Q4 2024 The AES Corp Earnings Call

telephone keypad.

Operator: I will now hand over to Susan Harcourt, Vice President of Investor Relations, to begin.

I will now hand over to Susan how courts, Vice President of Investor Relations to begin Susan you may begin.

Susan Harcourt: Susan, you may begin. Thank you, Operator. Good morning and welcome to our fourth quarter and full year 2024 Financial Review call.

Susan: Thank you operator, good morning, and welcome to our fourth quarter and full year 2020 for financial review call.

Susan Harcourt: Our press release, presentation, and related financial information are available on our website at aef.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 FCC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the president's statement.

Susan: Our press release presentation and related financial information are available on our website I E S Dot com.

Susan: Today, we will be making forward looking statements.

Susan: 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 thank you filed with the SEC.

Susan: 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 Sklucki, our president and chief executive officer, Steve Coughlin, our chief financial officer, Ricardo Falou, our chief operating officer, and other senior members of our managing...

Speaker Change: Joining me this morning are Andres Kluski, our president and Chief Executive Officer.

Speaker Change: <unk> Kaufmann, our Chief Financial Officer, Ricardo for Lou <unk>, Our Chief operating officer, and other senior members of our management team.

Susan Harcourt: With that, I will turn the call over to Andres.

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

Andrzej Sklucki: Good morning, everyone, and thank you for joining our fourth quarter and full year 2024 financial review call. Today I will cover. are 2024 accomplishments.

Andreas: Good morning, everyone.

Andreas: Thank you for joining our fourth quarter and full year 2020 for financial review call.

Andreas: Today I will cover.

Andreas: Our 2024 accomplishments.

Andrzej Sklucki: The Resiliency of Our Business. and our 2025 guidance and longer-term outlook.

Andreas: The resiliency of our business.

Andreas: And our 20 to 25 guidance and longer term outlook.

Andrzej Sklucki: Steve Coughlin, our CFO, will provide more details on our financial performance and expectations after my remarks.

Steve Hoffman: Steve Hoffman.

Steve Hoffman: Paul will provide more details on our financial performance and expectations.

Steve Hoffman: After my remarks.

Andrzej Sklucki: To say that we are extremely disappointed with our stock price performance is an understatement. Steve and I will address what we believe to be investors' concerns. including policy uncertainties. Renewables, EBITDA growth. and Balance Sheet and Funding Constraints. We will review why renewables are critical to meeting growing demand for electricity, particularly among technology customers, and why our business model is relatively well insulated from and resilient to potential regulatory changes.

Steve Hoffman: To say that we are extremely disappointed with our stock price performance is an understatement.

Steve Hoffman: Steve and I will address what we believe to be investors concerns.

Steve Hoffman: The policy uncertainties.

Steve Hoffman: Renewables EBITDA growth.

Steve Hoffman: Balance sheet and funding constraints.

Steve Hoffman: We will review why renewables are critical to meeting growing demand for electricity, particularly among technology customers.

Our business model is relatively well insulated from and resilient to potential regulatory changes.

Andrzej Sklucki: Even with our resilient position, we are taking immediate steps to strengthen our financial position and outlook. These steps include. Reducing our parent investment in renewables by focusing on the highest risk-adjusted return project. improving organizational efficiency and continuing to operate some of our energy infrastructure assets. As a result of these actions, we expect to improve our credit metrics over time while eliminating the need for issuing new equity during the forecast period and maintaining our dividends.

Steve Hoffman: Even with our resilient position, we are taking immediate steps to strengthen our financial position and outlook.

Steve Hoffman: These steps include.

Steve Hoffman: Reducing our parent investment in renewables.

Steve Hoffman: Focusing on the highest risk adjusted return projects.

Steve Hoffman: Improving organizational efficiency.

Steve Hoffman: And continuing to operate some of our energy infrastructure assets.

Steve Hoffman: As a result of these actions.

Steve Hoffman: We expect to improve our credit metrics over time.

Steve Hoffman: While eliminating the need for issuing new equity during the forecast period and maintaining our dividend.

Steve Hoffman: Turning to slide four let.

Andrzej Sklucki: Let me start with our 2024 results. We signed 4.4 gigawatts of new power purchase agreements for renewables last year. Our performance in 2024 puts us on track to achieve our goal of signing 14 to 17 gigawatts of new PPAs through 2025. We are prioritizing signing those contracts with the best risk-adjusted returns rather than just maximizing growth in gigawatts. In 2024, we also completed the construction or acquisition of three gigawatts of renewables. and a 670 megawatt combined cycle gas plant in Panama, greatly increasing the utilization of our existing LNG terminal in that country. Our best-in-class record of on-time and on-budget delivery of renewable projects is something that our customers value highly and is one of our competitive advantages.

Steve Hoffman: Let me start with our 2024 results.

Steve Hoffman: We signed four four gigawatts of new power purchase agreements for renewables last year.

Steve Hoffman: Our performance in 2024 puts us on track to achieve our goal of signing 14 to 17 Gigawatts of new Ppas through 2025.

Steve Hoffman: We are prioritizing signing those contracts with the best risk adjusted returns rather than just maximizing growth in gigawatts.

Steve Hoffman: In 2024, we also completed the construction or acquisition of three gigawatts of renewable.

Steve Hoffman: And a 670 megawatt combined cycle gas plant in Panama greatly increasing the utilization of our existing LNG terminal in that country.

Steve Hoffman: Our best in class record of on time and on budget delivery of renewable projects is something that our customers value highly and it's one of our competitive advantages.

Andrzej Sklucki: Lastly, I should note that in 2024, we received approval from the Indiana Regulatory Commission for new base rates and an ROE of 9.9 percent, supporting an investment program that will improve reliability for our customers and support local economic development.

Steve Hoffman: Lastly, I should note that in 2024, we received approval from the Indiana Regulatory Commission for new base rates and an ROE of nine 9% supporting an investment program that will improve reliability for our customers and support local economic development.

Andrzej Sklucki: Now moving to our financial results.

Steve Hoffman: Now moving to our financial results.

Andrzej Sklucki: In 2024, we achieved adjusted EBITDA of $2.64 billion, which is in the lower half of our guidance range, as a result of extreme one-time weather-related events in Colombia and Brazil. with both businesses down a combined $200 million year on year. Nonetheless, we generated parent fee cash flow of $1.1 billion, which is at the midpoint of our guidance.

Steve Hoffman: In 2024, we achieved adjusted EBITDA of $2, six 4 billion, which is in the lower half of our guidance range.

Steve Hoffman: As a result of extreme one time weather related events in Colombia and Brazil.

Steve Hoffman: With both businesses down a combined $200 million year on year.

Steve Hoffman: Nonetheless, we generated parent free cash flow of $1 1 billion, which is at the midpoint of our guidance.

Andrzej Sklucki: And we earned a record adjusted EPS of $2.14, which is materially above our guidance range and puts us well on track to achieve our annualized growth target of 7% to 9% from 2020 to 2025.

Steve Hoffman: And we earned a record adjusted EPS of $2.14, which is materially above our guidance range and puts us well on track to achieve our annualized growth target of 7% to 9% from 2020 to 2025.

Andrzej Sklucki: Moving to our renewables business on slide five. 2025 will be an inflection point as we begin to realize the financial benefits from the maturing of our renewable business, including the addition of 6.6 gigawatts we inaugurated in 2023 and 2024. We're able to achieve increasing economies of scale that reduce our overhead per megawatt, as we now have 16.2 gigawatts of renewables online versus 5.9 gigawatts in 2018, excluding Brazil. At the same time, our redevelopment business is becoming more efficient as we are now harvesting the investments we made in creating our pipeline. Furthermore, as profitability of each megawatt of new PPA sign has substantially increased, we do not need to bring online as many new projects to achieve the same level of financial growth.

Steve Hoffman: Moving to our renewables business on slide five.

Steve Hoffman: 2025 will be an inflection point as we begin to realize the financial benefits from the maturing of our renewable business <unk>.

Steve Hoffman: Including the addition of six six Gigawatts, we inaugurated in 2023 and 2024.

Steve Hoffman: We were able to achieve increasing economies of scale that reduce our overhead per megawatt as we now have 16, two gigawatts of renewables online.

Versus five nine Gigawatts in 2018, excluding Brazil.

Steve Hoffman: At the same time, our redevelopment business is becoming more efficient as we are now harvesting the investments we've made in creating our pipeline.

Steve Hoffman: Furthermore, as profitability of each megawatt of new PPA sign has substantially increased we do not need to bring online as many new projects to achieve the same level of financial growth.

Andrzej Sklucki: This strategy allows us to focus on the most profitable new projects while reducing costs and capital requirements, as I will shortly discuss. There is a time lag between renewables development expenditures, which flow through the P&L and grows in EBITDA. Creating a pipeline of potential projects requires expenditures in development activities, such as scouting for prospects, negotiating land purchases or leases, measuring the wind or sun resource, and finally obtaining permits. As our renewables are in a more mature state, our financials will start to reflect the true profitability of the business, as new projects coming online, producing cash and EBITDA, cover the cost of early stage projects.

Steve Hoffman: This strategy allows us to focus on the most profitable new projects, while reducing costs and capital requirements as I will shortly discuss.

Steve Hoffman: There is a time lag between renewables development expenditures, which flow through the P&L and growth in EBITDA.

Steve Hoffman: Creating a pipeline of potential projects requires expenditures in development activities, such as scouting for prospects negotiating land purchases releases measuring the wind or Sun resource and finally obtaining permits.

Steve Hoffman: As a renewables or in a more mature state.

Steve Hoffman: Our financials will start to reflect the true profitability of the business.

Steve Hoffman: As new projects coming online producing cash and EBITDA cover the cost of early stage projects.

Andrzej Sklucki: As the business grows, stewardship, including administrative and back office activities, will get allocated over a larger operating base.

Steve Hoffman: As the business grows stewardship, including administrative and back office activities will get allocated over our larger operating base.

Andrzej Sklucki: This inflection in our life cycle, starting in 2025, will strengthen our credit metrics as we achieve a higher ratio of projects online selling energy versus spending on pipeline and projects under construction.

Steve Hoffman: This inflection in our lifecycle starting in 2025, we will strengthen our credit metrics as we achieved a higher ratio of projects online selling energy versus spending on pipeline and projects under construction.

Andrzej Sklucki: With this background, let me turn to our financial expectations for our renewables business. In 2025, we expect over 60% year-over-year growth in our renewables EBITDA, which Steve will discuss in more detail. Previous growth in our U.S. renewables portfolio drives the majority of our expected EBITDA growth. And in 2025, we expect to bring online another 3.2 gigawatts of renewable capacity, which will contribute to strong EBITDA growth in 2026 and beyond. These numbers also reflect the maturing of our U.S. renewable business as we harvest the investments we made to create our 50 gigawatt U.S. pipeline.

Steve Hoffman: With this background, let me turn to our financial expectations for our renewables business.

Steve Hoffman: In 2025, we expect over 60% year over year growth in our renewables, EBITDA, which Steve will discuss in more detail.

Steve Hoffman: Previous growth in our U S renewables portfolio drives the majority of our expected EBITDA growth.

Steve Hoffman: And in 2025.

Steve Hoffman: We expect to bring online another three two gigawatts of renewable capacity.

Steve Hoffman: This will contribute to strong EBITDA growth in 2026 and beyond.

Steve Hoffman: These numbers also reflect the maturing of our U S renewable business is being <unk>.

Steve Hoffman: Harvest the investments we made to create our 50 gigawatt U S pipeline.

Andrzej Sklucki: Finally, I should note that our 2025 Renewable Segment Guidance incorporates some changes in segment makeup, including the sale of 5.2 gigawatts in Brazil last year and the addition of 2.5 gigawatts in Chile. As the business has evolved, these Chilean renewable assets have now been moved from the Energy Infrastructure SBU to the Renewables SBU. The sale of Brazil is an important de-risking of our portfolio as we have eliminated a significant portion of our hydrology, currency, spot price, and floating interest rate risk exposure.

