The AES Corporation had a successful second quarter in 2024, with strong financial performance and advancements with large technology customers. They are also incorporating generative AI into their portfolio to gain a competitive advantage. The company is on track to meet its 2024 financial objectives and expects to be in the top half of its ranges for adjusted EBITDA and EPS. They are reaffirming their guidance metrics and growth rate for 2027.

Since the last call in May, the company has signed 2.5 gigawatts of new agreements, including 2.2 gigawatts with hyperscalers. This includes 1.2 gigawatts of new datacenter load growth across AES Ohio and AES Indiana, as well as a PPA for 727 megawatts of new renewables in Texas and a 310 megawatt retail supply agreement in Ohio. These agreements will significantly increase the peak load at both AES Ohio and AES Indiana, potentially by more than 50%. This will result in AES Ohio's rate base consisting mostly of FERC-regulated transmission assets and create opportunities for significant investment in transmission and new-generation assets at AES Indiana. The company's service territories are well-positioned to serve datacenters and other large loads. Progress is also being made in upgrading and transforming the generation fleet at AES Indiana by shutting down or converting coal units to gas and building a renewable fleet.

AES Indiana has signed a deal to acquire a 170 megawatt solar plus storage project, with an expected completion date in late 2027. They have also expanded their partnership with Google, signing a 15-year PPA for 727 megawatts in Texas and a retail supply agreement for 310 megawatts in Ohio. This brings their total signed contracts with technology companies to 8.1 gigawatts and their backlog of projects under long-term contracts to 12.6 gigawatts. AES Indiana is focused on delivering high-quality projects with higher returns and long-duration PPAs, and is confident in their customer relationships and market dynamics.

Slide 9 discusses the demand for power from the rise of generative AI in datacenters and how AES is well-positioned to take advantage of this opportunity. Slide 10 shows that AES expects to bring online 3.6 gigawatts this year, with a significant portion already completed and the remaining projects expected to be completed in the third quarter. AES also has a diversified and resilient supply chain that mitigates potential risks from tariffs. Slide 11 highlights how generative AI is not only shaping the customer landscape but also transforming internal operations and providing new opportunities for efficiencies and innovation, as seen in AES's partnership with AI Fund.

AI Fund is a venture studio working with entrepreneurs to build companies that use AI to improve efficiencies in the energy transition. They have developed proprietary tools, including an AI-powered solar installation robot, Maximo, which has already been used in the construction of a large project contracted to serve Amazon. The CFO will discuss the company's second quarter results, 2024 guidance, and capital allocation.

In the second quarter, the company saw an increase in adjusted EBITDA with tax attributes, driven by growth in the renewables SBU, new rates and investments in the U.S. utilities, and higher margins in the energy infrastructure SBU. Adjusted EPS also increased, but was partially offset by higher depreciation and interest expenses. The performance of the four SBUs was also discussed, with the renewables SBU seeing higher EBITDA due to new projects but offset by a forced outage at a hydroplant. The utilities SBU saw higher adjusted PTC due to investments and new rates, while the energy infrastructure SBU saw higher revenues and margins but offset by lower margins in some areas. The new energy technologies SBU saw relatively flat EBITDA due to ongoing development of early stage technology businesses.

The company expects strong financial performance in the second half of the year, with adjusted EBITDA and EPS expected to be in the upper half of their respective ranges. This is due to higher contributions from new renewable projects and growth investments, as well as increased load at U.S. utilities. The company also plans to return $500 million to shareholders and invest $2.4 billion to $2.7 billion in new growth projects. They are on track to reach their long-term asset sale target of $3.5 billion by 2027, having already signed or closed over $2.2 billion in sales since last year.

In summary, the company has made significant progress towards its strategic and financial targets, including signing agreements with large technology customers and completing projects on time and on budget. They are well-positioned to continue serving the growing demand for power from datacenters, with a strong development pipeline and backlog of signed long-term PPAs. The company is confident in their ability to continue delivering financial success for shareholders.

The speaker is confident in their company's ability to meet long-term objectives. They answer a question about credit metrics, stating that they expect to have even better credit by the end of the year than last year. They also mention adding to the Utilities and Renewable sectors.

Andres Gluski, the CEO of a renewable energy company, is asked if the current political climate and discussions about repealing tax credits affect their ability to sign new contracts. Gluski responds that it has not slowed down their contract signings and that the main concern for their clients is getting power on time for their datacenters. He also mentions that the investment tax credits and production tax credits have been around for 32 years and that a total dismantling is highly unlikely. He believes that any changes would be more likely to happen in a similar manner to what happened with NAFTA, where it was updated and improved. The next question is from Richard Sunderland with J.P. Morgan.

Richard Sunderland asks about the utility load opportunity and the breakdown of the 3 gigawatts in advanced negotiations between Indiana and Ohio. Andres Gluski and Steve Coughlin explain that it's too early to give specific details, but there will be significant load and transmission assets added. They also mention that there is upside potential to their previous guidance of 10% growth for the utilities combined. The company's focus is on maximizing megawatt quality over quantity, which is consistent with their previous assumptions. They also clarify that having something in the interconnection queue and land control means they have a pipeline.

The speaker discusses the differences in pipelines and backlog in the energy industry, stating that they have not removed any projects from their backlog despite the COVID-19 pandemic. They also mention optimizing the value of their resources among various clients and opportunities, leading to increased average returns. They feel confident about their current mid-teen returns and believe they are making the best use of their pipeline to create value for shareholders. In response to a question about credit metrics, they state that they see the possibility of reaching a mid-BBB rating in the coming years as their credit metrics continue to improve with the growth of their installed base.

