Core Insights - The AES Corporation is expanding its renewable energy generation through solar, wind, and battery storage to meet long-term clean energy targets while also increasing its presence in the liquefied natural gas (LNG) market [1][2] - The company is facing challenges due to a decline in wholesale electricity prices [1][6] Growth Catalysts for AES - AES completed the development of 1.2 gigawatts (GW) of solar and energy storage projects in Q2 2025 and aims to add 3.2 GW of renewable capacity by year-end [2][9] - In Q2 2025, AES secured long-term power purchase agreements (PPAs) for 1.6 GW of renewables, increasing its total PPA backlog to 12 GW [3] - AES Indiana's acquisition of the 170-megawatt (MW) Crossvine solar-plus-storage project is set to begin operations in 2027 [3] - The company completed the construction of the 1,000 MW Bellefield 1 project, supported by a 15-year contract with Amazon, and plans to deploy up to 1,300 MW of solar, wind, and battery energy storage by 2027 [4][9] LNG Operations - AES operates LNG import terminals in the Dominican Republic with a storage capacity of 160,000 cubic meters, supplying re-gasified LNG to industrial users and third-party power plants [5][9] Headwinds for AES - The decline in wholesale electricity prices is attributed to the rising adoption of renewable energy, abundant natural gas, and demand-side management initiatives, with new PPAs being signed at lower rates [6] - This downward trend in electricity prices is expected to continue, potentially impacting AES's financial performance [6] Financial Overview - As of June 30, 2025, AES had a long-term debt of $26.55 billion and a current debt of $3.72 billion, with cash equivalents of $2.11 billion [7] Stock Performance - Over the past six months, AES shares have increased by 20.7%, outperforming the industry's growth of 7.7% [8]

Group 1 - In July, five best-performing S&P 500 stocks gained between 24% and 36%, significantly outperforming the S&P 500's 2% return [3][7] - The five stocks included Generac, Invesco, Norwegian Cruise Line, AES, and GE Vernova, with GE Vernova showing a 61% gain year-to-date in the first half of 2025 [3][7] - Stock performance over a single month is not a reliable indicator for future performance, as short time horizons diminish the correlation between business results and stock prices [8][12] Group 2 - A study by Boston Consulting Group indicates that stock valuation is a major factor in single-year performance, and short-term thinking increases the importance of valuation [9][10] - Investor sentiment plays a significant role in stock valuations, as demonstrated by Nvidia's fluctuating valuation based on market perception [10][12] - Companies should focus on business fundamentals rather than short-term stock movements, as these fundamentals are better indicators of future performance [14][16] Group 3 - Invesco's recent success is attributed to a strategic change in its ETF structure, which could enhance profitability and long-term stock performance [15][16] - Embracing market volatility is essential for long-term investment success, as it prevents investors from making impulsive decisions during market fluctuations [13][16]

Core Insights - There is a growing concern that SaaS software may no longer dominate the market, with analysts highlighting the potential threat posed by AI-native companies to traditional enterprise software business models [1] Group 1: Industry Trends - Analysts are increasingly discussing the shift in the software landscape, suggesting that AI-native companies could disrupt established SaaS providers [1] - The recommendation for investors is to safeguard their investments in software-heavy companies due to these emerging risks [1] Group 2: Analyst Background - The analyst has a strong educational background, holding an MBA in Management and a B.S. in Finance from Manhattan College, along with credit training from New York University [1] - The analyst is recognized for expertise in areas such as the Exponential Age, SaaS software, and Blockchain [1]

