from last year and then the second phase.

Speaker Change: And so that's an example of the things we've been doing with data centers on a very large scale.

Stephen Coughlin: We've been active not only in signing contracts but also in executing and spreading our execution throughout the year. As I mentioned, we had many more megawatts installed in this quarter, and as such, our earnings for the year will be much more balanced. But no, we feel really good about our signing target.

Speaker Change: So we've done a lot.

Speaker Change: In the first quarter, we've been active not only in signing but also in executing and spreading our execution throughout the year.

As I mentioned, so we have many more megawatts installed in this quarter and as such our earnings for the year will be much more balanced.

Speaker Change: But no we feel really good about our signings target that demand is stronger than ever and I think the deal announced earlier this week with Microsoft as Andre said is just one example of what we've been saying is that the renewables is where these folks come first and thats.

Stephen Coughlin: The demand is stronger than ever, and I think the deal announced earlier this week with Microsoft, as Andres said, is just one example of what we've been saying, that renewable energy is where these folks come first. You know, and that's a 10 gigawatt agreement. And so it dwarfs anything that's been signed with like a nuke or things like that. So, you know, but as Andres also said, this is not a zero-sum game.

Speaker Change: That was a 10 gigawatt.

Speaker Change: Our agreement and so it dwarfs anything thats been signed with like a nuke or things like that so.

Speaker Change: As Andre has also said this is not a zero sum game and there is much more demand.

Stephen Coughlin: And there is much more demand here and continuing to come, and so we feel really good about our pipeline and the maturity of it and where it's located and its positions in the queues. So, no, I think our signing progress has been excellent, and I still feel really good about where we're headed for the rest of the year.

Speaker Change: Here and continuing to come.

Speaker Change: And so we feel really good about our pipeline and the maturity of it and where it's located and its position in the queues. So I think our signing progress has been excellent and still feel really good about where we're headed for the rest of the year.

David Keith Arcaro: Okay, great. Yeah, thanks for that extra color. And yeah, I was going to go back to that multi-year kind of framework agreement that we saw earlier this week. I was wondering, are you seeing that same level of demand where data center companies are getting potentially more aggressive, willing to contract out further into the decade where you could be, where should we start to see potentially deals, bigger deals getting signed, and looking farther out in your pipeline?

Speaker Change: Okay, great yeah, thanks for that extra color.

Speaker Change: And yes, it was going to go back to that multi year kind of a framework agreement that we saw earlier. This week I was wondering are you seeing that scene.

Speaker Change: Same level of demand where data center companies are getting potentially more aggressive willing to contract out further into the decade, where you could be where should we start to see potentially deals bigger deals getting signed and looking further out in your pipeline.

Andres Gluski: Well, I think, you know, that's sort of a framework agreement. And I think, you know, what we've been doing is negotiating big deals with several of the hyperscalers. So we're not solely focused on one. And so we're looking at how to solve their demands. And quite frankly, they have slightly different preferences where they're going. You know, we have data center deals with Microsoft in Chile, for example. So, you know, what they're looking for is, you know, people who can provide, you know, of course, the U.S. That's the biggest, the fastest growth.

Speaker Change: Well I think that's sort of a framework agreement and I think.

And what we've been doing is negotiating big deals and I'd say with.

Speaker Change: With several of the Hyperscale.

Speaker Change: So we're not just.

Speaker Change: Solely focused on one and so we're looking at how does the solve their demands and quite frankly, they have slightly different preferences.

Speaker Change: Where they're going we have.

Speaker Change: Data center deals with Microsoft in Chile for example.

Speaker Change: What they're looking for is people, who can provide of course U S. The biggest the fastest growth, but I think theyre very interesting international opportunities and it depends where you have your footprint. So I believe the deal that we're talking about the Brookfield.

Andres Gluski: But I think they're very interesting international opportunities, and it depends where you have your footprint. So I believe the deal that we're talking about in Brookfield that, you know, they have more Asia and European capabilities. And, you know, quite frankly, we have decided not to be in those.

Speaker Change: More Asia and European capabilities, and quite frankly, we have decided not to be in those markets.

David Keith Arcaro: I understand. Thanks so much. I appreciate it.

Speaker Change: Understood. Thanks, so much I appreciate it.

Jordan: Alright, thank you. Thanks, David.

Speaker Change: Alright. Thank you thanks, David.

Speaker Change: Yes.

Agnieszka Anna Storozynski: Our next question comes from Angie Storozynski of Seaport. Angie, please go ahead.

Speaker Change: Our next question comes from Angie stores in scheme of Seaport Angie. Please go ahead.