Steve Hoffman: Finally, I should note that our 2025 renewable segment guidance incorporates some changes in segment make them <unk>.

Steve Hoffman: Including the sale of five two gigawatts in Brazil last year.

Steve Hoffman: And the addition of 2.5 Gigawatts in Chile.

As the business has evolved these Chilean renewable assets have now been moved from the energy infrastructure SBU to the renewables SBU.

Steve Hoffman: The sale of Brazil is an important derisking of our portfolio.

Steve Hoffman: We have eliminated a significant portion of our hydrology currency spot price and floating interest rate.

Steve Hoffman: Risk exposures.

Andrzej Sklucki: Turning to slide six and the renewables market in our business. Last year, the U.S. added 49 gigawatts of new capacity. with Renewables and Battery Storage, representing 92% of those additions. In 2025, the US is expected to add 63 gigawatts, 93% of which are solar storage and wind.

Steve Hoffman: Turning to slide six and the renewables market and our business.

Steve Hoffman: Last year the U S added 49 gigawatts of new capacity.

Steve Hoffman: With renewables and battery storage, representing 92% of those additions.

In 2025, the U S is expected to add 63 gigawatts, 93%.

Steve Hoffman: All of which are solar storage and wind.

Andrzej Sklucki: While we will likely see a surge for new gas capacity over the next decade, the delay in delivery of new gas turbines averages three to four years without taking into account new permitting requirements or building new gas pipelines. While a few decommissioned nuclear units are expected to be brought online in the next five years, a material contribution in new capacity from small nuclear reactors or advanced design nuclear plants is unlikely to occur for at least another decade. Taking all this into consideration, renewables have the shortest time to power and much greater price certainty.

Steve Hoffman: While we will likely see a surge for new gas capacity over the next decade, the delay in delivery of new gas turbine averages three to four years.

Steve Hoffman: Without taking into account, new permitting requirements or building new gas pipeline.

Steve Hoffman: While a few decommission nuclear units are expected to be brought online in the next five years the.

Steve Hoffman: A material contribution in new capacity from small nuclear reactors or advanced design nuclear plants is unlikely to occur for at least another decade.

Steve Hoffman: Taking all this into consideration renewables had the shortest time to power and much greater price certainty.

Andrzej Sklucki: Therefore, there is no doubt that the increased demand for electricity over the next decade coming from data centers and advanced manufacturing will continue to require vast amounts of renewable energy and batteries.

Steve Hoffman: Therefore.

Steve Hoffman: There is no doubt with the increased demand for electricity over the next decade coming from data centers and advanced manufacturing will continue to require vast amounts of renewable energy and batteries.

Andrzej Sklucki: Moving to slide seven. Over the past five years, we have endeavored to make our business resilient to potential policy changes. First, we have taken a lead in unshoring our supply chain to the U.S., which limits our exposure to new tariffs. We now have essentially all of our solar panels, trackers, and batteries, either in-country or contracted to be domestically produced for our U.S. projects coming online through 2027. Second, of the 8.4 gigawatts of signed contracts we have in the U.S., more than half are under construction and nearly all have significant safe harbor protections, which will grandfather them under the existing tax policy regime.

Steve Hoffman: Moving to slide seven.

Steve Hoffman: Over the past five years, we have endeavored to make our business resilient to potential policy changes.

Steve Hoffman: We have taken the lead in answering our supply chain to the U S, which limits our exposure to new tariffs.

Steve Hoffman: We now have essentially all of our solar panels trackers and batteries either in country or contracted to be domestically produced for our U S projects coming online through 2027.

Steve Hoffman: Second.

Steve Hoffman: The eight four gigawatts of signed contracts, we have in the U S.

Steve Hoffman: More than half are under construction and nearly all have significant safe harbor protections, which will grandfather them.

Steve Hoffman: Under the existing tax policy regime.

Andrzej Sklucki: Third, about three gigawatts, or 30% of our backlog of signed PPAs, are in U.S. dollars, but in international markets, primarily Chile, which are unaffected by U.S. policy changes. I should note that in our international markets, renewables can be even more profitable and, most often, the cheapest form of dispatchable energy, even in a regime without meaningful subsidies.

Steve Hoffman: Third about three gigawatts or 30% of our backlog of signed Ppas are in U S dollars, but in international markets, primarily Chile, which are unaffected by U S policy changes.

Steve Hoffman: I should note that in our international markets renewables can be even more profitable and most often the cheapest form of responsible energy even in an regime without meaningful subsidies.

Andrzej Sklucki: Lastly, the vast majority of AES's customer base are corporations whose demand for new renewables continues to increase at a rapid pace. In fact, in 2024, approximately 70% of the PPAs we signed were with large corporations.

Steve Hoffman: Lastly, the vast majority of Aes as customer base or corporations, whose demand for new renewables continues to increase at a rapid pace.

Steve Hoffman: In fact in 2024, approximately 70% of the Ppas, we signed were with large corporations and notably we have once again and designated by B and E F. As the largest provider of clean energy to corporations in the world.

Andrzej Sklucki: And notably, we have once again been designated by BNEF as the largest provider of clean energy to corporations in the world. Even in the very unlikely scenario where tax credits for renewables are eliminated prospectively, in their entirety, we believe that there will be continued strong demand from our corporate clients. especially data centers, because there are no realistic alternatives for many years.

Steve Hoffman: Even in the very unlikely scenario, where tax credits for renewables are eliminated prospectively in their entirety. We believe that there will be continued strong demand from our corporate clients.

Especially data centers, because there are no realistic alternative for many years.

Andrzej Sklucki: Without timely access to power, there can be no AI revolution. Obviously, the price of new PPAs in a future without tax incentives would increase, and the profile of earnings and cash flow would change. This will look a lot like our projects in Chile. However, in any case, what ultimately matters to AES is our returns and cash flow per dollar invested.

Steve Hoffman: Without timely access to power there can be no AI revolution.

Steve Hoffman: Obviously, the price of new Ppas in a future without tax incentives would increase.

Steve Hoffman: And the profile of earnings in class flow would change.

Steve Hoffman: This will look a lot like our projects in Chile, However, in any case, what ultimately matters to aes as our returns and cash flow per dollar invested.

Andrzej Sklucki: Now let me turn to our utilities business on slide eight. A.S. Indiana and A.S. Ohio are executing on a multi-year investment program to improve customer reliability and support economic development. In 2024, we invested $1.6 billion, leading to a rate-based growth of 20%. This investment program includes growth and modernization programs at both of our utilities and a plan to transition our aging coal generation in Indiana. Our investment plans are driven by our customers, and our top priority is to support local communities with reliable, resilient, and affordable power.

Steve Hoffman: Now, let me turn to our utilities business on slide eight.

Steve Hoffman: A S, Indiana, and Ohio are executing on our multiyear investment program to improve customer reliability and support economic development in.

Steve Hoffman: In 2024, we invested $1 6 billion, leading to a rate base growth of 20%.

Steve Hoffman: This investment program includes growth and modernization programs at both of our utilities and they plan to transition our aging coal generation in Indiana.

Steve Hoffman: Our investment plans are driven by our customers and our top priority is to support local communities with reliable resilient and affordable power.

Andrzej Sklucki: We have among the lowest residential rates in both states, which we expect to maintain even as we grow our rate base.

Steve Hoffman: We have among the lowest residential rates in both states, which we expect to maintain even as we grow our rate base.

Andrzej Sklucki: Turning to slide nine. Across our two utilities, we have growth riders, or trackers, which yield near real-time returns on our investment. More than 70% of the investment program is recovered through formula rates or existing riders. As through the TD-SICC program at AES-Indiana, or the FERC formula rates that support transmission investment at AES-Ohio. All of this, combined with signed agreements for over 2 gigawatts of new data center demand, make A.S. Indiana and A.S. Ohio among the fastest growing and modernizing utilities in the nation.

Steve Hoffman: Turning to slide nine.

Steve Hoffman: Across our two utilities, we have growth riders or trackers, which yield near real time returns on our investments.

Steve Hoffman: More than 70% of the investment program is recovered through formula rates or existing riders.

Speaker Change: Through the TD sick program at a S Indiana.

Speaker Change: The FERC formula rates that support transmission investment at Aes, Ohio.

Speaker Change: All of this combined with signed agreements for over two Gigawatts of New data center demand make Aes, Indiana, and Ohio, among the fastest growing and modernizing utilities in the nation.

Andrzej Sklucki: From 2023 to 2027, we expect annualized growth in our rate base of at least 11% across two utilities. This plan will support credit improvement at DPL, Inc., which we expect to achieve investment-grade metrics by 2026.

Speaker Change: From 2023 through 2027, we expect annualized growth in our rate base at least 11% across the two utilities.

This plan will support credit improvement at <unk>, Inc, which we expect to achieve investment grade metrics by 2026.

Andrzej Sklucki: Now, turning to slide 10. Our energy infrastructure business provides a substantial and steady base of earnings and cash flow that support our credit ratings and help fund our dividends and new growth. We remain committed to an all-of-the-above strategy, which includes an important role for gas in our businesses and customer offers.

Speaker Change: Now turning to slide 10.

Speaker Change: Our energy infrastructure business provides a substantial and steady base of earnings and cash flow that support our credit ratings and help fund our dividends and new growth.

Speaker Change: We remain committed to and all of the above strategy, which includes an important role for gas in our businesses and customer offerings.

Andrzej Sklucki: During the fourth quarter, we completed the construction of a new 670-megawatt, fully-contracted-in-dollars CCGT in Panama, which will result in much greater utilization of our existing LNG regasification and storage tanks in the country. In addition, we're delaying the closure or sale of a few of our coal plants as a result of increased demand in those markets. These assets are largely depreciated, yet contribute meaningful EBITDA and cash flow.

Speaker Change: During the fourth quarter, we completed the construction of a new 670 megawatts fully contracted in dollars CGT in Panama, which will result in much greater utilization of our existing LNG regasification and storage tanks in the country.

Speaker Change: In addition, we are delaying the closure or sale of a few of our coal plants as a result of increased demand in those markets.

Speaker Change: These assets are largely depreciated, yet contribute meaningful EBITDA and cash flow.

Andrzej Sklucki: We still remain committed, nonetheless, to a full exit from coal generation and will continue to rapidly lower our carbon intensity and minimize carbon emissions from our generation fleet.

Speaker Change: We still remain committed nonetheless to a full exit from coal generation.

Speaker Change: And it will continue to rapidly lower our carbon intensity and minimize carbon emissions from our generation fleet.

Andrzej Sklucki: Now moving to our financial outlook on slide 11. Today, we are initiating our 2025 guidance, including adjusted EBITDA of $2.65 to $2.85 billion. parent-free cash flow of $1.15 to $1.25 billion and adjusted EPS $2.10 to $2.26.

Speaker Change: Now moving to our financial outlook on slide 11.

Today, we are initiating our 2025 guidance, including adjusted EBITDA of $2 65 to 285 billion.

Speaker Change: Parent free cash flow of 1.15.

Speaker Change: 212, 5 billion and adjusted EPS of.

Speaker Change: $2 10 to $2 26.

Andrzej Sklucki: We're also reaffirming all of our long-term growth rates, including 5% to 7% adjusted EBITDA growth through 2027. As we grow, we're also improving our business mix as we see a significant increase in adjusted EBITDA from renewables and U.S. utilities.

Speaker Change: We're also reaffirming all of our long term growth rates, including 5% to 7% adjusted EBITDA growth through 2027.

Speaker Change: As we grow we're also improving our business mix as we see a significant increase in adjusted EBITDA from renewables and U S utilities.