Market Overview - The overall market is considered expensive by historical metrics, with the S&P 500's forward price-to-earnings (P/E) ratio at 22.1, a level last seen during the COVID rebound and the dot-com bubble [3][4] Investment Opportunities Cheap Dividends - **AES Corp.**: Virginia-based electric utility with a 5.5% yield, trading at 5 times cash-flow estimates and a PEG of 0.6, indicating it is inexpensive compared to growth estimates [4][5] - **Edison International**: Offers a 5.9% yield, with shares down over 25% due to wildfire litigation, but expected to generate decent top-line growth and significant profit recovery in the coming years [6][8][9] - **Amcor**: A packaging specialist yielding 5.2%, acting defensively while being involved in various sectors, with a P/CF of roughly 6x [11][19] - **Kodiak Gas Services**: An energy services firm yielding 5.2%, well-positioned for growth with a young fleet and trading at 6 times cash flow estimates [12][14] - **Atlas Energy Solutions**: Yielding 8.4%, but shares have dropped 45% this year; however, it has sufficient free cash flow to cover dividends [15][17] - **United Parcel Service (UPS)**: A blue-chip stock yielding 7.5%, shares have lost nearly half their value in two years, trading at roughly 8 times cash-flow estimates [18][21][22] - **Western Union**: Yielding 11.3%, facing competition from payment apps, but has launched initiatives to improve operations and expand digital offerings [23][24]

Group 1 - The AES Corporation (NYSE: AES) is recommended for a speculative Buy for risk-aware investors willing to accept volatility [1] - Concerns exist regarding the company's debt load and operational underperformance [1] - The analysis is conducted by a stock analyst with over 20 years of experience in quantitative research, financial modeling, and risk management [1] Group 2 - The analyst has a focus on equity valuation, market trends, and portfolio optimization to identify high-growth investment opportunities [1] - The research approach combines rigorous risk management with a long-term perspective on value creation [1] - There is a particular interest in macroeconomic trends, corporate earnings, and financial statement analysis [1]

Group 1 - iREIT+HOYA Capital focuses on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1] - The article discusses the potential of beaten down dividend stocks, which can be considered 'dead money' but may yield significant returns when market conditions improve [2] - The emphasis is on defensive stocks with a medium- to long-term investment horizon, appealing to enterprising investors looking for value [2] Group 2 - The article does not provide specific investment advice or recommendations, highlighting the importance of due diligence by readers [4][5] - It clarifies that past performance is not indicative of future results, and no guarantees are made regarding investment suitability [5]

Core Viewpoint - The article discusses seven low beta stocks with dividend yields up to 8%, which are considered more stable during market downturns, providing a cushion against volatility [2][3]. Group 1: Low-Beta Dividend Stocks - Getty Realty (GTY) offers a 6.6% yield with a 5-year beta of 0.86 and a 1-year beta of 0.12, indicating lower volatility compared to the market. The company has a stable cash-flowing tenant base, primarily from convenience stores and car washes [5][7]. - AES Corp. (AES) has a 5.5% yield and operates with a 1-year beta of 0.88 and a 5-year beta of 0.96. It combines traditional utility services with renewable energy sales, providing growth potential [9][10]. - Northwest Bancshares (NWBI) offers a 6.8% yield with a 5-year beta of 0.69 and a 1-year beta of 0.80. The company has a solid balance sheet but faces challenges in consistent growth despite a recent merger [11][12]. - Conagra Brands (CAG) has a yield of 7.4% but faces significant challenges, including supply chain issues and food inflation, with a 1-year beta of -0.05 and a 5-year beta of 0.08 [17][21]. - Cal-Maine Foods (CALM) boasts an 8.0% yield and has seen a 60% increase year-to-date, with a 1-year beta of 0.67 and a 5-year beta of 0.19. The company has benefited from rising egg prices but faces income variability [23][24]. Group 2: Market Performance and Trends - The article highlights that low beta stocks tend to attract buyers during market downturns, which can help stabilize their share prices [3]. - The performance of low beta stocks like Kraft Heinz (KHC) and General Mills (GIS) has been disappointing, with low betas reflecting counter-market movements rather than stability [14][15]. - The overall trend indicates that while some low beta stocks have maintained dividends, their growth has been limited, and challenges remain in the current market environment [16][22].

