Financial Data and Key Metrics Changes - In 2024, the company achieved adjusted EBITDA of $2.64 billion, down from $2.8 billion in 2023, primarily due to extreme weather events in South America [40] - Adjusted EPS for 2024 was $2.14, an increase from $1.76 in 2023, driven by higher tax attributes on new renewable projects and a lower adjusted tax rate [40][41] - Parent free cash flow was $1.1 billion, at the midpoint of guidance [11] Business Line Data and Key Metrics Changes - The renewables business saw lower adjusted EBITDA due to historic weather volatility in South America, with significant impacts from droughts and floods [43] - The utilities segment experienced higher adjusted PTC driven by rate-based investments and new rates at AES Indiana [44] - The energy infrastructure segment's adjusted EBITDA declined due to outages and lower margins, but the new 670-megawatt gas plant in Panama is expected to enhance cash flow [30][40] Market Data and Key Metrics Changes - The US added 49 gigawatts of new renewable capacity in 2024, with expectations for 63 gigawatts in 2025, primarily from solar and wind [18][19] - The company signed 4.4 gigawatts of new power purchase agreements (PPAs) in 2024, aiming for 14 to 17 gigawatts by 2025 [9] Company Strategy and Development Direction - The company is focusing on high-risk-adjusted return projects and improving organizational efficiency while maintaining its dividend [8] - A shift towards fewer but larger projects is expected to enhance profitability and reduce capital requirements [13][35] - The company aims to improve credit metrics and maintain investment-grade ratings while executing on its backlog of projects [33][70] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with stock price performance but emphasized the resilience of the business model amid regulatory uncertainties [7] - The company anticipates over 60% year-over-year growth in renewables EBITDA in 2025, driven by new projects coming online [16] - Management highlighted strong demand from corporate clients, particularly in data centers, which is expected to continue driving growth [24][39] Other Important Information - The company plans to reduce parent investments in renewables by $1.3 billion through 2027, eliminating the need for new equity [35] - A restructuring program is expected to yield $150 million in cost savings in 2025, ramping up to over $300 million in 2026 [37][50] Q&A Session Summary Question: On cost savings and their sources - Management confirmed that the $150 million in cost savings, ramping to $300 million, are ongoing and not one-time, with confidence in achieving these reductions [78][80] Question: On renewable CapEx and growth strategy - Management clarified that the focus is on executing the existing pipeline rather than expanding it significantly, with a commitment to maintaining financial results despite reduced CapEx [87][88] Question: On asset sales and coal contributions - Management indicated that asset sales will include some coal exits and technology monetization, but the reliance on asset sales has decreased [92][93] Question: On cost reduction specifics - Management detailed that cost reductions include resizing the development program, cutting early-stage project costs, and a workforce reduction of about 10% [99][100] Question: On credit metrics and future expectations - Management provided insights on credit metrics, indicating a significant cushion above downgrade thresholds and expectations for improvement over time [104][106]