Andrzej Sklucki: Now turning to our balance sheet and plans to improve our credit ratios through and beyond our guidance period on slide 12. We are firmly committed to maintaining our investment credit ratings as well as our dividends. As a result, we're taking several actions to improve cash flow and reduce parent equity requirements while ensuring that our capital plan will be totally self-funded. I should note that these efforts are ongoing, and we will continue to evaluate measures to strengthen our financial position on top of what's already included in our guidance.

Speaker Change: Now turning to our balance sheet and plan to improve our credit ratios through and beyond our guidance period on slide 12.

Speaker Change: We are firmly committed to maintaining our investment grade credit rating as well as our dividend.

Speaker Change: As a result, we're taking several actions to improve cash flow and reduced parent equity requirement.

Speaker Change: While ensuring that our capital plan will be totally self funded.

Speaker Change: I should note that these efforts are ongoing and we will continue to evaluate measures to strengthen our financial position on top of what's already included in our guidance.

Andrzej Sklucki: First, we have resized our development program and organization to focus on executing on our backlog and pursuing fewer but larger projects to better serve our core customers. This strategy allows us to increase our returns on our available capital by selecting the most attractive projects. Given the strength of our 50 gigawatt U.S. pipeline, we also expect to execute more development transfer agreements. enabling us to monetize a portion of our renewables pipeline without requiring Significant AES equity. As a result of all of these actions, we have reduced our parent investments. in the renewables business by $1.3 billion from now through 2027 and eliminated the need for equity.

Speaker Change: First we have resized, our development program and organization to focus on executing on our backlog and.

Speaker Change: And pursuing fewer but larger projects to better serve our core customers.

Speaker Change: This strategy allows us to increase our returns on our available capital by selecting the most attractive projects.

Speaker Change: Given the strength of our 50 gigawatt U S pipeline, we also expect to execute more development transfer agreement.

Speaker Change: Labeling us to monetize a portion of our renewables pipeline without requiring.

Difficult Aes equity.

Speaker Change: As a result of all of these actions we have reduced our parent investments.

Speaker Change: In the renewables business.

Speaker Change: By $1 3 billion from now through 2027.

Speaker Change: And eliminated the need for equity.

Andrzej Sklucki: Second, we are streamlining our organization ahead of what was originally planned. Our business is significantly simpler today than it was 10 years ago. As we now operate in fewer countries, our portfolio consists of more than 50% renewables, and our growth is primarily concentrated in the U.S. In 2025, after the execution of this restructuring, we will realize approximately $150 million in cost savings, ramping up to over $300 million in 2026 as we achieve a full year run rate. Third, as I previously mentioned, we will retain a few of our coal assets beyond 2027 to support our financial metrics and fund new projects.

Speaker Change: Second we are streamlining our organization ahead of what was originally planned or.

Speaker Change: Our business is significantly simpler today.

Was 10 years ago as.

Speaker Change: As we now operate in fewer countries.

Speaker Change: Our portfolio consists of more than 50% renewables.

Speaker Change: And our growth is primarily concentrated in the U S.

Speaker Change: In 2025.

Speaker Change: After the execution of this restructuring we will realize approximately $150 million in cost savings.

Speaker Change: Ramping up to over $300 million in 2026, as we achieved a full year run rate.

Speaker Change: Sure.

Speaker Change: As I previously mentioned, we will retain a few of our coal assets beyond 2027 to support our financial metrics and fund new projects.

Andrzej Sklucki: Taken together, these actions enable an even stronger AES with a clear path to achieve our 2025 and long-term financial commitments and strengths in our credit method.

Speaker Change: Taken together these actions enable an even stronger aes.

Speaker Change: A clear path to achieve our 2025 and long term financial commitment and strengthen our credit metrics.

Andrzej Sklucki: In summary, we have a resilient strategy to deliver on our financial commitments regardless of regulatory outcomes. We have continued to de-risk our business by exiting Brazil, locking in and un-shoring our equipment, and moving our supply chain to the U.S. As I mentioned earlier, 2025 is an inflection point for the financial results of our U.S. renewable business as we begin to harvest many years of work and investment. Demand from our corporate clients remains strong and growing, and we are taking all steps to increase our efficiency and profitability. We are confident in the underlying value of our business and we are committed to strengthening our balance sheet while capitalizing on our unique competitive advantage.

Speaker Change: In summary, we have a resilient strategy to deliver on our financial commitments, regardless of regulatory outcomes.

Speaker Change: We have continued to derisk, our business by exiting Brazil locking in an onshoring, our equipment and moving our supply chain to the U S.

Speaker Change: As I mentioned earlier 2025 is an inflection point for the financial results of our U S. Renewable business as we begin to harvest as many years of work and investments.

Speaker Change: <unk> from our core corporate clients remained strong and growing and we're taking all steps to increase our efficiency and profitability.

Speaker Change: We are confident in the underlying value of our business and we are committed to strengthening our balance sheet, while capitalizing on our unique competitive advantages.

Andrzej Sklucki: With that, I will turn the call over to Steve. Thank you, Andres.

Steve Hoffman: With that I will turn the call over to Steve.

Steve Hoffman: Thank you Andres and good morning, everyone. Today, I will discuss our 2024 results and capital allocation, our 2025 guidance and our updated expectations through 2027.

Stephen Coughlin: And good morning, everyone. Today, I will discuss our 2024 results and capital allocation, our 2025 guidance, and our updated expectations through 2027.

Stephen Coughlin: Turning to slide 14, full year 2024 adjusted EBITDA was $2.64 billion versus $2.8 billion in 2023, driven primarily by record-breaking drought conditions in South America, several forest outages, and asset sales, but partially offset by contributions from new renewables projects. Turning to slide 15, adjusted EPS was $2.14 in 2024 versus $1.76 in 2023. Drivers were similar to those for Adjusted EBITDA, but also include significantly higher tax attributes on new renewables commissionings and a lower Adjusted Tax Rate. This tax benefit was associated with our transition to a simpler, more U.S.-oriented holding company structure better aligned with our growth.

Steve Hoffman: Turning to slide 14 full year 2024, adjusted EBITDA was 264 billion versus $2 8 billion in 2023, driven primarily by record breaking drought conditions in South America, several forced outages and asset sales, but partially offset by contributions from new <unk>.

Steve Hoffman: <unk> projects.

Steve Hoffman: Turning to slide 15, adjusted EPS was $2 14 in 2024 versus $1 76 in 2023.

Steve Hoffman: Drivers were similar to those for adjusted EBITDA, but also includes significantly higher tax attributes on new renewables commissioning and a lower adjusted tax rate.

Steve Hoffman: This tax benefit was associated with our transition to a simpler more U S oriented holding company structure better aligned with our growth.

Stephen Coughlin: This is partially offset by a 7-cent headwind from parent interests on higher debt balances primarily used to fund new renewables projects.

Steve Hoffman: This is partially offset by a <unk> <unk> headwind from parent interest on higher debt balances primarily used to fund new renewables projects.

Stephen Coughlin: I'll cover our results in more detail over the next four slides beginning with the Renewable Strategic Business Unit, or SBU, on slide 16. Lower adjusted EBITDA at a renewables SPU was primarily driven by historic weather volatility in South America. In the second quarter, an unprecedented flood forced an outage at our Shavour facility for nearly two months, which was then followed by a record-breaking drought across the country. Brazil was also impacted by a lengthy drought and extremely low wind resource. And the sail closing in the fourth quarter reduced Ibada on a year-over-year basis. These negative drivers were partially upset by contributions from new projects that came online primarily in the U.S.

Steve Hoffman: I'll cover our results in more detail over the next four slides beginning with the renewable strategic business unit or SBU on slide 16.

Steve Hoffman: Lower adjusted EBITDA at our renewables SBU was primarily driven by historic weather volatility in South America in.

Steve Hoffman: In the second quarter and unprecedented flood forced an outage at our <unk> facility for nearly two months, which was then followed by a record breaking drought across the country.

Brazil was also impacted by a lengthy drought and extremely low wind resource and the sale closing in the fourth quarter reduced EBITDA on a year over year basis.

Steve Hoffman: These negative drivers were partially offset by contributions from new projects that came online primarily in the U S.

Stephen Coughlin: At our Utilities SBU, higher-adjusted PTC was primarily driven by rate-based investment in the U.S., new rates at AES Indiana, and improved weather, but partially offset by the 2023 recovery of purchase power costs at AES Ohio, included as part of the ESP-4 settlement, as well as higher interest expense from new borrowing. Lower adjusted EBITDA at our Energy Infrastructure SVU reflects an outage in Mexico, lower margins at Southland, and sell-downs in Panama and the Dominican Republic.

Steve Hoffman: At our utilities SBU higher adjusted PTC was primarily driven by rate base investment in the U S. New rates at a S, Indiana and improved weather, but partially offset by the 2023 recovery of purchase power costs at a S. Ohio included as part of the ESP for settlement.

Steve Hoffman: As well as higher interest expense from new borrowings.

Steve Hoffman: Lower adjusted EBITDA at our energy infrastructure SBU reflects an outage in Mexico lower margins at Southland and sell downs in Panama and the Dominican Republic.

Stephen Coughlin: Finally, at our New Energy Technologies SVU, Higher Adjusted EBITDA reflects improved results at Fluence.

Steve Hoffman: Finally at our new energy technologies SBU higher adjusted EBITDA reflects improved results at fluids.

Stephen Coughlin: Now let's turn to how we allocated our capital last year on slide 20. Beginning on the left-hand side, sources reflect $3.1 billion of total discretionary cash. This includes parent-free cash flow of just over $1.1 billion, which increased more than 10% from the prior year. We distributed nearly $600 million of asset sales proceeds to the AES parent. And we issued $1.4 billion of hybrid parent debt.

Steve Hoffman: Now, let's turn to how we allocated our capital last year on slide 20.

Steve Hoffman: Beginning on the left hand side sources reflect $3 1 billion of total discretionary cash this.

Steve Hoffman: This includes parent free cash flow of just over $1 1 billion, which increased more than 10% from the prior year.

Steve Hoffman: We distributed nearly $600 million of asset sales proceeds to the parent.

Steve Hoffman: And we issued $1 4 billion of hybrid parent debt.

Stephen Coughlin: Moving to uses on the right-hand side. We invested approximately $1.9 billion in growth at our subsidiaries, of which more than 80% was allocated toward our renewables and utilities business. We also repaid roughly $180 million of subsidiary debt and allocated $500 million of discretionary cash to our dividend. In addition, we used a portion of December hybrid issuance proceeds to repay parent debt and have ended the year with a significant cash balance that will go toward executing on our backlog in 2025.

Steve Hoffman: Moving to uses on the right hand side.

Steve Hoffman: We invested approximately $1 9 billion and growth at our subsidiaries of which more than 80% was allocated toward our renewables and utilities businesses.

Steve Hoffman: We also repaid roughly $180 million of subsidiary debt and allocated $500 million of discretionary cash through our dividend.

Steve Hoffman: In addition, we used a portion of December hybrid issuance proceeds to repay parent debt and have ended the year with a significant cash balance that will go toward executing on our backlog in 2025.

Stephen Coughlin: Now, turning to our guidance and expectations, beginning on slide 21. Today, we're initiating 2025 Adjusted EBITDA guidance of $2.65 to $2.85 billion in which growth in our core businesses is offsetting a number of one-time year-over-year headwinds. Our guidance includes more than $300 million of growth at our Renewables and Utilities SVUs.

Steve Hoffman: Now turning to our guidance and expectations beginning on slide 21.

Steve Hoffman: Today, we are initiating 2025, adjusted EBITDA guidance of $2 65 to $2 85 billion in which growth in our core businesses is offsetting a number of onetime year over year headwinds.

Steve Hoffman: Our guidance includes more than $300 million of growth at our renewables and utilities SBU.

