Q1 2025 The AES Corp Earnings Call

Okay.

Operator: Hello everybody and welcome to the AES Corporation Q1 2025 Financial Review Call. My name is Emily and I'll be moderating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so at any time by pressing star followed by the number one on your telephone keypad.

Hello, everybody and welcome to the Aes Corporation, Q1, 2025 financial with your coal mine.

Emily: My name is Emily and I'll be moderating Yoko today.

Emily: After the presentation, you will have the opportunity to ask any questions, which you can do so at any time by pressing star followed by the number one on your telephone keypad.

Susan Harcourt: I will now hand the call over to Susan Harcourt, Vice President of Investor Relations, to begin. Susan, please go ahead. Thank you, operator. Good morning and welcome to our first quarter 2025 financial review call. Our press release, presentation, and related financial information are available on our website at af.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 presentation.

Susan: I will now hand, the call over to Susan to haul coach Vice President of Investor Relations to begin soon.

Speaker Change: Please go ahead.

Susan: Thank you operator, good morning, and welcome to our first quarter 2025 financial review call.

Susan: Our press release presentation and related financial information are available on our website at <unk> Dot com.

Susan: We will be making forward looking statements. There are many factors that may cause future results to differ materially from these statements, which are disclosed in our most recent 10-K and 10-Q filed with the SEC.

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

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

Andres: Joining me. This morning are on risk risky, our president and Chief Executive Officer, Steve Hoffman, Our Chief Financial Officer, Ricardo for Lou <unk>, Our Chief operating officer, and other senior members of our management team with that I will turn the call over to Andres.

Andrzej Skluski: With that, I will turn the call over to on. Good morning, everyone, and thank you for joining our first quarter 2025 financial review call. Today, I'm very pleased to reaffirm both our 2025 guidance and long-term growth rate targets, which reflect our strong execution to date, as well as the resilience of our business overall. I will discuss this in more detail and provide an update on the robust growth program at our U.S. utilities.

Andres: Good morning, everyone and thank you for joining our first quarter 2025 financial review call.

Andres: I'm very pleased to reaffirm both our 2025 guidance and long term growth rate targets, which reflect our strong execution to date as well as the resilience of our business overall.

Andres: We'll discuss this in more detail and provide an update on our robust growth program at our U S utilities.

Andrzej Skluski: Following my remarks, Steve Coughlin, our CFO, will provide additional color on our financial performance and outlook. Beginning on slide three. with our first quarter results. Our financial performance was in line with our expectations. with adjusted EBITDA of $591 million and adjusted EPS of $0.27. We completed the construction of 643 megawatts. and signed or were awarded 443 megawatts of new PPAs bringing our backlog to 11.7 gigawatts. We have achieved our asset sale proceeds target for the year, including the sale of a minority stake in our global insurance company, AJIC, for $450 million. Now turning to the resilience of our business model and portfolio.

Speaker Change: Following my remarks, Steve Kaufman, our CFO will provide additional color on our financial performance and outlook.

Andres: Yeah.

Andres: Beginning on slide three.

Andres: With our first quarter results.

Andres: Financial performance was in line with our expectations with adjusted EBITDA of $591 million and adjusted EPS of 27.

Andres: We completed the construction of 643 megawatts.

Andres: <unk> signed or were awarded 443 megawatts of new Ppas bring.

Our backlog to 11.7 gigawatt.

Andres: We have achieved our asset sale proceeds target for the year include.

Andres: Including the sale of a minority stake in our global insurance Company, Hey, Jake for $450 million.

Andres: Now turning to the resilience of our business model and portfolio.

Andrzej Skluski: Our execution is proceeding as planned. And we expect to hit all of our financial metrics for the year. We have positioned ourselves for success even in the face of uncertainty around tariffs, changes to the Inflation Reduction Act, or potential recessions. Our business model is based on long-term contracted generation with creditworthy offtakers, as well as growth in our U.S. regulated utility. Our contracting, financing, and supply chain strategies have all been designed to minimize the impact of economic conditions, including inflation, interest rates, energy prices, and tariffs. As a result, we have clear visibility into our future financial performance.

Andres: Our execution is proceeding as planned.

Andres: We expect to hit all of our financial metrics for the year.

Andres: We have positioned ourselves for success, even in the face of uncertainty around tariffs.

Speaker Change: Just to the inflation reduction act or potential recession.

Speaker Change: Our business model is based on long term contracted generation with creditworthy off takers as well as growth in our U S regulated utilities.

Speaker Change: Our contracting financing and supply chain strategies have all been designed to minimize the impact of economic conditions, including inflation interest rates energy prices and tariffs.

Speaker Change: As a result, we have clear visibility into our future financial performance.

Andrzej Skluski: I'll first discuss the performance of our renewable business and then address the ways we have ensured that this business is resilient to macroeconomic and policy shifts. Turning to slide four. A major driver of our renewables EBITDA growth this year is the approximately 3 gigawatts of new projects we expect to bring online. I'm pleased to say that we are fully on track, with more than 600 megawatts already completed, including the 250-megawatt Morris Solar Project in Missouri, serving Microsoft. Our remaining projects under construction for the year are now approximately 80% complete. Our one gigawatt Belfield One project, which includes 500 megawatts of solar and 500 megawatts of storage, is virtually complete, and we will be fully operational this summer.

Speaker Change: I'll first discuss the performance of our renewable business.

Speaker Change: And then address the ways, we have ensured that this business is resilient to macroeconomic and policy shifts.

Speaker Change: Turning to slide four.

Speaker Change: Major driver of our renewables EBITDA growth. This year is the approximately three gigawatts of new projects, we expect to bring online.

Speaker Change: I'm pleased to say that we are fully on track with more than 600 megawatts already completed including the 250 megawatt Morris solar project in Missouri.

Speaker Change: Microsoft.

Speaker Change: Our remaining projects under construction for the year are now approximately 80% complete.

Speaker Change: Our one gigawatt Belfield, one project, which includes 500 megawatts of solar and 500 megawatts of storage is virtually complete and we will be fully operational this summer.

Andrzej Skluski: This is the first phase of what will be a two gigawatt project and the largest solar plus storage plant ever built in the United States. all of which is contracted with Amazon.

Speaker Change: This is the first phase of what will be a two gigawatt project and the largest solar plus storage plant ever built in the United States all.

Speaker Change: All of which is contracted with Amazon.

Andrzej Skluski: Moving on to slide five. Our supply chain strategy provides us strong protections from any current or potential future tariffs, as well as from the impact of inflation. For the seven gigawatts in our backlog scheduled to come online in the U.S. between 2025 and 2027, nearly all of the CAPEX is protected with zero exposure to tariffs as the equipment is already in the U.S. in transit or contracted to be produced domestically. Our tariff exposure is limited to a small quantity of batteries that are being imported from Korea for projects coming online in 2026, with a maximum potential exposure of 50 million, which we are actively working to further mitigate.

Speaker Change: Moving on to slide five.

Speaker Change: Our supply chain strategy provides a strong protections from any current or potential future tariffs as well as from the impact of inflation.

Speaker Change: For the seven Gigawatts in our backlog schedule to come online in the U S. Between 2025 and 2027 nearly all of the Capex is protected with zero exposure to tariffs as the equipment is already in the U S in transit or contracted to be produced domestically.

Speaker Change: Our tariff exposure is limited to a small quantity of batteries that are being imported from Korea for projects coming online in 2026 with a maximum potential exposure of $50 million, which we're actively working to further mitigate.

Andrzej Skluski: This represents just 0.3% of the total U.S. capital. and is well within the normal project contingency. I would like to emphasize that our U.S. supply chain protects us from any potential tariffs that could be announced, including reciprocal tariffs.

Speaker Change: This represents just 0.3% of the total U S Capex and is well within the normal project contingency.

Speaker Change: I would like to emphasize that our U S supply chain protects us from any potential tariffs that could be announced including reciprocal tariffs.

Andrzej Skluski: We also serve our corporate customers outside the U.S., where we continue to see substantial demand. Contracts that we are signing outside the U.S. are benefiting from lower equipment prices as a result of the increase in international equipment supply, with solar panels typically one-third the cost in Chile versus the U.S.

Speaker Change: We also serve our corporate customers outside the U S, where we continue to see substantial demand.

Speaker Change: Contracts that we're signing outside the U S are benefiting from lower equipment prices as a result of the increase in international equipment supply with solar panels typically one third the cost in Chile versus the U S.

Andrzej Skluski: Turning to slide six. Our business is also well protected from possible changes to U.S. renewable policy for several reasons. First, we are the top electricity provider to premier corporate clients, including data center customers that require capacity. They can come online relatively quickly. We have signed agreements for 9.5 gigawatts with data center companies, more than anyone else in the sector. There are few others in the industry who can develop, build, and operate the projects we offer, which are often large, geographically diverse, and with customized commercial structures. Furthermore, with our extensive history of working with large corporate customers, our development projects are tailored to meet their specific needs.

Speaker Change: Turning to slide six.

Speaker Change: Our business is also well protected from possible changes to U S renewable policy for several reasons.

Speaker Change: First we are the top electricity provider to premier corporate planes, including datacenter customers that require capacity that can come online relatively quickly.

Speaker Change: We have signed agreements for 95, Gigawatts with data center companies more than anyone else in the sector.

Speaker Change: There are few others in the industry, who can develop build and operate the projects we offer them, which are often large geographically diverse and with customized commercial structures.

Speaker Change: Furthermore, with our extensive history of working with large corporate customers are development projects are tailored to meet their specific needs.

Andrzej Skluski: We believe our customers will have strong demand for renewables in any scenario. Through the end of the decade, Bloomberg New Energy Finance sees increased electricity demand requiring at least 425 gigawatts of new capacity. While AAS is committed to serving our customers with an all-of-the-above strategy, including new gas generation, we see renewables as the primary source of new energy to serve this demand for the following reasons. First, they offer the fastest time to power, given their short construction period, and advanced permitting and interconnection queue position. Second, the fact that they are a low-cost source of power, particularly considering the rapidly rising cost of gas turbines and long lead time.