Group 1 - The Dividend Champions list is a monthly compilation of companies that have consistently increased their annual dividend payouts, but the data can quickly become outdated due to its monthly publication frequency [1] - Justin Law is a contributor to The Dividend Kings, a group of analysts focused on teaching individuals how to invest wisely in dividend stocks [1] - The Dividend Kings curates the Dividend Champions list, highlighting companies with a history of increasing dividends [1] Group 2 - Justin Law holds a Ph.D. in Chemistry from Rice University and has earned the CFA Institute Investment Foundations certificate, applying his expertise to deep value and dividend-paying stocks [2]

Core Insights - AES reported a significant increase in non-GAAP earnings with Adjusted EPS rising to $0.51, exceeding analyst estimates of $0.40, while GAAP results showed a large loss primarily due to accounting factors [1][5][11] - The company demonstrated substantial growth in its renewables and utilities segments, with renewables SBU adjusted EBITDA increasing approximately 45% year-over-year and a target of 60% renewables growth year-over-year [1][6][12] Financial Performance - Adjusted EPS (Non-GAAP) for Q2 2025 was $0.51, a 34.2% increase from Q2 2024's $0.38 [2] - GAAP net loss was $150 million in Q2 2025, a significant decline from a net income of $153 million in Q2 2024, reflecting a 198.0% year-over-year change [2][5] - Total revenue for Q2 2025 was $2,855 million, down 3.0% from $2,942 million in Q2 2024 [2][6] - Adjusted EBITDA rose to $681 million, a 3.5% increase year-over-year [2][9] Business Overview - AES focuses on electricity generation and distribution, emphasizing renewable energy sources like solar and wind, and is recognized as the top provider of clean energy to corporations globally [3][4] - The company has a substantial project pipeline in renewables, with 12 GW in total, including 5.2 GW under construction [7] Segment Performance - The renewables segment saw a revenue increase of 4.1% year-over-year, driven by new projects and improved operations [6][9] - The utilities segment experienced a 6.5% revenue rise, supported by investments in grid modernization and new generation [8][9] - Energy Infrastructure revenue declined by 10.7% year-over-year due to the absence of one-time benefits from previous years [6] Future Outlook - Management reaffirmed its 2025 financial outlook, expecting non-GAAP Adjusted EBITDA between $2,650 million and $2,850 million, and Adjusted EPS between $2.10 and $2.26 [12] - The company anticipates annualized non-GAAP Adjusted EPS growth of 7% to 9% through 2025, with similar growth of 5% to 7% targeted through 2027 [12] - Investors should monitor trends in renewable energy origination, particularly in the data center sector, and further rate proceedings in the utilities segment [13]

