Q3 2024 The AES Corp Earnings Call

Good morning.

Operator: Thank you for attending today's AES Corporation Third Quarter 2024 Financial Review Call.

Speaker Change: Thank you for attending today's Aes Corporation third quarter 2020 for financial review call.

Megan: My name is Megan and I'll be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad.

Megan: My name is Megan and I'll be your moderator for today.

Megan: All lines will be needed during the presentation portion of the call with an opportunity for questions and answers at the end if he would like to ask a question. Please press star one on your telephone keypad.

Susan Harcourt: I would now like to turn the call over to Susan Harcourt, Vice President of Investor Relations at AES Corporation.

I would now like to turn the call over to Susan Harcourt, Vice President of Investor Relations at a U S Corporation, Susan you may begin.

Susan Harcourt: Susan, you may begin.

Susan Harcourt: Thank you operator, good morning, and welcome to our third quarter 2020 for financial review call. Our press release presentation and related financial information are available on our website at <unk> Dot com.

Susan Harcourt: Thank you, Operator.

Susan Harcourt: Good morning and welcome to our third 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.

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

Susan Harcourt: Joining me this morning are Andrzej Skluski, our President and Chief Executive Officer, Steve Coughlin, our Chief Financial Officer, and other senior members of our management.

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

Speaker Change: With that I will turn the call over to Andreas.

Andrzej Skluski: With that, I will turn the call over to Andres.

Andres Kluski: Good morning, everyone and thank you for joining our third quarter 2024, and that's what we're buccal.

Andrzej Skluski: Good morning, everyone. And thank you for joining our third quarter 2024 Financial Review Call. We are pleased with our performance this year. And today, I will discuss our third quarter results, a robust growth we are seeing at our renewables and U.S. utility businesses, and our progress towards our asset sales target. Beginning on slide three, with our third quarter results, which were generally in line with our expectations, adjusted EBITDA with tax attributes was about $1.2 billion. Adjusted EBITDA was $692 million and adjusted EPS was $0.71. We're on track to meet our 2024 financial objectives, including our expectation to be in the top half of our ranges for adjusted EBITDA with tax attributes and adjusted EPS.

Andres Kluski: We are pleased with our performance this year and today I will discuss our third quarter results. Our robust growth we are seeing in our renewables and you.

Andres Kluski: Utility businesses, and our progress towards our asset sales target.

Andres Kluski: Beginning on slide three with our third quarter results.

Andres Kluski: We're generally in line with our expectations.

Adjusted EBITDA with tax attributes was about $1 2 billion.

Andres Kluski: Adjusted EBITDA was $692 million and adjusted EPS was <unk> 71.

Andres Kluski: We're on track to meet our 2024 financial objectives.

Clearly our expectation to be in the top half of our ranges for adjusted EBITDA with tax attributes and adjusted EPS at.

Andrzej Skluski: At the same time, we now expect adjusted EBITDA to be towards the low end of the guidance range for the year, primarily due to the one-time impact of extreme weather in Colombia and the lower margins in the energy infrastructure SBU. We are reaffirming our expected growth rates through 2027.

Andres Kluski: At the same time, we now expect adjusted EBITDA to be towards the low end of the guidance range for the year, primarily due to the onetime impact of extreme weather in Colombia, and the lower margins in the energy infrastructure SBU.

Andres Kluski: We are reaffirming our expected growth rates through 2027, Steve.

Andrzej Skluski: Steve Coughlin, our CFO, will provide more detail on our financial performance and outlook. I'm also very pleased to report that since our last call in August, we have signed or been awarded 2.2 gigawatts of new contract. This includes both long-term renewable PPAs and new data center load growth at our US utility. Turning to our renewables business on slide four. Since our Q2 financial review call, we have added 1.3 gigawatts of new PPAs to our backlog, bringing our year-to-date total to 3.5 gigawatts, more than 70% of which is with corporate customers. As a reminder, last year we set a target of signing 14 to 17 gigawatts of new PPAs from 2023 to 2025.

Speaker Change: Steve Hoffman, our CFO will provide more detail on our financial performance and outlook.

Speaker Change: I'm also very pleased to report that since our last call in August we have signed or have been awarded 2.2 gigawatt new contracts. This.

Speaker Change: This includes both long term renewable ppas.

Speaker Change: And new data center load growth at our U S utilities.

Speaker Change: Turning to our renewables business on slide four.

Speaker Change: Since our Q2 financial review call. We have added one three gigawatts of new Ppas to our backlog.

Speaker Change: Digging our year to date total to three five gigawatts more than 70% of which is with corporate customers.

Speaker Change: As a reminder, last year, we set a target of signing 14 to 17 Gigawatts of new Ppas from two.

23 to 2025.

Andrzej Skluski: And with 9.1 gigawatts signed or awarded since the beginning of last year, we're currently well on track to meet this objective. Since setting that goal, we also materially increased our project return targets, and we are focused on prioritizing the most profitable PPAs.

Speaker Change: And with $9, one gigawatt side or awarded since the beginning of last year. We're currently well on track to meet this objective.

Speaker Change: Setting that goal, we also materially increased our project return targets and we are focused on prioritizing the most profitable ppas.

Speaker Change: Moving to slide five and our construction progress since our second quarter call in August.

Andrzej Skluski: Moving to slide five in our construction project. since our second quarter call in August. We have completed construction of an additional 1.2 gigawatts of new projects, bringing our year-to-date total to 2.8 gigawatts, which represents nearly 80 percent of the 3.6 gigawatts we expect to complete this year. On-time execution is one of our competitive advantages, and we believe we have the best supply chain management in the industry. In the U.S., we have 100 percent of our solar panels on site for those projects coming online this year and 84 percent in-country for next year. For 2026, we have 100% of our solar panels, either in country or contracted to be domestically manufactured, providing protection against potential changes in tariff policy.

Speaker Change: We have completed construction of an additional one two gigawatt of new projects, bringing our year to date total to two eight gigawatts, which represents nearly 80% of the three six gigawatts, we expect to complete this year.

Speaker Change: On time execution is one of our competitive advantages and we believe we have the best supply chain management in the industry.

Speaker Change: In the U S. We have 100% of our solar panels on site for those projects coming online this year and 84% in country for next year.

Speaker Change: Our 2026, we have 100% of our solar panels, either in country or contracted to be domestically manufactured providing protection against potential changes in tariff policy.

Speaker Change: We have also been a first mover in securing domestically manufactured.

Andrzej Skluski: We have also been a first mover in securing domestically manufactured battery modules and cells. We expect our first battery energy storage project with domestic content to come online in the first half of 2026. Additionally, we have established a robust supply chain for wind through our strategic suppliers with domestic manufacturing. Regarding long-lead time equipment, such as transformers and high-voltage breakers, we have secured all of the supply for our backlog through 2027.

Speaker Change: Re modules and cells.

Speaker Change: We expect our first battery energy storage project with domestic content to come online in the first half of 2026.

Speaker Change: Additionally, we have established a robust supply chain for win through our strategic suppliers with domestic manufacturing.

Speaker Change: Regarding long lead time equipment, such as Transformers and high voltage breakers, we have secured all of the supply for our backlog to 2027.

Speaker Change: Turning to slide six we are very well positioned as the leading provider of renewable energy to data center companies, particularly in the U S and two large mining companies outside the U S. These.

Andrzej Skluski: Turning to slide six. We are very well positioned as a leading provider of renewable energy to data center companies, particularly in the U.S., and to large mining companies outside the U.S. These customers want to work with AES due to our track record of providing customized solutions that best serve their specific needs and delivering our projects on time and on budget. With the U.S. elections only a few days away, I had great confidence in the resilience of our business plan, regardless of the outcomes of the presidential and congressional elections. While we do not believe the elimination of the investment tax credit or production tax credit is likely, Even in an extreme scenario, we're uniquely well-positioned due to the following.

Speaker Change: These customers want to work with a yes due to our track record of providing customized solutions that best serve their specific needs and delivering our projects on time and on budget.

Speaker Change: With the U S elections, only a few days away I have great confidence in the resilience of our business plan.

Speaker Change: Regardless of the outcomes of the presidential and congressional elections.

Speaker Change: While we do not believe the elimination of the investment tax credit or production tax credit is likely.

Speaker Change: Even in an extreme scenario, we are uniquely well positioned due to the following.

Andrzej Skluski: First, regardless of federal policies, our corporate customers have a massive need for new power that can only be met by renewables over the next decade. McKinsey estimates that in the US, data centers alone could require an additional 450 terawatt hours through the end of the decade. which is equivalent to more than the annual electricity consumption of France. With these market dynamics, we will continue to design high return renewables PPAs with our core customers. Second, Should there be any changes to U.S. tariff policy, we have a resilient supply chain with a large majority of our project components manufactured domestically by 2026.

Speaker Change: Tourists.

Speaker Change: Regardless of federal policies are corporate customers had a massive need for new power that can only be met by renewables over the next decade.

Speaker Change: Mckinsey estimates that in the U S data centers alone could require an additional 450 terawatt hours through the end of the decade.

Speaker Change: Which is equivalent to more than the annual electricity consumption of France.

Speaker Change: With these market dynamics, we will continue to design high return renewables ppas with our core customers.

Speaker Change: Second.

Speaker Change: Should there be any changes to U S tariff policy, we have a resilient supply chain.

With a large majority of our project components manufactured domestically by 2026.

Speaker Change: Finally, our strategy of procuring our equipment at the time of the PPA signing provides clear safe harboring protection from potential changes in policy.

Andrzej Skluski: Finally, our strategy of procuring our equipment at the time of the PPA signing provides clear, safe harboring protections from potential changes in policy.

Now turning to slide seven over the last 12 months, we have embarked on the most ambitious investment program in the history of our U S utilities.

Andrzej Skluski: Now turning to slide 7, over the last 12 months, we have embarked on the most ambitious investment program in the history of our U.S. utility. which will improve reliability and quality of service for our customers while maintaining some of the lowest rates in both states. A.S. Indiana and A.S. Ohio are now two of the fastest growing U.S. utilities with projected double-digit rate-based growth through 2027, based on necessary investments for our customers. As you may recall, in the third quarter of last year, we received commission approval for a new regulatory structure for AES-Ohio, providing for timely recovery of the majority of these investments.

Speaker Change: Which will improve reliability and quality of service for our customers, while maintaining some of the lowest rates in both states.

Speaker Change: A S, Indiana and Ohio are now two of the fastest growing U S utilities with projected double digit rate base growth through 2027 based on necessary investments for our customers.

Speaker Change: As you may recall in the third quarter of last year.

Speaker Change: We received commission approval for a new regulatory structure for a S. Ohio.

Speaker Change: Providing for timely recovery of the majority of these investments.

Andrzej Skluski: Similarly, earlier last year, we received commission approval for new rates at A.S. Indiana, our first rate case in seven years. We're starting to see the benefits from the $1.2 billion we have invested in both utilities so far this year, representing a year-over-year increase of investment of 60%. Excluding the one-time settlement benefit recognized in 2023, year-to-date EBITDA is up 25%.

Speaker Change: Early earlier last year.

Speaker Change: We received commission approval for new rates at a S. Indiana, our first rate case in seven years.

Speaker Change: We are starting to see the benefits from the $1 $2 billion, we have invested in both utilities. So far this year, representing a year over year increase of investment of 60%.

Speaker Change: Excluding the onetime settlement benefit recognized in 2023 year to date EBITDA is up 25%.

Andrzej Skluski: Turning to slide eight, we're also seeing additional investment opportunities from data center growth in our service areas above and beyond our existing rate-based projection. Our utilities have many natural advantages that are attractive to large technology companies, such as proximity to fiber networks and the presence of ample land and water. We have worked to proactively identify sites that are well positioned to support new data centers capitalizing on our deep relationships with technology companies. At AES Indiana, we expect to have specific data center deals to announce in the coming months, as we've been in active negotiations with several parties.