Financial Data and Key Metrics Changes - In 2024, the company achieved adjusted EBITDA of $2.64 billion, down from $2.8 billion in 2023, primarily due to extreme weather events in South America and asset sales [32][34] - Adjusted EPS for 2024 was $2.14, an increase from $1.76 in 2023, driven by tax benefits from new renewable projects and a lower adjusted tax rate [33][34] - Parent free cash flow was $1.1 billion, at the midpoint of guidance, reflecting a more than 10% increase from the prior year [37] Business Line Data and Key Metrics Changes - The Renewables SBU experienced lower adjusted EBITDA due to historic weather volatility in South America, with significant contributions from new projects in the U.S. partially offsetting losses [34][36] - The Utilities SBU saw higher adjusted PTC driven by rate-based investments and improved weather, but was partially offset by higher interest expenses [36] - The Energy Infrastructure SBU's lower adjusted EBITDA was attributed to outages and lower margins, while the New Energy Technologies SBU showed improved results [36] Market Data and Key Metrics Changes - The U.S. added 49 gigawatts of new renewable capacity in 2024, with renewables and battery storage representing 92% of those additions [15] - In 2025, the U.S. is expected to add 63 gigawatts, with 93% being solar, storage, and wind [16] - The company noted that renewables have the shortest time to power and greater price certainty, which is critical for meeting the growing demand for electricity [17] Company Strategy and Development Direction - The company is focusing on reducing investments in renewables to prioritize high-risk adjusted return projects and improve organizational efficiency [6][10] - The 2025 financial outlook indicates a significant growth in renewables EBITDA, with expectations of over 60% year-over-year growth [12][41] - The company is committed to maintaining its investment-grade credit rating and dividend while streamlining operations and reducing costs [26][50] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with stock price performance but emphasized the resilience of the business model against regulatory changes [5][6] - The company is confident in achieving long-term growth targets of 5% to 7% adjusted EBITDA growth through 2027, supported by a strong backlog of projects [26][57] - Management highlighted the importance of renewables in meeting the increasing demand for electricity, particularly from technology customers [6][17] Other Important Information - The company signed 4.4 gigawatts of new power purchase agreements (PPAs) in 2024, aiming for 14 to 17 gigawatts by 2025 [7] - The sale of Brazilian assets was noted as a significant de-risking move, reducing exposure to various market risks [14] - The company plans to maintain a focus on larger, more profitable projects while reducing overall capital expenditures [27][63] Q&A Session Summary Question: On cost savings and their sources - The company confirmed that the $150 million in cost savings ramping to $300 million is ongoing and not one-time, with confidence in achieving these reductions [60][61] Question: On renewable CapEx and growth strategy - Management clarified that while CapEx is being cut, the focus remains on executing a strong pipeline, with a shift towards fewer but larger projects [71][73] Question: On asset sales and coal contributions - The company indicated that asset sales will include some coal exits and technology monetization, but the reliance on these sales has decreased [76][77] Question: On cost reduction specifics - The cost reduction program includes resizing the development team, cutting early-stage project costs, and a 10% workforce reduction [81][82] Question: On credit metrics and future outlook - Management discussed expectations for improving credit metrics, with a focus on increasing cash flow and EBITDA through operational efficiencies [86][95]

The AES Corporation Fourth Quarter & Full Year 2024 Financial Review CONTAINS FORWARD-LOOKING STATEMENTS February 28, 2025 Safe Harbor Disclosure Certain statements in the following presentation regarding AES' business operations may constitute "forward-looking statements." Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but inste ...

Group 1: Earnings Performance - AES reported quarterly earnings of $0.54 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, but down from $0.73 per share a year ago, representing an earnings surprise of 58.82% [1] - Over the last four quarters, AES has surpassed consensus EPS estimates four times [2] - The company posted revenues of $2.96 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 9.12%, and down from $2.97 billion year-over-year [2] Group 2: Stock Performance and Outlook - AES shares have declined approximately 19.4% since the beginning of the year, compared to a decline of -0.3% for the S&P 500 [3] - The future performance of AES stock will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.43 on revenues of $3.27 billion, and for the current fiscal year, it is $2.02 on revenues of $12.79 billion [7] Group 3: Industry Context - The Utility - Electric Power industry, to which AES belongs, is currently ranked in the bottom 46% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact AES's stock performance [5]