Stephen Coughlin: This is partially offset by the sale of AES Brazil and the pending 30% sale of AES Ohio, as well as approximately $200 million from a reduction in Southland margins related to declining power prices in California and the retirement of our Warrior Run coal plant in energy infrastructure, where we recognized revenues in the first half of 2024 related to the monetization of the PPA. The timing of these 2024 items combined with the seasonality of our renewables growth will result in our first half EBITDA being lower on a year-over-year basis, while the second half will be significantly higher.

Steve Hoffman: This is partially offset by the sale.

Steve Hoffman: <unk>, Brazil, and the pending 30% sale of a S, Ohio as well as approximately $200 million from a reduction in Southland margins related to declining power prices in California, and the retirement of our warrior run coal plant in energy infrastructure, where we recognized revenues in the first half of 2024.

Steve Hoffman: Related to the monetization of the PPA.

Steve Hoffman: The timing of these 2024 items combined with the seasonality of our renewables growth will result in our first half EBITDA being lower on a year over year basis, while the second half will be significantly higher in.

Stephen Coughlin: In addition to these drivers, we also expect to realize $150 million of cost savings in 2025 across all businesses from the actions we are taking that Andres outlined. Looking beyond this year, these savings, which increased to a run rate of over $300 million in 2026 combined with continued growth in renewables and utilities, will accelerate the growth trajectory of AES.

Steve Hoffman: In addition to these drivers we also expect to realize $150 million of cost savings in 2025 across all businesses from the actions we are taking that Andre outlined.

Steve Hoffman: Looking beyond this year these savings, which increased to a run rate of over $300 million in 2026, combined with continued growth in renewables and utilities will accelerate the growth trajectory of Aes.

Stephen Coughlin: As a result, we now expect a much higher low-teams EBITDA growth rate in 2026 versus 2025. In addition, we expect to recognize $1.4 billion of tax attributes in 2025. This represents an increase of nearly $100 million driven by more projects coming online in the U.S.

Steve Hoffman: As a result, we now expect a much higher low teens EBITDA growth rate in 2026 versus 2025.

Steve Hoffman: In addition, we expect to recognize $1 4 billion of tax attributes in 2025.

Steve Hoffman: This represents an increase of nearly $100 million driven by more projects coming online in the U S.

Stephen Coughlin: In total, we expect to achieve $3.95 to $4.35 billion of adjusted EBITDA with tax attributes in 2025.

Steve Hoffman: In total we expect to achieve $3 95 to $4 35 billion of adjusted EBITDA with tax attributes in 2025.

Stephen Coughlin: Turning to slide 22, I will now provide some additional color on our renewables SBU adjusted EBITDA, which we expect to increase significantly year over year in 2025. This growth includes more than $150 million from new projects. much of which relate to the 6.6 gigawatts of new capacity we placed in service in late 2023 and throughout 2024. These projects are already online and operating and will now contribute a full year of EBITDA in 2025.

Steve Hoffman: Turning to slide 22.

Steve Hoffman: I will now provide some additional color on our renewables SBU adjusted EBITDA, which we expect to increase significantly year over year in 2025.

Steve Hoffman: This growth includes more than $150 million from new projects much of which relates to the six six gigawatts of new capacity, we placed in service in late 2023 and throughout 2024.

Steve Hoffman: These projects are already online and operating and we will now contribute a full year of EBITDA in 2025.

Stephen Coughlin: The sale of AES Brazil in the fourth quarter of last year will serve as a 100 million headwind year over year, but is more than offset by the re-segmenting and growth of our renewables business in Chile, which is forecast to be close to 190 million in 2025.

Steve Hoffman: The sale of Aes in Brazil in the fourth quarter of last year will serve as a 100 million headwind year over year, but it was more than offset by the re segmenting and growth of our renewables business and Choi, which is forecasted to be close to $190 million in 2025.

Stephen Coughlin: The last two drivers are the normalization of Columbia results after the second quarter flood driven outage and historic drought conditions in twenty twenty four and the impact of resizing our development business as Andres previously discussed.

Steve Hoffman: The last two drivers of the normalization of Columbia results. After the second quarter flood driven outage and historic drought conditions in 2024, and the impact of Resizing, Our development business is Andres previously discussed.

Stephen Coughlin: Turning to slide 23, we are initiating 2025 Adjusted EPS Guidelines. $2.10 to $2.26, and we expect to achieve the upper half of the 7% to 9% long-term growth target we initiated in 2021. Drivers are similar to adjusted EBITDA with tax attributes, but will be offset by higher parent interest and a higher adjusted tax.

Steve Hoffman: Turning to slide 23, we are initiating 2025, adjusted EPS guidance of $2 10 to $2 26 and.

Steve Hoffman: And we expect to achieve the upper half of the 7% to 9% long term growth target we initiated in 2021.

Steve Hoffman: Drivers are similar to adjusted EBITDA with tax attributes, but will be offset by higher parent interest and a higher adjusted tax rate.

Stephen Coughlin: As a reminder, our results have historically been somewhat seasonally weighted toward the second half of the year, and this year is no exception.

Steve Hoffman: As a reminder, our results have historically been somewhat seasonally weighted towards the second half of the year and this year is no exception.

Stephen Coughlin: Now, turning to our 2025 Parent Capital Allocation Plan on slide 24. beginning with approximately $2.7 billion of sources on the left-hand side. Parent-free cash flow for 2025 is expected to be around $1.15 to $1.25 billion. we expect to generate 400 to 500 million of net asset sale proceeds this year and issue an additional 700 million of net new parent debt.

Steve Hoffman: Now turning to our 2025 parent capital allocation plan on slide 24.

Steve Hoffman: Beginning with approximately $2 7 billion of sources on the left hand side.

Steve Hoffman: Free cash flow for 2025 is expected to be around 1.15 to 1.25 billion.

Steve Hoffman: We expect to generate $400 million to $500 million of net asset sale proceeds this year and issue an additional $700 million of net new parent debt.

Stephen Coughlin: Now for the uses on the right-hand side, we plan to invest approximately $1.8 billion in new growth, of which more than 85% will be in the U.S. We also plan to repay roughly $400 million of subsidiary debt and allocate more than $500 million to our shareholder dividend, which reflects the previously announced 2% increase.

Steve Hoffman: Now to the uses on the right hand side, we plan to invest approximately $1 8 billion in new growth of which more than 85% will be in the U S. We.

Steve Hoffman: We also plan to repay roughly $400 million of subsidiary debt and allocate more than $500 million to our shareholder dividend, which reflects the previously announced 2% increase.

Stephen Coughlin: Turning to slide 25 and our long-term expectations. We expect tremendous growth at our Renewables SVU with an average annual CAGR of 19 to 21% expected from our 2023 guidance mid- This will be primarily driven by 6.6 gigawatts of new projects already placed in service, along with roughly 700 million of new EBITDA from bringing the majority of our 11.9 gigawatt backlog online. Also included is the addition of Chile renewables offset by the sale of AES Brazil, neither of which were contemplated in our 2023 SBU guidance range.

Steve Hoffman: Turning to slide 25, and our long term expectations, we expect tremendous growth at our renewables SBU with an average annual CAGR of 19% to 21% expected from our 2023 guidance midpoint.

Steve Hoffman: This will be primarily driven by six six gigawatts of new projects already placed in service along with roughly $700 million of new EBITDA from bringing the majority of our 11 nine gigawatt backlog online.

Steve Hoffman: Also included is the addition of Chile renewables offset by the sale of a S. Brazil, neither of which were contemplated in our 2023 SBU guidance ranges.

Stephen Coughlin: At our Utilities SPU, we expect annualized growth of 13 to 15% through 2027, reflecting upside from new data center development in our service territories that could serve as an even greater tailwind beyond 2027. This growth is largely covered by trackers and will be critical to improving service quality and reliability for our customers. Our utilities plan also incorporates the 30% sell-down of A.S. Ohio we expect to close in the first half of this year. This will reduce adjusted EBITDA in the near term but allows us to fully capture the data center opportunity in the long term and maximize shareholder value.

Steve Hoffman: At our utilities SBU, we expect annualized growth of 13% to 15% through 2027, reflecting upside from new data Center development in our service territories that could serve as an even greater tailwind beyond 2027.

Steve Hoffman: This growth is largely covered by trackers and will be critical to improving service quality and reliability for our customers.

Steve Hoffman: Our utilities plan also incorporates the 30% sell down at a S. Ohio, we expect to close in the first half of this year.

Steve Hoffman: This will reduce adjusted EBITDA in the near term, but allows us to fully capture the data center opportunity in the long term and maximize shareholder value.

Stephen Coughlin: In our energy infrastructure SBU, we now expect EBITDA contributions will decline at a slower rate than in our prior guidance, as we plan to operate a few coal plants beyond our previously planned 2027 exit, improving earnings and cash flow.

Steve Hoffman: In our energy infrastructure SBU, we now expect EBITDA contributions will decline at a slower rate than in our prior guidance as we plan to operate a few coal plants.

Steve Hoffman: And our previously planned 2027 exit improving earnings and cash flow.

Stephen Coughlin: Now to slide 26. Bringing it all together, I am pleased to reaffirm our long-term adjusted EBITDA growth target of 5 to 7% and our long-term parent-free cash flow growth target of 6 to 8% through 2027. This growth is largely locked in through signed PPAs for our backlog projects and approved or tracked rate-based investment at our utilities. Turning to slide 27, in our long-term capital Total sources of $6 billion will be funded primarily with parent-free cash of $3.6 billion to $3.9 billion, reflecting average annual growth of 6% to 8% off our 2023 guidance midpoint. We also expect to issue $900 million to $1 billion of net new parent debt and realize $800 million to $1.2 billion of proceeds from asset sales.

Steve Hoffman: Now to slide 26.

Steve Hoffman: Bringing it all together I am pleased to reaffirm our long term adjusted EBITDA growth target of 5% to 7% and our long term parent free cash flow growth target of 6% to 8% through 2027.

Steve Hoffman: This growth is largely locked in through signed Ppas for our backlog projects and approved or track rate base investment at our utilities.

Steve Hoffman: Turning to slide 27, and our long term capital plan.

Steve Hoffman: Total sources of $6 billion will be funded primarily with parent free cash of $3 6 billion to $3 9 billion, reflecting average annual growth of 6% to 8% off our 2023 guidance mid points.

Steve Hoffman: We also expect to issue $900 million to $1 billion of net new parent debt and realize $800 million to $1 2 billion of proceeds from asset sales.

Stephen Coughlin: It is important to note here that we have fully removed any need for equity issuance throughout our guidance period. On the right-hand side, parent investment of approximately $4 billion reflects our reduced investment in renewables. We also plan to repay $600 million of subsidiary debt. We expect to allocate another $1.6 billion of cash to our dividend, which we are fully committed to maintaining at its current level. However, given our efforts to minimize parent cash needs and the already highly attractive yield, we do not expect to grow the dividend during our planned period.

Steve Hoffman: It is important to note here that we are fully removed any need for equity issuance throughout our guidance period.

Steve Hoffman: On the right hand side parent investment of approximately 4 billion reflects a reduced investment in renewables. We also plan to repay $600 million of subsidiary debt.

Steve Hoffman: We expect to allocate another $1 6 billion of cash to our dividend, which we are fully committed to maintaining at its current level.

Steve Hoffman: However, given our efforts to minimize parent cash needs and the already highly attractive yield we do not expect to grow the dividend during our planned period.

Stephen Coughlin: Our long-term guidance includes the impact of the actions we're taking to simplify our operations, reduce spending on development, and further increase our cash flow and strengthen our credit metrics. These include reducing our planned renewables investments by $1.3 billion. implementing a restructuring program to generate over $300 million of run rate cost savings by 2026 and continuing to operate select coal assets with earnings and cash potential beyond 2027. These actions demonstrate our commitment to our financial targets as well as our investment-grade credit rating.