Speaker Change: Turning to slide eight we're also seeing additional investment opportunities from datacenter growth in our service areas above and beyond our existing rate base projections.

Speaker Change: Our utilities have many natural advantages there are attractive to large technology companies such as proximity to fiber networks and the presence of ample land and water.

Speaker Change: We have worked to proactively identify sites that are well positioned to support new data centers capitalizing on our deep relationships with technology companies.

Speaker Change: A S. Indiana, we expect to have specific data center deals to announce in the coming months as we've been in active negotiations with several parties. We recently launched an RFP for three gigawatts of new generation to support accelerating demand growth from.

Andrzej Skluski: We recently launched an RFP for three gigawatts of new generation to support accelerating demand growth. From a regulatory perspective, we will use the results of this RFP to help inform our IRP submission next year. At AES Ohio, we have now signed agreements for new data center load growth of 2.1 gigawatts, including an incremental 900 megawatts, on top of the 1.2 gigawatts we already announced on our last call. On our fourth quarter call in February, we will provide a comprehensive update on how these agreements impact our long-term investment plan and rate-based growth. Today, we can indicate that just what we've signed to date provides a nearly 30% increase in investment through the end of the decade over our current plan.

From a regulatory perspective, we will use the results of this RFP to help inform our IR Pete submission next year.

Speaker Change: And he is Ohio, we have now signed agreements for new data center load growth of two one gigawatts, including an incremental 900 megawatts on top of the one two gigawatt, we already announced on our last call.

Speaker Change: On our fourth quarter call in February we will provide a comprehensive update on how these agreements impact our long term investment plan and rate base growth today.

Speaker Change: Today, we can indicate that just what we've signed to date provides a nearly 30% increase in investment through the end of the decade over our current plan.

Andrzej Skluski: Turning to slide 9, in September, we announced a plan to sell down 30% of AS Ohio to CDPQ, our longtime partner in AS Indiana. This transaction builds upon our strong relationship with CDPQ and allows for common ownership across our U.S. utilities. This partnership will support growth at A.S. Ohio with CDPQ as a funding partner for increasing investments to support reliability and economic development.

Speaker Change: Turning to slide nine.

Speaker Change: September we announced the plan to sell down 30% of a S, Ohio to CDP Q.

Speaker Change: Our longtime partner in <unk>, Indiana.

Speaker Change: This transaction builds upon our strong relationship with CDP Q and allows for common ownership across our U S utilities.

Speaker Change: This partnership will support growth at <unk>, Ohio, with CDP Q as a funding partner for increasing investments to support reliability and economic development.

Speaker Change: Finally, as you may have seen in our release, we are pleased to report that we have now closed the sale of our equity interest in <unk>, Brazil.

Andrzej Skluski: Finally, as you may have seen in our release, we are pleased to report that we have now closed the sale of our equity interest in AES Brazil. We are proud of the work our people have done in Brazil to expand beyond the 2.7 gigawatt hydro portfolio by adding 2.5 gigawatts of operating wind and solar, creating one of the largest renewable businesses in the country. With these two transactions, we have now signed or closed agreements for more than three quarters of our $3.5 billion asset sale proceeds target through 2027. We have also further simplified our portfolio and eliminated Brazilian weather, interest rate, and currency risk.

We are proud of the work our people have done in Brazil to expand beyond the two seven gigawatt hydro portfolio by adding two five gigawatts of operating wind and solar creating one of the largest renewable businesses in the country.

Speaker Change: With these two transactions, we have now signed or closed agreements for more than three quarters of our $3 5 billion asset sale proceeds target through 2027.

Speaker Change: We have also further simplified our portfolio and eliminated Brazilian weather.

Speaker Change: Interest rate and currency risks with that I would now like to turn the call over to our CFO Steve cough.

Steve Coughlin: With that, I would now like to turn the call over to our CFO, Steve Coughlin.

Steve cough: Thank you Andres and good morning, everyone today, I will discuss our third quarter results and our 2020 for guidance and parent capital allocation.

Steve Coughlin: Thank you, Andres.

Steve Coughlin: And good morning, everyone. Today, I will discuss our third quarter results in our 2024 Guidance in Parent Capital Allocation. Turning to slide 11. Adjusted EBITDA with tax attributes was approximately $1.2 billion in the third quarter versus $1 billion a year ago. Although we realized $458 million of additional tax value year over year, Renewables EBITDA was down $68 million, driven mostly by record-breaking drought conditions in South America. In addition, our energy infrastructure SBU was down $221 million, largely due to expected items, which I'll cover in more detail on a later slide. Turning to slide 12, adjusted EPS for the quarter was $0.71 versus $0.60 last year.

Steve cough: Turning to slide 11, adjusted EBITDA with tax attributes was approximately $1 2 billion in the third quarter versus $1 billion a year ago.

Steve cough: Although we realized $458 million of additional tax value year over year renewables EBITDA was down $68 million driven mostly by record breaking drought conditions in South America.

Steve cough: In addition, our energy infrastructure SBU was down 221 million largely due to expected items, which I'll cover in more detail on a later slide.

Steve cough: Turning to slide 12.

Steve cough: Adjusted EPS for the quarter was 71 cents versus 60% last year.

Steve Coughlin: Drivers were similar to those of adjusted EBITDA with tax attributes, but partially offset by higher parent interest due to growth investments, as well as a higher adjusted tax rate. I'll cover the performance of our SBUs or strategic business units on the next four slides. Beginning with our Renewables SBU on slide 13, higher EBITDA with tax attributes was driven primarily by significant growth from new projects in the U.S. where we've added 3.3 gigawatts since Q3 2023, but was partially offset by significant declines at our Colombia and Brazil business. This year we've experienced unprecedented weather volatility and a record-breaking drought in South America driven by El Nino conditions.

Steve cough: Drivers were similar to those of adjusted EBITDA with tax attributes, but partially offset by higher parent interest due to growth investments as well as a higher adjusted tax rate.

Steve cough: I'll cover the performance of our SP use or strategic business units on the next four slides.

Steve cough: Beginning with our renewables SBU on slide 13.

<unk> EBITDA with tax attributes was driven primarily by significant growth from new projects in the U S where we've added three three gigawatts since Q3, 2023, but was partially offset by significant declines at our Columbia and Brazil businesses.

Steve cough: This year, we've experienced unprecedented weather volatility and a record breaking drought in South America, driven by El Nino conditions.

Steve Coughlin: In June, a historic flooding event took out our one gigawatt Shavour facility in Colombia for nearly two months, followed by an extreme drought across the entire country. Also, you may recall that the third quarter of 2023 was extremely positive as we had better hydrology at our Shavore facility than the rest of the country, while spot prices were very high, yielding significant margins. As a result, Columbia is down $92 million versus the third quarter of last year and over $130 million year-to-date versus last year. In Brazil, the record drought and extremely low wind resource this year have also negatively impacted renewables in Q3 and year to date.

In June and historic flooding event took out our one gigawatt shavord facility in Columbia for nearly two months, followed by an extreme drought across the entire country.

Steve cough: Also you may recall that the third quarter of 2023 was extremely positive as we had better hydrology at our <unk> facility and the rest of the country, while spot prices were very high yielding significant margins.

Steve cough: As a result, Columbia is down $92 million versus the third quarter of last year and over $130 million year to date versus last year.

Steve cough: In Brazil, the record drought and extremely low wind resource. This year have also negatively impacted renewables in Q3 and year to date.

Steve Coughlin: While 2024 has been a difficult year due to the events in South America, we expect our renewable segment will grow significantly in 2025. Emerging La Nina conditions in the Pacific are expected to return the region to much better hydrology. While in the U.S., by the end of this year, we will have brought online a total of nearly two gigawatts of new capacity, which will drive a large increase in our renewable segment EBITDA in 2025.

Steve cough: While 2024 has been a difficult year due to the events in South America, we expect our renewable segment will grow significantly in 2025.

Steve cough: Emerging linear conditions in the Pacific are expected to return the region to much better hydrology, while in the U S. By the end of this year. We will have brought online a total of nearly two gigawatts of new capacity, which will drive a large increase in our renewable segment EBITDA in 2025.

Steve cough: Now turning to slide 14, lower adjusted PTC at our utilities SBU was mostly driven by the prior year recovery of $39 million of purchase power costs at Aes, Ohio included as part of the ESP for settlement.

Steve Coughlin: Now turning to slide 14. Lower adjusted PTC at our Utilities SBU was mostly driven by the prior year recovery of $39 million of purchase power costs at AES Ohio, included as part of the ESP-4 settlement, as well as higher interest expense from new borrowing. This was offset by returns on new rate based investment in the U.S. as well as new rates implemented in Indiana in May. Adjusting for the one time settlement last year, utilities adjusted PTC grew by 18 percent in the third quarter over prior year. Lower year-over-year Q3 EBITDA at our Energy Infrastructure SBU was primarily driven by nearly $200 million of expected declines at our Warrior Run and Southland Legacy businesses and the impact of several sell-downs, all of which were baked into our guidance.

Steve cough: Well, it's higher interest expense from new borrowings.

This was offset by returns on new rate base investment in the U S as well as new rates implemented in Indiana in May.

Steve cough: Adjusting for the one time settlement last year utilities, adjusted PTC grew by 18% in the third quarter over prior year.

Steve cough: Lower year over year Q3, EBITDA at our energy infrastructure SBU was primarily driven by nearly $200 million of expected declines at or will you run and Southland legacy businesses and the impact of several sell downs all of which were baked into our guidance.

Steve Coughlin: At Warrior Run, we recognize revenues from the accelerated monetization of the PPA beginning last year and ending in the second quarter of this year. Our legacy Southland assets benefited from energy margins earned in the prior year, which are no longer an opportunity in 2024 under the new extension monetization structure. In addition to these known drivers, we experienced lower margins at our new Southland combined cycle assets in the U.S. due to much milder weather, as well as extended outages at our TEG and TEP thermal plants in Mexico.

Steve cough: At where you run we recognize revenues from the accelerated monetization of the P. P. A beginning last year and ending in the second quarter of this year.

Steve cough: Our legacy South on assets benefited from energy margins earned in the prior year, which are no longer an opportunity in 2024 under the new extension monetization structure.

Steve cough: In addition to these known drivers we experienced lower margins at our new Southland combined cycle assets in the U S. Due to much milder weather as well as extended outages at our TEG and tap thermal plants in Mexico.

Steve cough: Finally, higher EBITDA at our new energy technologies SBU reflects continued high growth and margin increases at fluids.

Steve Coughlin: Finally, Higher EBITDA at our New Energy Technologies SBU reflects continued high growth and margin increases at Fluence.

Steve cough: Now turning to our expectations on slide 17.

Steve Coughlin: Now turning to our expectations on slide 17. We are reaffirming our 2024 adjusted EBITDA with tax attributes guidance of $3.6 to $4 billion and adjusted EPS guidance of $1.87 to $1.97 and continue to expect to be in the top half of both ranges, driven in part by the success we've had securing higher tax value on our new project. Our renewables team expects to capture over $200 million in tax value upside this year, which reduces our growth capital needs. EBITDA from Renewables will be favorable in the fourth quarter from revenues earned on our new PPAs, although we expect lower tax attributes in the fourth quarter as a result of the more balanced timing of renewable commissionings throughout the year.

Steve cough: We are reaffirming our 2024 adjusted EBITDA with tax attributes guidance of three six to 4 billion and adjusted EPS guidance of $1 87 to $1 97, and continue to expect to be in the top half of both ranges.