Financial Performance - Full year 2024 Net Income was $698 million, an increase of $880 million compared to 2023, driven by higher contributions from renewables projects and lower impairments[8]. - Adjusted EBITDA for 2024 was $2,639 million, a decrease of $189 million from 2023, primarily due to drought conditions and outages in Colombia[9]. - Adjusted EPS for 2024 was $2.14, an increase of $0.38 compared to 2023, mainly driven by higher contributions from renewables projects[11]. - Total revenue for the year ended December 31, 2024 was $12,278 million, a decrease of 3.1% from $12,668 million in 2023[27]. - Net income attributable to The AES Corporation for the year ended December 31, 2024 was $1,679 million, compared to $249 million in 2023, representing a significant increase[27]. - Basic earnings per share for the year ended December 31, 2024 was $2.38, up from $0.37 in 2023[27]. - For the three months ended December 31, 2024, total revenue was $2,962 million, slightly down from $2,968 million in the same period of 2023[29]. - Operating margin for the year ended December 31, 2024 was $2,314 million, a decrease from $2,504 million in 2023[27]. - Interest expense increased to $1,485 million in 2024 from $1,319 million in 2023[27]. - The company reported a gain on disposal and sale of business interests of $444 million for the year ended December 31, 2024, compared to $134 million in 2023[27]. - The total cost of sales for the year ended December 31, 2024 was $9,964 million, down from $10,164 million in 2023[27]. - Net income for the year ended December 31, 2024, was $698 million, a significant recovery from a net loss of $182 million in 2023[35]. - Cash and cash equivalents at the end of 2024 were $2,039 million, up from $1,990 million in 2023, indicating a year-over-year increase of 2.5%[35]. - Total current liabilities decreased to $8,571 million in 2024 from $9,731 million in 2023, representing a reduction of approximately 11.9%[33]. - The company reported a net cash provided by operating activities of $2,752 million for the year ended December 31, 2024, compared to $3,034 million in 2023[35]. - Capital expenditures for the year were $7,392 million, a slight decrease from $7,724 million in 2023[35]. - The company reported a diluted EPS of $0.79 for Q4 2024, recovering from a loss of $0.14 in Q4 2023, with a twelve-month EPS of $2.37 compared to $0.34[45]. Strategic Initiatives - The company signed or awarded 6.8 GW of new contracts in 2024, including 4.4 GW of renewables under long-term PPAs[5]. - The PPA backlog consists of 11.9 GW, with 4.9 GW under construction, indicating strong future growth potential[13]. - The company is initiating 2025 guidance for Adjusted EBITDA of $2,650 to $2,850 million, with expected growth from new renewables projects[15]. - The company expects to complete construction of 3.2 GW of new renewables in 2025, contributing to future revenue growth[5]. - The company reaffirmed its annualized growth target of 5% to 7% for Adjusted EBITDA through 2027, based on 2023 guidance[15]. - The company plans to continue its market expansion efforts, particularly in renewable energy sectors, to align with global sustainability trends[36]. Debt and Liquidity Management - The company issued $1,450 million in recourse debt during 2024, compared to $1,400 million in 2023, reflecting a strategic move to enhance liquidity[35]. - Future guidance indicates a focus on reducing non-recourse debt, which stood at $20,626 million in 2024, down from $18,482 million in 2023[33]. - Parent Company liquidity at the end of December 2024 was $2.047 billion, comprising $265 million in cash and $1.782 billion available under credit facilities[50]. - The Parent Company relies on subsidiary distributions to fund debt service and other cash needs, highlighting the importance of these distributions for operational liquidity[50]. Impairments and Losses - Impairment losses for Q4 2024 were $195 million, a decrease from $559 million in Q4 2023, while the twelve-month impairment losses were $374 million compared to $877 million[45]. - The total asset impairments across various projects, including $198 million at Warrior Run and $139 million at New York Wind, significantly impacted the overall financial performance[48]. - Income tax benefits associated with impairments and losses amounted to $68 million related to AES Ventanas, $46 million for Warrior Run, and $13 million for AES Andes, impacting earnings per share positively[48]. - Losses incurred due to early retirement of debt at AES Andes totaled $46 million, or $0.07 per share, indicating financial strain from debt management[48]. - The company experienced day-one losses of $20 million, or $0.03 per share, at AES Renewable Holdings due to sales-type leases, indicating challenges in new project implementations[48]. Subsidiary Distributions - Total subsidiary distributions to the Parent Company for the last four quarters reached $1.633 billion, with $1.603 billion from subsidiary distributions and $30 million from returns of capital[50]. - The company reported a total of $1.504 billion in subsidiary distributions for the quarter ended September 30, 2024, reflecting a decrease from previous quarters[50].

Core Insights - The AES Corporation anticipates 2025 to be a pivotal year with significant growth in renewables Adjusted EBITDA driven by completed projects and a substantial backlog of signed Power Purchase Agreements (PPAs) [2][12] - The company reaffirms its long-term growth rate targets, indicating a de-risked growth strategy primarily from signed projects and rate base growth at US utilities [2][3] 2024 Financial Highlights - Full year 2024 Net Income reached $698 million, an increase of $880 million compared to 2023, attributed to higher contributions from renewables, lower impairments, and favorable foreign currency gains [3][6] - Adjusted EBITDA for 2024 was $2,639 million, a decrease of $189 million from 2023, mainly due to drought conditions and outages in Colombia [4] - Adjusted EBITDA with Tax Attributes for 2024 was $3,952 million, an increase of $513 million compared to 2023, driven by more renewables projects placed in service [5] Strategic Accomplishments - The company signed or awarded 6.8 GW of new contracts, including 4.4 GW of renewables under long-term PPAs and 2.1 GW of data center load growth at AES Ohio [10][11] - AES was ranked the 1 provider of clean energy globally to corporations for the third consecutive year by BloombergNEF [10] - The company completed the construction or acquisition of 3.0 GW of renewables and a 670 MW combined cycle gas plant in Panama [10] Financial Position and Outlook - The company is initiating 2025 guidance for Adjusted EBITDA of $2,650 to $2,850 million, with growth expected from new renewables projects and rate base growth at US utilities [12][14] - The expectation for 2025 Adjusted EBITDA with Tax Attributes is set at $3,950 to $4,350 million [13] - The company reaffirms an annualized growth target of 5% to 7% through 2027, based on 2023 guidance [13][15]

