Q2 2025 The AES Corp Earnings Call

hello, everyone, and welcome to the AES Corporation second quarter, 2025 financial review call

My name is Emily and I'll be coordinating your call today.

After the presentation, you will have the opportunity to ask any questions, which you can do. So, by pressing star, followed by the number 1 on your telephone keypad.

I would now like to turn the call over to Susan Harcourt vice president of investor relations.

Susan. Please go ahead.

Thank you, operator. Good morning and welcome to our second quarter 2025 financial review call. Our press release, presentation, and related financial information are available on our website at aes.com.

Today, we will be making forward-looking statements.

There are many factors that may cause future results to differ materially from these statements, which are disclosed in our most recent 10K and 10 Q filed with the SEC.

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

Joining me this morning are Andre skooki.

Our President and Chief Executive Officer, Stephen Coughlin; our Chief Financial Officer, Ricardo Fu; our Chief Operating Officer; and other senior members of our management team.

with that, I will turn the call over to Andres

Good morning everyone and thank you for joining our second quarter 2025 financial review call.

Today, I'm pleased to reaffirm both our 2025 guidance and our long-term growth targets. Our business remains resilient, and we continue to execute on our strategy, which I will discuss in more detail.

Following my remarks Steve Coughlin, our CFO will provide additional color on our financial performance and Outlook.

Before delving into our second quarter results, allow me to share a few thoughts regarding the state of the electricity market in the U.S.

Obviously, the past couple of months have seen major policy announcements, which will have a significant impact on the sector. Let's not get distracted by some of the noise surrounding these developments.

It's important to keep in mind key market fundamentals.

Demand for energy in the U.S. is growing rapidly by historical measures.

Prices are rising and the bulk of new additions. Over the next 5 years, will be Renewables and energy storage. These are the technologies that can be feasibly built, given their shorter time to power Advanced development pipeline, existing Supply chains.

Competitive levelized cost of energy and customer preference.

To increase the amount of future power coming from fossil fuels, nuclear and enhanced geothermal.

While measures can be taken to increase generation from existing thermal plants.

New additions will take years to materially come online.

Some more than others.

In the meantime, AES has a mature pipeline of renewables and battery storage, with a substantial safe harbor and a backlog of signed PPAs positioning us to meet our clients' growing energy needs.

As an all-of-the-above energy company, we have the capabilities to deliver those technologies that are most cost-competitive and demanded by our customers.

We see our business model as supplying, not a specific technology, but the electric energy and capacity in the shape cost and reliability, the market demands,

over many years as is demonstrated its flexibility and Innovation time and again

Now, turning to our results, beginning on slide 4, we're executing well and on track to achieve all of our financial metrics.

Our performance was in line with our expectations, with adjusted ibitta of 681 million and adjusted, EPS, a 51 cents.

We are seeing significant growth in our Renewables, sbu with adjusted ibida. For the second quarter of 240 million representing overall growth of 56% versus Q2 last year.

This growth is directly related to the 3.2 gigawatts of new projects that we have added to our portfolio, over the last 4 quarters. We are also seeing the benefits of more projects with higher returns, which we forecasted earlier last year and are now hitting our results as these projects come online.

We're on track to add a total of 3.2 gigawatts of new projects in operation in 2025 year to date. We have completed construction of 1.9 gigawatt and we Approximately 80% complete on the remaining 1.3 gigawatts.

I am pleased to report that our progress so far this year includes the completion of the 1 gigawatts, which is the first phase in the largest project of its kind in the country.

As part of our construction efforts, we utilize our AI robotic solar installation technology maximally, which makes construction significantly faster, less labor-intensive, and more cost-effective.

Since our last call, we have signed ppas for an additional 1.6 gigawatts of new projects including 650 megawatts with meta bringing our backlog to 12 gigawatts.

The 1.6 gigawatts of new ppas is entirely with data center customers.

Further solidifying, our position as the leading provider of Renewables to this customer segment.

Now, turning to slide 5.

Our business is resilient to changes in Renewables policy, whether it's the new legislation signed by Congress, the prospect of additional tariffs or changes to IRS guidelines around tax credits.

We have significant protections due to the actions. We have taken over the last several years, including safe harboring ensuring a US supply chain and avoiding projects on Federal Land.

Let me also emphasize that for the majority of our business, any of the recent changes in U.S. policy are largely inconsequential. This includes our entire operating portfolio, our utilities, and our international business.

Turning to slide 6, we feel very confident in the strength of our backlog of renewables and energy storage projects, which have signed contracts but are not yet operational.

Of this 12 gigawatt backlog 4.1, gigawatts are international selling primarily to mining companies and data centers with no exposure to US policy.

Looking at our 7.9 gigawatt U.S. backlog, we plan to place in service 6 gigawatts before year-end 2027, all of which qualify for existing tax credits under recent legislation.