And in part by the success, we've had to carrying higher tax value on our new projects.

Steve cough: Our renewables team expects to capture over $200 million in tax value upside this year, which reduces our growth capital needs.

Steve cough: EBITDA from renewables will be favorable in the fourth quarter from revenues earned on our new Ppas, Although we expect lower tax attributes in the fourth quarter as a result of the more balanced timing of renewable commissioning throughout the year.

Steve Coughlin: We also expect further growth in our U.S. utilities in Q4 as we continue to realize returns from our investment program. This will be offset by the negative impact from the prior year monetization of the warrior run PPA, as well as incremental impact from asset sales, including AES Brazil. Drivers of adjusted EPS will be similar, along with higher interest expense from growth capital, but benefiting from a lower adjusted tax rate. As a result of our efforts to spread renewables construction more evenly throughout the year, we've achieved more than 80% of our adjusted EPS guidance year-to-date, providing greater certainty around our 2024 financial objectives.

Steve cough: We also expect further growth in our U S utilities in Q4, as we continue to realize returns from our investment program.

Steve cough: This will be offset by the negative impact from the prior year monetization of the warrior run PPA as well as incremental impact from asset sales, including Aes, Brazil.

Steve cough: Drivers of adjusted EPS will be similar along with higher interest expense from growth capital, but benefiting from a lower adjusted tax rate.

Steve cough: As a result of our efforts to spread renewables construction more evenly throughout the year, we've achieved more than 80% of our adjusted EPS guidance year to date, providing greater certainty around our 2024 financial objectives.

Steve cough: Turning to slide 18, we are also reaffirming our adjusted EBITDA guidance range of two six to $2 9 billion while.

Steve Coughlin: Turning to slide 18, we are also reaffirming our adjusted EBITDA guidance range of 2.6 to 2.9 billion. Well, I'm pleased with our execution this year on our growth objectives. Several large drivers have impacted results primarily at our legacy businesses. And we now expect to end the year toward the lower end of our guidance range. Milder weather compressed spark spreads in California, resulting in lower margins at our Southland Combined Cycle Gas Plant. The PPA for these assets contains an option that allows us to choose to sell the energy to the market in a given year. We previously chose to execute this option for 2024 and were therefore impacted by declining spark spreads that occurred later in the year.

While I'm pleased with our execution this year on our growth objectives. Several large drivers have impacted results primarily at our legacy businesses and we now expect to end the year toward the lower end of our guidance range.

Steve cough: Milder weather compressed spark spreads in California, resulting in lower margins at our Southland combined cycle gas plants.

Steve cough: The PPA for these assets contained an option that allows us to choose to sell the energy to the market in a given year. We'd previously chose to execute this option for 2024 and were therefore impacted by declining spark spreads that occurred later in the year.

Steve cough: In Mexico, the unplanned outages, which have now been resolved further impacted our results in the second and third quarter.

Steve Coughlin: In Mexico, the unplanned outages which have now been resolved further impacted our results in the second and third quarter. In Colombia, the combination of the Q2 flood-related outage at Chivor and yearlong record drought have negatively impacted us versus our guidance. Finally, inverter failures at several of our solar sites impacted availability versus our plan. These inverters were under warranty and are being remediated by the manufacturer. Despite the confluence of these one-time negative impacts, growth in U.S. renewables remains very strong, and our U.S. utilities have outperformed. We expect to continue this momentum and substantially increase EBITDA at both the renewables and utilities businesses in 2025.

In Colombia, the combination of the Q2 flood related outage at <unk>.

Steve cough: Year long record drought have negatively impacted us versus our guidance.

Steve cough: Finally, inverter failures at several of our solar sites impacted availability versus our plan.

Steve cough: He's inverters were under warranty and are being remediated by the manufacturers.

Steve cough: Despite the confluence of these one time negative impacts growth in U S. Renewables remains very strong and our U S. Utilities have outperformed we expect to continue this momentum and substantially increased EBITDA at both our renewables and utilities businesses in 'twenty to 'twenty five.

Steve cough: Now to our 2020 for parent capital allocation plan on slide 19.

Steve Coughlin: Now to our 2024 Parent Capital Allocation Plan on slide 19. Sources reflect approximately $2.7 billion of total discretionary cash, including $1.1 billion of parent-free cash flow, $950 million of hybrid debt that we issued in May, and $650 million of proceeds from asset sales. Sale proceeds will be slightly lower than expected in 2024 due to timing, but we are well ahead of our $3.5 billion long-term target through 2027. 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.

Steve cough: Sources reflect approximately $2 7 billion of total discretionary cash, including $1 1 billion of parent free cash flow $950 million of hybrid debt that we issued in may and $650 million of proceeds from asset sales.

Steve cough: Sale proceeds will be slightly lower than expected in 2024 due to timing, but we are well ahead of our $3 5 billion long term target through 2027.

Steve cough: 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 we also plan to invest 2.2 to $2 3 billion in new growth.

Steve Coughlin: We also plan to invest $2.2 to $2.3 billion in new growth. In summary, we've continued to execute in the year to date and are well positioned for a strong finish to 2024. Our substantial renewables commissionings thus far give us greater line of sight toward achieving our earnings and cash targets, and our funding plan is largely complete. With $1.60 of adjusted EPS year to date, we have overachieved on our EPS growth with a clear path to landing at least in the upper half of our guidance range. As we look ahead to 2025, we see strong growth in our renewables and utility segments and continued execution of our decarbonization strategy in energy infrastructure.

Steve cough: In summary, we continue to execute in the year to date and are well positioned for a strong finish to 2024.

Steve cough: Our substantial renewables commissioning, thus far give us greater line of sight toward achieving our earnings and cash targets and our funding plan is largely complete.

Steve cough: With a $1 60 of adjusted EPS year to date, we have over achieved on our EPS growth with a clear path to landing at least in the upper half of our guidance range.

As we look ahead to 2025, we see strong growth in our renewables and utilities segments and continued execution of our de carbonization strategy in energy infrastructure.

Steve Coughlin: I look forward to providing additional detail around 2025 and beyond on our fourth quarter call.

Steve cough: I look forward to providing additional detail around 2025 and beyond on our fourth quarter call.

Andrzej Skluski: With that, I'll turn the call back over to Andre.

Speaker Change: With that I'll turn the call back over to Andres.

Andres Kluski: Thank you Steve.

Andrzej Skluski: Thank you, Steve. Before opening up the call for Q&A, I would like to summarize the highlights from today's call. We continue to execute well on our strategic priorities, including robust growth at our renewables and U.S. utility business. With 9.1 gigawatts of new PPA signed or awarded in 2023, and year to date 2024, we're well on our way towards achieving our goal of 14 to 17 gigawatts in 2023 through 2025. Regarding our construction program, we have added 2.8 gigawatts of new projects to our operating portfolio so far this year, and we're seeing the direct financial benefits in our adjusted EPS and adjusted EBITDA with tax attributes results.

Before opening up the call for Q&A I would like to summarize the highlights from today's call.

Andres Kluski: We continue to execute well on our strategic priorities, including robust growth at our renewables and U S utility businesses.

Andres Kluski: With nine one gigawatts of new Ppas signed or awarded in 2023 and year to date 2024, we are well on our way towards achieving our goal of 14 to 17 Gigawatts in 2023 through 2025.

Andres Kluski: Regarding our construction program, we have added 2.8 gigawatts of new projects to our operating portfolio. So far this year and we're seeing the direct financial benefits.

Andres Kluski: Our adjusted EPS and adjusted EBITDA with tax attributes results.

Andrzej Skluski: At our U.S. Utilities, we have embarked on the most ambitious investment program in their history while signing agreements for 2.1 gigawatts of data center load growth, and we expect more in the coming months. We're also executing well on our Asset Sale and Transformation Program, and we feel good about the remainder of 2024 and our long-term outlook, despite specific one-time weather-related events this year. Finally, I can confidently say that I believe no one is better positioned with large technology customers than AES. Energy Market Fundamentals, and the strong demand we are seeing from our corporate customers. give us great confidence in the resilience of our business plan, regardless of the outcomes of the upcoming U.S.

Andres Kluski: At our U S utilities, we have embarked on the most ambitious investment program and their history, while signing agreements for two one gigawatts of data center load growth and we expect more in the coming months.

Andres Kluski: We're also executing well on our asset sale and transformation program and we feel good about the remainder of 2024 and our long term outlook. Despite specific one time weather related events this year.

Andres Kluski: Finally, I can confidently say that I believe no one is better positioned with large technology customers than aes.

Andres Kluski: Energy market fundamentals and the strong demand we are seeing from our corporate customers.

Andres Kluski: Give us great confidence in the resilience of our business plan, regardless of the outcomes of the upcoming U S elections.

Operator: election.

Andres Kluski: Operator, please open up the line for questions.

Operator: Operator, please open up the line for questions. Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to retract your question for any reason, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to register.

Andres Kluski: Absolutely.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: If you would like to retract your question for any reason please press star followed by two.

To ask a question. Please press star one as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question. They will pause briefly to allow questions to register.

Speaker Change: Our first question will go to the line of Nick Campanella with Barclays. Your line is now up at Nic.

Nick Campanella: Our first question will go to the line of Nick Campanella with Barclays. Your line is now open, Nick.

Nick Campanella: Hey, good morning, Thanks for taking my question.

Nick Campanella: Hey, good morning. Thanks for taking my question.

Speaker Change: So good morning, Nick I wanted to ask.

Andrzej Skluski: So good morning, Nick. I wanted to ask.

Nick Campanella: Yeah, good morning. So I wanted to just ask, you know, the comments about supply chain. You seem well positioned through 2026 with panels, etc. But you continue to construct three and a half gigs for this year. You kind of outlined this previous target at the end, let's say, of 14 gigs, you know, into 2025. So we're getting closer up to 25 now. I just kind of want to check in and see how you feel progressing towards that target, because there will be it seems like it'll be a pretty good step up into 25 here. And is that still attainable?

Nick Campanella: So I wanted to just.

Nick Campanella: The comments about supply chain, you seem well positioned through 2026.

Nick Campanella: Panels et cetera, but you continue to construct three and a half cadence for this year you kind of outlined the previous target at the analyst day or 14 gig into 2025. So we're getting close to up to 25 now I just kind of wanted to check in E E.

Nick Campanella: Before progressing towards that target.

Nick Campanella: Because it will be it seems like it'll be a pretty good step up into 25 here does that fall table. Thank you.

Andrzej Skluski: Thank you. Yeah, thanks for the question, Nick. I mean, we feel very strong about our supply chain management and construction program. We are the only large. ...renewables developer, which really hasn't had to abandon any large PPAs in the last 3-4 years. So, you know, what we've said, we have all the equipment we need this year. We have 84% of what we need for next year already in-country. In the next month or so, we should have 100%. So we feel very good about supply chain. And we tend to concentrate on the big items like wind turbines, batteries, solar panels.

Speaker Change: Yeah. Thanks for the question there I mean, we feel very strongly about our supply chain management and construction program.

Speaker Change: We are the only large.

Speaker Change: Renewables developer, which really hasn't had too.

Speaker Change: Abandon any large ppas over the last.

Speaker Change: Three or four years.

Speaker Change: So you know what we've said we have all the equipment we need this year.

Speaker Change: We have 84% of what we need for next year already in country in the next month or so we should have 100%. So we feel very good about supply chain and we tend to concentrate on the big items like our wind turbines batteries solar panels, but didn't you also have inverters.

Andrzej Skluski: But you also have inverters and you have transformers, which are long lead time, and we feel very solid there. In addition, we've really had no problems with the workforce either, because we have strategic relationships with EPC contractors so that they can move the crews from one project to the next. So in answering your question, we feel very good about our...