Speaker Change: We believe our customers will have strong demand for renewables in any scenario.

Speaker Change: Through the end of the decade, Bloomberg New energy finance sees increased electricity demand.

Speaker Change: At least 425 gigawatts of new capacity.

Speaker Change: While a S is committed to serving our customers.

Speaker Change: With an all of the above strategy, including new gas generation, we see renewables as the primary source of new energy to serve this demand for the following reasons.

Speaker Change: First they offer the fastest time to power given their short construction period, and advance permitting and interconnection queue positions.

Speaker Change: Second the fact that they are a low cost source of power, particularly considering the rapidly rising cost of gas turbines and long lead times.

Andrzej Skluski: And third, the price stability that they offer customers once contracted, unlike thermal power, which is subject to fluctuating fuel prices. In addition, roughly one third of our backlog is in international markets, where we develop, build, and operate renewable projects without tax credits, usually with higher returns than in the U.S. In the absence of tax credit, projects have higher net capital needs, but PPA prices are also higher to account for this funding structure. In these cases, we earn higher EBITDA per megawatt and are able to achieve our financial targets with fewer projects.

Speaker Change: And third the price stability that they offered customers once contracted.

Speaker Change: <unk> thermal power, which is subject to fluctuating fuel prices.

Speaker Change: In addition, roughly one third of our backlog is in international markets, where we develop build and operate renewable projects without tax credits.

Speaker Change: Usually with higher returns than in the U S.

Speaker Change: In the absence of tax credit projects had higher net capital needs, but PPA prices are also higher to account for this funding structure.

In these cases, we earn higher EBITDA per megawatt and are able to achieve our financial targets with fewer projects.

Andrzej Skluski: Turning to slide seven, another reason for our confidence in the resilience of our business is that nearly our entire U.S. backlog has safe harbor protection. Once a project starts construction or incurs 5% of the cost of materials, the project has safe harbor protections and has a period of four years to be placed in service and begin receiving tax credit. For example, any project that reaches startup construction milestones in 2025 is safe harbored through 2029.

Speaker Change: Turning to slide seven another reason for our confidence in the resilience of our business is that nearly our entire <unk>.

Speaker Change: <unk> backlog as safe Harbor protections once the project starts construction or encourage 5% of the cost of materials.

Speaker Change: <unk> has safe harbor protections and has a period of four years to be placed in service and begin receiving tax credits.

Speaker Change: For example, any project that reaches startup construction milestones in 2025 is safe harbored through 2029.

Andrzej Skluski: Turning to slide eight, we're also resilient to any economic downturn. Our business is heavily contracted, with approximately two-thirds of our EBITDA coming from long-term contracted generations, essentially all of which are take-or-pay and not tied to underlying demand conditions. Looking to the future, nearly all of our growth through 2027 is already secured through our 11.7 gigawatt backlog of signed long-term contracts. At the same time we sign our PPAs, we contractually lock in all major capital costs. EPC Arrangements, and Hedge Our Long-Term Finance. This approach gives us clear line of sight to our future evidence.

Speaker Change: Turning to slide eight were also resilient to any economic downturn.

Speaker Change: Our business is heavily contracted with approximately two thirds of our EBITDA coming from long term contracted generation essentially all of which are take or pay and not tied to underlying demand conditions.

Speaker Change: Looking to the future nearly all of our growth through 2027 is already secured through our 11 seven gigawatt backlog of signed long term contracts.

Speaker Change: At the same time, we sign our Ppas, we contractually locked in all major capital costs.

Speaker Change: APC arrangements and hedge our long term financing.

Speaker Change: This approach gives us clear line of sight to our future EBITDA.

Andrzej Skluski: We have also achieved our asset sale proceeds target for the year with the sale of a minority interest in our captive insurance company, and we have closed the sell-down of AES Ohio. Furthermore, with our March debt issuance, we have successfully completed all financings needed to address our 2025 debt maturities, and we have hedged 100% of our benchmark interest rate exposure for all corporate financings through 2027.

Speaker Change: We have also achieved our asset sale proceeds target for the year with the sale of a minority interest in our captive insurance company and we have closed the sell down of Aes, Ohio.

Speaker Change: Furthermore, with our March debt issuance, we have successfully completed all financings needed to address our 2025 debt maturities and we have hedged 100% of our benchmark interest rate exposure for all corporate financing through 2027.

Andrzej Skluski: Next, I'll discuss the robust growth program we're undertaking at our U.S. utilities on slide 9. We're executing. on the largest investment program in the history of both AES Indiana and AES Ohio as we work to improve customer reliability and support economic development. This year, we're on track to invest approximately $1.4 billion across the two utilities to support areas such as hardening the distribution network, smart grid, new generation, and transmission build-out for data centers. With signed agreements for 2.1 gigawatts of new data centers in AES-Ohio's service territory, we're beginning construction on new transmission to service loads.

Speaker Change: Next I'll discuss the robust growth program, we're undertaking at our U S utilities on slide nine.

Speaker Change: We are executing.

Speaker Change: On the largest investment program in the history of both a S, Indiana and Ohio, as we work to improve customer reliability and support economic development.

Speaker Change: This year, we're on track to invest approximately $1 4 billion across the two utilities to support areas such as hardening the distribution network smart grid, new generation and transmission Buildout for data centers.

Speaker Change: We signed agreements for two one gigawatts of new data centers and Aes, Ohio Service territory, we're beginning construction on new transmission service load.

Andrzej Skluski: This summer, we'll be breaking ground on the $500 million transmission investment needed to serve a new Amazon data center in Fayette County. Additionally, last month we completed the sale of a 30% stake in A.S. Ohio for $544 million to CDPQ, a global investment partner that also owns 30% of A.S. Indiana. This partnership helped support capital requirements for their substantial growth programs, while also strengthening our balance sheet. No trading to A.S. Indiana. We're continuing to invest in new generation to support our customers with affordable and reliable power. In March, we brought online the Pike County Energy Storage Project, which includes 200 megawatts of installed capacity and 800 megawatt hours of dispatchable energy, the largest operational battery project in MISO.

Speaker Change: This summer, we'll be breaking ground on the 500 million transmission investment needed to serve a new Amazon data center in Fayette County.

Speaker Change: Additionally, last month, we completed the sale of a 30% stake in <unk>, Ohio for $544 million to CDP cube.

Speaker Change: A global investment partner that also owns 30% of ASM D&O.

Speaker Change: This partnership help support capital requirements, where there substantial growth programs, while also strengthening our balance sheet.

Speaker Change: Now turning to a S. Indiana, we're continuing to invest in new generation to support our customers with affordable and reliable power.

Speaker Change: In March we brought online the pipe County energy storage project, which includes 200 megawatts of installed capacity and 800 megawatt hours of this possible energy the largest operational battery projects in MISO.

Andrzej Skluski: We continue to make progress on the Petersburg Energy Center, a 250 megawatt solar and 180 megawatt hour energy storage facility, which we expect to be operational by the end of the year. And in April, we received final regulatory approval for the 170 megawatt CrossVine Solar Plus Storage Project, which we expect to bring online in 2027.

Speaker Change: We continue to make progress on the Petersburg Energy Center, a 250 megawatts solar and 180 megawatt hour energy storage facility.

Speaker Change: Which we expect to be operational by the end of the year.

Speaker Change: And in April we received final regulatory approval for the 170 megawatt cross buying solar plus storage project.

Speaker Change: We expect to bring online in 2027.

Steve Coughlin: With that, I would now like to turn the call over to our CFO, Steve Coughlin. Thank you, Andres, and good morning, everyone. Today, I will discuss our first quarter results, our 2025 full year guidance, and our parent capital allocation. Turning to slide 11, adjusted EBITDA was $591 million in the first quarter versus $640 million a year ago. This decline was anticipated in our guidance and was primarily driven by prior year revenues from the accelerated monetization of the Warrior Run PPA and the sale of our five gigawatt AES Brazil business. but partially offset by growth in our renewables and utilities business.

Speaker Change: With that I would now like to turn the call over to our CFO Steve Crawford.

Steve Crawford: Thank you Andres and good morning, everyone. Today, I will discuss our first quarter results, our 2025 full year guidance and our parent capital allocation plan.

Steve Crawford: Turning to slide 11.

Steve Crawford: Adjusted EBITDA was $591 million in the first quarter versus $640 million a year ago.

Steve Crawford: This decline was anticipated in our guidance and was primarily driven by prior year revenues from the accelerated monetization of the way you run PPA and the sale of our five gigawatt Aaas, Brazil business, but.

Steve Crawford: But partially offset by growth in our renewables and utilities businesses.

Steve Coughlin: Turning to slide 12, adjusted EPS for the quarter was $0.27 versus $0.50 last year and was also in line with our expectations. Drivers include the prior year warrior run PPA monetization, the timing of U.S. renewables tax attribute recognition, higher parent interest, and the prior year tax benefit associated with our transition to a more U.S.-oriented holding company structure. This was partially offset by higher contributions from our Utilities SBU.

Steve Crawford: Turning to slide 12, adjusted EPS for the quarter was 27.

Steve Crawford: Versus 50 last year and was also in line with our expectations.

Steve Crawford: Drivers include the prior year, where you run PPA monetization the timing of U S. Renewables tax attribute recognition higher parent interest and the prior year tax benefit associated with our transition to a more U S oriented holding company structure.

Steve Crawford: This was partially offset by higher contributions from our utilities SBU.

Steve Coughlin: I'll cover the performance of our SBUs or strategic business units on the next four slides. Beginning with our renewables SPU on slide 13, higher EBITDA of approximately 45% year-over-year was driven primarily by contributions from new projects, which includes projects brought online over the prior four quarters. In addition, the renewable segment now includes all of our renewables in Chile, which were a part of the Energy Infrastructure SVU in prior years. This change was offset by the EBITDA impact from the sale of AES Brazil in the fourth quarter of last year. With this quarter's results, we are fully on track to achieve our full year renewables SBU guidance of $890 to $960 million.

