The AES Corporation Q3 FY2024 earnings call

• Third quarter results were generally in line with expectations, with adjusted EBITDA with tax attributes, adjusted EBITDA, and adjusted EPS reported. • Renewables business: Since Q2 call, added 1.3 gigawatts of new PPAs to backlog, year-to-date total at 3.5 gigawatts (over 70% with corporate customers), on track to meet 2023-2025 PPA target of 14-17 gigawatts. Completed 1.2 gigawatts of new projects year-to-date, with strong supply chain management. • U.S. utility businesses: Embarked on most ambitious investment program in history, AES Indiana and AES Ohio are fast-growing with projected double-digit rate base growth through 2027. Received regulatory approvals for new rates in Indiana and Ohio, with significant investment made and seeing benefits. • Asset sales: Announced plan to sell down 30% of AES Ohio to CDPQ, closed sale of equity interest in AES Brazil, with over three-quarters of $3.5 billion asset sale proceeds target signed or closed through 2027. • Tax value: Renewables team expects to capture over $200 million in tax value upside this year, reducing growth capital needs.

In the third quarter, adjusted EBITDA with tax attributes was approximately $1.2 billion, adjusted EBITDA was $692 million, and adjusted EPS was $0.71. Renewables EBITDA was down $68 million due to breaking drought conditions in South America. The Energy Infrastructure SBU was down $221 million. The Renewables SBU saw higher EBITDA with tax attributes driven by significant growth from new projects in the U.S., but was offset by declines in Colombia and Brazil businesses. The Utilities SBU had lower adjusted PTC due to prior year settlement and higher interest expense, but was offset by returns on new rate base investment in the U.S. The New Energy Technologies SBU had higher EBITDA reflecting continued high growth and margin increases at Fluence. In terms of revenue contribution, details weren't explicitly broken down by exact percentage for each segment, but the renewables and U.S. utility businesses were highlighted as areas of robust growth.

• Reaffirmed 2024 adjusted EBITDA with tax attributes guidance of $3.6 billion to $4 billion and adjusted EPS guidance of $1.87 to $1.97, expecting to be in the top half of both ranges. • Now expects adjusted EBITDA to be towards the low end of the 2024 guidance range primarily due to extreme weather in Colombia and lower margins in the Energy Infrastructure SBU. • Reaffirmed expected growth rate through 2027. • Renewables segment expected to grow significantly in 2025 with emerging La Nina conditions expected to return South America to better hydrology, and U.S. bringing online nearly 2 gigawatts of new capacity by year-end. • U.S. utilities expected to continue growth with returns on new rate base investment.

• Extreme weather events such as the record drought in South America and flooding in Colombia negatively impacting renewables performance. • Potential changes in U.S. tariff policy affecting the supply chain, although positioned well with a resilient supply chain with majority of project components manufactured domestically by 2026. • Market policy changes like elimination of investment tax credit or production tax credit, but uniquely positioned due to corporate customer need for renewables, resilient supply chain, and Safe Harboring protection from policy changes.

Q: Nicholas Campanella asked about progress towards the renewables PPA target and growth into 2025.

A: Andres Gluski stated they feel good about the supply chain management and construction program, with renewables expected to grow significantly in 2025 as South America returns to normal hydrology and the U.S. brings online nearly 2 gigawatts of new capacity. Steve Coughlin added about the installed base of renewables being significantly higher and utilities growth contributing.

Q: David Arcaro inquired about the higher-than-expected tax credits.

A: Steve Coughlin said it stemmed from maximizing tax value through qualifying for energy community sites, research to justify adders, and successful transfers, with potential for more upside in the future.

Q: Durgesh Chopra asked about the hydrogen project with APD and Moody's credit rating.

A: Andres Gluski mentioned they have an attractive 1.5 gigawatts of renewables for hydrogen with potential Asian buyers, and Steve Coughlin said dialogue with Moody's is constructive with an expected update before year-end.

Q: Julien Dumoulin-Smith asked about credit metrics, asset sales, and Palco.

A: Steve Coughlin said credit metrics at the parent level are strong, asset sale program successful, and Palco has robust investment and growth plans with double-digit rate base growth expected.

Q: Angie Storozynski questioned renewable power EBITDA and free cash flow.

A: Andres Gluski and Steve Coughlin explained renewable EBITDA affected by one-time events but expected to grow significantly in 2025 with return to normal conditions, and free cash flow distribution timing is normal with clear visibility.

Q: Michael Sullivan asked about growth in 2025 and gas at the utility and wind supply chain.

A: Steve Coughlin said an update in February, gas in the utility to be seen in the IRP, and more balance between wind and solar in U.S. projects.

Q: Ryan Levine asked about Colombia impact return and California spark spreads.

A: Steve Coughlin said Colombia conditions are improving, fourth quarter expected higher, and California spark spreads impact on Southland discussed with hedging strategy.

Q: Richard Sunderland asked about monetizing new energy technologies investments.

A: Andres Gluski said they will monetize new energy technologies investments when appropriate, well ahead of the 2027 plan.