Transformers, which are long lead time, but we feel very solid there in.

Speaker Change: In addition, we've really had no problems with the workforce either because we have strategic relationships with EPC contractors. So that they can move the crews from one project to the next so in answering your question, we feel very good about our.

Andrzej Skluski: Construction Program. And as you know, in 2023, we geared up 100%. So now we've been able to really smooth out our commissioning throughout the year. We expect that in 2025 and 2026.

Speaker Change: Construction program.

Speaker Change: And as you know in 2023, we geared up a 100%. So now we've been able to really smooth out our commissioning throughout the year and we expect that in 2025 and 2026.

Speaker Change: Alright. Thanks.

Nick Campanella: All right, thanks. And, you know, when I think about, you know, 25, again, obviously, you had on an ex-pat statute basis, Some one-timers that's kind of putting you a little lower here, and I sense the notable confidence on the growth into 2025.

Speaker Change: When I think about 25 again, obviously you had.

Speaker Change:

Speaker Change: Tax attribute basis.

Speaker Change: Some one time or is that kind of put you a little lower here and I.

Speaker Change: Since the notable confidence on the growth into 2025 can you just kind of quantify for us how.

Nick Campanella: Can you just kind of quantify for us, you know, how much has really just returned to normal versus, you know, new EBITDA from, you know, renewables contributions?

Speaker Change: How much is really just a return to normal versus you know.

Speaker Change: New EBITDA.

Speaker Change: From renewables contribution.

Andrzej Skluski: And then, you know, when you consider things like Brazil going off, do you still expect that renewable segment to grow year over year? Thank you.

Speaker Change: And then when you consider things like Brazil, well in la.

Speaker Change: Do you still expect that renewable segment to.

While year over year. Thank you.

Speaker Change: Yeah look that's a very good question you know, we aren't giving guidance for 2025 at this time, but you're right. What you really have is a book.

Andrzej Skluski: Yeah, look, that's a very good question. You know, we aren't giving guidance for 2025 at this time, but you're right. What you really have is, you know, mean reversals, you know, reversion. You're really coming back to a sort of more normal year. 2024 is a year that, you know, we've never had before, this sort of combination of extreme floods and extreme droughts in some of our service territories. You know, largely driven by El Nino, coming into La Nina, we expect a return to normal, but you also correctly point out that, you know, we're maintaining all of our guidance.

Speaker Change: But you know mean reverses.

Reversion, you were really coming back to sort of more normal year.

Speaker Change: 2024 is a year that we've never had before because of the combination of extreme floods in extreme drought in some of our service territories.

Speaker Change: Largely driven by El Nino coming into linear we expect a return to normal but you also correctly pointed out that you know, we're maintaining all of our guidance.

Andrzej Skluski: and our long-term growth. Without Brazil. And so that means that the other sectors are picking up. So, to the extent that I can say we expect next year to be a more normal year, and that, you know, we've absorbed the sale of Brazil by increasing the growth rates, you know, especially in U.S. renewables and U.S. utilities.

Speaker Change: And our long term growth rates.

Speaker Change: With without Brazil.

Speaker Change: And so that means that the other sectors are picking up so to the extent that I can say, we expect next year to be a more normal year.

Speaker Change: And that you know we've absorbed the <unk>.

Speaker Change: Sale of Brazil by increasing the growth rates.

Speaker Change: Especially in U S renewables and U S utilities.

Steve Coughlin: Hey, Nick and Steve, I would just add, we've added, and will add, a total of 3 gigawatts of new renewables this year across the portfolio. So there's, in addition to some more normalization, with like La Maninia coming in South America. The install base is going to be significantly higher. So that's that's part of it. Renewables segment will grow significantly. And we also have outside the renewables, we have the utilities growth. So with a full year of new rates in Indiana and continued rate-based growth in Ohio. That makes sense.

Speaker Change: Hey, Nick it's Steve I would just add.

Speaker Change: We have added and will add a total of three gigawatts of new renewables this year across the portfolio. So theres. In addition to some more normalization.

Speaker Change: I mean, you're coming in South America.

Speaker Change: The installed base is going to be significantly higher.

Speaker Change: So that's that's part of it renewable segment will grow significantly.

Speaker Change: And we also.

Speaker Change: Half outside the renewables, we have the utilities' growth so with a full year of new rates in Indiana and continued rate base growth in Ohio.

Speaker Change: Okay.

That makes sense, thanks for answering those questions.

Nick Campanella: Thanks.

Nick Campanella: Thanks for answering those questions and we'll see you soon. Thank you. Thanks.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thanks, Mike.

Nick Campanella: Thank you Nick.

Operator: Thank you, next.

David Arcaro: Our next question goes to the line of David Arcaro with Morgan Stanley.

Speaker Change: Our next question goes to the line of David Arcaro with Morgan Stanley David Your line is now open.

David Arcaro: David, your line is now open. Thanks so much.

David Arcaro: Hey, thanks, so much good morning.

David Arcaro: Good morning, I was wondering if you could elaborate on them.

David Arcaro: I was wondering if you could elaborate on... I was wondering if you could elaborate on the outperformance you had in tax credits that you received. You referenced the $200 million higher-than-expected tax credit. What that stemmed from, and is there an opportunity for any more, you know, outperformance?

David Arcaro: If you could elaborate on the outperformance you had in tax credits that you received you referenced that $200 million higher than expected tax credits wondering what that stemmed from and is there an opportunity for any more outperformance from here.

Speaker Change: Yes, Hey, David Steve.

Steve Coughlin: Yes. Hey, David, Steve. Definitely been a very good year.

Speaker Change: Definitely.

Speaker Change: Very good year.

Steve Coughlin: Look, this is, I would say, a very core competency for us and a key differentiator. We have, I think, the strongest tax team and renewables finance team there is. We're always looking to ensure that we maximize the tax value opportunity, because what does that do? It reduces our capital requirements and also increases return. So we've had a good year. We've done a number of things to ensure we qualify for bonuses, including places where there's a brownfield adder that allows us to qualify for the energy community. These are sites that were formerly agricultural sites that had different materials, chemicals applied that allow them to qualify.

Look this is.

Speaker Change: They are very core competency for us and a key differentiator, we have I think the strongest tax team and renewables finance team there is.

Speaker Change: We're always looking to ensure that we maximize the tax value opportunity because what does that do reduces our capital requirements.

Speaker Change: So increases.

Returns.

Speaker Change: So it's we've had a good year, we've done a number of things to ensure we qualify for bonuses.

Speaker Change: Including places, where theres a brownfield adder.

Speaker Change: That allows us to qualify for the energy community.

Speaker Change: You know these are sites that were formerly say agricultural sites.

Different materials chemicals applied that will allow them to qualify so we've done a lot of research and digging to justify.

Steve Coughlin: So we've done a lot of research and digging to justify adders where we can. So the other thing we're doing is, you know, all tax credits are not created equal. So because of our track record, people tend to come to us and expect and we get less of a discount. And we get people very focused on working with us. So I would say, you know, monetizing through transfers, we've had a lot of success. And transfers do tend to get recognized a little earlier than through the tax equity partnerships, but the credit value, so that's part of it as well.

Speaker Change: Adders.

Speaker Change: There, where we can say.

Speaker Change: So the other thing we're doing is all tax credits are not created equal so because of our track record.

People tend to come to us and expect.

Less of a discount.

Speaker Change:

Speaker Change: And.

Speaker Change: People are very focused on.

Speaker Change: On working with us so I would say.

Speaker Change: Monetizing through transfers, we've had a lot of success and transfers do tend to get recognized a little earlier than through the tax equity partnerships, but the credit value. So that's part of it as well so I do see this as a potential upside in the future but of course, there's other things.

Steve Coughlin: So I do see this as, you know, potential upside in the future, but of course, there's other things going on in the portfolio. You know, we have to take a holistic look.

Speaker Change: On the portfolio.

Speaker Change: You know we have to take a holistic look at them and when we give guidance in 'twenty five we'll update you guys on the entire portfolio.

Steve Coughlin: Executive Guidance in 25, we'll update you guys on the entire portfolio.

Speaker Change: Okay got it that's helpful. Thanks, Yeah, good to see just chipping away at the financing need with that.

David Arcaro: Okay, got it. That's helpful. Thanks.

David Arcaro: Yeah, good to see, uh, just chipping away at the fine. And then.

Speaker Change: And then wondering if you could just touch on what renewable returns have been on the incremental projects that you've been signing I guess since raising your return expectations earlier in the year have those or turn level. Its been <unk> been trending has there been continued momentum upwards.

Steve Coughlin: I guess since raising your return expectations earlier in the year, how have those return levels been been trending? Well, we, we're seeing, you know, good returns from our projects. And we continue to see a market that values what we bring to our customers. So the answer to that is that yes, that we continue to see, you know, our newer projects have been within that range towards the upper end of that range. So we feel, you know, very confident in the numbers that we provided. You got it.

Speaker Change: Okay.

Well, we're seeing good returns from our projects and would continue to see a market that values are what we bring to our customers. So.

Speaker Change: The answer to that is yes, we continue to see.

Speaker Change: Our newer projects had been within that range towards the upper end of that range. So we feel very confident in the numbers that we've provided.

Speaker Change: Yeah.

Speaker Change: Okay got it appreciate it thanks so much.

David Arcaro: Appreciate it.

David Arcaro: Thanks so much. Thanks Dave.

Speaker Change: Thanks, Dave.

Speaker Change: Thank you David.

David Arcaro: Thank you, David.

Durgesh Chopra: Our next question goes to the line of Durgesh Chopra with Evercore ISI.

Speaker Change: Our next question comes from the line of <unk> Chopra with Evercore ISI.

Durgesh Chopra: Durgesh, your line is now open. Hey, thank you. Good morning, team. Thanks for taking my questions.

Sure not line is now open.

Speaker Change: Hey, Thank you good morning team. Thanks for taking my questions just.

Durgesh Chopra: Just wanted to start off with a good morning, Andrew, just want to start off with the actual portfolio that might that that is going to come online, not not front, front of front on the guidance. But in terms of the 2.8 gigawatts that's coming online this year, should we expect an uptick in that number as we go into 2025, the actual construction and getting projects online?

Just wanted to start off with Hey, good morning, Andre just wanted to start off with the actual portfolio that that that is going to come online not not front of furniture in the guidance, but in terms of the two eight gigawatts that's coming online. This year should we expect an uptick in that number as we go into.

Speaker Change: 2025, the actual construction and getting projects online.

Speaker Change: Yeah. So this is a steep so we'll give that guidance in February so there's a number of moving pieces here.

Steve Coughlin: Yeah, so this is Steve.

Steve Coughlin: So we'll we'll give that guidance in February. So there's a number of moving pieces here.

Steve Coughlin: I would say the largest inflection will be beyond 2025. Durgesh And so I expect renewables will be up somewhat, but I think based on what our COD schedules look like, the largest increase increases will come in 26 and 27. Got it. Okay, that's very helpful. That's just project timing.

I would say.

Speaker Change: Largest inflection will be beyond 2025, there are deaths.

Speaker Change: Yes.

Speaker Change:

Speaker Change: And so I expect renewables will be up somewhat but I think based on what our our CRT schedules look like the largest increase increases will come in 'twenty six 'twenty seven.

Got it okay. That's very helpful that just project timing, Okay Ive two other questions.

Durgesh Chopra: Okay, I have two other questions.

Andrzej Skluski: First, on the hydrogen project with APD, There may have been some changes there with the activist involvement with the company. Can you update us what your plan is there? How much capital might you have invested to date and what do we do with those gigawatts coming online? Just anything you can share that would be helpful.

Speaker Change: First on the hydrogen project with a P D.

Speaker Change: There may have been some changes there would be the activist involvement.

