The paragraph details the introduction to The AES Corporation's Fourth Quarter and Full Year 2024 Financial Review Call. Emily, the operator, welcomes participants and outlines how to ask questions. Susan Harcourt, the Vice President of Investor Relations, then discusses the availability of financial information on their website and notes the presence of forward-looking statements. She introduces key company leaders, including Andres Gluski, the President and CEO, who starts by acknowledging the company's accomplishments in 2024, discussing the business's resilience, and presenting the 2025 guidance and future outlook. Andres also plans to address concerns about the company's stock price performance, policy uncertainties, renewable earnings growth, and financial constraints, with further financial details to be provided by CFO Steve Coughlin.

The article discusses the importance of renewables in meeting growing electricity demand, especially for tech customers, and the company's resilience to regulatory changes. To strengthen its financial position, the company is reducing its investment in renewables to focus on high-return projects, improving efficiency, and maintaining some energy assets. These measures are expected to enhance credit metrics and avoid new equity issuance while keeping dividends stable. The company signed 4.4 gigawatts of new renewable power purchase agreements last year and aims for 14-17 gigawatts by 2025, prioritizing risk-adjusted returns. In 2024, they completed 3 gigawatts of renewables and a 670-megawatt gas plant in Panama, increasing LNG terminal utilization. Their timely delivery of projects is a competitive advantage. Additionally, they gained approval for new rates and a 9.9% ROE from the Indiana Regulatory Commission to support reliability investments and local economic development.

In 2024, the company achieved an adjusted EBITDA of $2.64 billion, influenced by significant weather-related impacts in Colombia and Brazil, but still generated $1.1 billion in parent free cash flow and a record adjusted EPS of $2.14, exceeding expectations. The company is on track to meet its annual growth target of 7% to 9% from 2020 to 2025. By 2025, financial benefits from its renewables business will become more prominent, following the addition of 6.6 gigawatts in 2023 and 2024, reaching a total of 16.2 gigawatts, excluding Brazil. As the renewables business matures, it achieves economies of scale, improving efficiency and profitability. The company is also strategically focusing on the most profitable projects, reducing costs and capital needs. While there is a time lag between expenses and EBITDA growth in renewable development, the company expects financials to better reflect the business's true profitability as new projects offset early-stage costs.

As the company grows, its operational efficiency will improve, particularly from 2025 when more of its projects will be selling energy than are under construction. This shift is expected to enhance credit metrics and lead to significant growth in the renewables segment, with a projected 60% increase in EBITDA. This growth is largely driven by the US renewables portfolio, with 3.2 gigawatts of new capacity set to contribute from 2025 onward. The segment's adjustment includes the sale of 5.2 gigawatts in Brazil and the addition of 2.5 gigawatts in Chile, aiming to mitigate various market risks. The US is expected to add significant renewable capacity, mainly through solar, storage, and wind. However, adding new gas capacity may face delays due to lengthy delivery and permitting processes.

The paragraph discusses the energy company's strategy and positioning in response to increasing electricity demand and potential policy changes. It highlights that while new nuclear capacity is delayed, renewables provide faster implementation and cost certainty. The company has strengthened its resilience by onshoring its supply chain to the US, protecting most of its projects from tariff changes, and having significant safe harbor protections for tax policy. Internationally, renewables remain profitable without subsidies. The majority of their contracts are with corporations, and they've been recognized as the largest clean energy provider for corporations globally.

The paragraph discusses AES's outlook on the demand for renewable energy from corporate clients, particularly data centers, despite potential future elimination of tax credits. This would lead to higher PPA prices, but AES emphasizes its focus on returns and cash flow per investment. It highlights AES Indiana and AES Ohio's multiyear investment program aimed at improving customer reliability and transitioning from coal, with a $1.6 billion investment in 2024 resulting in a 20% growth in the rate base. The investment is largely supported by growth riders or trackers, ensuring real-time investment returns. With ongoing agreements for over 2 gigawatts of new data center demand, these utilities are positioned among the fastest-growing in the nation, anticipating at least 11% annualized rate base growth from 2023 to 2027.

The paragraph outlines DPL Inc.'s strategy to improve its credit rating to investment-grade by 2026 through enhanced earnings and cash flow from its energy infrastructure business, including a new 670-megawatt gas plant in Panama. The company is delaying the closure of some coal plants due to demand but remains committed to exiting coal and reducing carbon emissions. The financial outlook for 2025 includes guidance on adjusted EBITDA, parent free cash flow, and adjusted EPS, with reaffirmed long-term growth rates. The focus is on improving the business mix with more contribution from renewables and US utilities, and actions are being taken to enhance cash flow, reduce parent equity requirements, and maintain investment-grade credit ratings and dividends.