Agnieszka Anna Storozynski: Hey, good morning. So I know we talked about it in the past, but I just wanted to go back to this, you know, the how much it really costs to develop these renewables, and how seemingly little of an EBITDA and fricassee recreation you guys are going to get from it. And even using your math, right, with this, the financing of CAPEX, and the amount of money that you were planning to spend on renewables from the analyst day, it would, and you would end up with like about $2.7 billion of your equity contribution, and, you know, say $350 million of free cash flow on the back of it, just again, using the target return, isn't that, I'm just wondering if that's, if that's enough?

Angie: Hey, good morning, So I know, we talked about in the past, but I just wanted to go back to this.

Angie: How much it really costs to develop these renewables and how do you mean, a little of an EBIT EBITDA and free cash flow accretion you guys are going to get from it then even using your math right with this.

On the financing of Capex.

Angie: And the amount of money that you are planning just not planning to spend on renewables from the analyst day. It was and you would end up with about $2 $7 billion of your equity contribution you know say $350 million of free cash flow on the back of it just again using the target return isn't that I'm just wondering.

Angie: If that's if that's enough I mean is.

Angie: Is it time to maybe applebee's return expectations or is it just simply that.

Agnieszka Anna Storozynski: I mean, is it time to maybe increase these return expectations? Or is it just simply, you know, that that's how competitive the market is. And, you know, you just have to accept the terms. All I'm trying to say is that it doesn't seem like it generates enough EBITDA or free cash flow from the amount of investment that those renewables require.

Angie: How competitive the market is and you just have to accept the terms all of them.

Angie: I'm trying to say is that it doesn't seem like it generates EBITDA or free cash flow from the amount of investment that helps when you have those require.

Andres Gluski: Yeah, I would disagree. I mean, we can maybe go into more detail offline, but I think the way to, you know, first of all, realize that we do renewables not only in the U.S.; we do it, for example, a lot of renewables in Chile, where you don't have any of the upfront tax advantages. But it's a different, let's say, model, but actually, our returns are better there. I would say, given the tax attributes in the States, what you have is, thinking of it sort of like a flow and a stock, right? So you get a lot of the tax advantages as cash, right?

Angie: Yes.

Speaker Change: I would disagree I think we can maybe go into more detail offline, but I think the way to first of all realize that we do renewables not only in the U S. We'd do it for example, a lot of renewables in Chile, where you don't have any of the upfront tax attributes.

But it's a different different let's say model, but actually our returns are better there.

Speaker Change: I would say given the tax attributes in the states what you have is.

Speaker Change: Thinking about sort of a flow and the stock right. So you get a lot of the tax attributes this cash to use that cash to pay down the construction debt and then you're left with a project with a lower amount of debt going forward and then you also get cash immediately by selling down to minority partners who want.

Andres Gluski: So you use that cash to pay down the construction debt. And then you're left with a project with a lower amount of debt going forward. And then you also get cash immediately by selling it to minority partners who want, in the example we gave, like a solar bond. So they're willing to take lower returns.

Speaker Change: And the example, we gave like a solar bond. So they are willing to take lower returns so.

Andres Gluski: So on the project itself, you do get very good cash returns for the total cost of the project because, again, you're getting, well, almost 50% back right after you commission it. Now when you're looking at the EBITDA numbers, realize that we're growing very fast. So, you know, last year, our commissioning of projects grew 100%. So, you know, those projects are now coming online over time. So, no, I don't think, I mean, I think returns will increase.

Speaker Change: On the projects itself you do have a very good cash returns for the total cost of the project because youre getting youre getting.

Speaker Change: Well almost 50% back in right. After you Commission it.

Speaker Change: Now when Youre looking at the EBITDA number is realize that we're growing very fast so last year, our commissioning of projects grew 100%.

Speaker Change: So those projects are now coming online over time so.

Speaker Change: No I don't think I think returns will increase we did increase our targeted returns.

Andres Gluski: We did increase our targeted returns for the U.S. because of what we're seeing in the market and our increased, let's say, maturity and efficiency. And I would remind you that, again, without tax attributes, we're getting even better returns internationally. And another comment on it: when people talk about the competitiveness of renewables, realize that solar panels in the States cost two to three times what they cost internationally. So, you know, the cost of the megawatt hours from renewables with energy storage on the is much, much cheaper, and certainly the cheapest energy in most places that we operate. So again, you know, we can go into more discussions about it, but no, we feel very good about the cash profile of renewables and what they're generating.

The U S because of what we're seeing in the market and our increased let's say maturity and efficiency and I would remind you that again without tax attributes, we're getting even better returns internationally.