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

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

Steve Crawford: Higher EBITDA of approximately 45% year over year was driven primarily by contributions from new projects, which includes projects brought online over the prior four quarters.

Steve Crawford: In addition, the renewable segment now includes all of our renewables in Chile, which we're a part of the energy infrastructure SBU in prior years.

Steve Crawford: This change was offset by the EBITDA impact from the sale of Brazil in the fourth quarter of last year.

Steve Crawford: With this quarter's results we are fully on track to achieve our full year renewables SBU guidance of $890 million to $960 million.

Steve Coughlin: Our construction program is proceeding on schedule, cost savings measures have been implemented, and we have already seen hydrological conditions in Columbia normalized year-to-date. In other words, our main segment drivers are greatly de-risked and we're well on our way to achieving 60% renewables growth year over year. Turning to slide 14, higher adjusted PTC at our utilities SBU was mostly driven by tax attributes from the completion of the Pike County Energy Storage Project, new rates implemented in Indiana in May of last year, demand growth, and favorable weather in the U.S. Lower EBITDA at our Energy Infrastructure SBU primarily reflects prior year revenues recognized from the accelerated monetization of the coal PPA at our Warrior Run plant, as well as Chile renewables moving to the renewable segment.

Steve Crawford: Our construction program is proceeding on schedule and cost savings measures have been implemented and we have already seen hydrological conditions in Colombia normalized year to date.

Steve Crawford: In other words, our main segment drivers are greatly derisked and we are well on our way to achieving 60% renewables growth year over year.

Steve Crawford: Turning to slide 14, higher adjusted PTC at our utilities SBU is mostly driven by tax attributes from the completion of the Pike County energy storage project.

Steve Crawford: New rates implemented in Indiana in May of last year.

Steve Crawford: Demand growth and favorable weather in the U S.

Steve Crawford: Lower EBITDA at our energy infrastructure SBU, primarily reflects prior year revenues recognized from the accelerated monetization of the coal PPA at or where you run plant as well as Chile renewables moving to the renewables segment.

Steve Coughlin: Finally, lower EBITDA at our New Energy Technologies SBU reflects lower contributions from fluents in the first quarter.

Steve Crawford: Finally, lower EBITDA at our new energy technologies SBU reflects lower contributions from fluids in the first quarter.

Steve Coughlin: Now turning to our guidance, beginning on slide 17. We are reaffirming our 2025 adjusted EBITDA guidance of $2.65 to $2.85 billion. We continue to see strong growth in our renewables SBU and expect our utilities businesses to grow approximately 7% this year, despite the sell-down of AAS Ohio.

Steve Crawford: Now turning to our guidance beginning on slide 17.

Steve Crawford: We are reaffirming our 2025 adjusted EBITDA guidance of $2 65 to 2.85 billion. We continue to see strong growth in our renewables SBU and expect our utilities businesses to grow approximately 7%. This year. Despite the sell down of a S. Ohio.

Steve Coughlin: The cost savings actions we announced on our February call have already been implemented. We expect the $150 million cost savings in 2025 will primarily benefit the second half of the year, and we remain on track to achieve a full run rate of over $300 million of cost savings next year.

Steve Crawford: The cost savings actions, we announced on our February call have already been implemented the.

Steve Crawford: We expect the $150 million cost savings in 2025 will primarily benefit the second half of the year and we remain on track to achieve a full run rate of over $300 million of cost savings next year.

Steve Crawford: Yeah.

Steve Coughlin: We are also reaffirming our 2025 adjusted EPS guidance of $2.10 to $2.26. As you can see on slide 18, we expect growth in the three remaining quarters of this year to be driven by adjusted EBITDA growth in renewables and utilities and the monetization of tax attributes on new renewables projects. partially offset by higher interest and a higher adjusted tax rate.

Steve Crawford: We are also reaffirming our 2025 adjusted EPS guidance of $2 10 to $2.26.

Steve Crawford: As you can see on slide 18, we expect growth in the three remaining quarters of this year to be driven by adjusted EBITDA growth in renewables and utilities and the monetization of tax attributes on new renewables projects.

Steve Crawford: Firstly offset by higher interest and a higher adjusted tax rate.

Steve Coughlin: Now to our 2025 Parent Capital Allocation Plan on slide 19. Sources reflect approximately $2.7 billion of total discretionary cash, including $1.2 billion of parent-free cash flow, which represents more than an 8% increase versus 2024. We also expect $700 million of planned parent debt issuance and close the $450 million sell-down of a minority interest in our global insurance business earlier this week. Our captive global insurance business is a valuable asset within the AES portfolio that consistently produces attractive cash flow while managing property and business interruption risk within our operating portfolio. This structured transaction allows us to monetize a minority portion of this valuable business to support growth capital for renewables and utilities business.

Steve Crawford: Now to our 2025 parent capital allocation plan on slide 19.

Steve Crawford: Sources reflect approximately $2 7 billion of total discretionary cash, including $1 2 billion of parent free cash flow, which represents more than an 8% increase versus 2024.

Steve Crawford: We also expect $700 million of planned parent debt issuance and close the 450 million sell down of a minority interest in our global insurance business earlier this week.

Steve Crawford: Our captive global insurance business is a valuable asset within the a S portfolio that consistently produces attractive cash flow, while managing property and business interruption risk within our operating portfolio.

Steve Crawford: This structure transaction allows us to monetize a minority portion of this valuable business to support growth capital for renewables and utilities businesses.

Steve Coughlin: With this transaction, we have achieved our entire asset sale target for 2025. On the right-hand side, you can see our planned use of capital. We will return approximately $500 million to shareholders this year, reflecting the 2% dividend increase announced last December. We also plan to invest approximately $1.8 billion toward new growth and have already repaid roughly $400 million of subsidiary debt. With the sell-down of a minority interest in A.S. Ohio at the beginning of April, we now have CDPQ as a 30% partner in both of our U.S. utilities. This partnership is another example of how we use private capital to help fund growth and reduce parent investment requirements into our subsidiaries.

Steve Crawford: With this transaction, we have achieved our entire asset sale target for 2025.

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

Steve Crawford: We will return approximately $500 million to shareholders. This year, reflecting the 2% dividend increase announced last December.

Steve Crawford: We also plan to invest approximately $1 8 billion towards new growth and have already repaid roughly $400 million of subsidiary debt.

Steve Crawford: With the sell down of a minority interest in a S. Ohio at the beginning of April we now have CD PQ as a 30% partner in both of our U S utilities.

Steve Crawford: This partnership is another example of how we use private capital to help fund growth and reduce parent investment requirements into our subsidiaries.

Steve Crawford: Yeah.

Steve Coughlin: Finally, turning to slide 20, our credit metrics are progressing in line with our expectations. benefiting from the actions we've taken since the beginning of this year. With the selldown of our global insurance business, we have locked in our asset sales proceeds for the year. The sell-down of A.S. Ohio and subsequent debt pay-down enabled S&P's recent one- and two-notch upgrades for DPL, Inc. and A.S. Ohio respectively. We have also refinanced this year's parent debt maturity and have already fully hedged the benchmark on all expected parent financing through 2027. Additionally, we implemented cost efficiencies and resized our development business to generate over $300 million in annual savings by next year.

Steve Crawford: Finally, turning to slide 20, our credit metrics are progressing in line with our expectations.

Steve Crawford: Benefiting from the actions we've taken since the beginning of this year.

Steve Crawford: With the sell down of our global insurance business, we have locked in our asset sales proceeds for the year.

Steve Crawford: The sell down of Aas, Ohio, and subsequent debt Paydown enabled S&P's recent one and two notch upgrades for <unk>, Inc, and a S Ohio, respectively.

Steve Crawford: We have also refinanced this year's parent debt maturity and have already fully hedged the benchmark on all expected parents financings through 2027.

Steve Crawford: Additionally, we implemented cost efficiencies and resized, our development business to generate over 300 million in annual savings by next year.

Steve Coughlin: These actions provide us with a fully self-funded plan through 2027.

Steve Crawford: These actions provide us with a fully self funded plan through 2027.

Steve Coughlin: In summary, I am very pleased with our results this quarter, which are fully in line with the guidance we gave in February. We expect significant growth in the year to go that will come from projects that have already been brought online, but which are still ramping to their full EBITDA, rate-based investments that have already been made, and cost reduction actions already in place. I am confident we will achieve our guidance regardless of changes in the economic environment or changes in policy due to our focus on regulated utilities and long-term contracted generation, which has minimal volume, interest rate, or foreign currency exposure.

Steve Crawford: In summary, I'm very pleased with our results this quarter, which are fully in line with the guidance. We gave in February we expect significant growth in the year to go that will come from projects that have already been brought online, but which are still ramping to their full EBITDA.

Steve Crawford: Rate base investments that have already been made.

Steve Crawford: And cost reduction actions already implemented.

Steve Crawford: I am confident we will achieve our guidance regardless of changes in the economic environment or changes in policy due to our focus on regulated utilities and long term contracted generation, which has minimal volume interest rate for foreign currency exposure.

Andrzej Skluski: I look forward to providing an update on our progress on our second quarter call.

Andreas: I look forward to providing an update on our progress on our second quarter call with that I'll turn the call back over to Andreas.

Andrzej Skluski: With that, I'll turn the call back over to Andres. Thank you, Steve. In summary, our long-term contracted business model continues to demonstrate its resilience to tariffs, economic policies, and business cycles. Our first quarter results are in line with our expectations and we are reaffirming our 2025 guidance and long-term growth rate targets. Demand from our core corporate customers remains very strong, and we're seeing no slowdown in the energy needs of hyperscalers in any scenario. As a result of our strategy to be a first mover creating a domestic supply chain and working with existing suppliers to onshore imported equipment, the tariff exposure on our 11.7 gigawatt backlog is de minimis.

Andreas: Thank you Steve.

Andreas: In summary, our long term contracted business model continues to demonstrate its resilience to tariffs economic policies and business cycles.

