The AES Corporation Q4 FY2024 earnings call

• Andres Gluski discussed 2024 accomplishments, resiliency of the business, and 2025 guidance. Signed 4.4 GW of new renewables PPAs in 2024. Completed 3 GW renewables and a CCGT in Panama. Renewables EBITDA expected to grow over 60% in 2025. Utilities invested $1.6B in 2024 for customer reliability and economic development. Energy infrastructure delayed coal plant closures. De-risked portfolio by selling Brazil assets and adding Chile renewables. AES Indiana received approval for new base rates and ROE of 9.9% supporting investment program.
• Steve Coughlin discussed 2024 financial results and capital allocation. 2024 adjusted EBITDA $2.64B vs $2.8B in 2023. Adjusted EPS $2.14 in 2024. Capital allocation included $3.1B discretionary cash, $1.9B in growth investments, $500M dividend. 2025 adjusted EBITDA guidance $2.65B-$2.85B, parent free cash flow $1.15B-$1.25B, adjusted EPS $2.10-$2.26

Renewables Business

• In 2024, signed 4.4 gigawatts of new power purchase agreements for renewables. Completed construction/acquisition of 3 gigawatts of renewables and a 670-megawatt combined cycle gas plant in Panama. In 2025, expected over 60% year-over-year growth in renewables EBITDA, with US renewables portfolio driving most growth. The 2025 renewable segment guidance incorporates changes in segment makeup, including sale of 5.2 gigawatts in Brazil and addition of 2.5 gigawatts in Chile.

Utilities Business

• AES Indiana and AES Ohio invested $1.6 billion in 2024, leading to a 20% rate base growth. Executing a multiyear investment program to improve customer reliability and support economic development, with among the lowest residential rates in both states.

Energy Infrastructure Business

• Completed construction of a new 670-megawatt fully contracted CCGT in Panama, increasing utilization of existing LNG terminal. Delaying closure or sale of a few coal plants due to increased demand in those markets, while remaining committed to full exit from coal generation in the long term

• Initiated 2025 adjusted EBITDA guidance of $2.65 billion to $2.85 billion, parent free cash flow of $1.15 to $1.25 billion, and adjusted EPS of $2.10 to $2.26. - Reaffirmed long-term adjusted EBITDA growth target of 5% to 7% through 2027. - Renewables SBU expected to have an average annual CAGR of 19% to 21% from 2023 guidance midpoint. - Utilities SBU expected annualized growth of 13% to 15% through 2027. - Plan to invest approximately $1.8 billion in new growth in 2025, with over 85% in the US

• Policy uncertainties affecting renewables tax credits and regulatory changes. - Weather-related events in Colombia and Brazil impacting EBITDA. - Balance sheet and funding constraints. - Exposure to hydrology, currency, spot price, and floating interest rate risks from Brazil assets

Q: On the cost savings, $150 million ramping to $300 million over time. Is the bulk coming from the parent, and where is the bulk happening in the portfolio?

A: Steve Coughlin said cost savings are spread across the portfolio, including renewables, and are run rates, not one-time. The proportion of renewables cost savings will remain roughly the same as it ramps up.

Q: On cutting CapEx and renewables growth, is this a pause or pullback, and what's the profile of assets in asset sales target?

A: Andres Gluski said they're focusing on executing on a 12-gigawatt pipeline, harvesting existing investments. Steve Coughlin said asset sales include coal exit, technology portfolio monetization, and partnerships, with the target including some coal exit and technology monetization.

Q: On cost savings examples, what are the reductions (personnel, process)?

A: Ricardo Fallu said cost reduction program includes resizing development program, sizing team, cutting new site origination and early-stage project costs, and a 10% reduction in workforce with elimination of management layers.

Q: On federal debt basis and credit downgrade thresholds, where are we and outlook?

A: Steve Coughlin said at parent level, recourse metric ended at 22% in 2024, Moody's metric at 10%. Expect to get into mid-twenties on recourse metrics by end of guidance period, and at or above 12% in 2026. Leverage ratios improve as operating portfolio grows relative to construction debt.

Q: On renewables investment cadence, coal contribution in EBITDA, and interest rates on parent maturities?

A: Andres Gluski said renewables investment cadence is executing on backlog, with no cliff in 2027. Steve Coughlin said coal EBITDA contribution is roughly a third of the previous $750 million guide remaining beyond 2027. On interest rates, they will refi parent maturities in July and January, typically refi 3-6 months in advance, and are nearly fully hedged for refis.

Q: On CapEx flexibility and technology customer contracts impact?

A: Andres Gluski said they're executing a plan confident will benefit shareholders, paying a healthy dividend. On technology customer contracts, AES feels confident in their pipeline as most projects are on private lands with few federal lands involved, not affected by relevant regulations