Speaker Change: And another comment on it when people talk about the competitive mix of renewables realized that solar panels in the states are costing two to three times, what they cost internationally.

Speaker Change: So the cost of the megawatt hours from renewables.

Speaker Change: With energy storage on the.

Speaker Change: Much much.

Speaker Change: Cheaper and certainly the cheapest energy in most places that we operate so.

Speaker Change: Again, we can go into more discussions about it but no we feel very good about the cash profile of renewables.

Stephen Coughlin: Yeah, I would just add, Angie, also on the EBITDA profile: EBITDA in the U.S. is growing significantly. I think you're not seeing it in part because of some of the things happening in LATAM around the El Nino, where we've had lower hydro generation. For example, in Panama, as I mentioned in my comments, Brazil had very low wind in the first quarter.

Speaker Change: And what Theyre generating yeah, I would just add Andy also on the EBITDA profile. The EBITDA in the U S is growing significantly I think you're not seeing it in part because of some of the things happening in Latam around the El Nino, where we've had lower hydro generation.

Speaker Change: For example in Panama as I had in my comments, Brazil has had very low wind.

Speaker Change: In the first quarter, and then frankly Q1 and even in the U S.

Stephen Coughlin: And then, frankly, Q1, and even in the U.S., is a very low solar irradiation quarter, so you won't see the EBITDA growth to the same degree. But within that number, there's substantial U.S. growth throughout this year, but it is somewhat offset by a couple of those other factors outside the U.S. for many, many years. So the development process has gotten quite efficient. We are able to drive high success rates through our development process. And so that cost continues to come down relative to,

Speaker Change: It is a very low solar irradiation quarter. So you won't see the EBITDA growth to the same degree.

Speaker Change: But within that number there's substantial U S growth throughout this year.

Speaker Change: But it is somewhat offset by a couple of those other other factors outside the U S. So the EBITDA is strong and then the other thing I'd mentioned in terms of developing renewables. We've been perfecting this machine for for many many years. So the development has gotten quite efficient.

Speaker Change: We are able to drive high success rates through our development process and so that cost continues to come down relative to <unk>.

Speaker Change: Bringing projects successfully online so that we can go into more detail, perhaps separately, but it is a very attractive profile for this business.

Agnieszka Anna Storozynski: And then, just separately, you mentioned all of these projects that you develop for hyperscalers. I mean, those are virtual PDAs, right?

Speaker Change: And then just separately.

Speaker Change: So you mentioned about I mentioned all of these projects that you develop a hyperscale or is I mean those are virtual.

Speaker Change: Virtual PPA sites.

Agnieszka Anna Storozynski: So they're not directly feeding into these data centers. And I'm just wondering, I mean, is it in a close geographic proximity, given that I think there's more and more discussion about the viability of the grid and transmission congestion? Again, I understand that hyperscalers have net zero goals, but at the end of the day, you know, they have to have access to reliable power in the sort of proximity of these facilities. So, again, I'm honestly trying to understand how renewables just built somewhere far will help keep the lights on in these 24-7 demand machines. Yeah, indeed. It's all good points.

Speaker Change: They're not directly feeding into these data centers and I'm I'm just wondering I mean is it like a close geographic proximity given that I think that there's more and more discussion about the availability of the viability of the grid and transmission congestion.

Speaker Change: Again, I understand that Hyperscale is have the net zero goals.

Speaker Change: End of the day, they have to have access to reliable power and settles at proximity of these facilities. So again.

Speaker Change: I'm honestly trying to understand how renewable.

Speaker Change: Renewables, just somewhere far well will help keeping the lights on in these 27 mm.

Speaker Change: Yes.

Speaker Change: It's good all good points and so youre absolutely right that the proximity is important within the region co location I think is overblown in terms of you're adding a new load to the grid, regardless that needs.

Stephen Coughlin: And so you're absolutely right that the proximity is important within the region. Now, co-location, I think, is overblown in terms of you're adding a new load to the grid regardless that needs interconnection and approval regardless of where this data center is. But what are they really looking for?

Speaker Change: Interconnection and approval, regardless of where this data center is but what are they really looking for as Andre said Theyre looking for renewables and Theyre looking for additionality, meaning new renewables and so you do want to do that in a smart way by minimizing your transmission charges. So you want them to be within a region.

Stephen Coughlin: As Andres said, they're looking for renewable energy, and they're looking for additionality, meaning new renewable energy. And so you do want to do that in a smart way by minimizing your transmission charges. So you want them to be within a region of the data center, and then you want to be able to add batteries in many cases. And we see tremendous upside. We've been developing battery storage, both technology influence, as well as battery storage projects in our portfolio for a very long time, a decade plus.