Of the remaining 1.9. Gigawatts coming online after 2027 nearly all its Safe, Harbor under the current treasury guidance.

Even looking out to 2028 and Beyond.

Our pipeline includes an additional 4 gigawatts of projects that are expected to be added to our backlog, over the coming year.

2 2033.

In short, our backlog is well protected. And we have a long Runway of projects that we expect to bring online with tax incentives.

Turning to slide 7 our supply chain strategy also provides us with strong protection from changes in US policy or potential future tariffs.

All of our major equipment is now either on-site or coming from U.S.-based suppliers with their own supply chains diversified outside of China.

We have essentially eliminated, any potential impact from previously announced tariffs and our projects comply with the restrictions on foreign entities of concern or Fiat.

Now, turning to slide 8 and our future growth, even as tax credits expire, we expect strong demand, which will enable us to maintain or improve our existing project returns and continue to rapidly grow our Ibiza.

We are uniquely positioned as the top provider of renewables to data center companies, with over 11 gigawatts of agreements signed to date. We are confident in our ability to deliver on our financial objectives for the following three reasons.

First, we're seeing robust demand for electricity driven, primarily by the rapid growth of data centers.

Meeting this demand in the U.S. will require over 600 terawatt-hours of additional power generated by the end of the decade, which is roughly equivalent to the current aircot system.

With this backdrop, as you can see on slide 9, the corporate PPA market for renewables has a long history of adjusting to account for changes in market conditions, with average contract prices moving as the underlying cost of building new projects has evolved.

It is worth noting that for data centers, electricity represents less than 10% of total lifetime cost on average.

Second turning to slide 10.

Renewables offer a competitive levelized cost of energy (LCE) for new generation, even without tax credits.

Over the past year the cost of a new gas turbine. Has more than doubled and Lead times have stretched to 4 years or more.

Additionally, new gas pipelines have yet to be approved, permitted, and built. As a result, a surge in new gas plants coming online will likely take time.

And third are strategy remains centered on meeting our customer needs.

Today, customers are asking for renewables and storage because they can be deployed quickly. At scale, I should add, AES has extensive gas development capabilities, and we are focused on delivering those solutions that large data center customers are requesting.

Finally, turning to slide 11 and the robust growth program we are undertaking at our U.S. utilities, we are executing on the largest investment program in the history of both AES Indiana and AES Ohio.

To improve customer reliability and support economic development.

In 2025, across these utilities, we're on track to invest approximately 1.4 billion in areas such as hardening, the distribution Network, smart grid, new generation and transmission buildout for data centers.

At as Indiana, we're making significant progress on our generation build up.

Earlier this year, we completed the Pike County energy storage project which includes 200 megawatts of installed capacity and 800 megawatt. Hours of dispatchable energy, the largest operational battery project in MSO

We're also on track to bring online the Petersburg Energy Center, a 250 megawatt solar and 180 megawatt Hour. Energy storage facility by the end of the year.

Furthermore, we're on schedule with repowering two of the Petersburg units from coal to natural gas.

We expect this project to be completed in 2026.

This quarter, we also filed a petition for a regulatory rate review with the Indiana Utility Regulatory Commission.

This rate case represents our first using a forward-looking testure.

Which will reduce regulatory lag and enable a more efficient investment program.

As we work to best serve, our customers with cost-effective and reliable electricity service.

In the third quarter.

In addition, with the passage of House Bill 15 this spring, we're working towards a new regulatory framework that will incorporate forward-looking gestures, significantly reducing regulatory lag in Ohio.

With our current ESB regulatory structure in place until early 2027, we expect to file for new rates later this year, which will include 2027 to 2029 as the test years.

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

Thank you, Andre and good morning everyone. I am very pleased to share that as had a great second quarter. Keeping us well on track toward our full year 2025 guidance targets.

First turning to adjusted ibida on slide, 13.

Second quarter adjusted Eva, de was 681 million versus 658 million a year ago.

this was driven by significant growth from new Renewables projects and the positive impact from cost reductions we announced on our fourth quarter call

These were partially offset by several portfolio changes, including the prior year, Warrior Run, coal PPA, monetization, the sale of AES Brazil, and the 30% sell-down of AES Ohio.

Attorney to slide 14.

Second quarter adjusted EPS increased 34% to $0.51 per share versus $0.38 in the prior year.

In addition to the IBA growth, drivers EPS also increased as a result of 185 million of higher us renewable taxes attributes.

This strong growth was partially offset by higher parent, interest expense and a higher adjusted tax rate.

Next, I'll cover the performance drivers within each of our strategic business units on the next 4, slides.

The 56% increase in Evita was as expected and puts us well on our way to achieving our full year. Guidance of 890 to 960 million

This was primarily driven by 3.2 gigawatts of new capacity brought online since Q2 2024 as well as the positive impacts from the cost reductions and scaling down of our development spending that we discussed on our fourth quarter call.