Our long term guidance includes the impact of the actions, we're taking to simplify our operations reduced spending on development and further increase our cash flow and strengthen our credit metrics.

Steve Hoffman: These include reducing our planned renewables investments by $1 3 billion.

Steve Hoffman: Implementing a restructuring program to generate over $300 million of run rate cost savings by 2026, and continuing to operate select coal assets with earnings and cash potential beyond 2027.

Steve Hoffman: These actions demonstrate our commitment to our financial targets as well as our investment grade credit ratings.

Stephen Coughlin: I want to briefly make a few points about our capital structure and financing model. While we see an uptick in our total debt levels by the end of 2027, which should be looked at on an ownership-adjusted basis, our actions to reduce costs and focus our development efforts on higher-returning projects will increase cash flows and improve our credit metrics.

Steve Hoffman: I want to briefly make a few points about our capital structure and financing model.

Steve Hoffman: While we see an uptick in our total debt levels by the end of 2027, which should be looked at on an ownership adjusted basis, our actions to reduce cost and focus our development efforts on higher returning projects will increase cash flows and improve our credit metrics.

Stephen Coughlin: This eliminates any need for new equity and gives us more flexibility on timing to execute asset sales and sell-downs. Approximately 20% of our debt is related to projects still under construction that are not yet yielding EBITDA or cash. And more than half of this amount will be permanently taken out by monetizing tax attributes when projects are placed in service, leading to a significantly lower level of long-term project debt.

Steve Hoffman: This eliminates any need for new equity and gives us more flexibility on timing to execute asset sales and sell them.

Steve Hoffman: Approximately 20% of our debt is related to projects still under construction that are not yet yielding EBITDA or cash.

Steve Hoffman: And more than half of this amount will be permanently taken out by monetizing tax attributes when projects are placed in service leading to a significantly lower level of long term project debt.

Stephen Coughlin: Given that we carry this construction debt, it is relevant to consider a pro forma view of the annual EBITDA and cash generation that will recur once construction is complete. To be specific, the projects that come online during 2027, or are still in construction at the end of 2027 will generate an additional 400 million of annual adjusted EBITDA that is not reflected in our 2027 guidance window.

Given that we carry this construction debt it is relevant to consider a pro forma view of the annual EBITDA and cash generation that will recur once construction is complete.

Steve Hoffman: To be specific the projects that come online during 2027 or are still in construction at the end of 2027 will generate an additional $400 million of annual adjusted EBITDA that is not reflected in our 2027 guidance window.

Stephen Coughlin: Beyond construction, our projects are financed with long-term, non-recourse debt that fully amortizes using project-level cash flows over the life of the PPA. This project debt is non-recourse to the AS parent, resulting in a capital structure that is robust and low-risk.

Steve Hoffman: Beyond construction our projects are financed with long term nonrecourse debt that fully amortized as using project level cash flows over the life of the PPA. This.

Steve Hoffman: This project debt is nonrecourse to the parent resulting in a capital structure that is robust and low risk.

Stephen Coughlin: Turning to slide 28, this chart provides an example of the typical debt and EBITDA levels we would expect over the life of a U.S. renewables project. while a new project is under construction. debt ramps up with no corresponding EBIT. Once the project is placed in service, there is a material reduction in the debt balance as more than half of the construction debt is repaid through the monetization of tax attributes. The remainder is refinanced using long-term, fixed-rate, amortizing project debt that is pre-hedged when the PPA is signed. In the first full year of operations, leverage ratios begin at approximately six times debt to EBITDA and will continue to decline each year as the project debt amortizes.

Steve Hoffman: Turning to slide 28.

Steve Hoffman: This chart provides an example of the typical debt and EBITDA levels, we would expect over the life of a U S renewables project.

Steve Hoffman: While our new project is under construction.

Steve Hoffman: That ramps up with no corresponding EBITDA.

Steve Hoffman: Once the project is placed in service there was a material reduction in the debt balance is more than half of the construction debt is repaid through the monetization of tax attributes.

Steve Hoffman: The remainder is refinanced using long term fixed rate amortizing project debt that is pre hedged when the PPA is signed.

Steve Hoffman: In the first full year of operations leverage ratios begin at approximately six times debt to EBITDA and will continue to decline each year as the project debt amortizing.

Stephen Coughlin: This example helps demonstrate how AES leverage ratios appear artificially high while we execute on our ongoing construction program, but will come back down as our operating portfolio reaches a larger scale.

Steve Hoffman: This example helps demonstrate how aes leverage ratios appear.

Steve Hoffman: Artificially high while we execute on our ongoing construction program, but will come back down as our operating portfolio reaches a larger scale.

Stephen Coughlin: In conclusion, 2025 is an inflection point for our business. The renewable segment will increase over 60 percent in 2025 and will yield annual growth at least in line with our 19 to 21 percent guidance through 2027. Utilities rate-based growth is even stronger than previously expected.

Steve Hoffman: In conclusion two.

Steve Hoffman: <unk> 25, as an inflection point for our business. The renewable segment will increase over 60% in 2025 and will yield annual growth at least in line with our 19% to 21% guidance through 2027.

Steve Hoffman: Utilities rate base growth is even stronger than previously expected.

Stephen Coughlin: while Energy Infrastructure continues to contribute meaningfully to EBITDA and cash. We have taken actions to streamline our organization and reduce both costs and capital investment. These actions are further increasing our cash flows and will enable AES to deliver increasingly higher credit metrics as we execute on our backlog.

Steve Hoffman: While energy infrastructure continues to contribute meaningfully to EBITDA and cash.

Steve Hoffman: We have taken actions to streamline our organization and reduce both costs and capital investments.

Steve Hoffman: These actions are further increasing our cash flows and will enable us to deliver increasingly higher credit metrics as we execute on our backlog.

Stephen Coughlin: Finally, we are on track to achieve our long-term financial guidance. I look forward to providing updates throughout the year as we continue executing on our plan and capitalizing on the actions we have taken to ensure continued success at AES.

Steve Hoffman: Finally, we are on track to achieve our long term financial guidance.

Steve Hoffman: Look forward to providing updates throughout the year as we continue executing on our plan and capitalizing on the actions we have taken to ensure continued success at aes.

Andrzej Sklucki: With that, I'll turn the call back over to Andre. Thank you, Steve.

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

Thank you Steve.

Andrzej Sklucki: In conclusion, here are the key points we want to leave with you today. There is an unprecedented need for incremental energy to power the AI revolution in the United States. Notwithstanding concerns about potential regulatory changes under the new administration, renewables have the best time to market at a competitive price.

Andreas: In conclusion here are the key points, we want to leave with you today.

Speaker Change: There is an unprecedented need for incremental energy to power the AI Revolution in the United States.

Speaker Change: Notwithstanding concerns about potential regulatory changes under the new administration renewables have the best time to market at a competitive price.

Andrzej Sklucki: Additionally, we are well insulated from potential changes in U.S. renewables policy or tariffs through safe harbor protections for our backlogs, having locked-in equipment and EPC pricing, and established domestically-based supply chains.

Speaker Change: Additionally, we are well insulated from potential changes in U S renewables policy or tariffs through safe Harbor protections for our backlog, having locked in equipment and EPC pricing and established domestically based supply chain.

Andrzej Sklucki: Our renewables business is at an inflection point with improving financial results from the combination of continued growth, reaching economies of scale, and reductions in development expenses. We are reaffirming our longer-term growth rates through 2027 as we execute on our 11.9 gigawatt backlog.

Speaker Change: Our renewables business is at an inflection point with improving financial results from the combination of continued growth.

Speaker Change: Reaching economies of scale and reductions in development expenses.

Speaker Change: We are reaffirming our longer term growth rates through 2027, as we execute on our 11 nine gigawatt backlog.

Andrzej Sklucki: And we are taking steps to improve our credit. As always, we are highly focused on delivering the highest risk-adjusted returns to our shareholders. And we believe that AES is very well positioned to meet both our customers' energy demands as well as our financial commitments.

Speaker Change: And we're taking steps to improve our credit metrics.

Speaker Change: As always we are highly focused on delivering the highest risk adjusted returns to our shareholders and.

Speaker Change: And we believe that Aes is very well positioned to meet both our customers' energy demand as well as our financial commitments.

Operator: Operator, please open the line for questions. Thank you.

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

Thank you we will now begin the question and answer session.

Operator: We will now begin the question and answer session. If you would like to ask a question today, please do so now by pressing start followed by the number 1 on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press start followed by 2 to withdraw yourself from the queue.

Speaker Change: If you would like to ask a question today tasty say now by pressing star followed by the number one on your telephone keypad.

Speaker Change: You changed your mind or you feel like your question has already been ounces you can press star followed by K to withdraw yourself for Nicole.

Nick Campanella: Our first question comes from Nick Campanella with Barclays. Nick, please go ahead.

Speaker Change: Our first question comes from Nick Campanella with Barclays.

Speaker Change: Nick Please go ahead.

Nick Campanella: Hey, good morning. So just on the cost savings, you know, morning, so you had $150 million ramping to $300 million over time. You know, I heard you, Steve, say that these are run rates, so I assume these are ongoing and not one-time in nature. I recognize you had about $52 million in the bridge for renewables, so is the bulk of this coming from the parent? Does it happen naturally as you sell down more in the energy infrastructure business?

Nick Campanella: Hey, good morning.

Nick Campanella: Tony just on the cost savings.

Speaker Change: Good morning, So you had a 150 million ramping 300 over time.

Speaker Change: I heard you Steve said that these are run rates I assume these are these are ongoing and not one time in nature, just I recognize you at about $52 million in the bridge for renewable so is the bulk of this coming from the parent is it doesn't happen naturally as you sell down more on the energy infrastructure business and maybe you can kind of just expand on your confidence.

Steve Coughlin: And maybe you can kind of just expand on your confidence level in achieving these reductions and where you see a bulk of these happening in the portfolio. Thanks.

Speaker Change: Achieving these reductions.

Speaker Change: And where you see a bulk of these happening in the portfolio. Thanks.

Steve Coughlin: Yeah, hi, Nick, it's Steve. So the cost savings are spread across the portfolio and definitely include the renewables business as well. It is a run rate when we hit over $300 million next year. So these are not one time, and I would emphasize that we've already taken these actions. So this is something that we're very confident in because we've already made the decisions and taken the actions that we need to take to achieve the cost savings. So the renewables number that you see for 2025 in that bridge, that will also ramp up in line with the $150 million going to $300 million.

Speaker Change: Yeah, Hi, Nick it's Steve So the cost savings are spread across the portfolio and definitely include the renewables.

Speaker Change: Business as well.

Speaker Change: As a.

Speaker Change: Run rate when we hit over $300 million next year. So these are not one time.

Speaker Change: And I would emphasize that we've already taken these actions. So this is something that we're very confident in because we've already made the decisions and taking the actions that we need to take to achieve the cost savings. So the renewables number that you see for 2025 in that bridge that will also.

Ramp up.

Speaker Change: In line with the 150 go into 300, we'd expect that proportion to remain roughly the same.

Steve Coughlin: I would expect that proportion to remain roughly the same. Okay, okay.

Speaker Change: Okay. Okay, and then just on the comments youre cutting capex, but youre still heading the growth target of 5% to 7% long term EBITDA. So.

Steve Coughlin: And then, you know, just on the comments, you're cutting CapEx but you're still hitting the growth target of five to seven percent long-term EBITDA. So, um, You know, you previously talked about a 12 to 15% IRR in renewables.

Speaker Change:

Speaker Change: You previously talked about a 12% to 15% IRR on renewables, what's the IRR of these higher quality projects that youre now targeting and.