Andreas: Our first quarter results are in line with our expectations and we are reaffirming our 2025 guidance and long term growth rate targets.

Andreas: Demand from our core corporate customers remains very strong and we're seeing no slowdown in the energy needs of hyper scaler in any scenario.

Andreas: As a result of our strategy to be a first mover in creating a domestic supply chain and working with existing suppliers to onshore imported equipment. The tariff exposure on our 11 seven gigawatt backlog is de Minimis.

Andrzej Skluski: Similarly, our construction program of 3.2 gigawatts this year is on track and well advanced. We have completed construction of 643 megawatts, and we are 80% complete for the remaining 2.6 gigawatts, including 99% complete on the 1 gigawatt of our Belfield project, which will be the largest solar plus storage project in the US. Our two utilities are among the fastest-growing in the country and we continue to make progress on attracting new data centers to our service territory.

Andreas: Similarly, our construction program a 3.2 Gigawatts. This year is on track and will advance we have completed construction of 643 megawatts and we are 80% complete for the remaining two six gigawatts, including 99% complete on.

Andreas: On the one gigawatt of our Belfield project, which will be the largest solar plus storage project in the U S.

Andreas: Our two utilities are among the fastest growing in the country and we continue to make progress on attracting new data centers to our service territory.

Andrzej Skluski: Lastly, we have already completed all of our major asset sales and financings for the year, solidifying our commitment to self-funding through our long-term guidance period.

Andreas: Lastly, we have already completed all of our major asset sales and financings for the year solidifying our commitment to self funding through our long term guidance period.

Operator: With that, I would like to open up the call for questions. Thank you. We will now begin the question and answer session.

Andreas: With that I would like to open up the call for questions.

Andreas: Thank you we will now.

Andreas: Now begin the question and answer session.

Operator: As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by two to withdraw yourself from the queue.

Andreas: A reminder, if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.

Andreas: If you change your mind or you feel like your question has already been on stage you can press star followed by two to enjoy yourself from Nikkei.

Julien Dumoulin Smith: Our first question comes from Julien Dumoulin Smith with Jeffreys. Please go ahead, Julien. Hey, good morning, team. Thank you guys very much. Appreciate the time and the opportunity here. Nicely done on this insurance transaction. Actually, if I can just start off with a little housekeeping there.

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

Andreas: <unk>.

Speaker Change: Hey, good morning team. Thank you guys very much appreciate the time and the opportunity here nicely done on this insurance transaction actually if I. If I can just start off a little bit of a housekeeping. There. How do you think about that transaction just in terms of the prospective EBIT impact just when you think about the financials here I mean again innovative idea in how to raise kind of equity indirectly write them.

Steve Coughlin: How do you think about that transaction, just in terms of the prospective EBITDA impact, just when you think about the financials here? I mean, again, innovative idea and how to raise kind of equity indirectly, right, from private capital, as you say. Sure.

Andreas: Private capital as you say.

Andreas: Sure Good morning, Julien I'm going to pass that question to Steve.

Steve Coughlin: Good morning, Julien.

Steve Coughlin: I'm going to pass that question to Steve. Yeah, good morning, Julien. Yeah, the EBITDA impact is expected in the $25 million to $30 million range. So overall, you know, given that we've raised $450 million, you know, we're reinvesting that in returns, you know, 13%, 14%, 15%. It's very accretive for us. So, you know, we're very pleased. This was an opportunity that we have seen quite a while ago. It had been part of the universe of potential asset sales. And so we've anticipated for some time we did include it in our guidance in February. And it's effectively, you know, a low cost equity financing that supports growth while also meeting our credit goals.

Speaker Change: Julien, yes, the EBITDA impact expected in the 25 million to $30 million range. So overall given that we raised 450, we're reinvesting that in returns 13 14, 15%.

Speaker Change: It's very accretive for us. So we're very pleased this was.

Speaker Change: Opportunity that we have seen quite a while ago. It had been part of the universe of potential asset sales.

Speaker Change: And so we have anticipated for some time. We did include it in our guidance in February but its effectively the low cost equity.

Speaker Change: Financing that supports growth while also meeting our credit goals. So very happy to complete this early this year.

Steve Coughlin: So very happy to complete this early this year.

Julien Dumoulin Smith: Awesome.

Speaker Change: Awesome, Yeah nicely done Steve Ive got to say.

Julien Dumoulin Smith: Yeah, nicely done, Steve, I got to say.

Julien Dumoulin Smith: Neat idea.

Speaker Change: Neat idea if I can turn more substantively right just to clarify your earlier comment check first just on the tariff exposure is it principally that you've got a recovery.

Andrzej Skluski: If I can turn more substantively, right, just to clarify your earlier comment, Jake, first, just on the tariff exposure, is it principally that you've got recovery as in from your suppliers, i.e. they are taking the risk when you guys provide this 0.3% that effectively the risk burden is effectively put on the vast majority of your suppliers versus going back to your customers? Just wanted to clarify that. Just given the 400 and change megawatts of origination this quarter, given the backdrop today, would you say that this is kind of what we should be expecting for this year?

Speaker Change: From your.

Speaker Change: Your suppliers I E. They're taking the risk when you guys provide this <unk>, 3%, but that effectively the risk because the risk burden is effectively put on the vast majority of your of your suppliers versus going back to your customers just wanted to clarify that and the related just given the 400 and change megawatts of origination this quarter given the backdrop today would you.

Speaker Change: I'd say that this is kind of what we should be expecting for this year or could you see some sort of a more meaningful uptick I'm just trying to get a sense of what that cadence should be against setting expectations for further down the line.

Andrzej Skluski: Or could you see some sort of more meaningful uptake? I'm just trying to get a sense of what that cadence should be against setting expectations for further down the line.

Ricardo Falu: I'll have Ricardo answer the first question and I'll take the second. Thank you, Julien. I think, you know, let me provide a bit of more context on our supply chain.

Speaker Change: I'll have to think how to.

Speaker Change: And so the first question and then I'll take the second.

Speaker Change: Thank you Julia I think let me provide a bit more context on our supply chain.

Ricardo Falu: Three years ago, we have made the decision of basically building a reliable and USA-made supply chain. And guided by that sort of decision, we implemented three actions. The first one was that we entered into a strategic partnership with suppliers with manufacturing capacity outside of China, that was the first action. The second action, we were a first mover, as Andres mentioned, in supporting U.S. manufacturing to secure solar batteries and wind components. And third, to bridge the gap as local manufacturing ramps up, we accelerated the import of all the equipment coming from abroad required to support our backlog through 2027.

Speaker Change: Three years ago, we made the decision.

Speaker Change: Basically building.

Speaker Change: Liable USA made.

Speaker Change: <unk> chain.

Speaker Change: Guided by that sort of.

Sure we implemented three actions.

Speaker Change: First one was that we enter into a strategic partnerships with suppliers.

Speaker Change: Manufacturing capacity outside of China that was the first actual.

Speaker Change: The second action, we were first mover as Andres mentioned in supporting U S manufacturing, so secure solar lotteries and wing components.

Speaker Change: Alastair to breach.

Speaker Change: GAAP as local manufacturing ramps up we accelerated the import of all the equipment coming from abroad.

Speaker Change: To support our backlog through 2027.

Ricardo Falu: And as a result of these actions, apart from the small quantity of batteries that Andres mentioned that these are for a few projects coming online in 2026, we have no impact on tariff for our 2025-2027 batteries. I think with respect to who sort of bear the exposure, these contracts are with the Korean supplier for a very few projects. Of course, these tariffs were not in place at the time we signed the contract. And what we're doing, the $50 million represents the full exposure, to be sure, between the And of course, the first action, as Andres mentioned, is to actively reduce that exposure, which we've been so far very successful, and for the remaining impact to share it evenly.

Speaker Change: And as a result of these actions are far from the small quantity of batteries that Andres.

Speaker Change: The risk mentioned that.

Speaker Change: These are for a few projects coming online in 'twenty 'twenty six we have no impact on.

Speaker Change: Our 2025 2027.

Speaker Change: No.

Speaker Change: I think we respect a whole sort of there.

Speaker Change: Oh sure.

Speaker Change: <unk> contracts are with a Korean supplier.

Speaker Change: For a very few projects.

Speaker Change: Of course, they start if were not in place at the time, we sign the contract.

Speaker Change: And what we are doing the $50 million represent the full exposure to be sure between parties and of course, the first actual as I've just mentioned.

Speaker Change: Actively.

Speaker Change: Radio stats exposure, which we've been so far very successful for the remaining impact to share. It evenly. So we expect the overall impact will be well below that $50 million.

Andrzej Skluski: So we expect the overall impact to be well below that $50 million that is the total exposure that Andres mentioned. Other than that contract, we have no exposure to tariffs. Yeah. And I'd like to clarify that what we did was we imported all of the equipment, you know, the vast majority of it. So we have all that equipment that we need, for example, for 2025, with the exception that we pointed out already in the U.S., and most of it on site. And we have a lot of the equipment for 2026 that's imported as well. So in 2026, we expect to shift over to domestic supply.

Andres: Total exposure that Andres mentioned other than that contract.

Speaker Change: We have no exposure to us.

Speaker Change: I'd like to clarify that what we did was we imported all of the vast majority.

Speaker Change: Majority of it so we have all of that equipment that we need for example for 2025 with the exception that we pointed out already in the U S.

Speaker Change: Most of it onsite.

Speaker Change: We have a lot of the equipment for 2026, that's imported as well. So in 2026, we expect to shift over to domestic supply. So when we say that the exposures to minimus. We really got ahead of US now I will remind you. This is what we did in 2020 as well in 2020, we achieved all of our targets that we're the only large developer who did not abandon or.

Andrzej Skluski: So when we say that the exposure is de minimis, we really got ahead of this. Now, you know, I will remind you, this is what we did in 2020 as well.

