The operator introduces the AES Corporation's third quarter 2023 financial review call and turns it over to Susan Harcourt, the Vice President of Investor Relations. Harcourt discusses forward-looking statements and introduces the other members of the management team. CEO Andres Gluski then gives an overview of the company's financial results, addressing concerns from investors and reaffirming their financial metrics for the third quarter.

The company is pleased with the results of their renewable energy contracts and has seen strong demand from technology companies. They have signed 3.7 gigawatts of new contracts this year and expect to sign at least 5 gigawatts by the end of the year. They have also secured a first-ever developed transfer agreement for 975 megawatts of solar plus storage. Their backlog of projects with signed contracts is 13.1 gigawatts, with over 70% expected to come online by 2025 and 44% already under construction. The company has increased their construction target for the year to 3.5 gigawatts.

The company has seen a significant increase in renewable projects and plans to continue this growth through asset sales rather than issuing equity. They have already secured financing for the year and are in discussions with potential partners. The company also has a strategy in place to minimize the impact of higher interest rates on their debt.

In the fourth quarter, Corp has been able to pass on higher costs and interest rates in their new PPAs, and they are committed to maintaining their investment-grade credit ratings. The CFO, Steve Coughlin, discussed their strong third quarter results and their plans to adapt to current financial market conditions while minimizing their exposure to interest rates. Adjusted EBITDA was just over $1 billion, driven by higher contributions at their Renewables SBU and improved results at Fluence. Adjusted EPS was $0.60, with higher parent interest expense and an adjusted tax rate.

The paragraph discusses the performance of the company's strategic business units, with a focus on the Renewables SBU and Utilities SBU. The Renewables SBU saw higher adjusted EBITDA, driven by new projects and higher margins in Colombia. The company has also raised $1.8 billion in tax capital financing and plans to use tax credit transfers to monetize tax credits in the future. The Utilities SBU saw higher adjusted PTC due to the recovery of prior year's purchase power costs. The company's utility growth program is also making progress, with approval for a new Electric Security Plan and plans to grow rate bases at a 10% average annual rate through 2027.

The company plans to invest 80% of their planned investments through 2027 in approved or under FERC formula rate programs. They are on track to increase capital expenditures by over 35% to modernize and improve system reliability. The Energy Infrastructure SBU saw lower adjusted EBITDA due to significant LNG transaction margins in the prior year, offset by one-time expenses and higher revenues from the monetization of a PPA. The New Energy Technologies SBU saw higher adjusted EBITDA thanks to improved results at Fluence. The company expects to achieve the top half of their 2023 adjusted EPS and parent free cash flow guidance, and reaffirms their adjusted EBITDA guidance.

The company expects to exceed their tax attribute estimate for the year and has secured external sources of capital for 2023. They will prioritize their credit profile and investment-grade ratings, and will not issue equity at current share price levels. They plan to increase their asset sale target and accelerate their plan to achieve asset sale proceeds in 2024 and 2025. The company also has the option to transfer tax credits to increase free cash flow and fund growth.

The company plans to exit its coal businesses in most markets by the end of 2025, but may delay the exit of a few select plants until 2027 to support electricity reliability. They expect to fund their remaining capital needs through asset sales and debt issuances. The company is hedged against future increases in interest rates, with their long-term debt being fixed and future project debt being pre-hedged. Their project debt structure allows for higher leverage.

The speaker addresses concerns about the future of the renewable sector and global warming. They mention the effects of climate change, such as record temperatures and natural disasters, and how it is affecting the general public. The speaker also mentions that even apolitical actors, like insurance companies, are being impacted by climate change and pulling out of vulnerable areas.

The author believes that AES is well-positioned to benefit from the ongoing energy transition due to its focus on resilient and lucrative opportunities in the renewable energy space. The company is a major supplier of renewable energy in attractive markets and has a strong reputation for reliability among premium customers. AES is also an innovative company, developing new technologies such as grid-scale energy storage and green hydrogen production. The author believes these efforts will benefit shareholders in the long term.

The speaker discusses their company's renewable energy projects and their focus on maximizing shareholder value. They mention strong demand from customers, especially in markets like California and New York, and from corporations in the tech and data center industry. They have not seen a slowdown in demand for their projects.

The company is seeing strong demand for their target customers and is confident in their asset sale outlook. They have a favorable position in the market and are receiving interest from potential partners. The sell-down of renewable projects is going well and they typically sell down after projects come online. These projects have low risk and long duration cash flows.

AES has attractive assets that have been yielding higher equity returns, and this has not been affected by the decrease in base rates. The company expects to see a $0.10 EPS upside from projects being moved from 2024 to late 2023, and a portion of this is already factored into their raised EPS guidance. They have a clear line of sight to this increase and are confident in their year-end numbers. There have been reports of weakening credit metrics, but the company is focused on maintaining a strong balance sheet. The expectation is that asset sales will result in a decrease in cash flow, but the company is working to maintain their FFO debt metrics and avoid any potential downgrades.