Steve Coughlin: What's the IRR of these higher quality projects that you're now targeting? And are the cost cuts just making up for the rest of that delta, just tying out to the long-term guidance? Thank you. Sure. We're taking an integrated approach. So yes, we see a strong demand in the markets. We see that we have very attractive projects. so that our IRRs are going up on average. But at the same time, we're also reducing those costs not directly associated with the project. So it's really coming from both sides. So it's an integrated approach. So what we're doing is, and, you know, we quite frankly have said this to some extent in the past, it's not just the number of gigawatts.

Speaker Change: It's a cost cuts just on the cost cuts just making up for the rest of that Delta just.

Speaker Change: Just tying out to the long term guidance. Thank you.

Speaker Change: Sure look we're taking an integrated approach.

Speaker Change: Yes, we see strong demand in the markets, we see that we have very attractive projects so that our.

Speaker Change: Irr's are going up on average.

Speaker Change: But at the same time, we're also reducing those costs not directly associated with the project. So it's really coming from both sides. So it's an integrated approach. So what we're doing is and we quite frankly have said this some extent in the past it's not just the number of Gigawatts. It's the returns we get.

Steve Coughlin: It's the returns we get, for example, EBITDA, created by each investment dollar. So that's really what we're focusing on.

Speaker Change: EBITDA created by each investment dollar so that's really what we're focusing on so it will mean fewer projects, but larger projects and at the end more profitable projects.

Steve Coughlin: So, you know, it will mean fewer projects, but larger projects, and at the end, more profitable projects. Okay, thank you.

Speaker Change: Okay.

Speaker Change: Okay. Thank you.

David Arcaro: Our next question comes from David Arcaro with Morgan Stanley. Please go ahead, Dave.

Speaker Change: Our next question comes from David <unk> with Morgan Stanley.

Speaker Change: Please go ahead David.

Speaker Change: Yeah.

David Arcaro: Oh, hey, thanks.

Speaker Change: Oh, Hey, thanks, good morning.

David Arcaro: Good morning, Dave. On the... Morning.

Speaker Change: Good morning, Dave.

Speaker Change: On the.

Speaker Change: Good morning.

Andrzej Sklucki: Looking at that, it seems like you're pulling back somewhat on the renewable cap. Andres, do you see this as a kind of a pause? growth or just a bit of a pullback in making those investments into the renewables business given the current environment. And over time, would you expect to reassess and potentially reaccelerate? to the extent, you know, financing becomes easier, the backdrop.

Speaker Change: Let's see yes, looking at that it seems like you're pulling back somewhat on the renewable capex in the forecast.

Speaker Change: From a high level kind of strategic perspective, entrees do you see this as a.

And have a pause in I guess in the renewables growth or just a bit of a pullback in making those investments into the renewables business just given the current environment and over time would you expect to reassess and potentially reaccelerate.

Speaker Change: To the extent you know financing becomes easier the backdrop becomes more favorable.

Andrzej Sklucki: Yeah, that's a great question. Look, we are focusing on executing on our 12 gigawatt pipeline, which 85% of that will be online by 2027. So that's our number one focus. As we mentioned in our script, we've been spending a lot, which flows through P&L, is building that 50 gigawatt pipeline in the States and 10 gigawatt pipeline outside. So really what we're doing is harvesting that pipeline. So we don't want to grow it to 100 gigawatts. So we've done that work, we're gonna harvest it. So basically we're spending less, if you will, on future projects with a time horizon of five to seven years, because we've done that work.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Great question look we are focusing on executing on our 12 gigawatt pipeline.

Speaker Change: With 85% of that will be online by 2027, So thats our number one focus.

Speaker Change: As we mentioned in our script, we've been spending a lot.

Speaker Change: Which flows through.

Speaker Change: P&L is building that 50 gigawatt pipeline in the states and 10 gigawatt pipeline outside.

Speaker Change: So really what we're doing is harvesting that pipeline. So we don't want to grow it to 100 Gigawatts. So we've done that work, we're going to harvest. It. So basically we are spending less if you will.

Speaker Change: Future projects with a time horizon of five to seven years, because we've done that work now in terms of total growth rate, but we are saying is we're going to be building less gigawatts.

Andrzej Sklucki: Now, in terms of total growth rate, what we're saying is we're gonna be building less gigawatts for sure, but we're going to maintain our financial results. So that's the sort of picture. Now, again, what we see is strong demand from our clients. But, you know, we're very happy to, you know, this year we'll be commissioning around three gigawatts of new projects. Next year that would step up to four gigawatts. So you're seeing we're signing around, you know, four plus per year. So eventually the amount that we commission and the amount that we build have to, you know, roughly come in line.

Speaker Change: For sure, but we're going to maintain our financial results.

Speaker Change: So.

Speaker Change: That's the sort of picture in our again, but we see a strong demand from our clients.

Speaker Change: But we're very happy to.

Speaker Change: This year, we will be commissioning around three.

Speaker Change: Gigawatts of new projects next year that would step up to four gigawatts. So you are seeing with signing up.

Speaker Change: Four plus per year. So eventually the amount that we commissioned an amount that we build half to roughly come in line.

Speaker Change: Okay.

Andrzej Sklucki: Yep. Got it.

Speaker Change: Yes got it.

Andrzej Sklucki: Great. Thanks for that.

Speaker Change: Great Thanks for that.

Speaker Change: Extra detail and then I guess looking at the.

Andrzej Sklucki: The overall profile of the businesses and your asset sales target now. coal in the plan for a bit longer than originally planned. Could you maybe talk about what the profile... that you might be looking at in the asset sales target. That's sure. I gave it to you. So, similar to what we have talked about in the past, it does still include some coal exit. It does still include some monetization of our technology portfolio. But we have always said that the universe is greater than the three and a half billion. We've actually taken a little bit more conservative view on what we intend to execute here.

Speaker Change: The overall profile of the businesses and your asset sales target now I guess you are.

Speaker Change: It seems like Youre, increasing the asset sales target overall, but youre keeping.

Speaker Change: Coal in the plan for a bit longer than originally planned could you maybe talk about what the profile is of the assets that.

Speaker Change: That you might be looking at in the asset sales target now what could be represented in there.

Speaker Change: Sure.

Speaker Change: David.

Speaker Change: So.

Speaker Change: Similar to what we have talked about in the past.

Speaker Change: It does still include some coal exit.

Speaker Change: It does still include some monetization of our technology portfolio.

Speaker Change: But we have.

Speaker Change: We said that the universe is greater than the $3 5 billion.

Speaker Change: We've actually taken a little bit more conservative view on what we intend to execute here.

Andrzej Sklucki: So we're really confident in the number between 25 and 27. And we have looked at the sell downs as well. So this number includes some of the partnerships that we do. But what I would say is this capital plan relies less on these asset sales than in the past. And we have baked in more flexibility to execute the sales over time. Okay, got it.

Speaker Change: So we're really confident in the.

A number between 25 to 27.

Speaker Change: And we have looked at the sell downs as well so this number.

It includes some of the partnerships that we do.

Speaker Change: But what I would say is this capital plan relies less on these asset sales than in the past and.

Speaker Change: Yes, we have.

Speaker Change: Baked in more flexibility to execute the sales over time.

Speaker Change: Okay.

Speaker Change: Okay got it makes sense. Thanks, so much.

Durgesh Chopra: Our next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Our next question comes from <unk> Chopra with Evercore ISI. Please.

Please go ahead.

Durgesh Chopra: Hey Tim, good morning. Thanks for giving me time. Just, I wanted to double-click on cost savings. $300 million annual target. You know, it's pretty substantial when I look at your EBITDA number, roughly 10%. Maybe just, can you give us some examples? of what cost reductions are these? Are these personnel reductions? Are these process improvements? Just so we can get a little bit more comfort around your target level of cost reduction, please.

18, good morning, Thanks for giving your time.

Speaker Change: Just I wanted to double click on cost savings of 300 million annual target.

Speaker Change: Pretty substantial when I look at your EBITDA number roughly 10% maybe just can you give us some examples.

Speaker Change: Or what.

Speaker Change: Cost reductions are these are these personnel reductions are these process improvements just so we can get a little bit more comfort around your targeted level level of cost reduction. Please.

Ricardo Falou: Sure Durgesh, great question.

Speaker Change: Sure Yes.

Ricardo Falou: With me is Ricardo Falou, our Chief Operating Officer, who's been leading a lot of the reorganization and restructuring efforts, so I'll let him answer that question. Thank you and good morning. So this, you know, cost reduction program includes, as Andres and Steve mentioned first, the resizing of our development program to focus it on executing on our backlog, as well as pursuing fewer parallel projects, and as a result, we resized the team. They also materially cap the new site's origination as well as early stage project costs. And on top of that, we had a 10% reduction in our workforce.

Speaker Change: Great question.

Speaker Change: With me, it's Riccardo so little our Chief operating officer, who has been leading a lot of the reorganization restructuring efforts. So I'll, let him answer that question.

Speaker Change: Thank you.

Speaker Change: So.

Speaker Change: <unk> cost reduction program includes us.

Speaker Change: Jason Steve mentioned first the resizing of our development program to focus it on it.

Speaker Change: Executing on our backlog as well as pursuing fewer but larger projects and as a result, we resize.

Speaker Change: <unk>.

Speaker Change: We also materially cat.

Speaker Change: Hey.

Speaker Change: New sites origination as well as early stage project cost.

Speaker Change: And on top of that we reduce it 10%.

Speaker Change: Had a 10% reduction in our workforce.

Ricardo Falou: which includes the elimination of certain management layers as well as a much leaner organization both at corporate and business. This is something that we plan to occur more gradually through 2027, however, in response of the current market conditions. We decided to accelerate, and this organization now is aligned to a much simpler portfolio.

Speaker Change: Which includes the elimination of certain management layers us with us in March.

Speaker Change: Leaner organization.

Speaker Change: At corporate on business.

Speaker Change: Yeah.

Speaker Change: D. C is something that we plan to or more gradually through 2027. However response.

Speaker Change: Current market conditions, we decided to accelerate.

Speaker Change: This organization now which.

Speaker Change: Aligned to it much simpler portfolio.

Andres Kluski: Andres mentioned.

Ricardo Falou: Yes, I'd like to mention that these actions have been taken. So Steve also mentioned that. So, you know, these are done, and also the decisions in terms of reducing the amount of capital we put into the renewables business. So, you know. There is very little execution risk on this because it's done. That's a very helpful color, and I can sense the confidence you have in executing on these cost reductions. Okay. Thank you.

I'd like to mention that these actions have been taken.

Steve Hoffman: Steve also mentioned that.

Andres Kluski: So.

Andres Kluski: These are done.

Andres Kluski: Also the decisions in terms of.

Andres Kluski: We're using the amount of capital we put into the renewables business. So.

Andres Kluski: It's there is a very little execution risk on this because it's done.

Andres Kluski: That's very helpful color and.

Speaker Change: I can sense the confidence you have in executing.

Speaker Change: These are discussed reductions okay. Thank you and then my final question, Steve just maybe can you help us with where you landed on that have total debt basis, and referring to sort of on a moody's adjusted basis of.

Durgesh Chopra: And then my final question, Steve, just maybe, can you help us with where you landed on a Federal Debt Basis and referring to sort of on a Moody's Adjusted Basis for 2024 relative to your credit downgrade thresholds? Thank you. Yeah, absolutely, Durgesh. So on the recourse metric, so at the parent level, we ended at 22%. So, you know, it's a significant cushion above the 20% threshold. On the Moody's metric, we ended on our calculations at 10 percent, which is right in line with where we expected to be. In both cases, these metrics will improve over time.

Speaker Change: For 2024 relative to your credit downgrade thresholds. Thank you.

Speaker Change: Yeah, absolutely so on the recourse metrics so at the parent level, we ended at 22%.

Speaker Change: So.

Speaker Change: A significant cushion above the 20% threshold.