Andrzej Skluski: In 2020, we achieved all of our targets, and we're the only large developer who did not abandon or significantly delay any large project, and we intend to continue that track record. Now, getting your question about the cadence of PPA signings, as we've been saying, look, we're concentrating on fewer. larger projects. that are also more financially attractive. So the 400 megawatts is not a cadence that you should expect for every quarter. You know, we are in final negotiations of a number of large projects. We expect to hit the 4 gigawatts, roughly, that we have talked about prior to this year.

Speaker Change: Any delay any large project and we intend to continue that track record.

Speaker Change: Getting to your question about the cadence of PPA signings.

Speaker Change: As we've been saying look we're concentrating on fewer.

Speaker Change: Larger projects.

Speaker Change: There are also more.

Speaker Change: Financially attractive.

Speaker Change: So the 400 megawatts and there's not a cadence that you should expect for every quarter.

Speaker Change: We are in final negotiations.

Speaker Change: I have a number of large projects, we expect to hit the four gigawatts roughly that we have.

Speaker Change: <unk> talked.

Speaker Change: <unk> talked about prior to this year, it's sort of a three year target we had talked about a 14% to 17 gigawatts. So we remain on track.

Andrzej Skluski: To hit sort of the three-year target we had talked about of 14 to 17 gigawatts. So we remain on track. And, you know, we've always said these are lumpy, so it's not like we're doing a lot of small projects. We're doing a few large ones, and sometimes they happen in a quarter or they happen in the next quarter or they come together. So there's nothing to be read in the 400 megawatts. Got it. All right. Excellent, guys. Thank you. I'll leave it there. Nice to see you down again on the transaction. All right. Thanks, Julien.

Speaker Change: And we've always said these are lumpy. So it's not like we're doing a lot of small projects, we're doing a few large ones and sometimes they.

Speaker Change: Happen in a quarter of that happen in the next quarter or they come together. So there's nothing to be read of the 400 megawatt.

Speaker Change: Yeah.

Speaker Change: Got it all right excellent guys. Thank you I'll leave it there thanks.

Speaker Change: Then again on the transaction.

Julien Dumoulin Smith: Thank you.

Speaker Change: Thank you. Our next question comes from Nick Campanella with Barclays. Please go ahead Nick.

Nick Campanella: Our next question comes from Nick Campanella with Barclays. Please go ahead Nick. Hey, good morning, everyone. Thanks for taking my questions and appreciate all the color. I just wanted to come back to the insurance sale quickly. So I know you kind of disclosed the Class B dividends are like $148,500 to $198 million. Is that like a yearly number or is that a cumulative number? And I guess if you hit that call option in 2030 to 2035, what is that strike price? And, you know, how should we kind of think of the cost of financing here that you just raised versus, I guess, deploying, you know, future CapEx at 13 to 15 percent returns?

Speaker Change: Yeah.

Nick Campanella: Hey, good morning, everyone and thanks for taking my question and I appreciate all the color.

Nick Campanella: I just wanted to come back to the insurance sale quickly. So I know you kind of disclosed the class B dividends are like 148 $5 million to $198 million is that like a yearly.

Nick Campanella: Number or is that cumulative number and I guess, if you hit that call option in 2030 to 2035, what does that strike price and how should we kind of think of the cost of financing here.

Nick Campanella: That you just raised versus I guess deploying.

Nick Campanella: Deploying future Capex at 13% to 15% returns maybe you could just unpack that.

Steve Coughlin: Maybe you could just unpack that.

Steve Coughlin: Yeah, hey, Dick, Steve. So those numbers are based on the five year, the first five year target distribution. And so this would, you know, be the aggregate amount at that five year call date that needs to get met. And, you know, that's very much in line with a fairly conservative case on what this insurance business delivers. Keep in mind, you know, this is a business that is Hello. In terms of, you know, the cost of this, I would think about it as, you know, roughly in line with like a junior subordinated debt issuance at the parent.

Nick Campanella: Yes, Hey, Steve So that those numbers are based on the five year the first five year target.

Nick Campanella: Target distributions and so this would.

Nick Campanella: B the aggregate amount at that five year call date that needs to get met.

Nick Campanella: And that's very much in line with.

Nick Campanella: A fairly conservative case on what this insurance business delivers keep in mind. This is a business that is.

Nick Campanella: Its captive, but it hasnt reinsurance behind it so we have a very predictable the max amount of losses.

Nick Campanella: And then the reinsurance kicks in so this was structured very conservatively that even in the event of.

Nick Campanella: Max losses, we feel very comfortable servicing this financial structure.

Nick Campanella: In terms of.

Nick Campanella: The cost of this I would think about it as roughly in line with like a junior subordinated.

Nick Campanella: Debt issuance at the parent and given that this is.

Steve Coughlin: And given that this is, you know, getting equity treatment, that effectively looks like a low-cost equity financing that is quite accretive. It will have target payments in the range of about $37 to $40 million per year to the counterpart. Okay, that's helpful. Appreciate that.

Nick Campanella: Getting equity treatment that effectively looks like a low cost.

Nick Campanella: Equity financings.

Nick Campanella: That is that it's quite accretive it will have.

Nick Campanella: Target payments in the range of about $37 million to $40 million per year to the to the counterparty.

Nick Campanella: Okay. That's helpful. I appreciate that.

Steve Coughlin: And I'll try not to butcher it, but just the Cochrane buyout that you disclosed in the 10-Q, can you just give us a sense of what you're purchasing and how much you paid for it, either on like a multiple basis or cash and just the rationale behind that transaction? Yeah, look, I mean, this is an asset that we already own and operate. We have a minority partner that was looking to exit. So what we're doing is we're buying up the 40 percent minority and taking nearly complete ownership of the asset. It's very valuable. It's contracted well into the next decade.

Nick Campanella: Now I'll turn up a bunch of it but just the Cochrane buyout that you disclosed in the 10-Q.

Nick Campanella: Can you just give us a sense of what you are purchasing or and how much you paid for it either on like a multiple basis or cash and just the rationale behind that transaction.

Nick Campanella: Yes look I mean, this is an asset that we already own and operate we have a minority partner that was looking to exit. So what we're doing is we're buying up to 40%.

Minority and taking nearly complete ownership of the asset it's very valuable it's contracted well into the next decade.

Steve Coughlin: Serving, you know, key customers for us in Chile. And the valuation was at a very low multiple. So it's quite accretive immediately this year and beyond. So so we're pleased with it. It's one of the assets that we had already guided that would be extended beyond twenty twenty seven. So it's no additional new capacity, just taking advantage of an attractive financial return on owning the entire thing, as opposed to just the share that we had.

Nick Campanella: <unk> key.

Nick Campanella: Key customers for us in Chile, and the valuation was at a very low multiple so it's quite accretive.

Nick Campanella: Lately.

Nick Campanella: This year and beyond so so we're pleased with it it's one of the assets that we had already guided that would be <unk>.

Nick Campanella: Send it beyond 2027, so it's no additional new capacity, just taking advantage of attractive financial return on owning the entire thing as opposed to just a share that we had.

Nick Campanella: Okay, thank you.

Nick Campanella: Okay. Thank you.

Nick Campanella: All right.

Speaker Change: Alright, Thanks, Nick.

Nick Campanella: Thanks, Nick.

Speaker Change: Thank you. The next question comes from David I'll call Ray with Morgan Stanley.

David Arcaro: The next question comes from David Arcaro with Morgan Stanley. Please go ahead, David. Hey, thanks so much. Good morning, Dave. On the AGIC sale, just one other follow-up there, you sold a minority stake. I'm just wondering, is there any...

Speaker Change: Please go ahead David.

David: Hey, thanks, so much good morning.

Speaker Change: Good morning, Dave and I was wondering on the on the GIC sale just wanted to follow up there you sold a minority stake I'm. Just wondering is there any strategic reason that you want to retain control and you know the the remaining stake there or could that be.

Steve Coughlin: retain control and, you know, the remaining stake there or could that You know, a consideration for future asset sales out in the rest of the program, the financial forward as one of the... Thank you, sir. We'll be soon. Thank you. Yeah, no, we want to maintain, you know, our control of this asset. And as Steve said, it's the financial metrics are very conservative and we're coming in with considerable margin on this. So we do want to maintain it. It's been very successful. We set this up about 15, 20 years ago. It was an independent business.

David: A consideration for future asset sales.

David: Out in the rest of the program at the financing plans going forward as Dave will further sell downs.

Speaker Change: Yes, no we want to maintain our control of this asset and as Steve said, it's it's the.

Speaker Change: Metrics are very conservative and we're coming in with considerable margin on this so we do want to maintain it it's been very successful we've set this up about.

Speaker Change: I think 20 years ago, if it was.

Speaker Change: Independent business as a unicorn.

Steve Coughlin: It's a unicorn. So it's been very successful, lowered our insurance costs and improved the quality of our reinsurance. Okay, great. Yeah, thanks for that detail.

It's been very successful lowered our insurance costs and improve the quality of our reinsurers.

Speaker Change: Okay, great yeah, thanks for that detail.

Speaker Change: I was wondering if you could comment on just what you're seeing in terms of the latest.

Andrzej Skluski: comment on just what you're seeing in terms of latest renewable demand trends. pull forward ahead of. Are there any general IRA changes here or any interest general change in customer demand level? Yeah, great question. Look, what we are seeing is, you know, continued strong demand, we're not seeing any sort of temporal shifts as a result. So our data center customers continue to strong demand, I think the key word is time to power. And that's why we mentioned that certainly, you know, for the next five years, you know, the predominant of this is going to be renewables because it's the fastest to power.

Speaker Change: Renewable demand trends has there been any pull forward ahead of potential.

Speaker Change: Changes here or any interest general change in customer demand levels that you're seeing.

Speaker Change: Yes, great question.

Speaker Change: We are seeing is continued strong demand, we're not seeing any sort of temporal shifts as a result.

Speaker Change: So our data center customers.

Speaker Change: Strong demand I think the keyword is time to power.

Speaker Change: And Thats why we mentioned that certainly for the next five years.

Speaker Change: The predominance of this is going to be renewables.

Speaker Change: The fastest to power its.