Core Viewpoint - Investors in The AES Corporation (AES) should closely monitor the stock due to significant movements in the options market, particularly the high implied volatility of the Mar 21, 2025 $4.00 Put option [1] Company Analysis - AES Corp. currently holds a Zacks Rank 3 (Hold) in the Utility - Electric Power industry, which is positioned in the Bottom 48% of the Zacks Industry Rank [3] - Over the past 60 days, there has been a mixed sentiment among analysts regarding earnings estimates; one analyst has increased the estimate for the current quarter, while two have decreased theirs, resulting in a consensus estimate drop from earnings of 51 cents per share to 34 cents [3] Options Market Insights - The high implied volatility surrounding AES Corp. suggests that options traders are anticipating a significant price movement, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected by expiration [4]

Group 1 - Miller/Howard is an independent investment boutique that focuses on managing dividend-oriented investment strategies [1] - ESG (Environmental, Social, and Governance) principles have been integral to the company's investment process since the launch of its first strategy in 1991 [1]

Group 1: Ford Motor Company - The automobile industry is facing significant changes, with declining car ownership and longer-lasting vehicles impacting traditional manufacturers like Ford [2][4] - Ford's U.S. market share in the electric vehicle sector is only 8.7%, trailing behind competitors such as Tesla, General Motors, Hyundai, and Kia [3] - Ford's stock has underperformed, down 64% from its early 2022 peak, and is currently priced at levels not seen since 1995, indicating a lack of growth prospects [4] - Despite stagnant growth, Ford offers a forward-looking dividend yield of 6.5% based on a quarterly payment of $0.15 per share, which is attractive compared to similarly risky investments [5] - The stock's forward-looking price/earnings ratio is low at 5.5, suggesting potential value despite the company's limited growth [6] Group 2: Merck - Merck's stock has declined 36% since its peak last March, primarily due to disappointing quarterly results and increased competition for its diabetes treatments and HPV vaccine [7][8] - Sales for diabetes treatments Januvia and Janumet fell 33% last year, but they represent less than 4% of Merck's total revenue, while Gardasil accounts for over 13% and has shown flat sales in 2024 [9] - Keytruda, Merck's flagship cancer drug, saw an 18% increase in sales to $29.5 billion, making up 46% of total revenue, with potential for further growth as it enters additional clinical trials [10] - Merck has a history of developing new blockbusters and has secured rights to promising immunotherapy projects, indicating potential for future growth [11][12] - The company has raised its dividend payments for 14 consecutive years, with a forward-looking dividend yield of just under 3.9% [13] Group 3: AES Corporation - AES Corporation's stock is down 64% from its late-2022 peak, leading to a forward-looking dividend yield of 6.7% [14] - The company operates in a transitioning industry, moving from fossil fuels to renewable energy sources, which requires significant investment and has led to increased debt [15] - Despite challenges, the renewable energy sector is projected to grow at over 17% annually through 2034, and AES expects its revenue growth to continue at least until 2027 [16] - AES has a backlog of 12.7 gigawatts in long-term contracts, supporting a positive outlook for profit growth [17] - Analysts largely view AES as a strong buy, with a consensus price target of $16.40, indicating significant upside potential from current levels [18]

Core Viewpoint - The market anticipates a year-over-year decline in AES's earnings despite an increase in revenues, with the actual results being crucial for stock price movement [1][2]. Earnings Expectations - AES is expected to report quarterly earnings of $0.34 per share, reflecting a year-over-year decrease of 53.4% [3]. - Revenue projections stand at $3.26 billion, indicating a 9.8% increase from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 4.44% over the last 30 days, indicating a bearish sentiment among analysts [4]. - The Most Accurate Estimate for AES is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -2.94% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive reading is a strong predictor of an earnings beat, particularly when combined with a favorable Zacks Rank [8]. - AES currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [11]. Historical Performance - In the last reported quarter, AES exceeded earnings expectations by delivering $0.71 per share against an expected $0.60, resulting in a surprise of +18.33% [12]. - Over the past four quarters, AES has consistently beaten consensus EPS estimates [13]. Conclusion - While AES may not be a strong candidate for an earnings beat, investors should consider other influencing factors before making investment decisions [16].