This year hydrology has normalized in Colombia improving results versus the prior year.

The net effect of moving Chile Renewables to the Renewables spu this year was offset by the sale of our 5 gigawatt, AES Brazil business.

In the utilities, spu lower adjusted pre-tax, contribution or PTC in the quarter was mostly driven by planned outages and the sell-down of as Ohio that closed in April.

These results were fully anticipated in our guidance and we expect significant growth in the utilities sbu in the year to go driven by new investments in the rate base.

Turning to our energy infrastructure, sbu on slide 17.

Lower IBA versus Q2 2024. Primarily reflects the prior year recognition of the Warrior Run, coal, PPA, monetization and Chile, renewable assets, moving to our renewable segments in 2025,

Partially offset by our acquisition of the remaining ownership in the Cochrane coal plant.

Excluding these portfolio changes energy. Infrastructure ibida would have increased by 23 million as a result of higher availability across the fleet.

finally lower ibida at our new Energy Technologies sbu, primarily reflects as a share of the lower results reported by fluence in their fiscal second quarter,

Turning to slide 19. We are reaffirming our 2025 adjusted Eva dog, guidance of 2.65 to 2.85 billion.

Driven by the robust 51% growth in our Renewables business year-to-date and our strong position heading into the second half of this year.

Growth in the year to go will be driven by the 3.7 gigawatts of projects brought online in 2024, the 1.9 gigawatts already brought online year to date, and the additional 1.3 gigawatts we will bring online by the end of the year.

Our business has reached a level of scale and maturity that allows us to operate. Even more effectively and efficiently which is improving ibida margins.

Mentioned hydrology, conditions in Colombia have normalized and we see our hydro plants. Well positioned to hit their targets through the end of the year.

We expect 7% year-over-year growth at our utilities spu driven by the 1.3 billion of rate-based investment. We've made over the last 12 months

We have already locked in the cost savings actions implemented during the first quarter which will yield at least the 150 million savings targets. We discussed on our fourth quarter call.

To put this year into context, when adjusted to exclude the impacts of asset sales year-over-year, adjusted EBA growth will be approximately 11%.

Looking beyond 2025, asset sales will be less of a driver due to the substantial progress we've already made.

This means that adjusted EBA growth will significantly accelerate in 2026 as the strong growth in our Renewables, and utilities businesses will not be offset by significant asset sales.

As a result, we still expect at least low teams ibida growth in 2026. Putting us well on track to achieve our long-term growth rate through 2027.

Now, looking at our 2025 adjusted earnings per share on slide 20.

we are reaffirming our guidance of $2.10 to $2.26 which exceeds the midpoint of the 7 to 9% long-term growth rate. We introduced back in 2021.

In addition to the drivers of adjusted IBAA, we expect higher interest expense as a result of new debt for our growth investments and a slightly higher adjusted tax rate.

We expect to benefit from higher tax credit monetization in the year to go as we complete an additional 600 megawatts of projects in the U.S. and expect these tax attributes to be weighted approximately equally between the third and fourth quarters.

Now, let's turn to our 2025 parent Capital, allocation plan on slide 21.

Sources reflect approximately 2.7 billion of total discretionary cash including achieving, the upper half of our 1.15. To 1.25 billion of parent, free cash, flow, targets reflecting, double digit, year-over-year growth.

Additional sources include the sell-down of our Global Insurance business that closed in the second quarter.

And we expect to borrow an additional 500 million at the parent to support our attractive growth investment plan.

On the right-hand side, you can see our planned use of capital.

We will return approximately $500 million to shareholders this year, with our $0.70 per share annual dividend.

while investing approximately 1.8 billion toward New Growth, primarily in the Renewables and utilities businesses,

We have also repaid approximately $400 million of subsidiary debt in line with our balance sheet optimization objectives.

Turning to slide 22.

We are reaffirming our long-term growth rate for adjusted. Eva of 5% to 7% driven by Renewables growth of 19 to 21% and utilities growth of 13 to 15%. We are also reaffirming our long-term growth rates for adjusted EPs and parent, free cash flows.

I want to emphasize that the recently passed reconciliation Bill, does not impact the growth plan included in our long-term guidance.

As Andreas discussed.

All projects coming online through year-end 2027 qualify to receive existing tax credits under the recently passed legislation.

Additionally, we have either already taken delivery of key components for our backlog projects, or we have secured domestic Supply chains. Which mitigate impacts of new tariffs.

These actions give us clear line of sight to achieving our long-term guidance.

As a reminder, as is adjusted IBA does not include Renewables tax credits.

As a result, we do not expect any reduction in adjusted Ava from the eventual sun setting of renewable tax credits.

I would also like to share a few thoughts on our balance sheet.