Andrzej Skluski: It's, you know, also very cost effective. And so there's more sort of, you know, you can combine this with gas in many cases to reach the optimal solution. I think there's too much discussion about the technology and not really what the customer wants. So we combine, you know, ways of producing energy in a way that satisfies our customer. So look, we're not seeing any pull forward. We are seeing, I would say, some of the contracts we're signing today that they have provisions for, say, changes in law, changes in tariffs, et cetera, to take that into account.

Speaker Change: Also very cost effective and so this is more sort of you know you can combine this with gas in many cases the reach the optimal solution I think theres too much discussion about the technology and that really what the customer wants. So we can bind ways of producing energy in a way that satisfies our customer. So look we're not seeing any pull forward.

Speaker Change: We are seeing I would say some of the contracts we're signing today.

Speaker Change: They have provisions for.

Speaker Change: Changes in law changes in tariffs et cetera to.

Speaker Change: To take that into account now for our backlog as I said before we have imported.

Andrzej Skluski: Now, for our backlog, as I said before, you know, we have imported the materials or have domestic supply, we have the EPC and we have the financing, so all that's locked in. Sounds good.

Speaker Change: The materials or have domestic supply we have the EPC and we have the financing. So all of that is looked at.

Speaker Change: Okay sounds good thank you.

Andrzej Skluski: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from Doug <unk> with Evercore.

Durgesh Chopra: Our next question comes from Durgesh Chopra with Evercore. Please go ahead Durgesh. Thank you. Good morning, team. Thanks for giving me time.

Speaker Change: Please go ahead good cash.

Speaker Change: Thank you good morning team, Thanks for giving me time Steve.

Durgesh Chopra: Steve, you know, congrats on this transaction. Maybe just A little bit more detail. You talk about the cash distributions being conservative. Can you just frame for us the 40 million or so average distributions a year? What is that as a percentage of total cash generated for that? Yeah, it's roughly around, you know, depending on the year, you know, 35-40%, I would say, in terms of this business reliably generates about $100 million of cash thereabouts, even with typical losses. So, and that includes some amortization of the instruments. So this is self-amortizing over the full 20-year life.

Speaker Change: Congrats on this transaction maybe just.

Speaker Change: Little bit more detail you can talk about the cash.

Speaker Change: Cash distributions being conservative can you just frame for us the $40 million or so average distributions a year.

Speaker Change: What's what is that as a percentage of total cash generated.

Speaker Change: For that business.

Speaker Change: Yes, it's roughly around depending on the year 35, 40% I would say in terms of this business reliably generates about.

Speaker Change: $100 million of cash thereabouts, even with.

Typical losses.

Speaker Change: And that includes some amortization of the instruments. So this is self amortizing over the full 20 year.

Steve Coughlin: It's nothing like, you know, these convertible portfolio financings that you've heard about with some other yield codes that were not amortizing and had a significant economic ownership flip. This doesn't have that kind of change. We have a call right at year five, and otherwise there's no incentive to have to call it. It continues along the same economics for the full 20-year potential period. So it's priced, as I said, like a junior parent note and gives us access to cheap, what I call cheap equity capital. And then we can continue to retain this so long as, you know, it's, unless we have a better option down the road that's a little bit slower cost.

Speaker Change: It's nothing like.

Speaker Change: These convertible portfolio financings that you've heard about some other yield COSE.

Speaker Change: That that were not amortizing and had a significant.

Speaker Change: Economic ownership slip this doesn't have that kind of change we have a call right at year five.

Speaker Change: And otherwise there's no incentive to have to call. It continues along the same economics for the full 20 year potential period. So it's priced as I said like a junior parent note.

Speaker Change: And it gives us access to cheap what I'd call cheap equity.

Speaker Change: Capital.

Speaker Change: And then we can continue to retain this so long as.

Speaker Change: Unless we have a better options down the road that's lower cost.

Steve Coughlin: But this one, you know, is a good way to monetize an asset that I think is perhaps underappreciated in the values that it generates. It's been in our disclosures around the distribution to the parent from this asset in the past. You can see that. And, you know, this is capital that would be put to work to generate, you know, mid-teens returns. So I think it looks quite good.

Speaker Change: But this one it was a good way to monetize an asset that I think is perhaps underappreciated and the values that it generates its been in our disclosures around the distributions to the parent from this asset in the past. So you can see that.

Speaker Change: And this is capital that will be put to work to generate.

Speaker Change: Mid teens returns so so I think it looks quite good.

Steve Coughlin: Got it, thank you for that clarity, a creative transaction there.

Speaker Change: Got it thank you for that clarity a creative transaction, they're just taking.

Durgesh Chopra: Just sticking on the financing topic, there's been a lot of discussion around transferability, you know, some legislation recently proposed, our OSU is probably doesn't get much traction, but just in terms of thinking about risks, can you talk about like, you know, in an event that transferability is eliminated? You go back to tax equity and perhaps you can frame for us, you know, what percentage of your plan is being provided by cash financing, is being provided by transferability. Thank you. Yeah, yeah, absolutely, Durgesh.

Speaker Change: Taking on the on the financing topic, there's been a lot of discussion around transferability.

Speaker Change: Some legislation.

Speaker Change: Recently proposed with our house view is probably doesn't get much traction, but just in terms of thinking about risks can you talk about like you know.

Speaker Change: In an event the transferability is eliminated.

Speaker Change: You go back to tax equity and perhaps even frame for us what percentage of your <unk>.

Speaker Change: Plan is is being.

It's being provided by cash and financing is being provided by transferability.

Speaker Change: Yeah.

Speaker Change: Yeah, Yeah, absolutely so.

Steve Coughlin: So, look, first of all, you know, transferability has only been around for, you know, a little over two years when the IRA was passed in 2022. It has been very good for the industry as it's opened up a broader participation in the market for monetizing tax value. And it is typically a little bit more efficient in transferring most of the tax benefit savings on to customers. There's lots of friction. in these types of transactions. But that said, for the IRA, we did tax equity. The majority of what we continue to do is still through tax equity partnerships.

Speaker Change: But first of all you are transferring the transferability has only been around for a little over two years. When I arrived was passed in 2022. It has been very good for the industry as it's opened up a broader participation in the market for monetizing tax value.

Speaker Change: It is typically a little bit more efficient and transferring most of the tax benefit savings onto customers just there's less friction in these in these types of transactions.

Speaker Change: But that said.

Speaker Change: For the IRA or we did tax equity the majority of what we continue to do is still through tax equity partnerships in fact.

Steve Coughlin: And in fact, we continue to form the partnerships anyway because we need to monetize the tax depreciation to maximize the opportunity, even when we are doing transfers. So we can continue to do the tax equity partnerships for all of our future projects if this were removed. We don't think it will be because we think it goes with the tax credits in terms of getting the most benefit of the tax credit to the cost of the end consumer of the energy. And then, you know, effectively the cash benefit to AES is the same, you know, so we bridge the tax financing with debt during construction, as I walked through on the February call, and then we immediately, when the tax value comes in.

Speaker Change: We continue to form the partnership's anyway, because we need to monetize that.

Speaker Change: Depreciation to maximize the opportunity even when we are doing transfers.

Speaker Change: So we can continue to do the tax equity partnerships for all of our future projects. If this were.

Speaker Change: Removed, we don't think it will be because we take it.

Speaker Change: It goes with the tax credits in terms of getting the most benefit of the tax credit to the to the cost of the consumer of the energy.

And then effectively the cash benefit to Aes is the same.

Speaker Change: So we bridge the tax financing with debt during construction as I walked through on the February call.

Speaker Change: And then we immediately when the tax value comes in.

Andrzej Skluski: either from the transfer counterparty or from the tax equity partner, we immediately monetize that at the place and service date and pay down a significant portion of the debt, typically more than 50% at that point. So you have a significant deleveraging from this. The fundamental cash and credit profile is really exactly the same. So I think it's been good, a lot more for some smaller developers and to sort of democratize the participation in the market. But as a large scale developer with deep relationships with sophisticated tax equity partners, we still feel very comfortable that we can monetize all of the tax value that we create with the tax equity venue.

Speaker Change: Either from the transfer of counterparty or from the tax equity.

Speaker Change: Our partner, we immediately monetize that at the placed in service date and pay down a significant portion of the debt typically more than 50%.

Speaker Change: At that point, so you have a significant deleveraging from this.

Speaker Change: London metal cash and credit profile is really exactly.

Speaker Change: The same.

Speaker Change: So I think it's been good you know a lot more for some smaller developers into sort of democratize the participation in the market, but as a large scale developer with deep relationships with sophisticated tax equity partners.

Speaker Change: We still feel very comfortable that we can monetize all of the tax value that we create with the tax equity.

Speaker Change: If needed.

Durgesh Chopra: Thanks, Steve. Appreciate that discussion.

Speaker Change: Thanks, Steve I appreciate that that discussion just real quick sorry. This is my third question I understand and realize the hydrogen.

Durgesh Chopra: Just real quick. Sorry. This is my third question.

Andrzej Skluski: I understand and realize just the hydrogen project that was canceled. in Texas. Are we still pursuing other customers for, you know, for contracted power generation that I believe it was over a gig? The answer is yes. I mean, that was a very attractive asset to development. It's all on private land on one farm, and it's very well located for the grid and for anything else. So, yes, we're continuing to pursue it. part of our pipeline. So, yes.

Speaker Change: Project that was canceled.

Speaker Change: In Texas, we still pursuing other customers.

Speaker Change: For you know for contracted power generation that I believe it was over a gig.

Speaker Change: The answer is yes, I mean that was a very.

Speaker Change: Attractive assets in development.

Speaker Change: And.

Speaker Change: It's all on private land.

Speaker Change: On one farm and it's very well located for the grid and for anything else. So yes, we're continuing to pursue it.

Speaker Change: Part of our pipeline so yes.

Andrzej Skluski: Thank you, Andres. Thank you, Durgesh.

Andreas: Thank you Andreas.

Speaker Change: Yes.

Speaker Change: Okay.