Speaker Change: On the Moody's metric, we ended on our on our calculations at 10%.

Speaker Change: Which is right in line with where we expect it to be.

Speaker Change: In both cases these metrics will improve over time.

Steve Coughlin: You know, at this point, with this updated plan, where we focus... very closely on improving our credit metrics. We do expect to get into the mid-20s on the recourse metrics by the end of the guidance period. And in 2026, in line with what we've been discussing with Moody's, we expect to be at or above the 12% threshold. So I feel really good about the actions that we've taken and what we're doing to increase our cash and EBITDA. Our net debt to EBITDA ratios will improve over time as well. The other thing I would point out is, as I said in my prepared remarks, we do carry about $4 to $5 billion of construction debt on our balance sheet at any one time.

Speaker Change: At this point with this updated plan, where we focus.

Speaker Change: Very closely on improving our credit metrics.

Speaker Change: We do expect to get into the mid twenties on.

Speaker Change: The recourse metrics.

Speaker Change: By the end of the guidance period and.

Speaker Change: In 2026 in line with what we've been discussing with Moody's and we expect to be at or above the 12% threshold. So I feel really good about the actions that we've taken.

Speaker Change: And what we're doing to increase our cash and EBITDA.

Speaker Change: Our net debt to EBITDA ratios will improve over time.

Speaker Change: Well the other thing I would point out is that.

Speaker Change: As I said in my prepared remarks, we do carry about <unk>.

Speaker Change: $4 billion to $5 billion of construction debt.

Speaker Change: On our balance sheet at any one time, but it is not yet yielding and so our leverage ratios look artificially high at any one point in time as a result.

Steve Coughlin: That is not yet yielding. And so, you know, our leverage ratios look artificially high at any one point in time as a result. And so these ratios, when adjusted for that, for example, on a net debt to EBITDA, comes down one to one and a half times just by adjusting for that construction debt. But as I looked at the ratios or I mentioned the ratios, those are based on the actual way that they get calculated, you know, without this adjustment. But I do think it's important in understanding our leverage profile. You know, it's very important to look at this ownership adjusted debt level because the EBITDA, of course, is ownership adjusted.

Speaker Change: And so these these ratios when adjusted for that for example in our net debt to EBITDA comes down one to one and a half times just by adjusting for that that construction debt.

Speaker Change: But as I as I've looked at the ratios are I mentioned the ratios those are based on the actual way that they get calculated without this adjustment, but I do think it is important in understanding our leverage profile.

Speaker Change: Very important to look at this ownership adjusted that level, because the EBITDA of course that ownership adjusted.

Steve Coughlin: And to understand that the leverage profile continues to improve over time as the operating portfolio gets bigger and bigger relative to the construction.

Speaker Change: And to understand and that the leverage profile continues to improve over time as the operating portfolio gets bigger and bigger relative to the construction.

Steve Coughlin: Got it.

Speaker Change: Got it very helpful color, Steve and I appreciate.

Steve Coughlin: Very helpful colors, Steve, and I appreciate the added disclosure and slides explaining the debt to you with overtime. Thank you. Thank you, Durgesh.

Speaker Change: The added disclosure on slides, explaining the debt to EBITDA over time. Thank you.

Speaker Change: Thank you guys.

Julien Dumoulin-Smith: Our next question comes from Julien Dumoulin-Smith with Jeffreys. Please go ahead.

Speaker Change: Our next question comes from Julien Dumoulin Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith: Hey, good morning, team. Thank you guys very much. I appreciate it.

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

Julien Dumoulin-Smith: Maybe just to follow up on that last one, just following the subject. Can you just elaborate? I mean, to what extent have you gotten in front of Moody's with this plan? And just if you could elaborate a little bit on how you're thinking through 27 on that evolution of those metrics, and that's sufficing given the backdrop of Moody's here.

Speaker Change: Maybe just a follow up on that last one just follow up on the subject can you just elaborate I mean to what extent have you got in front of movies with this plan and just if you could elaborate a little bit on how you're thinking through 'twenty seven.

And that I believe those metrics and that suffice thing given the backdrop of Moody's here.

Julien Dumoulin-Smith: Yeah, sure. Good morning, Julien. So we have, you know, discussed as we were working with Moody's last year where this was headed. What I would say is it looks right on track, in fact, even a little bit better, given the actions that we've taken. Effectively, you know, what's happening is, you know, our cash flow and EBITDA is increasing substantially through the plan period. And, you know, that's a result of bringing on substantial amounts of operating assets. We have, you know, 12 gigawatts in our backlog, most of which will be coming online through 2027. And then on top of that, we are reducing, as Andres and Ricardo discussed, our development spending is down based on our updated strategy of pursuing larger but fewer projects.

Speaker Change: Yes, Sir good morning.

Speaker Change: Julien so.

Speaker Change: We have discussed as we were working with Moody's last year, where this was headed what I would say as it looks right on track in fact, even a little bit better.

Speaker Change: Given the actions that we've taken effectively what's happening is.

Speaker Change: Our cash flow and EBITDA is increasing substantially through the plan period, and that's a result of bringing on substantial amounts of operating assets we have.

Speaker Change: 12, gigawatts in our backlog most of which will be coming online through 2027.

Speaker Change: And then on top of that we are reducing as Andreas and Ricardo discussed our development spending is down based on our updated strategy of pursuing larger but fewer projects, we're putting less money into early stage prospecting and more maturing the pipeline that we have.

Julien Dumoulin-Smith: We're putting less money into early stage prospecting and more maturing the pipeline that we have. And then our administrative spending is down substantially as well, and that's also as a result of what was mentioned about our simplification of our portfolio and the reduction of management layers and efficiencies that result from these actions that we have already taken. So together with this cash flow increase from operations, the reduction in cost, the ratios continue to look very healthy and grow in line to better than our prior expectations.

Speaker Change: And then our administrative spending is down substantially as well.

Speaker Change: That's also as a result of what was mentioned about our simplification of our portfolio and the reduction of management layers.

Speaker Change: Inefficiencies that result from from these actions that we have already taken so together with this cash flow increase from operations.

Speaker Change: Reduction in cost.

Speaker Change: The ratios.

Speaker Change: Continue to look very healthy and grow.

Speaker Change: In line to better than our prior expectations.

Julien Dumoulin-Smith: Excellent. Thanks, Stephen.

Speaker Change: Excellent. Thanks, Steve maybe maybe just keep going with that a little bit further just given the reduction of $1 3 billion here just on balance are you actually selling gowns stakes and more renewables in order to reduce that.

Julien Dumoulin-Smith: Maybe just to keep going with that a little bit further, just given the reduction of $1.3 billion here, just on balance, are you actually selling down stakes in more renewables in order to reduce that need for contributions, or is the aggregate level of renewable investment per year slowing down here? I just want to make sure we're clear.

Speaker Change: Need for contributions or is the aggregate level of renewable investment per year slowing down here I just want to make sure. We're clear you've talked about backlog and executing against it but I just want to understand like how you think about like renewables per your install evolving through the period now given the update as well as what level of contribution from call not what assets, but just.

Andrzej Sklucki: You've talked about backlog and executing assets, but I just want to understand how you think about renewables per year install evolving through the period now, given the update, as well as what level of contribution from coal, not what assets, but just what level of cash or even however you want to talk about it from coal are you anticipating in 2026 and 2027 and beyond now, as well? Okay, let's sort of break that. I think there's several questions there. So on the first one, again, through the 2027, we're basically executing on our backlog. And look, we're seeing very strong demand from our clients.

Speaker Change: What level of cash or EBITDA. However, you want to talk about it from coal are you anticipating in.

Speaker Change: 26, and 27 beyond that as well.

Speaker Change: Okay, let's sort of break I think the several questions. There. So on the first one again to the 227, we're basically executing on their backlog and look we're seeing very strong demand from our clients since our last call. We signed 450 megawatts with tech customers. So we see no downturn in demand so.

Andrzej Sklucki: Since our last call, we signed 450 megawatts with tech customers. So we see no downturn in demand. So basically what we see is, you know, there's no cliff in 2027. I mean, our demand continues to grow. Second, maybe an easy way of thinking, what Steve had described, is if you have a pool, say roughly $4 to $5 billion in construction debt, and you are basically carrying that over 16 gigawatts, and then you go up to 25, 30 gigawatts, you know, that debt is really sort of short-term rotating, because half of it's going to be paid back upon completion.

Speaker Change: Really what we see is.

Speaker Change: There is no cliff in 2027, I mean, our demand continues to grow.

Speaker Change: Maybe an easy way of thinking with Steve had described as if you have a pool say roughly $4 5 billion and construction debt.

Speaker Change: And you are basically carrying that over.

Speaker Change: 16, Gigawatts and then you go up to 25 30 Gigawatts.

Speaker Change: Credit metrics improved even though that that is really sort of short term rotating because half of it's going to be paid back upon completion.

Andrzej Sklucki: That's number one.

Speaker Change: That's number one.

Ricardo Falou: So then, number two, talking about how much the poll is going to contribute post-2027, I'll pass that to Ricardo. Thank you, Andres. Good morning, Julien. So, just to put it into perspective, we are talking about keeping, retaining fuel coal assets. less than half of what we currently have and will be less than 8% of the expected capacity by the end of 2027. These assets continue to provide critical capacity to the grid and also to our customers. And therefore, they continue contributing, I would say, you know, to the financial health of the world. We're clearly not abandoning our intention to exit coal, but it will take longer than we predicted.

Speaker Change: Number two.

Speaker Change: Talking about how much the.

Speaker Change: Coal is going to contribute.

Speaker Change: Post 2027, I'll pass that to recover.

Speaker Change: Thank you Andres good morning, Julien So just to put it into perspective, we are talking about keeping retaining fewer few coal assets.

Speaker Change: Half or less than half of what we currently have.

Speaker Change: Will be less than 8% of the expected capacity by the end of 2020.

Speaker Change: 27.

Speaker Change: These assets continue to provide critical.

Speaker Change: Critical capacity two degrees and also to our customers and therefore, they continue contributing.

Speaker Change: I would say.

Speaker Change: To the financial health of the company.

Speaker Change: We're clearly not abandoning our intention to exit coal, but it will take longer than we previously expected.

Ricardo Falou: And I would also add here, Julien, that these are also assets that as that they're as they're more mature, their debt is amortized, but they're also very accretive in terms of our credit. And lastly, to say, you know, we're doing this because in those markets, because of the sort of supply-demand balance, they need to keep these plants on line. So, you know, it all comes together. It's good for our financials, but it's also giving the market what the market is asking for.

Speaker Change: And I would also add here Julian that these are also assets that as that as theyre more mature their.

Speaker Change: Our debt is amortized.

Speaker Change: So very accretive in terms of our credit metrics.

Speaker Change: And lastly to say we're doing this because in those markets.

Speaker Change: Because of the sort of supply demand balance they need to keep these plants online.

Speaker Change: It all comes together.

Speaker Change: It's good for our financials, but it's also giving the market what the market is asking for.

Andrzej Sklucki: Bottom line though, you're seeing a leveling off in renewable cadences per annum. Just to come back to that backlog comment. I'm just trying to understand at the end of the day how you see it. Yes, I would put it this way, you know, post-2027, what we see is less growth in number of megawatts than our original plans. I mean, that's clear, because we're spending less on creating a pipeline of potential projects five to seven years out. So yes, the answer is yes. You've got a great cast. Thank you.

Speaker Change: Bottom line, though you're seeing a downturn, you're seeing a leveling off and renewable the cadence just the per annum just to come back to that that backlog comment.

Speaker Change: Trying to understand.

Speaker Change: End of the day.

Speaker Change: No.

Speaker Change: Yes, I would put it this way.

Speaker Change: But post 2027, what we see is <unk>.

Speaker Change: Less growth in number of megawatts than our original plans.