Our parent free cash flow to parent debt metric in the second quarter. Improved versus a year ago from 19% to 25%.

And we remain on track to reach our 12% ffo to debt Target with Moody's by the end of next year.

as we consider how the business will evolve with the step down of tax credits, toward the end of the decade, and Beyond, we feel confident in the resilience of our business due to our industry-leading position with data centers,

Data center customers have an incredible need for new power, and future expirations of renewable incentives are unlikely to slow this down.

Our expectation, is that PPA prices will adjust to fully remunerate invested Capital at attractive returns.

In other words, while future projects without tax incentives would require additional debt and equity to replace tax value monetization.

Those projects will also earn higher cash and Evita to remunerate that additional capital and Achieve our Target returns.

This also means that we could generate similar IBA and cash growth with fewer megawatts and without increasing capital needs.

We will maintain this flexibility to scale our growth investments to be in line with available capital sources within AES and our partners.

Looking beyond 2027, our growth will continue to be funded primarily with internally generated cash.

Partner capital and debt capacity is in line with our investment-grade credit rating.

As is future. Growth rates will be strong as declined. We've seen in our energy infrastructure, sbu related to asset sales and coal. Retirements will be largely behind us.

Allowing the high growth rates of renewables and utilities to dominate, as is the overall rate of growth.

In summary. I am very pleased with the progress. We've made toward our financial objectives for 2025, and Beyond, as our business strategy and execution, continue to prove resilient and successful.

With more than half of the Year behind us, I am confident. We will achieve our 2025 objectives and look forward to providing an update on next quarter's call.

With that, I'll turn the call back over to Andres.

Thank you, Steve. Before opening up the call to questions, I will share some closing thoughts.

As is business is resilient and we are reaffirming all of our 2025 and longer term financial and business objectives. We're on track to complete. 3.2 gigawatts of construction in full year 2025 and have signed 2, gigawatts of new ppas so far this year.

Our backlog of 12 gigawatts of signed PPAs is either international or Safe Harbor, and a majority will be completed by 2027.

As is, Renewables adjusted EBITDA grew by 56% in the quarter as we delivered on our construction projects.

At the same time, our balance sheet metrics are on track to meet all requirements to maintain our triple investment grade.

Our resilience is the result of years of preparation.

Of creating a domestic supply chain.

A safe harbor, backlog, and pipeline.

And being the preferred provider of the fastest growing market segment.

Namely data centers and corporate clients.

As has earned the reputation as the most reliable developer and builder of renewable projects, as well as the most innovative company in our sector.

We're seeing ourselves as a provider of electric energy and capacity with the cost shaped and carbon intensity that our clients demand

As will continue to deliver the solutions, our customers need, as we always have done in the past.

For all of these reasons, we feel confident in our ability to deliver on our financial commitments, through our guidance period.

and continue to show strong growth beyond.

With that, I would ask the operator to open up the call for questions.

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

As a reminder, if you wish to ask a question today, please do so by pressing star, followed by the number 1 on your telephone keypad. If you change your mind or feel like your question has already been answered, you can press star, followed by 2 to withdraw yourself from the queue.

Our first question, today comes from Nick Campanella with Barclays.

Please go ahead, Nick.

Hi, good morning team. This is safer Nick today and thanks for taking my questions.

Um first just wanted to touch on financial execution drivers. Um,

Timing for the rest of the year. And how does that affect Epps and EPA recognition? And also looking at longer term guidance into a post, obb world. What are your latest? Latest thoughts and potential timing to roll forward into 2028 or even a further uh as part of the multi-year guidance. Thanks.

Hi, good morning, Nick. This is Ricardo. So, I'll take the first part of your question with respect to the timing of the commissioning. Most of it will be, you know, I would say the third quarter and...

Small portion in the fourth quarter of this year. Uh, I think it's important to highlight that 80% uh, progress completion. We have all the equipment that we need on site so we can provide full confidence uh, in the remaining uh 1.3 gigawatt being commissioned uh by the end of the year.

Yeah and hey this is Steve. I'll just on on the second part and I I would also add that um, most of our growth.

This year is coming from uh uh capacity. That's already come online through last year and the first half uh of this year uh and the tax attributes related to, um, what Ricardo mentioned will be roughly split between the first 2 between the third and fourth quarters.

In terms of the longer term, uh guidance. We feel we feel very good. Um, you know, we're in our planning cycle but based on you know what's come out in the new bill.

Uh, and it's Andre's highlighted. You know, we're very well uh, positioned uh, Beyond 2027 given our safe harboring, given our domestic supply chain. Um, you know, so we see ourselves, you know, well on track in that period, uh, and so we will give an update and expect to extend guidance, um, in the February 25th, we, as we normally do. But, you know, we feel very good about the company even beyond the 2027 time frame.