Speaker Change: The company just can you update us what your plan is there how much capital might you have invested.

Speaker Change: To date, and what do we do with those Gigawatts coming online just any anything you can share there that would be helpful.

Sure No I. Appreciate the question look we have developed a very attractive one and a half gigawatts of renewables.

Andrzej Skluski: No, no, I appreciate the question. Look, we have developed a very attractive one and a half gigawatts of renewables, which as you know, there's a market that there's a shortage of large You know, advanced renewable projects. So we have to see, you know, when 45 V comes out and other things, how much of this goes to hydrogen. But in any case, we have a very attractive I do see those projects likely going forward with Asian buyers stepping up as partners in the early part of it. So we don't have a lot of money invested, other than the development money that we've done.

Speaker Change: Which as you know there is a market that there's a shortage of large.

Speaker Change: Advanced renewable project, so we'd have to see when forty-five V comes out and other things how much of this goes to hydrogen.

Speaker Change: But in any case, we have a very attractive asset there.

Speaker Change: Regarding.

Speaker Change: Outside of the states I do see those projects likely going forwards with Asia.

Speaker Change: Asian buyers stepping up and as partners and the early part of it. So we don't have a lot of.

Speaker Change: Money invested in the development money that we've done however, I think that this is probably some of the best as our pipeline development that we've done because it's a particularly attractive asset.

Andrzej Skluski: However, I think that this is probably some of the best pipeline development that we've done because it's a particularly attractive asset. You got it, Andres. That's very helpful.

Speaker Change: Got it that's very helpful. I mean, this is part of the backlog that you show right.

Andrzej Skluski: This is part of the backlog that you show, right? I believe that number is 12 now. Is that the one and a half gig? Is that included in the 12?

Speaker Change: I believe that that number is 12 now is that the one and a half gig is that included in the 12.

Speaker Change: No no. We only included in our backlog that's what you signed or you know awarded at the very final stage, we'd never taken any project out of our backlog really nothing but.

Andrzej Skluski: No, no, we only include in our backlog that which is signed or, you know, awarded at the very final stage. We've never taken any project out of our backlog, really, nothing but, you know, so we wouldn't include it until we have a signed PPA. Understood. Okay, very good.

Speaker Change: So.

Speaker Change: We wouldn't include until we have a signed PPA.

Speaker Change: Understood. Okay, and then one final question.

Durgesh Chopra: And then one one final question. Sorry for dragging for this long. Steve, just on Moody's basis, earlier in the year, we've had conversations on the methodology, potentially a methodology change at Moody's, maybe just update us on where you stand on Moody's basis, and the latest conversations you've had with the credit rating agency.

Speaker Change: Sorry for dragging for this long Steve just on Moody's basis early in the year, we've had conversations on the methodology of potentially a methodology change at Moody's maybe just update us on where you stand on Moody's basis, and the latest conversations you've had with the credit rating agency.

Steve Coughlin: Sure, Durgesh. So the dialogue continues. I do expect that they will publish an update before year-end. I characterize the conversations as continuing to be very constructive. They do see that our credit quality has indeed improved since they gave us the initial upgrade a few years back.

Speaker Change: Sure so.

Speaker Change: The dialogue continues I do expect that they will publish an update before year end.

Speaker Change: I characterize the conversations is continuing to be very constructive.

Speaker Change: They do see that our credit quality has indeed improved since they gave us the initial upgrade a few years back.

Steve Coughlin: What's the reality here is that we've been really transforming the portfolio, exiting markets, exiting carbon-intensive assets, and rotating capital into long-duration U.S. dollar, high-credit-worthy counterparties with no fuel exposure. So we have a very, very attractive profile. I think what they're working through, since Moody's looks at AAS on a consolidated basis as opposed to SMT and Fitch, which is at their parent recourse level only, they're looking at the project finance structures and how they take account of those. Project Finance is amortizing when we put debt on our projects, it amortizes over the life of the contract so there's not an exposed levered tail there.

You know whats the reality here is that we've been really transforming the portfolio.

Speaker Change: Exiting markets.

Speaker Change: Exiting carbon intensive assets and rotating capital into long duration U S dollar high credit worthy counterparties.

Speaker Change: With with.

Speaker Change: No fuel.

Speaker Change: Exposure. So we have a very very attractive profile I think what they're working through.

Since Moody's looks at Aes on a consolidated basis as opposed to S&P and Fitch, which is that their parent recourse level only looking at the project financed structures and how do they take account of those.

Project Finance is amortizing.

When we put that on our projects and.

Speaker Change: It amortize over the life of the contract so theres not an exposed levered tail.

Speaker Change: So it's a low risk structure its actually investment grade rated.

Steve Coughlin: So it's a low risk structure. It's actually investment grade rated debt at the project levels. So it's an attractive structure, it just hasn't fit well within the way they define their threshold. So they're looking at that. They're also looking at how, you know, given our high growth, we have a, we carry a fairly material amount of construction debt, and that's not yet yielding. And so they're looking at that in ways to recognize that there is cashflow pending that's very certain. And of course, this is non-recourse debt as well, that they're looking for adjustments along those lines as well.

Speaker Change: Yeah.

At the project levels so.

Speaker Change: It's an attractive structure it just hasn't fit within the well well within the way they define their thresholds.

Speaker Change: So theyre looking at that they're also looking at how you know given our high growth we have a carry a fairly material amount of construction debt and that's not yet yielding.

Speaker Change: And so theyre looking at that in ways too.

Speaker Change: Recognize that there is cash flow tending that's very certain.

Speaker Change: And of course, this is nonrecourse debt as well that.

Speaker Change: Theyre looking for adjustments along those lines as well so I feel good about where we are so really good about the conversations and I do expect there'll be.

Andrzej Skluski: So I feel good about where we are, feel really good about the conversations, and I do expect they'll be sharing their view here before the meeting. Yeah, I would add that the if you think of this sort of the big picture, overall, we continue to improve our credit profile. So you know, we exited Brazil, which was a substantial amount of our FX, certainly a big part of our foreign interest rate exposure and weather related exposures we learned this year. So as we shut down coal plants or sell coal plants, you're changing, you know, two year PPAs with fuel risk for really long term 20 year PPAs with no fuel risk.

Speaker Change: Sharing their view here before the end of the year, Yeah, I would add that if you think of the sort of the big picture overall, we continue to improve our credit profile. So we exited Brazil, which was a substantial amount of our FX certainly a big part of our.

Speaker Change: Foreign interest rate exposure and weather related exposures, we learned this year, so as we shut down coal plants or sell coal plants, you're changing two year ppas with fuel risk.

Speaker Change: Or really long term 20 year ppas with no fuel risk.

Andrzej Skluski: With investment grade offtakers in the US. So I feel, you know, very confident that any credit rating agency looking at the overall company, where we are today versus where they gave us the ratings a year or two ago, is a substantially better company.

Speaker Change: With investment grade off takers in the U S. So I feel.

Speaker Change: Confident that any credit rating agency looking at the overall company, where we are today versus where they gave us the ratings a year or two ago.

It is a substantially better company.

Speaker Change: Got it really appreciate that color guys. Thank you.

Durgesh Chopra: You got it. Really appreciate that color, guys. Thank you.

Speaker Change: Yeah.

Durgesh Chopra: Thank you, Durgesh.

Speaker Change: Thank you.

Speaker Change: Thank you Joe cash our next question goes to the line of Julien Dumoulin Smith.

Julien Dumoulin-Smith: Our next question goes to the line of Julien Dumoulin-Smith with Jeffreys. Julien, your line is open. Hey, good morning team. Thank you guys very much for the time. I appreciate it. Can you guys hear me?

Speaker Change: With Jefferies. Your line is now open.

Speaker Change: Hey, good morning team. Thank you guys very much for the time I appreciate it.

Speaker Change: Can you guys had originally.

Julien Dumoulin-Smith: Unknown Speaker Hey, thank you, Anders. Excellent.

Speaker Change: Hey, Thank you Andrew.

Speaker Change: Excellent well actually since we're talking on the on the credit here just to kick off on the new ones that were just where do you see your your metrics getting here and then more specifically do you anticipate needing to upsize the asset sales or accelerate the asset sale target.

Julien Dumoulin-Smith: Well, actually, since we're talking on the credit here, just to kick off on a nuance there, which is where do you see your your metrics getting here? And then more specifically, do you anticipate needing to upsize the asset sales or accelerate the asset sale target to kind of true of the balance sheet for any reason here? I get the Moody's methodology is in flux. But, you know, as you think about the asset sale piece of this, any observations to make on that front? Since we were focused on a second ago? Yeah. Yeah, no, certainly. So I mean, the credit metrics remain strong at the at the parent level.

Speaker Change: The balance sheet for any reason here I get that Moody's methodology is in flux, but you know as you think about the asset sale piece of this and any observations to make on that front since we're focused on in the second half.

Speaker Change: Yeah, I know certainly so I mean, the credit metrics remain strong at the at the parent level.

Andrzej Skluski: And actually, things that we've been doing are quite credit accretive. So some of the largest things we've done here now, just closing on Brazil, you know, Brazil, while it was generating a significant, significant amount of EBITDA in the renewable segment was actually producing very, very little cash, the business is highly levered. And so the sale is actually very credit accretive. Similarly, with the Ohio sell down, when that closes, next year, we're going to be paying down a tranche of debt that's due at the Holco over 400 million. So we see that as also credit accretive, and that we do, in fact, expect as a result of the transaction, Ohio will be able to start paying dividends at least a year sooner than it otherwise would have.

Speaker Change: And actually things that we've been doing are quite credit accretive. So some of the largest things we've done here now just closing on Brazil.

Speaker Change: Brazil, while it was generating a significant a significant amount of EBITDA in the renewables segment was actually producing a very very little cash the business is highly levered.

Speaker Change: And so the sale is actually very credit accretive similarly, with the Ohio sell down when that closes next year, we're going to be paying down.

Speaker Change: A tranche of debt that's due at the Holdco over 400 million. So we see that it's also credit accretive and that we do in fact expect as a result of the transaction, Ohio will be able to start paying dividends at least a year sooner than you otherwise would have.

So really feel good about the trajectory I would expect at the end of this year the parent level metrics will be between 22, and 23% which are.

Andrzej Skluski: So we really feel good about the trajectory. I would expect at the end of this year, the parent level metrics will be in between 22 and 23%, which are, you know, well, well above the threshold of 20 that that we have. And so, yeah, no, I, Julian, I think the asset sale program, we've had a lot of success, targeted three and a half, the universe is, in fact, bigger. So, you know, we'll see what what makes sense going, going into the future. But I see us, you know, having a having a lot of runway here, and that the credit metric has actually, in fact, been supported by the asset sale program.

Speaker Change: Well well above the threshold of 20 that we have and so yeah no Julian I think the asset sale program, we've had a lot of success.

Speaker Change: Targeted three and a half the University is in fact.

Bigger.

Speaker Change: So, we'll see what makes sense going going into the future, but I see us.

Speaker Change: Having a lot of runway here and that the credit metric is actually in fact been supported by the asset sale program.

Andrzej Skluski: I'd like to sort of also say that we've always exceeded our asset sale program targets. And I would also say, quite frankly, I think we have a very good record of selling assets at good value. And what we've always been doing is maximizing the value for our shareholders and not just, you know, doing asset sales to to hit a certain, let's say, megawatt or Generation Composition Target.

Speaker Change: I'd like to sort of also say that we've always exceeded our asset sale program.

Speaker Change: Targets and I would also say quite frankly, I think we have a very good record of selling assets at a good value and what we've always been doing is maximizing the value for our shareholders and not just.

Speaker Change: Doing asset sales to hit a certain.