Speaker Change: The data center.

Speaker Change: And then you wanted to be able to add.

Speaker Change: The batteries and in many cases, and we see tremendous upside and we have been developing battery storage, both technology influence as well as battery storage projects in our portfolio for a very long time.

Speaker Change: Decade, plus.

Stephen Coughlin: So that's a huge advantage for us in being able to meet their carbon-free needs throughout the entire day. And so being able to have those battery sites in the region with the solar, and the wind sites is key. And having that flexibility. So it's not a market you can tap into just by jumping into this.

Speaker Change: So that's a huge advantage for us and being able to meet their carbon free needs throughout the entire day and so so being able to have those battery sites in the region with the solar with the wind sites.

Speaker Change: Is key and having that flexibility. So it's not a market you can tap into.

Stephen Coughlin: You have to have had foresight for five years plus to be advanced in developing all these technologies within these regions to do that. And then the other thing I would say is that, and we've talked about this, data center locations are expanding more towards the middle of the country, and so it's opening up many more locations, which have much more land availability for solar, for wind, into regions like MISO, into ERCOT, less congested on the coast. And so that's an advantage in terms of ensuring you're locating your data centers close to your generation sites as well. Yeah, and these are really good points, because the other thing is that the new AI...

Speaker Change: By jumping into this you have to have been had foresight for five years plus to be advanced in developing all these technologies within these regions to to do that and then the other thing I would say is that the because.

Speaker Change: We've talked about this.

Speaker Change: The data center locations are expanding more towards the middle of the country.

And so it's opening up many more locations, which are have much more land availability for solar for wind in the regions like MISO.

Speaker Change: Into ERCOT less congested in the coast and so that's an advantage in terms of ensuring you're locating your data centers close to your generation sites as well.

Andres Gluski: These are really good points because the other thing is that the new AI requires less latency, you know, immediacy than traditional data centers. So it opens up geographic possibilities. But, you know, we've always felt, you know, for example, on green hydrogen as an example, that, you know, first, it has to be regional to minimize transmission. Second, that it should be additional. And the fact that it already matches something we can do. So, in the particular case of our Green Hydrogen Project,

Speaker Change: This is a really good point because the other thing is that the new AI requires less latency.

Speaker Change: Immediately then traditional data centers. So it opens up the geographic possibilities, but we've always felt for example on green hydrogen as an example that first it has to be regional to minimize our transmission.

Speaker Change: Second that it should be additional.

And the fact that it's already Max is something we can do so in the particular case of our.

Speaker Change: Green hydrogen project that one is actually.

Speaker Change: Pretty much co located across the street.

Speaker Change: That is a particular case where that works but.

Speaker Change: Thank that.

It very much depends on the transmission conditions.

Speaker Change: But this opening up of more geographies is very favorable.

Speaker Change: Good thank you.

Speaker Change: Okay. Thanks.

Jordan: Our final question comes from Michael Sullivan of Wolfe Research.

Speaker Change: Our final question comes from Michael Sullivan of Wolfe Research Michael. Please go ahead.

Michael Sullivan: Hey everyone, good morning. Good morning!

Michael Sullivan: Hey, Ron good morning.

Michael Sullivan: Hey, I wanted to just circle back on the utility side and the data center angle there. I think you alluded to it a little bit, but can you give a little more color on what you're seeing, I guess, particularly in Indiana, and do you think the IRP you have out there is enough to cover any, you know, particularly large announcements that have been made? How should we be thinking about that?

Michael Sullivan: Good morning, Good morning wanted.

Michael Sullivan: Hey.

Michael Sullivan: Wanted to just circle back on the utility side and the datacenter angle. There I think you alluded to it a little bit but can you give a little more color on what youre seeing I guess, particularly in Indiana and do you think.

Michael Sullivan: ERP you have out there is enough to cover any.

Michael Sullivan: Particularly large announcements that have been made how should we be thinking about that.

Andres Gluski: What I mentioned in my speech is that certainly, as we're involved in these negotiations, hyperscalers, due to transmission and other attributes, there is interest in our two utilities for possible locations. Now this would be outside of the IRP, per se, because this would be an additional demand that would be put onto the grid.

Michael Sullivan: Let's see what I had mentioned in my speech is search.

Michael Sullivan: As we were involved in these negotiations with the.

Michael Sullivan: Hyper scaler.

Michael Sullivan: Due to transmission and other attributes.

Michael Sullivan: There is interest.

Michael Sullivan: And our two utilities for a possible locations now.