Michael Sullivan: Thank you. Our next question comes from Michael Sullivan with Wolf Research. Please go ahead. Hey, good morning. Morning, Michael. Hey, wanted to just ask on where we stand on the longer term asset sale target. Are you still shooting for that $3.5 billion? Where are we up against that? And what else are you looking at for potential sales?

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

Michael Sullivan: Hey, good morning.

Speaker Change: Good morning, Michael I wanted to Hey wanted.

Speaker Change: I wanted to just ask on where we stand on the on the longer term asset sale target are you still shooting for that $3 5 billion, where are we up against that and what else are you looking at for potential sales.

Steve Coughlin: Yeah, hey, this is Steve. So now we so it's with respect to the three and a half, we're at 3.4. So we're, we're right almost there to the finish line on that target. We did talk about getting to 800 to 1.2 billion on the February call from 25 to 27. So with this sale, and that's not including the Ohio sell down, which went to paying down that this was referring to proceeds up to the parent. With this insurance sell-down, we're, you know, halfway, roughly there, close to halfway on that target. You know, what's remaining is, you know, we have the, In terms of proceeds, the Vietnam sale, we have some other asset sales in the thermal portfolio that are of a smaller scale.

Speaker Change: Yes.

Speaker Change: So.

Speaker Change: With respect to the three and a half floor at three four.

Speaker Change: Where we.

Speaker Change: Right almost fair to the finish line on that target.

Speaker Change: We did.

Speaker Change: Talk about.

Speaker Change: <unk>, two 800 to $1 2 billion.

Speaker Change: During our call.

Speaker Change: 25 to 27, so with this sale and thats, not including the Ohio sell down with paying down debt. This was.

Speaker Change: Referring to proceeds up to the parent.

Speaker Change: With this.

Speaker Change: Insurance sell down.

Speaker Change: Halfway roughly they are close to halfway on that target whats remaining.

We have.

Speaker Change:

Speaker Change: In terms of proceeds the Vietnam sale.

Speaker Change: Have some other asset sales in the thermal portfolio that are of a smaller scale we have partnerships.

Steve Coughlin: We have partnerships of operating assets. We've done partnerships with our LNG portfolio. As you've seen, those can and may be extended. We've done partnerships, sell-downs at attractive, low-cost capital of our renewable operating portfolios, so those remain an option. And our technology portfolio, at this point, Fluence is not at a value that we would tap that. It is significantly undervalued, but we are optimistic down the road that that's a potential, so we're not counting on that. We do have other assets in that portfolio, like Uplight that we've talked about, that may be a candidate. So the universe is larger than what's remaining.

Operating assets, we've done partnerships with our LNG portfolio.

Speaker Change: As you've seen those can and may be extended.

Speaker Change: We've done partnerships sell downs at attractive low cost capital of our renewable operating portfolios.

Speaker Change: So those remain an option.

Speaker Change: And our technology portfolio.

Speaker Change: This point fluids is not at a value that we would we would tap that it is significantly undervalued.

But we do we are optimistic down the road that that's a potential.

Speaker Change: So we're not counting on that.

Speaker Change: We do have other assets in that portfolio like Uplight that we've talked about.

Speaker Change: That that may occur.

Speaker Change: Our candidate so the universe is larger than whats remaining whats remaining is only roughly $500 million.

Steve Coughlin: What's remaining is only roughly $500 million in that target through 2027, and so I feel extremely comfortable that we'll be able to execute on that between now and 2027, across the range of things. Okay, great. That's helpful.

Speaker Change: Target through 2007.

Speaker Change: And so I feel extremely comfortable that we'll be able to execute on that between now and 2027.

Speaker Change: The range of things that I've mentioned.

Speaker Change: Okay, Great that's helpful.

Steve Coughlin: And back to the IRA discussion here.

Speaker Change: And back to the D irate discussion here.

Steve Coughlin: Do you all have any view on kind of when this starts to take shape in the reconciliation bill? Feels like things starting to come to a head a little bit. And then also, just specifically on transferability, your view on whether Safe Harbor would cover you on that, even in a scenario where that were to go away? OK, let's see.

Speaker Change: Do you all have any view on kind of when this starts to take shape in the reconciliation bill feels like things starting to come to a head a little bit and then also just specifically on transferability your view on whether a safe harbor.

Speaker Change: It would cover you on that even in a scenario where that were to go away.

Speaker Change: Okay, let's see.

Steve Coughlin: I spent some time up in the Hill with key senators and congressmen. What I would say is that I do expect, in sort of a first draft, to come out of the House And that's to start the discussion. So that's certainly, I don't think, the final point that was made clear to us. I do think that there is a—what I heard was it was a very pragmatic approach. One, was the importance of... I would say reliability, in the sense that something like... If you look at safe harboring, I think that everybody I spoke to said that that's a very important component to maintain because that's really the credibility of, you know, U.S.

Speaker Change: I spent some time up in the hill with key Senators and congressmen.

Speaker Change: Well, what I would say is that I do expect sort of a first draft to come out of the house ways and means committee.

Speaker Change: And that's to start the discussion. So that's certainly I don't think the final point that was made clear to us.

Speaker Change: I do think that there is what I heard was it was a very pragmatic approach.

Speaker Change: Or the importance of.

Speaker Change: I would say reliability in a sense that something like.

Speaker Change: If you look at safe harboring I think that everybody I spoke to.

Speaker Change: So does that sort of a very important component to maintain because that's really the credibility.

Speaker Change: U S laws or with the U S. Our programs. So I feel very good about that I think regarding the <unk> era. It's.

Steve Coughlin: laws or, let's say, U.S. programs. So I feel very good about that. I think regarding the IARA, it's a question of, you know, certainly going to be addressed, certain aspects of it. I think that, you know, you might have an earlier sunset of it. You know, I would say very likely, actually, that's where the majority of the savings that they would score would come from. But having said all that, I think that, you know, at the end, it's going to be quite pragmatic. There are hundreds of thousands of jobs, depending on this. You know, a lot of people are going to be going into elections in 26, and you don't want to have a, you know, jump in unemployment in rural areas where a lot of this is getting done.

Speaker Change: It's a question of.

Speaker Change: Yeah, certainly going to be addressed certain aspects of it.

Speaker Change: I think that.

Speaker Change: You might have a earlier sunset of it.

Speaker Change: I'll say very likely actually that's where the majority of the savings that they would score would come from.

Speaker Change: But having said all of that I think that at the end, it's going to be quite pragmatic. There are hundreds of thousands of jobs depending on this.

Speaker Change: A lot of people are going to be going into elections in 'twenty six and you don't want to have.

Speaker Change: Jumped on unemployment in rural areas, where a lot of this is getting done and you also have the tax revenues, but this is going to generate so.

Steve Coughlin: And you also have the tax revenues that this is going to generate. So, you know, my feeling on this is that we will have something relatively early. That's not the final. Whatever comes out, it's not final.

Speaker Change: My feeling on this is that we will have something relatively early that's not the final whenever it comes out it's not final.

Steve Coughlin: When can reconciliation be done? You know, take it with a huge grain of salt. People think it's before the August recess, that people will want to have this done before they go out of town. So that's more or less the timeframe. But you know, I think the discussions were, you know, that I had, I think were very encouraging about thinking about what's, you know, good for the country and what can realistically be done. Appreciate that, Collar, thank you.

Speaker Change: When can reconciliation done.

Speaker Change: Ill take it with a huge grain of salt people think it's before the August recess that people will want to have this done before they go out of town, so that's more or less timeframe.

Speaker Change: But.

Speaker Change: I think the discussions or.

Speaker Change: But I had I think were very encouraging about thinking about what's good for the country and what can realistically be done.

Speaker Change: I appreciate that color. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question comes from Richard Sunderland with Jpmorgan.

Richard Sunderland: The next question comes from Richard Sunderland with J.P. Morgan. Please go ahead, Richard. Hey, good morning. Thank you, Richard.

Speaker Change: Please go ahead Richard.

Richard Sunderland: Hey, good morning.

Speaker Change: Good morning, Richard.

Richard Sunderland: I just wanted to follow up on transferability one more time. On an agency metric basis, what would be the impact to your FFO without transferability, and how do you expect the agencies to treat that? So, the transferability, as I said, Rich, is fundamentally the same cash and credit profile. The difference is the transfer credits do go through operating cashflow. So, there's no, in terms of S&P and Fitch, it really has no impact because they're focused on the parent free cashflow, whereas this comes in at the subsidiary level and pays down debt primarily. And so, it does get captured in the Moody's metric.

Speaker Change: I just wanted to follow up on Transferability, one more time on an agency metric basis, what would be the impact to your <unk> without transferability and I'd expect agencies to treat that.

Speaker Change: So.

Richard Sunderland: The transfer ability as I said rich is fundamentally the same cash and credit profile.

Richard Sunderland: The difference is the transfer credits to go through operating cash flow. So there is no in terms of.

Richard Sunderland: S&P and Fitch really has no impact to their focus on the parent free cash flow.

Richard Sunderland: This comes in at the subsidiary level and pays down debt, primarily and so it does get captured in the in the Moody's metric.

Steve Coughlin: So, I think we will need to work with Moody's to ensure that this is well understood. I think they do understand it, that it's fundamentally no change. The cash comes in when the project's placed in service, whether it comes from a transfer or from a tax equity partner and the debt gets paid down. So, I think practically it has no impact. And if we got to that point, we would, of course, work with Moody's, as we have, and they've been very constructive in understanding how renewables works, including the adjustments that they made in the last update that they gave.

Richard Sunderland: So I think we will need to work with Moody's to ensure that this is well understood I think they do understand it.

Richard Sunderland: But it's fundamentally no change that cash comes in when the projects placed in service whether it comes from a transfer from a tax equity partner in the debt gets paid down so I think practically.

Richard Sunderland: It has no impact.

Richard Sunderland: If if we got to that point, we would of course work with Moody's as we have in and they've been very constructive and understanding how renewables works, including the adjustments that are made in the last.