Speaker Change: Let's say megawatt or a.

Speaker Change: Generation composition target.

Speaker Change: Yeah.

Speaker Change: No fair enough guys and thank you for that let me pivot real quickly they'll palco here right. We saw your peers to the north with NIPSCO Nisource give a very robust update you guys are talking about three gigawatts of procurement activity. I know you guys are already at a teens trajectory articulated at the analyst day last year, but I suspect that number is potentially meaningfully higher or potentially.

Julien Dumoulin-Smith: No, fair enough, guys. And thank you for that.

Julien Dumoulin-Smith: Let me pivot real quickly to Apolco here, right? We saw your peers to the north with NIPSCO, NYSRS give a very robust update. You guys talk about three gigawatts of procurement activity.

Andrzej Skluski: I know you guys already had a team's trajectory articulated at the analysts last year, but I suspect that number is potentially meaningfully higher or potentially extends itself for meaningfully greater duration, given A, the three gigawatts and B, the baseline of the rate base at Apolco here. If you can speak a little bit to what your expectations on what total portion that you can own and how that impacts your financials here.

Speaker Change: It extends itself for meaningfully greater duration.

Speaker Change: Even a the three gigawatts and be the baseline to the rate base at a poco here. If you can speak a little bit to what your expectations on what total portion that you can you can own and how that impacts your financials here.

Andrzej Skluski: Okay, so the rate case this year was resolved early, settled early, and approved early. So we had a significant increase, over $70 million annual increase. And so that is driving a significant year-over-year, we'll have a full year of the new rates next year.

Speaker Change: Okay. So.

Speaker Change: Look I mean the.

Speaker Change: The rate case. This year was resolved early settled early and approved early so we had a significant increase over $70 million annual increase.

Speaker Change: And so that is driving a significant year over year, we'll have a full year of the new rates next year and then as Andrew has described in his comments were.

Andrzej Skluski: And as Chris described in his comments, we're launching RFP for a lot of new generation in the utility, it'll go into the integrated resource plan to be filed next year. And we're talking, you know, I think we said in the last call, three gigawatts total. And that's increasing of data center load across the utilities, in addition to what we've already signed. So there's a I would say what we guided to is double-digit rate-based growth across the utilities. It's going to be much higher than that.

Speaker Change: Once an RFP for a lot of new generation and the utility it'll go into the.

Speaker Change: Integrated resource plan to be filed next year.

Speaker Change: And when we're talking.

Speaker Change: You know I think we said on the last call. It three gigawatts total.

Speaker Change: And that's increasing of data center load across the utilities. In addition to what we've already signed.

Speaker Change: So there's.

Speaker Change: There's a there's a.

Speaker Change: I would say, what we guided to a double digit rate base growth across the utilities, it's going to be much higher than that.

Andrzej Skluski: So we'll give more guidance in 25, Julien, but given what we're seeing, the utility investment is gonna increase, the returns are gonna increase, the rate base will increase. And that's also part of why we also sold down Ohio, because although we're selling down 30%, in fact, our net investment in the utilities is in. So this sell-down is allowing us to improve credit, get to earlier distributions. from the utility.

Speaker Change: So we'll give more guidance in 'twenty five Julien but.

Speaker Change: Given what we're seeing the utility investment is going to increase the returns are going to increase the rate base will increase and that's also part of why we also sold down.

Speaker Change: Ohio, because although we're selling down from 30% in fact, our net investment in the utilities is increasing so this sell down is allowing us to improve credit get to earlier distributions.

Speaker Change: From the utility it'll improve the credit quality in Ohio.

Andrzej Skluski: It'll improve the credit quality in Ohio, and it helps fund a much bigger investment program than even we anticipated a year ago. And our net investment, even though we're at 70% ownership in both utilities, is going to be even higher. So that's how I would look at it.

Speaker Change: And it helps fund a much bigger investment program than even we anticipated a year ago and our net investment even though we're at 70% ownership in both utilities is going to be even higher.

Speaker Change: So that's how I would look at it and of course in Indiana.

Andrzej Skluski: And of course, in Indiana, you know, it's an integrated utility. So not only do we have the load on the network, but we also have the generation piece to supply as well. So we see a lot of generation growth.

Speaker Change: It's an integrated utility so not only do we have the load on the network, but we also have the generation piece too.

Speaker Change: Slide as well so we see a lot of generation growth.

Speaker Change: Right. So even the medium term rate base growth CAGR, there could potentially be heading higher is what I'm hearing but actually.

Julien Dumoulin-Smith: Right. So even the medium term rate based growth CAGRs could potentially be heading higher is what I'm hearing.

Julien Dumoulin-Smith: But actually, you made allusion to one thing here, if I can just clarify. You'll be providing an updated outlook here on the fourth quarter. And I know that there's a lot of different things that are moving around in the plan.

Speaker Change: You made allusion to one thing here if I can just clarify you'll you'll be providing an updated outlook here on the fourth quarter and I know that there's a lot of different things that are moving around the plant. So as as you guys have done historically expect that that kind of integrated update here on the 14th.

Andrzej Skluski: So as you guys have done historically, expect that kind of integrated update here on the 4Q. Roll forward from the analyst. Yes, absolutely.

Speaker Change: Roll forward from the analyst day, yes, absolutely.

Andrzej Skluski: And yes, we will update you on on our long term for in February. Wonderful. Excellent, guys.

Speaker Change: Yes, we will update you on our long term for in February.

Wonderful excellent guys. Thank you for the time I appreciate it.

Julien Dumoulin-Smith: Thank you for the time. Appreciate it. Thanks.

Speaker Change: Thanks, Thanks Julien.

Julien Dumoulin-Smith: Thanks, Julien.

Speaker Change: Thank you Julien.

Operator: Thank you, Julien.

Angie Storozynski: Our next question goes to the line of Angie Storozynski with Seaport. Angie, your line is open. Thank you for taking my question.

Speaker Change: Our next question does your line of Angie Easter is in ski with Seaport Angie. Your line is now open.

Speaker Change: Yeah.

Angie Easter: Thank you for taking my questions.

Angie Storozynski: I just wanted to focus on the Renewable Power EBITDA, so the one without credits, so cash EBITDA, I would call it. So I'm looking at these results. I mean, you will be basically flat since 2022, and now it looks like 2025. It's going to be also in like a, you know, 620, 630 range. So, I mean, so, I mean, I understand that there are one-off items that wait on this year's EBITDA, which is going to be even lower than the number I just mentioned. So, I mean, I mean, there has to be some growth in that number.

Angie Easter: I just wanted to focus to the renewable power either Dan So the one without credits attack, so Kashi put down I would call it.

Angie Easter: I'm looking at these results I mean, you will be basically flat since 2022 and now it looks like 2025, it's going to be also in like a 620 630 range. So.

Angie Easter: <unk>.

Angie Easter: So I mean I understand that there are one off items that weighed on this year's EBITDA, which is going to be even more weapons.

Angie Easter: Just mentioned.

Angie Easter: So I mean.

Angie Easter: I mean, it has to be some growth in that number and I and I hear you Steve that there will be some in 'twenty six 'twenty, seven, but youre, making very substantial investments and were not seeing growth in that cash renewable EBITDA now.

Angie Storozynski: And I hear you, Steve, that there will be some in 26, 27.

Angie Storozynski: But, you know, you're making very substantial investments and we're not seeing growth in that cash renewable EBITDA. Now, the reason I'm actually asking about it is because if you look at the parent free cash flow, parent distributions, I mean, the vast majority of them come from energy infrastructure, but that's a segment that is shrinking. So I will have to rely on cash distributions from renewables very soon in order to hit the free cash flow expectations. So I just I'm just hoping that we can reconcile. First, you know, we're not saying that, you know, the renewable EBITDA will go substantially in 2025.

Angie Easter: I'm actually asking about it just because if you look at the.

Angie Easter: Parent free cash flow distributions I mean, the vast majority of them come from energy infrastructure, but that's a segment that is shrinking so I will have to rely on cash distributions from renewables.

Angie Easter: So in order to hit the <unk>.

The free cash flow expectations. So I guess I'm, just hoping that they can reconcile this.

Speaker Change: Yeah first you know, we're not saying that the renewable EBITA will grow substantially in 2025, and what you have is.

Andrzej Skluski: And what you have is, you know, the fact that we're selling Brazil, that's five gigawatts. So, you know, what you're having a little bit of apples and oranges here. So we're seeing the operating results from our renewable bills, absolutely, and where we think it should be. So it is, you know, there's a number of things going on here, Angie, that, you know, we can, time will clarify. But I don't think that it's so you can say that, you know, we're not getting the results from, you know, the investments that we're making. It's just, you know, moving.

Speaker Change: The fact that we're selling Brazil, that's five gigawatts. So you know what.

Speaker Change: Which are having a little bit of apples and oranges here. So we're seeing the operating results from our renewables build absolutely and where we think it should be.

Speaker Change: It is you know theres, a number of things going on here and we can tie in well clarified, but I don't think that.

Speaker Change: So you can say that we're not getting the results from the investments that we're making it's just you know moving and then second on the energy infrastructure, Yes, I mean, we have a balanced portfolio. So you know we tend to have you know that events in one spot offset by good events in the other and this was a particular.

Steve Coughlin: And then second on the energy infrastructure. Yes, I mean, we have a balanced portfolio. So, you know, we tend to have, you know, bad events in one spot offset by good events in the other. And this was a particular quarter where really a lot of things came together that normally don't come together. So, you know, normally if you have dry conditions, you have more wind. This time we had both. But what we also had was sort of all the years rain came in a very short period of time and damage of one gigawatt hydro. So I think we really did have sort of one time events.

Speaker Change: Quarter we're.

Speaker Change: Really a lot of things came together that normally don't come together. So you know normally if you have a dry conditions you have with Norway and this time, we had both but what we also had was.

Speaker Change: Sort of all the year's rain came in a very short period of time and damage of one gigawatt hydro so.

Speaker Change: I think we really did have sort of one time events and I think youre, drawing sort of longer term conclusions from there I'll pass it to Steve Yeah, I would just say and it's the only reason we're down year over year is because of the record throughout the only material reasons because of the record drought, primarily Colombia and sue.

Steve Coughlin: And I think you're drawing sort of longer term conclusions from that.

Steve Coughlin: I'll pass it to Steve. Yeah, I would just say, Angie, the only reason we're down year over year is because of the record drought. The only material reason is because of the record drought. Primarily Colombia and to a degree Brazil as well. So, you know, that those conditions are known to be changing. Moving to La Nina, obviously Brazil is out of the portfolio. You know, so Colombia, we do expect. returning to much more normal conditions next year. And don't forget, we also had an extremely high third quarter last year in Columbia, unusually high. So it makes the year over year comparison look more extreme.

Speaker Change: To a degree Brazil as well.

Speaker Change: That those conditions are known to be changing moving to linear.

Speaker Change: Brazil is out of the portfolio.

Speaker Change: So Colombia, we do expect.

Speaker Change: Returning to much more normal conditions next year and don't forget we also had a extremely high third quarter last year.

Speaker Change: In Colombia unusually high so it makes the year over year comparison look more extreme but what's the reality is the U S growth is significant.

Steve Coughlin: But what's the reality is the US growth is significant. And so this year, and even higher into next year, more than overcoming the loss of Brazil from the renewable segment. So the renewables growth will be very material next year. So we get that we're not on track at this point. Guidance, or, you know, if you were to straight line the guidance. But we're picking up substantially into next year and are reaffirming through 2027 that 19 to 21. growth rate, and that's largely driven by all of this U.S. growth, which is taking off. As I said, you know, we have added a total of three gigawatts of renewables across the year since Q3 of last year.

Speaker Change: And so this year and even higher into next year.