The company's credit metrics fluctuate throughout the year due to construction balances and the use of the corporate revolver. However, the company is in a high-growth mode and regularly exceeds their credit thresholds. Their leverage is amortizing and they prioritize maintaining investment credit. The company is confident that their plans, including asset sales, will not negatively impact their credit metrics.

The speaker asks a question about the transferability of tax credits mentioned by Andres Gluski. They want to make sure that this is not just a way to boost credit metrics and that the traditional tax equity structure is still in place. Steve Coughlin clarifies that AES has always been maximizing their tax credit value.

The speaker explains that transfers offer a broader market and more liquidity for tax credit monetization. They will still do both transfers and accelerated depreciation, but transfers are simpler and more liquid. The speaker believes this should be included in operating cash flow, and there may be upside in cash flow metrics due to more transferability. However, this does not change returns or increase leverage at the projects.

The speaker discusses the credibility and track record of their company and how they choose the best credit option for their projects. They also mention the attractiveness of renewables compared to other sources of power based on the levelized cost of electricity. However, they acknowledge that not all locations may require additional generation sources and that the issue with renewables is having 24/7 dispatchability.

Andres Gluski, CEO of the company, was asked about the flexibility on the retirement of the coal plants. He confirmed that it was due to the market backdrop and not delays in renewable energy projects. The company needs regulatory approval to retire these plants, and they are currently in discussions to sell some assets. Gluski expects to make announcements in the first half of next year regarding these sales.

The speaker is asking about the potential asset sales and partnerships mentioned on Slide 7. They ask if there have been any changes in thinking since the May Investor Day, specifically regarding the noncore businesses. The speaker also asks for clarification on what is meant by "new and expanded partnerships." The speaker mentions previous partnerships, such as the one with sPower, and asks if there are any potential new partners. They also ask about the $3.5 billion in coal exits and what that means for the company.

The speaker is discussing the impact of divesting coal assets on the company's earnings in '27 and '28. They acknowledge that selling some assets in '27 may delay the loss of contribution from those assets, but they are confident in their plan to hit their numbers. They also mention the potential for partnerships and new technologies to offset any potential loss in earnings. The speaker emphasizes that there will not be a significant drop in earnings in '28 and clarifies that there is no cliff in '26.

The speaker discusses the company's management of various variables and levers to ensure a smooth transition and maximize value per share. They clarify that the select assets being considered for retirement or sale are those with expiring PPAs or regulatory issues. The company has already announced the retirement of half of their 7 gigawatts of coal assets and only a small portion of the remaining 3 are being considered for selective retirement. The speaker also mentions the possibility of partial monetization, specifically regarding the company's involvement with Fluence.

The speaker discusses the company's plans for monetizing their investments in new technologies, including Fluence and other companies. They express confidence in the progress of these technologies and highlight the potential for value creation in areas such as solar farms and AI. However, they are unable to provide further details at this time.

The company has collaborated with technology companies to develop grid visualization technology, which they may monetize in the future. They have also been active in new origination and have acquired backlog, but this may vary depending on the value of their assets. The company sees acquiring late-stage development projects with premium customers as the most attractive option.

The speaker discusses the importance of creating shareholder value through development projects and acquiring late-stage projects. They mention that the current market is a buyer's market and that they are targeting low-teen returns at the project level. They also mention that they will be using all available means to create value and that the most important factor is having the right projects in the right markets and satisfying client needs. They confirm that there have been no changes to their levered returns targets and pass the question about changes in LCOEs or PPA pricing to another speaker.

The company is confident in their ability to consistently generate high returns due to their projects, markets, and supply chain management. They have adjusted their calculations to account for higher interest rates and have been able to maintain their margins. In the U.S., they are seeing higher returns with corporate clients and prices for solar modules and batteries are decreasing, which is supporting future demand.

The speaker believes that the company has overcome the challenges of the supply chain and inflation and is now seeing a decline in key technologies. They mention a wind project in Arizona that has increased energy production by 10% and their efforts to meet domestic content requirements. They also mention that a large portion of their pipeline is in energy communities, which could provide additional upside. In response to a question about the Indiana rate case, the speaker notes that it is the company's first rate case in over five years and they have the lowest residential rates in the state. They are confident in their IRP and acknowledge the involvement of multiple stakeholders in the rate case process.

The speaker is pleased with the outcome of their request for new rates, which was supported by their growth plan and the fact that it was their first rate case in five years. They expect the resolution to take place in the middle of next year and for new rates to come into effect after that. The speaker thanks everyone for joining the call and mentions the upcoming EEI Financial Conference.

This summary was generated with AI and may contain some inaccuracies.