The company is taking steps to strengthen its financial position by resizing its development program to focus on fewer, larger projects, thus increasing capital returns. It plans to monetize part of its US renewables pipeline through development transfer agreements, reducing parent investments by $1.3 billion through 2027 and eliminating the need for equity. Simplification of operations aims to achieve significant cost savings of $150 million by 2025 and over $300 million by 2026. While some coal assets will be retained beyond 2027 to support financial metrics and fund projects, the company is focused on exiting Brazil and onshoring its supply chain. These actions are intended to ensure that AES meets its 2025 and long-term financial commitments while strengthening its credit metrics.

The paragraph provides an update on the financial performance and future outlook of a US renewable business. It highlights that 2025 is critical for benefiting from past investments. Despite challenges like droughts and outages in South America affecting 2024's adjusted EBITDA, which decreased to $2.64 billion from $2.8 billion in 2023, new renewable projects helped offset some losses. Adjusted EPS increased to $2.14 in 2024 from $1.76 in 2023, aided by higher tax benefits and a streamlined holding company structure. However, there was a $0.07 EPS negative impact from increased debt interest used to finance new projects. The paragraph also notes significant weather-related disruptions, including a flood and drought, affecting the results of their Renewables Strategic Business Unit.

The paragraph discusses the financial performance and capital allocation of a company over the past year. Brazil faced challenges such as a drought and low wind resources, affecting EBITDA negatively, partially offset by new US projects. The utilities sector saw higher adjusted PTC due to investments and new rates, but faced costs from power purchase recoveries and higher interest expenses. Lower adjusted EBITDA in energy infrastructure resulted from outages and lower margins in various locations. However, new energy technologies reported higher EBITDA due to improved results at Fluence. The company had $3.1 billion in discretionary cash, largely from parent free cash flow and hybrid debt issuance. It invested $1.9 billion mainly in renewables and utilities, repaid $180 million in subsidiary debt, and allocated $500 million to dividends, ending with a substantial cash balance for future projects.

The paragraph outlines the 2025 adjusted EBITDA guidance for a company, projected at $2.65 billion to $2.85 billion, accounting for core business growth offsetting certain one-time challenges. Key factors include substantial growth in Renewables and Utilities, partially balanced by sales and reduced margins in other areas. Despite a lower first-half EBITDA due to timing and seasonality, a stronger second half is anticipated, aided by $150 million in cost savings. Looking to 2026, continued growth and cost-saving measures are expected to accelerate growth, leading to a higher growth rate. The company also expects to recognize $1.4 billion in tax attributes in 2025, driving total adjusted EBITDA to $3.95 to $4.35 billion. Additionally, significant year-over-year growth in the renewables sector is expected, driven by new projects adding significant capacity.

The paragraph outlines a financial and strategic outlook for a company, detailing its 2025 expectations. The projects already in operation will fully contribute to EBITDA by 2025, with the sale of AES Brazil posing a year-over-year headwind of $100 million, offset by a forecasted $190 million growth in renewables. Additional drivers include normalized results in Colombia and resized business development. The company is initiating a 2025 adjusted EPS guidance of $2.10 to $2.26, aiming for the upper half of a 7% to 9% long-term growth target set in 2021. For 2025, it plans parent capital allocation with approximately $2.7 billion, expecting $1.15 to $1.25 billion in parent free cash flow, $400-$500 million from net asset sales, and $700 million in new parent debt. Investments of $1.8 billion are planned, mostly in the U.S., alongside a $400 million subsidiary debt repayment and over $500 million allocated to shareholder dividends. Long-term, the renewables segment is projected to see significant growth, with an expected CAGR of 19% to 21% from the 2023 guidance midpoint.

The paragraph outlines the company's growth strategies and financial plans. It highlights the expected contributions from new projects, including 6.6 gigawatts already operational and 11.9 gigawatts in backlog, with new EBITDA of around $700 million. Growth from Chile Renewables is anticipated, while AES Brazil's sale was not included in the 2023 guidance. Utilities SBU is projected to grow 13% to 15% annually through 2027, driven by new data centers in service areas and aided by trackers. An AES Ohio sell-down is planned, balancing short-term EBITDA reduction with long-term data center opportunities. Energy infrastructure EBITDA is expected to decline slower due to extended coal plant operations. A reaffirmed long-term EBITDA growth target of 5% to 7% and free cash flow growth of 6% to 8% through 2027 is based on signed PPAs and utility investments. The capital plan will rely on $6 billion in sources, including $3.6 to $3.9 billion from parent free cash flow, $900 million to $1 billion in new debt, and $800 million to $1.2 billion from asset sales.