Speaker Change: More than overcoming the loss of Brazil from the renewable segment. So the renewables growth will be.

Speaker Change: Material next year, so we get that we're not on track at this point with the guidance.

Speaker Change: Guidance for and if you were to straight line the guidance.

We're picking up substantially into next year and are reaffirming through 2027 that 19% to 21%.

Speaker Change: Growth rate and that's <unk>.

Speaker Change: Largely driven by all of this U S growth, which is taking off as I said, we have added a total of three gigawatts of renewables.

Across the across the year since since Q3 of <unk>.

Speaker Change: <unk> of last year.

Steve Coughlin: We also will ultimately move Chile into the renewable segment, where it belongs, as we execute on our coal exit. So, the cash from this renewable segment will grow accordingly as well, and the EBITDA will be on track with that growth.

Speaker Change: We also will ultimately move chill, a instead of renewable segment, where it belongs as we execute on our coal exit so the cash from this renewable segment will grow accordingly, as well and the EBITDA will be on track with that growth rate.

Speaker Change: Yeah.

Angie Storozynski: Okay, so let me just push back. The latter, meaning the Latila, was supposed to be additive to the growth trajectory that you were showing at the Analyst Day. And now that we see the results, like year-over-year changes versus 23 results, we clearly point out that the second half of 23 had some big one-time benefits, which you could not have counted on during your 23 Analyst Day. And yet you came below your expectations, even the low end, on renewables for 23. So again, I mean, I hear you, that there is a growth in the U.S. portfolio which will benefit the IPEDA, but again, I mean, you had some big positives in the second half of 23, which you could not have expected when you were giving guidance on 23 on renewables, and yet you came below expectations on renewables in 23 now.

Speaker Change: Okay. So let me just pushed back the latter meaning that Sheila was supposed to be additive to the growth trajectory that you were showing at the analyst day and now that we see the results like year over year changes versus 'twenty results.

Speaker Change: You know acuity pointed out that's kind of second half of 'twenty. So you had some one.

Speaker Change: One time benefits, which you could not have counted on Joanne you're twenty-three analyst day, and yet you came below your expectations, even the low end on renewables EBITDA fell 23.

Speaker Change: So again I mean.

Speaker Change: I hear you that there is a growth in the U S portfolio, which will benefit the EBITDA, but.

Speaker Change: Again, I mean, you had some big positive in the second half of 'twenty, one 'twenty, three which you could not have expected when you were giving guidance on 'twenty three on renewables and yet you came below expectations on renewables since like between now so why should I.

Andrzej Skluski: So why should I have conviction that the same is not going to be true in future years? Well, you know, we feel confident we're going to hit the long range growth that we talked about. I mean, it has to do with, you know, reaching critical mass on some of these things. And, you know, certainly we can have one time, you know, weather events. But I think the important thing is, what returns are you actually seeing from the projects you're bringing online? What is the value of the PPAs you are assigning? And as we move forward, it'll be easier to make apples and apples comparisons as we have the same portfolio year to year.

Speaker Change: Have conviction that the same there's not going to be true in future years.

Speaker Change: Well, we feel confident we're going to hit the long range growth that we've talked about I mean, it has to do with.

Speaker Change: Reaching critical mass on some of these things are and you know.

Speaker Change: Certainly we can have one time you know weather.

Speaker Change: Weather events, but I think the important thing is what returns are you actually seeing from the projects you're bringing on line.

Speaker Change: What is the value of the Ppas you are signing.

Speaker Change: And as we move forward it'll be easier to make apples and apples comparisons as we had the St portfolio year to year.

Steve Coughlin: Yeah. The other thing I would say, Angie, is referring to last year, we did end up having more of our commissionings very late in the year, in fact, most in December. So a little later than expected. This year, we have substantially changed that trend. And so the renewable commissionings were much more evenly spread throughout the year. That's why we've already recognized 900. tax attributes already. So, you know, I think that's, that's another reason that that program has become more mature. spread throughout the year that were seeing a better result, and that 23 was lower.

Speaker Change: Yeah.

Speaker Change: The other thing I would say Angie is referring to last year, we did end up having more of our commissioning very late in the year in fact, most in December.

So a little later than expected this year, we have substantially changed the trend.

Speaker Change: And so the renewable commissioning so we're much more evenly spread throughout the year, that's why we've already recognized $900 million.

Speaker Change: The tax attributes already so I think that's that's another reason is that program has become more mature and spread throughout the year that that we're seeing a better result in that 23 was was lower.

Speaker Change: And just one other question so I'm looking at your guidance here on the cash flow for the parents for the year it.

Angie Storozynski: And just one other question.

Angie Storozynski: So I'm looking at your guidance here on the Picasso for the parents for the year. It seems like you're expecting about one point five to one point six billion dollars in distributions from subsidiary. And you are at about eight hundred, eight hundred and eighty, I forget.

Speaker Change: It seems like you're only expecting about 151 $6 billion in distributions from subsidiary and you are up about 800 800.

Speaker Change: I forget so is this apples to apples, meaning that I am basically 50% of distributions, meaning that the fourth quarter will be posted ketchup and distributions.

Steve Coughlin: So is this apples to apples, meaning that I am basically 50 percent of distribution, meaning that the fourth quarter will be this big catch up on distribution? Yeah, but that's, that's a normal trend. So that's, we've been having that type of seasonality for a long time. In, in, I would say, most cases, the cash is already sitting there. It's based on the windows in time, relative to our debt service that we're also allowed to pay dividends. So we have clear visibility into the remaining dividends. It's a matter of timing at this point as to when they get released on the periodic, you know, twice a year, once a year in some, in some cases.

Speaker Change: Yeah, but that's that's a normal trend. So that's we've been having that type of seasonality for a long time and I would say in most cases the cash is already sitting there. It's based on the windows and time relative to our debt service that were also allowed to pay.

Speaker Change: Dividends, so we have clear visibility into the remaining given it's just a matter of timing at this point as to when they get released on a periodic twice a year once a year and some in some cases.

Angie Storozynski: So I'm very, very confident in the, in the distribution level. Okay, thank you.

Speaker Change: So I'm very very confident in the in the distribution level.

Speaker Change: Okay. Thank you.

David Arcaro: Thank you Angie.

Angie Storozynski: Thank you, Angie.

Speaker Change: Thank you Angie.

Michael Sullivan: Our next question goes to the line of Michael Sullivan with Wolf Research. Michael, your line is now open.

Speaker Change: Next question comes the line of Michael Sullivan with Wolfe Research.

Speaker Change: Your line is now open.

Michael Sullivan: Hey, good morning.

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

Michael Sullivan: Good morning, Michael just yeah, I know that kind of got pasture, a bunch there on the last line of questions or.

Michael Sullivan: Um, just just yeah, I know that kind of got hashed through a bunch there on the last line of questions or Commentary, I guess, um, just to make it simple, like you keep talking about significant growth in 25. We obviously don't know what that means exactly. But you have this 5 to 7% EBITDA CAGR off of 23. When do you get inside of that within your plan?

Commentary I guess.

Michael Sullivan: Just to make it simple like you you keep talking about significant growth in 'twenty five we obviously don't know what that means exactly but you have this 5% to 7%.

Michael Sullivan: EBITDA CAGR off of 23, when do you get inside of that within your plan.

Speaker Change: Yeah. So again, we'll give we'll give an update in.

Steve Coughlin: Yeah, so again, we'll give we'll give an update in in February. The early years as we have been executing on the transformation and things like the Brazil exit, we'll have the Vietnam exit next year. We had the water run shut down, and so that that goes away. So so that weighs on the early years, but the trajectory, as I said, there's more of an inflection point beyond next year overall, getting through the 2027 period.

Michael Sullivan: In February the.

The early years as we have been executing on the transformation and things like that.

Michael Sullivan: The Brazil exit we will have the Vietnam exit next year, we had the Warner Ron shut down and so that that goes away.

So so that weighs on the early years, but the trajectory as I said, there's more of an inflection point.

Michael Sullivan: Next year overall getting through to 2027.

Michael Sullivan: Period, so what's happening is that the renewables.

Steve Coughlin: So, what's happening is that the renewable. will grow significantly next year. The utilities will grow significantly, catching back up closer to that level of return or growth that we've been expecting. But the energy infrastructure shrinking has been a little more front-end loaded. And then the Brazil sale, obviously, is a headwind in renewables in the near term, but we're significantly more than offsetting it next year. So that's how I would characterize it. We feel good about the growth rate overall, but it's... It's influenced by how we execute on the transformation. As well as the growth and the transformation shows up in the shrinking of the energy.

Michael Sullivan: We will grow significantly next year that utilities will grow significantly.

Michael Sullivan: Catching back up to.

Michael Sullivan: Those sorts of that that level of return that our growth that we've been expecting but the energy infrastructure striking has been a little more front end loaded.

And then the Brazil sale, obviously is a headwind in renewables in the near term, but were more significantly more than offsetting it next year.

So that that's how I would characterize it.

Michael Sullivan: We feel good about the the growth rate overall, but it is.

Michael Sullivan: It's it's influenced by how we execute on the transformation and as well as the growth in the transformation shows up in the shrinking of the energy infrastructure. So that's.

Steve Coughlin: infrastructure. So that that's That's how I would characterize it.

That's how I would characterize it in and so we'll give more more et cetera, but again I feel really good about the the renewables and the utilities and then the energy infrastructure.

Steve Coughlin: And and so we'll give more more in February. But again, I feel really good about the the renewables and the utilities and the energy infrastructure.

Steve Coughlin: You know, we'll look at the choices we have around how fast to continue the transformation and discuss that in February.

Look at the choices, we have around how fast to continue the transformation and discuss that in February.

Speaker Change: Okay. That's very helpful. Steve and then I had two one is just on your.

Michael Sullivan: Okay, that's very helpful, Steve.

Michael Sullivan: And then I had two ones just on your resource additions.

Speaker Change: Resource additions at the first just in terms of looking at new gas at the utility while we see that in the RFP or is that not until the IRB.

Michael Sullivan: The first just in terms of looking at new gas at the utility. Will we see that in the RFP? Or is that not until the IRP? And do you have a good Handle on how much you could look to be doing in gas.

Speaker Change: And do you have a good.

Speaker Change: Handle on how much you could look to be doing in gas and then on the non utility side.

Andrzej Skluski: And then on the non-utility side, you all have... Traditionally been pretty solar heavy, though I think you mentioned wind a few times just in terms of supply chain. But when I look at you and your peers, it doesn't seem like anyone's adding too much wind these days, so just curious what you're seeing on that front. Thank you. Yeah, on your first question, that would be really waiting for the IRP. So we certainly are looking at all options. So it will be likely a mix, you know, of renewables and some thermal, you know, of course, batteries as well.

Speaker Change: You all have.

Speaker Change: Traditionally been pretty solar heavy though I think you mentioned wind a few times just in terms of supply chain, but when I look at you and your peers and it doesn't seem like anyone's, adding too much. When these days. So just curious what are you seeing on that front. Thank you.

Yeah on your first question that would be really waiting for the AARP.

Speaker Change: So we certainly are looking at all options. So.

Speaker Change: It will be likely a mix of renewables and some thermal.

Uh huh.

Speaker Change: Of course batteries as well no.

Andrzej Skluski: Now, regarding the second question and wind, well, we were, we had been building quite a lot of wind in Brazil. But a lot of the projects that we have, let's say, in our pipeline have a considerable amount of wind. So if you think of the, what's been known as sort of the green hydrogen project in Texas, you know, one and a half giga, that's primarily wind. So we'll have a more balanced, more of a balance, let's say, in the U.S. between wind and solar in future years.

Regarding the second question and when well, where we had been building quite a lot of wind in Brazil.