Uh, Nick, Nick, this is Andreas. I would also add that, you know, we've always hit our construction targets that we've given. Um, and you know, other things like, you know, we have avoided public lands for our projects, and you know, there's a high component of energy storage on this. So, uh, overall, you know, we feel very good about hitting our targets.

Got it. Thanks very much, that's very helpful. Um, and I guess maybe Switching gears, I understand, uh, we've all seen the headlines about a potential acquisition of the company and while um, I know you can really opine directly on that. Could you maybe talk about how, um, how are you seeing the value of your underlying business?

Is currently versus where you traded. Uh, 2 3 years ago, obviously the Renewables backdrop has changed significantly. Uh but do you see private markets would still value your business higher than where the public market is currently. And if you were to pursue something for the whole company, uh what can be the regulatory hurdles required? Thanks.

Yes, look Nick. What I would say is, you know, we have seen over the last couple years, you know, we feel our company's been undervalued, consistently undervalued, uh, you know, just looking at today's call. Look at the strength of our backlog. Look at our execution, look at the clients that we have and also look at the, the flexibility that the company has, you know, we are really are in all of them both companies. I mean, we always had a foot in gas as well, you know, over the last 5 years, we've done about 2, gigawatts of new gas plants. And we're doing a conversion from coal to gas and 1 gigawatt, conversion from cold to gas now and we have the possibility of doing gas as well. We have other sites, we have other things in development. So what I would say is that if you look at all those factors, uh, you know, we really are a company that's oriented to serving our customers and we're not just 8, Single technology companies. So we'll combine the Technologies, uh, with the tax incentives, with the customer preferences that make sense. Uh, but our primary aim is is financial

So, to really do the very best, create the most shareholder value that we can from this portfolio. So we've been executing, and therefore, if you look at what the company consists of and our performance, you know we feel that yes, we've been undervalued over the last couple of years.

Understood. That's helpful color. Thanks a lot.

I'll leave it there.

Thank you.

Thank you. Our next question comes from Richard Sunderland with JP Morgan. Please go ahead, Richard.

Hi. Hi. Good morning. Can you hear me?

Yes, Richard. Good morning.

Great, thank you for the time today. Uh, you know, looking at 5 and 6 here, I'm wondering how you think about the risk to Safe Harboring from the executive order and potential changes to guidelines. Is there anything specific to your Safe Harbor activities that gives you confidence in that outlook?

I I'll give a high level answer and then I'll pass it to Ricardo, but I would say that

look overall, you know we've been very um looking at how to

Have a robust position.

And this is sort of a philosophy. We've had when you think about Co we're the only large developer that didn't postpone, you know, forget even that abandoned and any big projects as a result of Co. So, uh, thinking about what potential changes could come, you know, we have been, you know, very careful, you know, avoiding any uh public lands for example. Uh, we have been um, you know, our if you think about our pipeline in a high component of that is uh, is energy storage or or Batteries Plus energy storage so, you know, overall we're in a pretty robust position, uh, going into this. So on the specifics, I'm going to go ahead and pass it to Ricardo.

Good morning, uh, reach out. So, you know, let me start by saying that, uh, out of the 7.9 gigawatt of us backlog. And I, I think, you know, just to repeat what we have in the slide. Uh, 16 6 GW will be placed in service by the end of uh uh the 2027 so by December, 31st 2027 so they are not these projects. The 6 gigawatt are not exposed or subject to any modification by the new treasury guidance. Because by the law they have access to the tax attributes and we uh can provide full confidence that we can bring and where these projects are in construction and we will bring them online or place them in service before December 31st 2027 for the remaining 1.9 uh as an address mentioned nearly all uh already have a safe harbor protections uh under the treasury or existing treasury guidance and

In no event. We expect, uh, the new treasury guidance to be applied, retract retract. Uh, we respect to the executive order. There is another uh, element there which is, which relates to fio, which, uh, applies for project that start construction, uh, on or after January 1st 2026.

As all our projects already started construction, or nearly all, we have no exposure to this uh field uh, you know, potential changes uh as part of this uh treasury guidance. And I should also say that, you know, as a first mover in terms of securing and supporting uh domestic or us manufacturing for solar wind and storage. We can comply even with the highest uh, requirement or restriction, uh, for field even uh, that they will not apply for the projects, uh, in our backlog.

Got it. Thank you for the commentary there. And then it turned to the utility side. We've seen, sort of across the space, a lot of load updates on the quarter. Seems like, you know, pockets of the country and even broadly where there's a lot of acceleration of activity. Curious, you know, given you've already picked up some benefits on that side, how you're seeing overall inbounds and interest into your service territories. Anything notable, either on the court or on the horizon here, on the load front at the utilities? Thank you.