Part I [Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2025, show a decrease in total revenue and a shift from net income to a net loss compared to the same period in 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $48.54 billion, a slight increase from $47.41 billion at December 31, 2024 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $6,320 | $6,831 | | **Total Noncurrent Assets** | $42,222 | $40,575 | | **Total Assets** | **$48,542** | **$47,406** | | **Total Current Liabilities** | $7,679 | $8,571 | | **Total Noncurrent Liabilities** | $31,001 | $30,193 | | **Total Liabilities** | $38,680 | $38,764 | | **Total Equity** | $7,683 | $7,704 | | **Total Liabilities and Equity** | **$48,542** | **$47,406** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, the company reported a net loss of $150 million, a significant downturn from a net income of $153 million in the same period of 2024 Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,855 | $2,942 | $5,781 | $6,027 | | Operating Margin | $453 | $553 | $894 | $1,172 | | Net Income (Loss) | $(150) | $153 | $(223) | $431 | | Net Income (Loss) Attributable to AES | $(95) | $276 | $(49) | $708 | | Diluted EPS | $(0.15) | $0.39 | $(0.08) | $0.99 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities significantly increased to $1.52 billion from $679 million in the prior year Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,521 | $679 | | Net cash used in investing activities | $(2,882) | $(4,224) | | Net cash provided by financing activities | $1,462 | $3,759 | | **Total increase in cash** | **$162** | **$158** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and transactions, including a restructuring program, debt financing, asset impairments, and segment reporting updates - The company initiated a restructuring program in February 2025 to streamline its organization, resulting in pre-tax charges of **$52 million** for the first six months of 2025[190](index=190&type=chunk) - A significant asset impairment reversal of **$243 million** was recorded for the Mong Duong asset group after it was reclassified from held-for-sale to held-and-used. Conversely, impairment expenses of **$117 million** were recognized for AES Clean Energy Development projects[162](index=162&type=chunk)[163](index=163&type=chunk)[166](index=166&type=chunk) - The company sold 50% of its interest in Dominican Republic Renewables in June 2025 for **$103 million**, resulting in a pre-tax gain of **$70 million**[174](index=174&type=chunk) - The company changed its segment reporting in Q1 2025, moving the results of its businesses in Chile (excluding two coal plants) from the Energy Infrastructure SBU to the Renewables SBU[130](index=130&type=chunk) [Management's Discussion and Analysis (MD&A)](index=48&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses a decrease in net income for Q2 and H1 2025 compared to 2024, primarily due to higher income tax expense, losses on sales-type leases, and lower earnings from the Energy Infrastructure SBU [Executive Summary](index=49&type=section&id=Executive%20Summary) In Q2 2025, net income decreased by $303 million year-over-year to a loss of $150 million, while Adjusted EBITDA rose by $23 million to $681 million Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Loss) | ($150M) | $153M | ($303M) | | Diluted EPS | ($0.15) | $0.39 | ($0.54) | | Adjusted EBITDA (Non-GAAP) | $681M | $658M | +$23M | | Adjusted EPS (Non-GAAP) | $0.51 | $0.38 | +$0.13 | H1 2025 vs H1 2024 Performance | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income (Loss) | ($223M) | $431M | ($654M) | | Diluted EPS | ($0.08) | $0.99 | ($1.07) | | Adjusted EBITDA (Non-GAAP) | $1,272M | $1,298M | ($26M) | | Adjusted EPS (Non-GAAP) | $0.78 | $0.89 | ($0.11) | [Review of Consolidated Results of Operations](index=51&type=section&id=Review%20of%20Consolidated%20Results%20of%20Operations) Consolidated revenue for Q2 2025 decreased by 3% to $2.86 billion, and operating margin fell 18% to $453 million compared to Q2 2024 - Q2 2025 revenue decreased by **$87 million (3%)** YoY, largely due to a **$156 million** decline in the Energy Infrastructure SBU, partially offset by a **$58 million** increase in Utilities and a **$25 million** increase in Renewables[224](index=224&type=chunk) - Q2 2025 operating margin decreased by **$100 million (18%)** YoY, with declines of **$82 million** in Energy Infrastructure, **$20 million** in Utilities, and **$15 million** in Renewables[226](index=226&type=chunk) - A significant driver for the decline in Energy Infrastructure results was the prior year revenue of **$64 million** from the monetization of the Warrior Run coal plant PPA[224](index=224&type=chunk)[229](index=229&type=chunk) - Asset impairment reversals of **$154 million** in Q2 2025, compared to an expense of **$38 million** in Q2 2024, were primarily due to a **$243 million** reversal for the Mong Duong asset group[254](index=254&type=chunk) [SBU Performance Analysis](index=59&type=section&id=SBU%20Performance%20Analysis) In Q2 2025, the Renewables SBU showed strong growth with Adjusted EBITDA increasing 56% to $240 million, while Utilities and Energy Infrastructure SBUs saw declines Adjusted EBITDA by SBU (in millions) | SBU | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Renewables | $240 | $154 | 56% | $401 | $265 | 51% | | Utilities | $196 | $214 | -8% | $419 | $396 | 6% | | Energy Infrastructure | $254 | $303 | -16% | $508 | $659 | -23% | | New Energy Technologies | ($17) | ($14) | -21% | ($42) | ($31) | -35% | - Renewables SBU growth was