Speaker Change: But a lot of the projects that we have let's say in our pipeline have a considerable amount of wind. So if you think of the.

Speaker Change: What's been known as sort of the Green hydrogen project in Texas.

Speaker Change: But on a half giga, that's primarily wind.

Speaker Change: So it will have a more balanced more of a balance let's say in the U S between wind and solar in future years.

Okay, great. Thank you very much.

Michael Sullivan: Okay, great. Thank you very much.

Alright, thank you.

Michael Sullivan: All right, thank you. Thank you, Michael.

Michael Sullivan: Thank you Michael.

Speaker Change: Our next question goes to the line of Ryan Levine with Citi. Ryan Your line is now open.

Ryan Levine: Our next question goes to the line of Ryan Levine with Citi.

Ryan Levine: Ryan, your line is now open. Good morning, and thanks for taking my question.

Ryan Levine: Good morning, and thanks for taking my questions.

Ryan Levine: Um, what is the timeline for the $92 million?

Ryan Levine: What is the timeline for the $92 million. Okay. What is the timeline for the $92 million Columbia impact to return to historic norms and what is the risk to achieving this brand at this stage in the year.

Andrzej Skluski: Hey, what is the timeline for the $92 million Columbia impact to return to historic norms? And what is the risk to achieving this RAM at this stage? Yeah, so conditions are already improving. The fourth quarter, in fact, I expect will be higher in Colombia than last year, Ryan. And and all forecasts point to La Nina being highly probable over the next couple of months. and laughing well into next. So it's pretty much turning around now. Again, I expect the fourth quarter to be higher, and then throughout next year, I expect Columbia to be higher than this year overall.

Speaker Change: Yeah. So.

Speaker Change: Additional <unk> are already improving the fourth quarter in fact.

Speaker Change: <unk> will be higher in Colombia than last year Ryan.

Speaker Change: And and all forecasts point to a linear.

Being highly probable over the next couple of months and and lasting well into next year.

Speaker Change: So it's.

It's pretty much turning around now again I expect the fourth quarter to be higher and then throughout next year I expect Colombia to be higher than this year overall.

Andrzej Skluski: So Columbia has been, and it was 92 million in the quarter alone. It's 130 million down year-to-date over prior years. So that is the single largest driver here, and it shows up in the renewable segment. But the U.S. growth is doing hard work to offset that and significantly overcome. overcomes it in the fourth quarter here and into the next year. Yeah, I would add we had a two-month outage. So the truth is that outage was at the worst possible time because if. You know, we hadn't had the outage because we had a rain which was 25% higher than anything prior previously recorded.

Speaker Change: So Colombia has has been and it was $92 million.

In the quarter alone, it's $130 million down.

Speaker Change: Year to date over prior year. So that is the single largest driver here and it shows up in the renewables segment, but the U S growth is doing a hard work to offset that and significantly overcomes.

Speaker Change: All of it comes in in the fourth quarter here and into next year, Yeah, I would add we had a two month outage.

Speaker Change: Yeah. So the truth is that outage was at the worst possible time because if.

We hadn't had the outage because we had a range, which was 25% higher than anything prior previously recorded.

Speaker Change: We could have used that water tube.

Andrzej Skluski: We could have used that water to very good results, you know, subsequently in the drought. So being out for two months is, you know, that that's part of the recovery.

Speaker Change: Very good.

Speaker Change: Results are.

Speaker Change: Subsequently in the drought so being out for two months is that that's part of the recovery.

Speaker Change: Okay.

Andrzej Skluski: Okay, so then by 2026, you should be back to a nor more normal. performance. Thank you. No, 25, Ryan. So the conditions are already improving. We expect this quarter, fourth quarter, to be higher than last year. And next year in 2025, we expect normal to better hydrology. from the London U.S.

To them by 2026, you should be back to normal more normal.

Speaker Change: Apartments.

Speaker Change: 20.

Speaker Change: No twenty-five Ryan it's what the conditions are already improving we expect this quarter fourth quarter to be higher than last year and next year in 2025, we expect normal to better hydrology from the linear.

Speaker Change: Okay.

Speaker Change: And then maybe switching gears as you referenced in your prepared comments.

Andrzej Skluski: Um, and then maybe switching gears, do you reference in your prepared comments? Impact to California Spark Spreads, are you looking to change your hedging strategy there or any color you could share around the outlook going forward for the South? Yeah, so just as a reminder, the TALPIN structure has a 20 year contract for capacity and energy. So we have a very known monetization stream. It is at our election annually, a year in advance to decide whether we want to market the energy ourselves and hedge it or put it to the offtaker under the PPA. So for 24 years, we did previously decide at the end of 22 to call the energy to us and to market it.

Speaker Change: The impact to California's spark spreads.

Speaker Change: To change your hedging strategy, there or any color you could share around and the outlook going forward for South Africa.

Speaker Change: Yeah. So just as a reminder, the south on structure.

Speaker Change: It's a 20 year contract for capacity and energy. So we have a very known mom.

Speaker Change: <unk>.

Speaker Change: Stream. It is at our election annually a year in advance and to decide whether we want to market the energy ourselves and hedge it or or put it to the to the off taker under the PPA So for 'twenty four.

Speaker Change: We did previously decided at the end of 'twenty two to.

Speaker Change: Called the energy to us into marketed unfortunately spark spreads changed significantly.

Andrzej Skluski: Unfortunately, spark spreads changed significantly during the time that we made that decision and we're executing on the hedge program. And so we had downside this year, but still relative to the put value, still a good decision. And so we have made that decision also for 2025 that we will market the energy. We are over 95% hedged already at values well in excess of the put value. So the market has changed. The market has compressed a lot due to better hydro conditions. What we've had is milder weather. There's been a lot more battery penetration in California.

Speaker Change: During the time that we made that decision and we're executing on the hedge program and so we had downside.

Speaker Change: This year.

Speaker Change: But still relative to the put value still a good decision and so.

Speaker Change: We have made that decision.

Speaker Change: Also for 2025 that we will market the energy.

Speaker Change: We are over 95% hedged already at values well in excess of the put value.

Speaker Change: So it is it the market has changed the market has compressed a lot due to better hydro conditions.

Speaker Change: What we thought was milder weather theres been a lot more battery penetration in California.

Andrzej Skluski: So the market value is not as high over the long term as it had been back in 22 when we first made that decision. But nonetheless, we see overall the strategy. is has been increasing or has added value over the put. It's just not as much as we expected when we gave the guidance on.

Speaker Change: So the market value is not as high over the long term as it had been.

Speaker Change: Back in 'twenty, two when we first made those that decision.

Speaker Change: But nonetheless, we see overall the strategy is is is has.

Speaker Change: Has been increasing or has added value over the putt, it's just not as much as we expected when we gave the guidance. Unfortunately.

Speaker Change: But then as a follow up given that framework and your decisions for next year.

Andrzej Skluski: So then, as a follow up, given that framework and your decisions for next year, Is there any color around and direction and travel for that assets performance for 25? given what you've already decided. Yeah, I mean, I would say at this point, since we've already decided on 25, it is in excess of the put value, you know, and we're already nearly 100% hedged, 95% hedged, as I said. So. It is the value is lower than it was in the original guidance, but still above had we taken a no risk strategy.

Speaker Change: Is there any color around.

Speaker Change: The direction of travel for bad assets performance for 25.

Speaker Change: Given what you've already decided.

Speaker Change: Yeah I mean.

I would say at this point since you've already decided on 25. It is in excess of the put value.

Speaker Change: D nearly 100% hedged 95% hedged as I said.

Speaker Change: So.

It.

Speaker Change: The value is lower than it was in the original guidance, but still above had we taken a no risk strategy.

Andrzej Skluski: And then for 2026, we have not yet made that decision. And we'll have to hear later in the 4th quarter and we'll update you all on that later. And that will be based.

Speaker Change: And then for 2026, we have not yet made that decision and we'll have to hear later in the fourth quarter.

Speaker Change: And we will update you all on that later and that will be based upon what we see.

Unknown Executive: Unknown Executive, Durgesh Chopra, Stephen Coughlin, Fei She, Willard Grainger, Thanks for taking my questions. Thank you, Ryan.

And the hedge market at that time relative to the book value.

Speaker Change: Thanks for taking my questions.

Speaker Change: Thanks.

Speaker Change: Thank you Ryan.

Speaker Change: Our next question comes from the line of Richard Sutherland with J P. Morgan Richard Your line is now open.

Richard Sunderland: Our next question goes to the line of Richard Sunderland with J.P. Morgan. Richard, your line is open.

Hey, Thanks for the time I know, we've covered a lot of ground. So just one quick cleanup talks at various points about the asset sale program and how you've thought about timing that in affecting that.

Richard Sunderland: Hey, thanks for the time. I know we've covered a lot of ground. So just one quick, quick cleanup. You've talked at various points about the asset sale program and how you've thought about timing that and affecting that.

Andrzej Skluski: It sounds like more to come on year end around that, but just curious how you're thinking about monetizing the new energy technologies investments, and if that's something that should fall within the plan period. Any thoughts there? Thank When you think about the new energy technologies, look, what we've talked about is, you know, through 2027. And, you know, we approach these strategically. So what we've always said is that we will monetize these assets, you know, when we feel it's appropriate. And when, you know, we aren't sort of long term venture capitalist investors. So, you know, we'll monetize them at the right time when we don't think we're adding a lot of value.

Speaker Change: It sounds like more to come on year end around that but just curious how you're thinking about monetizing the new energy technologies investments.

Speaker Change: That's something that should fall within the planning period any thoughts there. Thank you.

What do you think about the new energy technologies.

Speaker Change: We've talked about as you know through 2027.

Speaker Change: And we approach these strategically.

Speaker Change: So what we've always said is that we will monetize these assets when we feel it's appropriate.

Speaker Change: And when you know.

Speaker Change: We are sort of long term venture capitalists investors. So we'll monetize them at the right time, when we don't think we're adding a lot of value and we know we've already done some monetization and then taking some money off the table. So it's been a very successful program and I think there's a lot more value there than it's being recognized by most of the sum of the parts.

Andrzej Skluski: And we know we've already done some monetization and taken some money off the table. So it's been a very successful program. And I think there's a lot more value there than is being recognized by most of the sum of the parts. But, you know, what I would say is that, you know, so long as we add a lot of value, you know, we'll stay in. However, you know, we'll continue to opportunistically, you know, monetize. And, you know, certainly, you know, we're well ahead of our plan for 2027. But, you know, as Steve mentioned, the universe is greater.

Speaker Change: But.

Speaker Change: What I would say is that so long as we add a lot of value.

Will you stay in however, you will continue to Opportunistically monetize.

Certainly.

Speaker Change: We're well ahead of our plan for 2027, but you know as Steve mentioned the universe is greater so it would include some things from from new energy technologies.

Andrzej Skluski: So it would include some things from new energy technologies.

Richard Sunderland: Great. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you Richard.

Richard Sunderland: Thank you, Richard.

Susan Harcourt: There are no additional questions waiting at this time, so I'll turn the call back over to Susan Harcourt for closing remarks. 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.

Speaker Change: There are no additional questions waiting at this time, so I'll turn the call back over to Susan Harcourt for closing remarks.

Susan Harcourt: 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.

Susan Harcourt: We look forward to seeing many of you at the EEI financial conference later this month. Thank you and have a nice day.

Susan Harcourt: We look forward to seeing many of you at the EI financial.

Susan Harcourt: Later this month.

And have a nice day.

Speaker Change: That concludes today's conference call. Thank you for your participation I Hope you have a wonderful rest of your day.

Operator: That concludes today's conference call. Thank you for your participation. I hope you have a wonderful rest of your day.

Speaker Change: [music].