The company has eliminated the need for new equity issuance and plans to reduce its investment in renewables, aiming to repay $600 million in subsidiary debt while maintaining its current dividend level without growth. They intend to simplify operations, cut costs, and enhance cash flow to meet financial targets and uphold credit ratings. Key steps include reducing renewables investment by $1.3 billion, a restructuring program for $300 million in savings by 2026, and continuing operations of select coal assets for earnings potential beyond 2027. Despite an expected rise in debt by 2027, the company plans to boost cash flows and credit metrics by focusing on higher-return projects and monetizing tax attributes from projects currently under construction, reducing long-term debt.

The paragraph discusses the financial outlook of AES's renewable projects, indicating that once under-construction projects are completed by 2027, they will generate an additional $400 million in annual adjusted EBITDA. These projects are financed with long-term non-recourse debt that amortizes using project-level cash flows, minimizing risk to AES. Initially, debt levels are high during construction, but significantly decrease once the projects go online, thanks to tax attributes and refinancing. Leverage ratios might seem high now due to ongoing construction but will decline as projects mature. The year 2025 is identified as a turning point, with the renewable segment projected to grow by over 60% and achieve annual growth consistent with AES's 19% to 21% guidance through 2027, supported by strong utilities rate-based growth and contributions from energy infrastructure.

The paragraph discusses the steps AES is taking to enhance its financial health, including streamlining operations and reducing costs to boost cash flow. These efforts are aimed at improving credit metrics and achieving long-term financial goals. The company is confident in meeting energy demands in the U.S. despite potential regulatory changes, emphasizing that renewables remain competitive. AES is protected from changes in U.S. renewable policies through secured equipment pricing and domestic supply chains. The renewables business is showing improved financial performance due to growth, economies of scale, and reduced development costs. The company reaffirms growth projections through 2027 and focuses on delivering high risk-adjusted returns to shareholders. The operator then opens the line for questions, with the first coming from Nicholas Campanella at Barclays.

In the article, Nicholas Campanella questions Steve Coughlin about the company's cost savings strategy, which aims to reach a run rate of $300 million. Steve confirms that the savings, spread across the portfolio including renewables, are ongoing rather than one-time and stem from decisions already made. Nicholas also inquires about the company's ability to achieve long-term EBITDA growth of 5% to 7% despite cutting capital expenditures (CapEx) and how these savings and higher project IRRs are maintaining their growth targets. Andres Gluski responds, indicating that an integrated approach is being taken, strong market demand is expected, and the targeted projects have increasingly attractive Internal Rates of Return (IRRs).

In the paragraph, the discussion revolves around a strategic shift in investment focus. The speaker mentions a reduction in costs not directly connected to projects and an emphasis on profitability rather than sheer project quantity. This approach means investing in larger, more profitable projects rather than numerous smaller ones. When questioned about a pullback in renewable capital expenditures, Andres Gluski confirms a strategic pause to emphasize executing an existing 12-gigawatt pipeline, with 85% expected online by 2027. The goal is to leverage current investments rather than expanding further, hence spending less on future long-term projects.

The article discusses the company's growth and asset management strategies. They anticipate building fewer gigawatts but aim to maintain strong financial results, with plans to commission 3 gigawatts of new projects this year and 4 gigawatts next year. The company is increasing its asset sales target while keeping coal for longer than initially planned. The asset sales plan includes coal exits, technology portfolio monetization, and potential partnerships. The company is confident in achieving its financial goals between 2025 and 2027 and has built flexibility into the capital plan, reducing reliance on asset sales compared to the past.

In the paragraph, Durgesh Chopra inquires about a $300 million annual cost-saving target and seeks details on how this will be achieved. Andres Gluski and Ricardo Fallu from AES explain that their cost reduction program involves resizing their development efforts, focusing on fewer large projects, cutting new site origination and early-stage project costs, and reducing their workforce by 10% through eliminating management layers and streamlining operations. These actions are being accelerated due to current market conditions, with the reorganization aimed to be completed by 2027, minimizing execution risk. Chopra appreciates the clarity provided.