The speaker discusses the company's construction debt and how it is increasing every year. They mention the possibility of reducing this debt in the future, but do not have a specific timeline. The quality of the company's cash flow is improving as they invest in long-term contracted projects with investment grade off takers. The majority of the company's debt is nonrecourse and amortizing, making it a strong structure. The speaker also mentions that there will likely be a heavier weighting towards the US in terms of geographical mix in the future due to the company's focus on US dollar-based investment grade off takers.

Andres Gluski, CEO of AES Corporation, discusses the company's opportunities to serve clients outside of the U.S. with investment grade dollar contracts. He mentions a backlog of 12 gigawatts of signed PPAs that need to be delivered by 2027, which will result in a guaranteed build out over the next three years. Gluski expects the company's annual PPAs to converge around 4 to 5 gigawatts, with potential for growth beyond 2027. On the utility side, there is potential for load growth and a reevaluation of the CapEx outlook. Financing opportunities may also contribute to potential upside in the utility CapEx trajectory.

Andres Gluski, CEO of AES Corporation, discusses the timing of recently signed deals and how it will affect the company's long-term plans. He assures that their funding plan will not change and that they have enough capital to invest in utility growth. Gluski also mentions their line of sight for domestic supply in 2026, stating that they have everything they need for this year and the next few years, and have signed agreements with domestic suppliers for 2026. He expresses confidence in their ability to execute and deliver on their backlog, and compares the predictability of supply chains in the renewable energy industry to the unpredictability caused by COVID-19.

The speaker discusses the company's plans to switch to domestic supply in 2026 and thanks the questioner for their understanding. They then address a question about renewable execution and mention an increase in tax credits and higher margins in their gas business, leading to favorable EBITDA for the year.

The company experienced a negative impact on EBITDA due to the Columbia outage and low wind resource in Brazil. They are aiming to bring the majority of their backlog online by 2027 and have smoothed out the cadence of bringing projects online. The growth rate will increase over the next three years, with a target of 12.6% growth. The company is pleased with their cash-driven growth and efficiency in their renewables and utilities sectors.

The speaker discusses the biggest challenge of ramping up 100% and completing all projects on time. A question is asked about the ability to handle the 50%+ load growth in AES Indiana and Ohio, and the speaker mentions that it will be timed over the years and will involve opportunities for additional generation, particularly renewables. The solution will differ between MISO and PJM and between the two utilities, with one possibly involving more direct securing of generation.

The paragraph discusses the potential for growth in the datacenter industry in Indiana and Ohio, and how it presents opportunities for AES. The company has existing gas sites in Indiana that can support this growth, and their service territory in Ohio is appealing for datacenter development. AES currently has no plans to own generation in Ohio, but their renewables team may be involved in meeting the targets for renewable energy in the state.

The speaker discusses the recent PJM capacity auction results and how they align with the company's expectations of shortages in the market. They state that this will not affect their plans for development and that their existing assets will become more valuable as a result.

In response to a question about how the current low interest rate environment may affect the company's profitability, the CEO and CFO explain that while it may benefit new contracts being signed, the company has already locked in costs for existing projects. They also note that lower interest rates could be a catalyst for increased demand in the sector.

The speaker discusses the emission reduction targets and renewable power goals of hyperscalers, who prefer renewable power but may have to rely on coal-heavy grids in certain situations. They also mention that most of the projects in the interconnection queue are focused on renewables. The key is to combine these resources in the most low-carbon way possible.

The speaker states that if necessary, gas plants will be added to meet energy demands, but the direction is clear that renewables will be the bulk of the add-on. The speaker and the interviewer discuss the role of renewable power in datacenters, with the speaker noting that the renewable standards may differ among clients and that their direction is clear towards renewables. The speaker also mentions that some clients have more stringent requirements, and that the pressure to address their total carbon footprint is increasing as datacenters ramp up.

In this paragraph, Angie Storozynski asks about the different types of transactions AES has entered into with hyperscalers. Steve Coughlin explains that these transactions result in renewable power purchase agreements, either directly or through RECs. He also mentions that most of the energy is supplied to data centers in the same grid or nearby locations. Angie then asks about the potential impact of increased capacity prices on electric bills and T&D investment, to which Andres Gluski responds that AES has the lowest rates in the state.

The company expects to meet domestic content requirements for its wind, solar, and storage projects by 2026, with the main supplier for batteries meeting the requirements by 2025. They have been working on meeting these requirements for components such as trackers and inverters.

The team has done a good job meeting domestic content criteria for renewable projects by combining different assets. The adder is 10% across the entire capital cost of the project. The team is confident in meeting prevailing wage requirements. The impact on returns and PPA pricing will depend on the specific market. The company works with clients to co-create solutions, such as DLR and batteries, to address concerns about time to power.

The speaker discusses how their company brings new technologies to their clients rather than pushing specific products. They mention their leadership in using lithium-ion batteries for grid stability and their innovative use of batteries for transmission lines. They also mention their success in securing long-term contracts with hyperscaler clients and their partnership with Uplight for energy management. The speaker then discusses their new technology, Maximo, which allows for quicker and more efficient installation of solar panels and can help alleviate labor shortages in the industry. They plan to ramp up the use of Maximo in the future to gain a competitive advantage.

The speaker discusses the company's success in implementing new technology and how it has helped them be more efficient. They also mention their leadership in the industry and their availability for any further questions.

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