Look is, you know, there's strong interest and and especially in in our 2 utility. I believe they're among the fastest uh, growing in the country. Uh, you know, we've signed about uh, 2 gigawatt of, you know, data center additional data center demand, and then we would expect more so

yes, we're we're having inbounds and uh,

Yes, you know, the demand continues to be strong. So again, across the board, we have positioned ourselves with that sector that's most robust and most rapidly growing.

Great. Thank you for the time today.

Thanks Richard.

Thank you. Our next question, comes from Michael Sullivan, with wolf research. Please, go ahead. Michael

Hey, good morning.

Morning, Michael. Um, hey, maybe I missed this, but is there any more detail you can give us on the PPA that you signed in the quarter, whether it be location or, uh, resource type?

Information that we've given is that, you know, 650 was with meta.

Uh, you know, all of the 1.6 that we've signed is, you know? Uh, and again, this is since the last call uh are with data center customers and you know, we'll provide more information going, you know, going into the future. You know, in general we're somewhat skewed towards so solar Plus batteries overall. That's that's the Technologies we're strongest in.

Okay, fair enough. Um, and then, yeah, I mean we've talked about this a bit, I think on some of the calls, but just any further evolution in your thoughts in terms of new gas plant builds for data centers? Have there been conversations or progress there at all? Or is there still mostly a skew towards renewable storage, at least for you?

So, you could question, is there... if there's a...

Conversation about gas build to back up data centers. Look, as I...

Sort of, you know, indicated we will use all the technologies that best meet our customers needs.

So if our customers would want gas as part of the package, absolutely. And you know, we have the capabilities as I said, you know, we've always been building gas plants, we have 10 gigawatts under operation today. So you know, we feel very comfortable with that. But, you know, we're going to react to what our customers require.

Okay, great. And then just a quick one on the utilities. Um, can you give us a sense of...

How much lag you're seeing in Ohio today and then what that can move to in a in a 3 year forward test year world.

Uh, yeah, this is Steve. So, look, we're very happy with the new, uh, regulatory framework allowing the 3-year forward rate cases. So, we have an existing rate case under the prior framework pending.

Uh, and we're expecting that um, you know, settlement in in the relative near-term in the coming months.

And new rates to be in place, uh, q1 of next year. But we're also moving forward, uh, with our plans, to file under the new 3-year, forward-looking rate structure, um, likely, uh, later this year and would expect rates, uh, in 2027, uh, under the new, uh, rate structure. So this is a really, uh, attractive, uh, structure for a utility with 3 or 4. Looking it, it, it significantly, uh, you know, largely eliminates regulatory lag, on our investment. And so I think it's good for uh, utility good for for investing to provide the the best service for our customers. And to support, um, the

Rapid low growth that Andre mentioned is coming, and to have very, uh,

Uh, regular and quick return on those investments. So, uh, that's the timing, and we’re looking forward to it.

Okay, thank you very much.

Thank you.

Thank you. Our next question comes from Julian de Moon Smith with Jeffreys. Please go ahead, Julian.

Hey, good morning, team. Thank you guys very much for the time.

Good morning, Julian. Can you guys hear me?

Hey absolutely excellent. Hey so wonderful. Hey I um, I just wanted to follow up on these articles in recent weeks. I just can you elaborate a little bit about the situation. It was a bit ambiguous as as to understand the Strategic um, developments here. What actions has the board taken did you all initiate this or has there been sort of an inbound formal bid from a third party? Just I I get that it might be difficult to speak to specifically at times but just in terms of what what actions does the board take into this point um with regards to reviewing the Strategic direction of the company and then separately there's also been some articles out there about revisiting the the the stable of unicorns as you like to call it address. Um, I suppose up light specifically here, can you speak a little bit more to asset sales within the plan. And within that, um, how that might?

Might fit against the broader strategic undertaking at hand too.

But you know, we would only do them when we feel the price is right. So, you know we monetize some affluence when we thought the price was right. Uh, and we will do so with some of the other ones. Uh, I think that some of the current developments, you know, make things like maximum potentially much more valuable because if there's a...

Let's say rush to complete projects by the 2027 uh end of year guide. You know, if you can build a solar farm and have the time, that's certainly becomes much more attractive. So that's let's say the 1 that uh, we have a lot of interest in. We're very pleased by how it performed in the bellfield 1. And now it's uh, has a bigger role in bellfield, too, so that's that's about all I can say because, you know, obviously as you uh, well know we can't comment on any uh, you know potential asset sale until it actually occurs.

You can't confirm necessarily that the board is elected to do anything either.

You know, as I said, we don't comment on any public market transactions and we never have

Okay, if I can pivot as quickly back to the other side of this, so you've made an allusion to it on the EO backdrop, and just what, what are your expectations without? I mean, I get that whatever you can say on this thus far, but how would you set expectations about the EO specifically here? And then related, how are you thinking about the cadence of your development business? I know,

You already alluded that you provide specific targets year-end here, but how do you think about the overall trajectory of the business when you think about the back half of the decade and the implications that might come from said EO or otherwise, right?