In the paragraph, Steve Coughlin addresses a question about their federal debt situation, focusing on credit metrics and future projections. He notes that they ended at 22% on the recourse metric and 10% on Moody's adjusted metric for 2024, which are within planned expectations. Coughlin is confident that these metrics will improve over time, potentially reaching the mid-twenties for the recourse metrics by the end of their guidance period and at or above 12% for Moody's metric by 2026. He highlights the impact of $4 to $5 billion in construction debt on their balance sheet, which temporarily inflates their leverage ratios. When adjusted for this construction debt, their net debt to EBITDA ratio significantly improves, reflecting a more accurate picture of their financial health. Coughlin emphasizes the importance of assessing their debt with ownership-adjusted figures for a clearer understanding of their leverage profile.

The paragraph features a Q&A session where Julien Dumoulin-Smith from Jefferies questions Steve Coughlin on the company's financial strategy and its presentation to Moody's. Steve explains that they have been collaborating with Moody's and are progressing according to plan, even exceeding expectations. Their cash flow and EBITDA have increased significantly due to the commencement of substantial operating projects, with 12 gigawatts of development set to be operational by 2027. The company has also reduced development spending by focusing on fewer, larger projects, and significantly decreased administrative costs.

The paragraph discusses the company's strategy of simplifying its portfolio and reducing management layers to enhance cash flow and cost efficiency, which results in favorable financial ratios. Julien Dumoulin-Smith inquires if the $1.3 billion reduction involves selling stakes in renewables or slowing down renewable investments. Andres Gluski responds that they are executing their backlog with strong demand, having signed significant new contracts. He reassures that there's no expected downturn in demand by 2027 and explains that increased gigawatts will improve credit metrics, suggesting continued growth in renewable investments despite financial adjustments.

The paragraph discusses a company's strategy regarding its coal assets and future energy capacity. It notes that a portion of debt is short-term and will be repaid upon project completion. Post-2027, the company plans to retain less than half of its current coal assets, which will make up less than 8% of its energy capacity. Retaining these assets supports the grid and financial health, even as the company plans to exit coal eventually. These assets also contribute positively to credit metrics. The company recognizes a need to maintain these plants due to market demand, which aligns with financial benefits. Post-2027, growth in renewable energy is expected to slow down, as less investment is being made in developing new projects.

In the conversation, Michael Sullivan asks about the coal contribution on an EBITDA basis and the impact of future maturities on interest rates. Steve Coughlin explains that about a third of the initially projected $750 million roll-off in coal may continue beyond 2027. He also discusses refinancing plans, noting that their refinancing strategy involves acting three to six months in advance, with two maturities coming up. Additionally, Steve reassures that they are nearly fully hedged against interest exposure on these refinances. When asked about the projected 5% to 7% EBITDA CAGR, Steve confirms that this range is expected to be achievable by 2026.

The paragraph discusses an action plan aimed at accelerating portfolio simplification and cost reduction, which is expected to result in significant EBITDA growth in 2026 and 2027. While the 2025 guidance is less favorable due to factors like the Brazil exit and the Warrior Run benefit, the core business is still contributing over $300 million. The energy infrastructure SBU's decline will be mostly absorbed by 2025, allowing growth from core businesses to positively impact the bottom line. In addition to quantitative results, the qualitative transformation of the portfolio involves shifting to more contracted, renewable, and utility-focused assets, with the exit from Brazil reducing exposure to variables like hydrology and floating interest rates.

In the paragraph, a discussion takes place during a conference call. Willard Grainger from Mizuho inquires about the company's flexibility regarding its capital expenditure (CapEx) reduction and the possibility of investing more in its stock because of its current trading position. Andres Gluski responds by emphasizing the company's awareness of its stock situation and confidence in its current plan, which includes returning $500 million to shareholders annually and maintaining a healthy dividend. He assures that the company is focused on ensuring good returns for shareholders when the market stabilizes. Grainger also asks about the impact of regulatory factors on long-term renewable contracting, to which Gluski acknowledges the relevance of colocation private use networks but does not provide a detailed answer in this segment.

In the paragraph, a speaker expresses confidence that their pipeline will not be impacted by federal regulations, as it operates primarily on private lands with no federal land involvement. Willard Grainger voices appreciation for the information, and Andres Gluski acknowledges it. The operator then notes that all questions have been addressed and turns the call over to Susan Harcourt, who concludes the call by thanking participants and offering further assistance from the IR team. The operator ends the call, allowing participants to disconnect.

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