Richard Sunderland: Update that they gave so.

Steve Coughlin: So, I don't see it as a negative at all for the credit profile. Got it. That was very clear. So presumably on a Moody's basis, this would push out the improvement you've called out for 26. But you'd also expect Moody's to look through the impacts, given what you laid out earlier on the value through tax equity as being the same. I mean, look, I can't speak for Moody's, but look, it's very logical. We're talking about a geography issue on the cash flow statement, so... I have a hard time being that logic won't prevail there, that fundamentally the credit profile is exactly.

Richard Sunderland: I don't see it as a as a negative at all for the credit profile.

Speaker Change: Got it that was very clear so presumably on a moody's basis would push out the improvement you've called out for 'twenty six but you'd also expect Moody's to look through the impacts given what you laid out earlier on the value through tax equity is being the same.

Speaker Change: I mean look I can't speak for Moody's, but look I, it's very logical that we're talking about geography issue on the cash flow statement. So.

Speaker Change: I have a hard time being that logic will prevail there that fundamentally the credit profile is exactly the same.

Speaker Change: Yeah.

Steve Coughlin: Understood.

Speaker Change: Understood and then maybe I'll just follow up with one more I mean, I think there's been a lot of attention on transferability and maybe some fears out there that this first draft on the IRA could have.

Steve Coughlin: And then maybe I'll just follow up with one more. I mean, I think there's been a lot of attention on transferability, and maybe some fears out there that this first draft on the IRA could have a lot of negative headlines, and then we migrate to more reasonable middle ground. Do you think transferability is something that may come out in that initial draft and then goes back in? Any thoughts on sort of the magnitude of that headline risk initially versus where things might ultimately shake out in your earlier commentary? Thank you.

Speaker Change: A lot of negative headlines and we migrate some more reasonable middle ground do you think transferability of something that may come out in that initial draft and then goes back in any thoughts on sort of the magnitude of that headline risk initially versus where things might ultimately shake out in your earlier commentary.

Steve Coughlin: No, what I would say is that, um... There are two sort of groups. One is use of scaffolds. and there's one that sort of be more blunt. I think, again, there's going to be a compromise. So I really have no insight in terms of what the initial language can be, but it's clear, you know, bills always come out, you know, to start a discussion, so it has to come from the House and then it has to be resolved with the Senate, and you have to have this conciliation. So I just think that anything that comes out now is the start, and it's not the ending.

Speaker Change: No what I would say is that.

Speaker Change: There are two sort of groups one is it was a scaffold.

Speaker Change: And there's one that sort of be more blunt.

Speaker Change: I think again, there's going to be a compromise.

Speaker Change: So I really have no insight in terms of what the initial language can be but it's clear bill has always come out.

Speaker Change: Started the discussion so it has to come from the house and then it has to be resolved with a set it and you have to have this reconciliation. So I just think that.

Speaker Change: Anything that comes out now is the start.

Speaker Change: It's not the ending point, but I also again from my discussions I think they were very.

Steve Coughlin: But I also, again, from my discussions, I think they were very... constructive, very, very positive in general. But I think people understand the issues, which is what's most important.

Speaker Change: <unk>.

Speaker Change: Constructively very very positive in general, but I think people understand the issues, which is what's most important that's the most important thing is among other things.

Steve Coughlin: Look, the most important thing is, among other things, We want two things, energy dominance. and you want to, with the AI race. Both of those require a lot of renewable energy, well actually a lot of energy now, if you think about additional gas plants. If we order a new gas turbine today, the waiting period is between three to five years, to say nothing that it's not permitted and it's not in the interconnection. So, you know, if you're coming out with something that was very negative, let's say, to new energy. Well, you're forfeiting two of the most important goals of the administration.

Speaker Change: We want two things energy dominance.

Speaker Change: And you want to with the AI race.

Speaker Change: Both of those require a lot of renewable energy.

Speaker Change: Actually a lot of energy now.

Speaker Change: If you think about additional gas plants, if you order a new gas turbine today. The waiting period is between three to five years to say nothing that it's not permitted and it's not an interconnection queue.

Speaker Change: So you know.

Speaker Change: If you're coming out with something that was very negative, let's say two new energy.

Speaker Change: Well, you're forfeiting towards the most important goals of the administration. So that's why I felt that there was clarity in terms of cause and effect and what it's going to take to have energy dominance in what it's going to it's a question also timeframe.

Steve Coughlin: So that's why I felt that there was clarity in terms of cause and effect and what it's going to take to have energy dominance and what it's going to—it's a question also of timeframe. So, you know, this is a question that must be resolved in the next four, five years, and you know, we have to be pragmatic what we can get accomplished in that time period. So I feel that that is understood. So I'm, let's say, reasonably optimistic about where it's going to end up. Who knows the political path or headlines? I can't—you know, your guess is as good as mine.

Speaker Change: This is of course that must be resolved in the next four five years and we have to be pragmatic. What we can get accomplished in that time period. So I feel that that is understood. So I'm.

Speaker Change: Let's say.

Speaker Change: Reasonably optimistic about where it's going to end up who knows the political paths are headlines I can't.

Speaker Change: So your guess is as good as mine.

Anthony Crowdell: Perfect. Thanks for the time today. Thank you. Thanks, Rick. Thank you.

Speaker Change: Perfect. Thanks for the time today.

Rich: Okay. Thanks rich.

Speaker Change: Thank you I'll final question today comes from Anthony crowded with mid to high <unk>.

Ricardo Falu: Our final question today comes from Anthony Crowdell with Mizuho. Please go ahead, Anthony. Hey, good morning. Thanks for squeezing me in most of my questions, Richard, taking care of in front of me just quickly on Ohio. Some legislation passed earlier, I think this week, multi-year rate plans, but also maybe removal of OVAC revenues. Just curious the impact for A.S. Ohio, and does it change your plan on rate filing?

Rich: Please go ahead Anthony.

Anthony crowded: Hey, good morning, Thanks for squeezing me in most of my questions, which had taken care of in front of me just quickly on Ohio. Some legislation passed earlier this week.

Rich: Multi year rate plans, but also maybe even removal of.

Anthony crowded: <unk> revenues, just curious the impact for Aes, Ohio, It doesn't change.

Anthony crowded: Plan on rate filings.

Ricardo Falu: Thank you so much, Mr. Ricardo. So I would start saying that overall, the impact of the bill is net positive for us. while on one side eliminates the ESP. It's going to be now replaced by a three-year forward-looking distribution rate case with annual true-up, which is a more constructive regulatory framework in a growing business such as A.S. Ohio. In addition, the language clearly states that the current ESP-4 features will be extended from August 2026, which was the original expiration date, to May of 2027. So this will give us enough time to have the new rates coming from this three-year forward-looking framework in place.

Speaker Change: Thank you so much this week out of them. So I will start saying that overall the impact of the deal is net positive for us while on one side eliminates the ESP.

Speaker Change: It's going to be now replaced by three year forward looking distribution rate case.

Speaker Change: With annual true up which you saw a more constructive regulatory frameworks in a growing business such as Aes, Ohio.

Speaker Change: In addition, the language clearly states.

Speaker Change: Got a cataract ESP for features will be extended from August 2026, which was state or regional exploration.

Speaker Change: <unk> date to May of 2027.

Speaker Change: So this will give us enough time to have new rates coming from these three year forward looking framework.

Speaker Change: In place.

Ricardo Falu: I think this is very, very constructive, it eliminates regulatory lags, so again, very, very positive for a growing business such as AES Ohio. I think in terms of our timing for filing the distribution rate case, more likely it's going to be by the end of this year. With respect to OVET, the impact is estimated to be between $0 and $10 million. Why $0? It's because it depends very much on the financial performance of the asset or assets, I should say, because I'm talking about 2.3 gigawatt, 2 coal assets that provide capacity to PJM. We are seeing a significant increase in capacity prices, where you may recall, you know, it was around $29 and now $270 per megawatt per day.

Speaker Change: I think piece.

Speaker Change: Very constructive.

Speaker Change: Eliminates a regulatory lags so again very very positive for a growing business such as Aes, Ohio.

Speaker Change: I think in terms of our timing for filing the distribution.

Speaker Change: Rate case up more likely its going to be by the end of ACO.

Speaker Change: With respect to all of it.

Speaker Change: Impact is estimated to be between zero and $10 million light zero, because it depends very much on the financial performance of the asset or assets I should say because I'm talking about two three gigawatt to coal assets that provide capacity to PJM, we are seeing a significant increase.

Speaker Change: In capacity prices, where you may recall at.

Speaker Change: It was like around 29.

Speaker Change: And now to $70 per megawatt hour a day so it's.

Ricardo Falu: So it's going to be within that sort of range, $0 to $10 million, depending on the financial performance and capacity prices in PJM. And as I say, you know, all in all, net positive, and I think this regulatory framework with a three-year forward-looking, it's extremely contractive for A.S. Ohio. Great, thanks for taking my question. Thank you very much. Thank you.

Speaker Change: It's going to be.

Speaker Change: We think that sort of range zero to $10 million, depending on the financial performance and capacity prices in PJM and as I say you know.

Speaker Change: All in all.

Speaker Change: Net positive and I think these regulatory framework with a three year forward looking it's extremely constructive for us okay.

Speaker Change: Great. Thanks for taking my questions.

Speaker Change: Thanks, Jeremy.

Susan: Thank you that's all the questions we have for today and so I'll turn the call back guys. This is Susan how cool it for closing remarks.

Susan Harcourt: Those are all the questions we have for today and so I'll turn the call back over to Susan Harcourt for closing remarks. We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have.

Susan: 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.

Susan Harcourt: Thank you, and have a nice day. Thank you everyone for joining us today.

Susan: Thank you to everyone for joining US today. This concludes our call and you may now disconnect your lines.

Operator: This concludes our call and you may now disconnect your lines.

Susan: [music].

Susan: Yeah.

Susan: Yeah.

Susan: Yeah.

Operator: [music]

Susan: Hum.

Susan: Yeah.

Susan: Yeah.