Michael Sullivan: This would be outside of the.

Michael Sullivan: ERP per se because this would be an additional.

Michael Sullivan: Additional demand that would be put onto the.

Michael Sullivan: Put onto our systems.

Michael Sullivan: Okay, but nothing specific, and it's in the works. We have nothing specific to announce at this time. We just thought it was important because...

Speaker Change: Okay, but nothing specific.

Speaker Change: And the works.

Speaker Change: Specific to announce at this time, we just thought it was important because.

Andres Gluski: When we talk about it, you know, we've talked about what we've done purely, but we haven't talked about, well, this is the first time we mentioned, for example, the megawatts that we're doing and actually providing that energy for other utilities to poor data centers, and we might be able to do some for ourselves. Yeah, so I would look at it as the plan has upside, really, is what it is about, So we have assumed sort of a line of sight to what we know about industrial development, you know, in Ohio, but they are becoming very attractive places, not only for data centers, but also chip manufacturing, battery manufacturing, we've talked about. So there'll be some discrete additions that I think will be upsides to our plan down the road.

Speaker Change: When we talk about it we've talked about what we've done purely we haven't talked about.

Speaker Change: This is the first time, we mentioned for example, the megawatts that were doing and actually providing that energy for other utilities to four data centers and we might be able to do some for ourselves here. So I would look at it.

Speaker Change: The plan has upside really is what it is about Mike. So we have assumed sort of line of sight to what we know in industrial development.

Speaker Change: Indiana, and Ohio, but they are becoming very attractive places not only for <unk>.

Speaker Change: Data centers offer chips manufacturing battery manufacturing, we've talked about so there'll be some discrete additions that I think will be upside to our plan down the road.

Speaker Change: In closing.

Speaker Change: Steve brought up a very good point that what we're seeing is growth in corporate demand. It's not just data centers. So whats you are seeing and in our.

Stephen Coughlin: So what you're seeing in our service areas is, for example, a re-industrialization of the U.S. So you have on-shoring, you know, whether it be EVs, battery manufacturing, panel manufacturing, other things, which are growing very substantially. And then you have to add in the load for electrification because people have been talking about, you know, EVs as if they're not selling, but the fact is, they're growing very fast. Charging stations are growing, they're just growing less than some of the forecasts that people had put out there.

Speaker Change: Service areas for example, Reindustrialization of the U S. So you have onshoring, whether it be EV battery manufacturer panel manufacturing other things.

Speaker Change: Which is growing very substantially and then you have to add in the load for electrification because people have been talking about evs as if they're not selling but the fact is.

Speaker Change: Growing very fast charging stations are growing they're just growing less than some of the forecast that people have put out there, but if you look at for example, China is 50% of.

Stephen Coughlin: But if you look at, for example, China, 50% of vehicles sold are EVs. So what we see is an increased demand from corporations from all of these sources. We have particularly focused on tech companies and data centers as really, you know, our sweet spot. But, you know, and, you know, internationally, it's the same. What we want is long-term dollar-denominated contracts with investment-grade off-takers. And again, we're doing well on both. So I am very optimistic about the sector. Okay, thank you. If I could just squeeze one last one in on just the latest thoughts on using Fluence as a funding source. You know, we don't comment on that.

Speaker Change: Vehicles sold our Evs. So what we see is an increased demand from corporations from all of these sources.

Speaker Change: We have particularly focused on tech companies and data centers as really our sweet spot but.

Speaker Change: And.

Speaker Change: Internationally.

Speaker Change: The same what we want is long term dollar denominated contracts with investment grade off takers and again.

Speaker Change: We're doing well on both so.

Speaker Change: Optimistic about the sector.

Speaker Change: Sure.

Speaker Change: Okay. Thank you if I could just squeeze one last one and just latest thoughts on using.

Speaker Change: Bluelinx.

Speaker Change: And being source.

Stephen Coughlin: You know, we don't comment on that, quite frankly, and, you know, we'll attempt this call later in the week. So next week. So we know we can't give any further comment on that. OK.

Speaker Change: We don't comment on that quite frankly.

Speaker Change: Fluent has its call later in the week.

Speaker Change: Our next week so.

Speaker Change: We can't give any further color on that.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Yeah.

Susan Pasley Keppelman Harcourt: With that, I'll hand it back to Susan Harcourt.

Speaker Change: With that I'll hand back to Susan <unk>.

Susan Pasley Keppelman Harcourt: All right. 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.

Jordan: Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect your lines.

Susan: Alright, 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.

Susan: Yes.

Susan: Yeah.

Speaker Change: Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.