Speaker Change: That's clear because we are spending less on creating a pipeline of potential projects five to seven years out. So yes. The answer is yes.

Speaker Change: Got it thanks guys.

Speaker Change: Thank you.

Michael Sullivan: The next question comes from Michael Sullivan with Wolf Research. Please go ahead, Michael.

Speaker Change: The next question comes from Michael Sullivan with Wolfe Research. Please go ahead Michael.

Michael Sullivan: Hey, hey, good morning. Thanks. Thanks for the update. Yeah. Hey, guys.

Speaker Change: Hey, Hey, good morning.

Speaker Change: Thanks, Thanks for the update.

Michael Sullivan: I want to just pick up on the last question around just the coal contribution. I think, Ricardo, you're giving it on a capacity basis. Any chance we can get that on an EBITDA basis? Just trying to think about, I think when you had the analyst there, you said coal was like a $750 million roll off. What does that look like now through 2027?

Speaker Change: Yeah, Hey, guys.

Speaker Change: Wanted to just pick up.

Speaker Change: On the last question around just the core contribution I think Ricardo youre, giving it on a capacity basis.

Speaker Change: Any chance, we can get that on an EBITDA basis, just trying to think about it.

Speaker Change: I think when you had the analyst day, you said cole was like a $750 million roll off.

Speaker Change: What does that look like now through 2007.

Steve Coughlin: Since I'm the financial numbers guy, Steve, I'll take that one, Michael. So we had guided, as you said, about $750 million that would be eliminated. You know, I would say, you know, we're looking at, you know, roughly a third of that that may continue. Okay, that's very helpful.

Steve Hoffman: The financial numbers guys, Steve I'll take that one Mike.

Michael Sullivan: Michael So.

Michael Sullivan: So we had guided as you said about 750 million that would be eliminated.

Michael Sullivan: Say, we're looking at.

Michael Sullivan: Roughly a third of that that May continue.

Michael Sullivan: Beyond beyond 'twenty seven for a period of time.

Michael Sullivan: Okay.

Michael Sullivan: That's very helpful.

Steve Coughlin: And then on just interest rates, I think you have a couple of parent maturities coming up. Should we think of those as de-risked from a sensitivity standpoint? Or what what are you embedding there in terms of re-fives or anything? Yeah, so we did do a hybrid at the end of last year, 500 million, which starts us well into this year. And then we will be in the market to refi. So we have a maturity here in July and one in January. So we will be in the market, I would say, relatively soon. We typically refi, you know, somewhere between three to six months in advance of these maturities, and our plans will be similar this year.

Michael Sullivan: And then on.

Michael Sullivan: Just interest rates I think there are a couple of parent maturities coming up.

Speaker Change: Should we think of those as de risked from a sensitivity standpoint, or what are you embedding there in terms of refis or anything like that.

Speaker Change: Yeah. So so we did do a hybrid at the end of last year 500 million, which starts us well into this year.

Speaker Change: And then we will be in the market.

Speaker Change: To refi so we have a maturity here in July and one in January.

Speaker Change: So we will be in the market I would say relatively soon.

Speaker Change: We typically refi somewhere between three to six months in advance of these maturities and our plans will be similar this year.

Steve Coughlin: Okay, and then last one, yeah, I definitely can appreciate the sort of rampant things here. The 5 to 7% EBITDA CAGR, can you get in that range in 2026? off of 23, or are we really looking to 27 to really get in there? Yeah, no, so definitely in 2026. And actually, let me add one other thing to your prior question is that on those refis, by the way, we are nearly fully hedged. So we don't carry any interest exposure, further interest exposure on those refunds. And then with respect to 2026, that's a significant benefit from this action plan.

Speaker Change: Okay.

Speaker Change: And then last one yes definitely.

Speaker Change: Only can appreciate the sort of ramp of things here.

Speaker Change:

Speaker Change: The 5% to 7% EBITDA CAGR can you get in that range in 2026 off.

Speaker Change: <unk> 23 or are we really looking to 2007.

Speaker Change: Really getting there.

Yeah no so.

Speaker Change: Definitely in 12 months.

Speaker Change: So actually let me add one other thing to your prior question is that on those refis by the way.

Speaker Change: We're nearly fully hedged.

Speaker Change: So we don't carry any interest exposure further interest exposure on those repo and then with respect to 2026, that's a significant benefit from this action plan.

Steve Coughlin: You know, we did contemplate simplification of the portfolio and cost reduction. in the past over time, but what we have really done here is we've accelerated this. And so 2026 is going to be a year of significant growth in our EBITDA, and I think I mentioned in my comments in the low teens. And we expect another significant year of growth in 2027. So we will, you know, jump ourselves up onto at least that trend line next year.

Speaker Change: Did contemplate.

Speaker Change: Simplification of the portfolio and cost reduction.

Speaker Change: In the past over time, but what we have really done here.

Speaker Change: It's really accelerated this and so 2026 is going to be a year of significant growth.

Speaker Change: Our EBITDA and I think I mentioned in my comments in the low teens.

Speaker Change: And we expect another significant year of growth in in 2027, So we will.

Speaker Change: Jump ourselves up on to at least that trend line next year. This year and 25 the guidance isn't as exciting simply because we had some of the.

Steve Coughlin: This year in 2025, you know, the guidance isn't as exciting simply because we had some of the, you know, remaining transformation here around the Brazil exit. We had the warrior run benefit last year. And so, you know, some of these items, you know, depressed the year over year. But the reality is where the core business is growing is contributing more than 300 million this year. There's just those offsets. Going forward, the energy infrastructure, SBU, we've largely absorbed most of the decline as of 2025. And so we won't see as significant of an offset from energy infrastructure going forward.

Speaker Change: Remaining transformation here around the Brazil exit.

Speaker Change: We had the warrior run benefit last year.

Speaker Change: And so some of these items.

Speaker Change: Depressed the year over year, but the reality is where the core business is growing is contributing more than $300 million. This year.

Speaker Change: Those offsets going forward the energy infrastructure SBU, we've largely absorbed most of the decline.

Speaker Change: As of 2025.

Speaker Change: So we won't see a significant of an offset from energy infrastructure going forward and therefore sort of that growth is unleashed from the core businesses to truly drop all the way into the total bottom line and therefore, we have higher growth rates beyond this year.

Steve Coughlin: And therefore, sort of that growth is unleashed from the core businesses to truly drop all the way into the total bottom line. And therefore, we have higher growth rates beyond this year.

Andrzej Sklucki: You know, one thing I'd like to mention is, you know, we're talking about the quantitative results, but it is really very important qualitative results. Yes, you know, we're transitioning this portfolio to be more contracted, to be, you know, more renewables, more utilities, you know, less, but by getting rid of five gigawatts, you know, think about Brazil. I mean, that was about. You know, we have about 30 gigawatts. We sold out of five. That was most of our hydrology, currency. It was all floating rate, interest rate exposure, so qualitatively we're transforming this portfolio at the same time.

Speaker Change: One thing I'd like to mention as we're talking about the quantitative results, but it is really very important quantitative results. Yes, we're transitioning this portfolio to be more contracted.

Speaker Change: To be more renewables more utilities.

Speaker Change: But by getting rid of five Gigawatts, you know thinking about Brazil, I mean that was about.

Speaker Change: We have about 30 Gigawatts, we sold out of five that was most of our hydrology currency.

Speaker Change: It was all floating rate interest rate exposure. So qualitatively we're transforming this portfolio at the same time. So it's not just that it's we're going to have very good growth.

Andrzej Sklucki: So it's not just that we're going to have very good growth in 26 and 27, but it's going to be a much better portfolio as well.

Speaker Change: Six and 27, but it is going to be a much better portfolio as well.

Michael Sullivan: Okay, appreciate all the color. Thank you. Thank you, Michael.

Speaker Change: Okay. Appreciate all the color. Thank you.

Speaker Change: Yeah.

Will Grainger: Thanks.

Speaker Change: Thank you Michael.

Speaker Change: Yeah.

Will Grainger: Our final question today comes from Will Grainger with Mizuho.

Speaker Change: Our final question today comes from well Great Joe with Mizuho. Please go ahead ma'am.

Will Grainger: Please go ahead Will. Hi, good morning, everybody. Appreciate all the disclosures here. I understand, you know, you've reduced the capex here, but just want to understand a little bit more. What's the flexibility to, you know, thinking about maybe reducing it even more and investing in your stock here, just given where you're trading? Any color on that, you know, cost of capital would be Now, we're, you know, as I said at my very first statement, you know, we're very well aware of where our stock price is, and we're doing everything possible to improve it. What I would say is that, you know, what we're presenting here is a plan that we think accomplishes this.

Joe: Hi, good morning, everybody.

Speaker Change: Appreciate all the disclosures here.

Joe: Understood.

Reduced the Capex here, but just wanted to understand a little bit more what's the flexibility to.

Joe: Thinking about may.

Maybe it would reducing it even more in investing in your stock here, just given where youre trading.

Joe: Any color on that cost of capital that would be super helpful.

Joe: No.

Joe: As I said it is my very first statement, we are very well aware.

Joe: Citizen, we're doing everything possible to improve it.

Joe: What I would say is that.

Joe: What we are presenting here is a plan that we think accomplishes this.

Andrzej Sklucki: And, you know, we are paying, we're giving back to shareholders $500 million a year, we're paying a very substantial dividend. So, right now, you know, this is the plan that we feel very confident about executing, and that we think will, when the market, you know, settles down, you know, we think will result in very good returns for our shareholders. But thanks for the question, and we are constantly thinking about it.

Joe: And.

Joe: We are paying we're giving back to shareholders $500 million.

Joe: Being a very substantial dividend so.

Joe: Right now this is the plan that we feel very confident about executing.

Joe: We think we will when the market settles down we think will result in very good returns for our shareholders, but thanks for the question and we are constantly thinking of those things.

Andrzej Sklucki: Appreciate that. And then maybe just one final one for me. I understand you're doing a lot of work with technology customers, manufacturing customers, and just on the items at the FERC and what we're seeing also in Texas, does that impact your ability to contract long-term renewables, either through co-location or virtual PPAs, and color on that? • • Yes, I think you're probably referring like this is a private, you know, co-location, private use network. And, um...

Speaker Change: I appreciate that and then maybe just one final one for me understand you're doing a lot of work with technology customers manufacturing customers.

Speaker Change: Just on the items at the FERC and what we're seeing also in Texas.

Speaker Change: Does that impact your ability to contract long term renewables, either co location or virtual Ppas and.

Speaker Change: Color on that appreciate it.

Speaker Change: Yes, I think you're probably referring to like this is a private colocation private use networks.

Speaker Change: And.

Speaker Change: Hello.

Speaker Change: Don't see that affecting us we think.

Speaker Change: Most of ours.

Speaker Change: We have a very.

Speaker Change: I'd say resilience.

Speaker Change: Pipeline, because we have very few federal lands if at all we're all on private land and.

Speaker Change: And we don't have.

Speaker Change: As part of that pipeline and then any of the U S. At this point. So we feel very very confident about our pipeline and we don't see any of these regulations are affecting <unk>.

Speaker Change: Okay.

Will Grainger: Great. Appreciate the call.

Speaker Change: Great I appreciate the color. Thank you.

Operator: Thank you.

Speaker Change: Thank you.

Susan Harcourt: Those are all the questions we have and so I'll turn the call back 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. Thank you everyone for joining us today.

Speaker Change: Those are all the questions, we have and so I'll turn the call back to season, how cool it for closing remarks.

Speaker Change: We thank everyone everybody for joining us on today's call.

As always the IR team will be available to answer any follow up questions. You may have thank you.

Speaker Change: Okay.

Speaker Change: Thank you everyone joining us today. This concludes our call and you may now disconnect your lines.

Susan Harcourt: This concludes our call and you may now disconnect your line.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].