Yeah, look what I can. You know, we don't really speculate too much on sort of what's going to come out of an executive order. But look what we expect is, there's a number of competing. Um,

Let's say desires here. You know, 1 is the need to power data centers. What can be provided, uh, in the time frames needed to sort of win this competition International competition for AI dominance. So I think that's 1 second, you know, there's there's a lot of jobs involved with, uh, building renewable. So you know,

Obviously they're indicating that they want to transition but that transition has to be done in a in a feasible, orderly fashion that meets all of the various needs you know for more energy for AI dominance uh for jobs for growth Etc. So that that's what I would expect is that all these factors are taken into consideration.

um, regarding the second question was, um,

which is how that fits in, right regardless of the

The, the timing and Cadence like, how would you broadly set expectations about the back half of this decade? Given that sort of whatever the timing is of that phase out. Given that phase out. How would you frame expectations of the initially?

Look, as we indicated, we continue to expect strong growth.

Because it's not a question of the technology; it is the question of the ability to put together and supply clients with what they want.

So, as you know, we are not going after, like, um, megawatt goals; we're going after financial goals. And so, you know, we have the constraint that we're going to remain triple investment grade and we're going to continue to pay a dividend. So within those, you know, uh, confines, we will grow.

in an orderly fashion. And I also say that if you have a sort of continuous growth, um, and and steady growth, it's much more uh, cost efficient uh, than if you have sort of spurts and and and valleys, you know, so that's what we're going to do. I don't expect any uh, you know uh post when these credits burn off, they'll they will continue to to grow at at at strong rates. And I would also add that we're the only large company, which has International experience. So, 30% of our new growth is outside of the us and we have no tax credits. And quite frankly, we have higher margins, uh so it will basically be as we've said in the past.

Our us business should look more like uh our international business. Uh and it's very likely that it will also add a component of gas as well and and that's fine with us, we're we're capable of doing that. Um, and it's Steve also mentioned, you know, the the profile of cash Etc is is actually somewhat more favorable than than using the tax credits. But of course you have to use the tax credits because that's what makes the projects competitive for your clients but in the absence of them, you know, we're we've shown, you know, over the years we're perfectly capable of making a very good business without tax credits,

You said growth earlier?

Well, we’re not going to give you know, uh, guidance outside of the period. But, as we said on the call, we feel very confident that this company is going to continue to grow its strong rates, and that, you know, as the circumstances change, you know, we will adapt to them. And I guess, you know, our experience in developing markets gives us an advantage because those markets’ regulations have tended to be much more volatile than in the States. So for us, you know, again we feel we’re in a very good position, and we have all the technologies we need. And, you know, as new technologies become available, say something like enhanced geothermal, you know, we’ve been dabbling in that, and we’ll be ready to provide that for our customers, even SMRs. Although I think that’s quite a ways off—I think that’s probably a decade off.

Yeah, I would just add that, you know, Julian, our backlog, as we show in the slides, is well productive even beyond 2027. And so, you know, we see that growth continuing to be strong and, even then, the demand is so robust.

Will evolve? Technology is Andre said uh pricing will adapt in terms of what the the net cost of of uh projects uh uh becomes. And then you know, as we described we always maintain flexibility here. Uh, we don't necessarily need to build as many megawatts. If if the investment is more concentrated without tax attributes in the renewable piece of the business. We also, um, you know, maintain the ability to sell down as we've done in the past.

So, um, because the IBA and cash yield will actually go up on a per megawatt basis, we can generate similar returns with, in fact, uh, less megawatts. So, you know, we'll, we'll adapt. But, you know, we feel very good about how well position we are through through the, the very long term.

Thank you guys very much.

Thank you, Julian.

Thank you. Our next question comes from Ryan LaVine with City.

Please go ahead Ryan.

Good morning.

Good morning. How much cash flow is associated with Maximo and the AES plan? And is there any color you can share around the financial metrics or commercial interest you're seeing with that, uh, sending your portfolio? Look, at this point, there's nothing in the plan for Maximo in terms of commercial interest. You know, we've had a considerable amount of inbound, but you know, our plan is this, right? Currently, we're going to have about four of these operating. And, you know, we are.

I guess you would call it beta testing. You know, we're getting more and more efficient. We're using Union Crews; you know, its main advantage is that it can go faster with the same amount of people—2 to 3 times faster. But I think what's very important is that in desert settings, where you have limitations on the hours worked and again, picking up, you know, 65 pounds.

Solar panels. It it requires you know, very strong people to do that. So with maximum, anybody can do this job so you can work. Not 6 hours, you can work 18 hours. So it has the advantage of, you know, being more efficient but also getting the projects done faster. So it would have a multiple of the efficiency of of getting these things done, which means, you know, less working capital but very important with the current guidelines where you have a a a deadline that the project has to be in service. Uh, could be very advantageous. So we should go to Ford or a couple dozen next year uh and we will use those internally and so in terms of selling them to third parties, that's probably 2027 or or Beyond uh, when we have that. So,

To give you sort of a time frame, which is similar to what we did with batteries, you know, for several years we put them on our own fleet, and only after that did we start to commercialize them. And, you know, there was a lot of learning, but we'll get a much better price once this product is perfected.

Thanks. And then in the prepared remarks, the the company is gas generation, build, that capability was highlighted just to clarify is the effort that you were speaking to more around back of generation for for a dentist in or build out or was that a more uh, broad effort that the companies pursuing?

If that, if data centers request them, you know, we're capable of building them and we have the capability of expanding sites, for example, to do it very quickly. So, uh,

The point is we don't count it as part of our, uh, pipeline. You know, we don't cook out. For example, the 1.1 conversion is part of our pipeline. We've basically sent it that on renewables, but we have the capabilities of doing more gas. Um, you know, for example, in other places as well, even the Dominican Republic, there's the possibility of doing more gas. So we have that in our arsenal, and it's a question of what the, uh, what our clients demand.

Okay, and then, um, just in terms of the renewable industry, uh, from a higher level, do you see consolidation given the policy uncertainty at the U.S. federal level? And does that create opportunity for your standalone business to acquire some assets or high-grade your portfolio?

Sure. I mean, obviously, I think it will be more difficult for the smaller, less capitalized developers in this environment. Um, so I certainly think that there will be opportunities. We have been doing this, you know, if you think of over the past five years, we've been rolling up smaller developers into AES. So I think there will be continued opportunities like that. We'll also have the opportunity to buy advanced-stage development projects.

And we'll have to weigh, you know, whether it's more profitable to take and develop a particular project we have in our pipeline or acquire it and then finish it. So, Bellefield is a good example of that. It's one of our best projects, and it was 2 gigawatts, which was a, let's say, medium stage acquisition.

Appreciate the color.

Thank you, Ryan.

Thank you. Our next question comes from David Aro with More.

David.

Hey, thanks so much. Good morning. I was wondering what the bookings trajectory has been in July post the OBB BM. Just wondering if there's any evidence of a pickup in activity now that the level of clarity is improved for the industry.

So then this Ricardo thanks David for, for the question. So what we are seeing is, uh, you know, as Andreas and also Steve mentioned, you know, the, the money is extremely strong. We see our customers, of course, uh, you know, trying to lock in, uh, ppas as as as as, as fast as they can, uh, possibly do it. Uh, why is that? Because, you know, of course, there is an intent of still getting some benefits from, uh, you know, the tax, um, incentives. Uh, we do have a 4 gigawatt, uh, of

Projects in our pipeline. So, not yet, uh, contracted that, of course, you know, our, uh, very attractive, uh, for our for our customers. Uh, but, uh, also, as Andreas mentioned, we are very, very focused on the big Tech, customer segments, uh, large and profitable, uh, ppas. So we are, of course balancing between, you know, of course, the, uh, the desire of our customers to move, uh, you know, uh, these projects along and sign PPA fast, uh, to make sure that, uh, you know, we are disciplined in terms of having all the permits, all the equipment and also ensuring that we can, uh

I would say capitalize on the great work that we have done Safe, Harbor in these projects and and, you know, the fact that they are very unique, uh, in the market that will adjust for the, you know, removal of the tax incentives going forward. So, we are seeing strong demand. Uh, they are, you know, trying to look, uh, uh, ppas, uh, uh, prices as soon as possible. So I think, uh, we feel very confident, uh, in our ability to uh, sign more ppas uh, in the, in the year to go. So, stay tuned, and we will be sharing more as we assign those contracts.

Great, yeah, thank you for that. And it, you know, it was solid bookings. Obviously, from data center customers. Um, great to see that acceleration. I was wondering if there's any inflection in those data center in that data center Renewables demand, anything that might have kind of sparked the industry recently, um, is that an inflection that you saw in the quarter specifically with, uh, with that customer sets?

Just for the removal of the tax incentive. This is a fixed uh, price for 20 years. So that our customers, of course, appreciate they don't have the volatility of uh of any fuel Associated to that generation and third uh you know, Renewables on a megawatt hour. Uh basis still more competitive even without tax incentives than any other uh, source of uh, electricity. So, uh, there is no, uh, we don't see any drop uh, in in demand or the interest of our customers.

Quite the opposite.

Excellent, thank you so much.

Thank you, David.

Thank you. At this time, we have no further questions. As far as technical, back over to Susan.

Closing comments.

We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Thank you, and have a nice day.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.