driven by new projects coming online and lower costs after restructuring, partially offset by the sale of AES Brasil[301](index=301&type=chunk)[302](index=302&type=chunk) - Utilities SBU performance was impacted by planned outages and the selldown of AES Ohio, though H1 results were boosted by higher retail rates from the 2024 Base Rate Order[309](index=309&type=chunk)[310](index=310&type=chunk)[312](index=312&type=chunk) - Energy Infrastructure SBU decline was mainly due to higher prior-year revenues from the monetization of the Warrior Run PPA and prior-year derivative gains[315](index=315&type=chunk)[317](index=317&type=chunk) [Key Trends and Uncertainties](index=68&type=section&id=Key%20Trends%20and%20Uncertainties) The company faces key trends and uncertainties including supply chain issues, U.S. tax law changes, decarbonization initiatives, and regulatory matters - **Supply Chain:** The company has managed risks from tariffs and trade restrictions by contracting and importing all solar panels and batteries needed for 2025 U.S. projects and has secured U.S. or allied-sourced supply for its 2026-2027 backlog[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - **U.S. Tax Law:** The 2025 Act amends and phases out certain renewable energy tax credits (ITC/PTC). While the company expects its project backlog to qualify, new Treasury guidance and restrictions on foreign entities of concern (FEOC) create uncertainty[348](index=348&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)[353](index=353&type=chunk) - **Decarbonization:** AES intends to exit the substantial majority of its coal facilities by year-end 2025, but efforts in some markets will continue beyond 2027 due to grid and market dynamics[378](index=378&type=chunk) - **Regulatory:** AES Ohio withdrew its Smart Grid Phase 2 application due to new legislation (H.B. 15) and has a distribution rate case pending. AES Indiana filed a new rate case in June 2025 seeking a phased revenue increase[385](index=385&type=chunk)[386](index=386&type=chunk)[388](index=388&type=chunk) [Capital Resources and Liquidity](index=79&type=section&id=Capital%20Resources%20and%20Liquidity) As of June 30, 2025, AES had $1.4 billion in unrestricted cash and total Parent Company Liquidity of $2.2 billion, with total debt outstanding of $29.7 billion Parent Company Liquidity (in millions) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Parent Co. & qualified holding co. cash | $9 | $265 | | Available borrowings under credit facilities | $2,185 | $1,782 | | **Total Parent Company Liquidity** | **$2,194** | **$2,047** | - As of June 30, 2025, total outstanding debt was approximately **$29.7 billion**, comprising **$23.9 billion** in non-recourse debt and **$5.8 billion** in recourse debt[414](index=414&type=chunk) - Primary cash uses in H1 2025 were capital expenditures (**$2.6B**), repayments under revolving credit facilities (**$2.4B**), and repayments of non-recourse debt (**$1.5B**)[425](index=425&type=chunk)[427](index=427&type=chunk) - **$175 million** of subsidiary non-recourse debt is in default as of June 30, 2025, primarily related to AES Puerto Rico (payment default) and technical defaults at AES Ilumina and AES Jordan Solar. These defaults do not currently trigger cross-defaults at the Parent Company level[414](index=414&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=86&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from commodity prices, interest rates, and foreign currency exchange rates, which are managed through hedging strategies - Primary market risks are commodity prices, interest rates, and foreign currency exchange rates[453](index=453&type=chunk) - As of June 30, 2025, a **10%** increase in commodity prices is projected to result in a pre-tax earnings gain of less than **$5 million** for power and gas, and a loss of less than **$5 million** for coal[457](index=457&type=chunk) - The company has material unhedged forward-looking earnings exposure to the Argentine peso. A **10%** USD appreciation against other key currencies (Colombian peso, Euro, Argentine peso) would result in a potential loss of less than **$5 million** on cash distributions[464](index=464&type=chunk) - A one-time **100-basis-point** increase in interest rates would result in less than a **$5 million** pre-tax earnings impact on interest expense for 2025[468](index=468&type=chunk) [Controls and Procedures](index=89&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a previously disclosed material weakness - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025[470](index=470&type=chunk) - The ineffectiveness is due to a previously identified material weakness related to the impairment calculation for the AES Brasil disposition in Q2 2024[471](index=471&type=chunk) - Remediation actions, including policy updates and training, have been implemented but are pending testing to confirm operating effectiveness[473](index=473&type=chunk)[474](index=474&type=chunk)[475](index=475&type=chunk) Part II [Legal Proceedings](index=90&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in several legal proceedings, including arbitration in India, environmental actions in Brazil, and lawsuits in the Dominican Republic - A lawsuit in the Dominican Republic alleges personal injuries from CCRs delivered in 2003-2004 and demands over **$900 million** in damages. A lower court dismissed the case, but the claimants have appealed[484](index=484&type=chunk) - Another lawsuit in the Dominican Republic related to CCRs demands over **$600 million**. The company's motion to dismiss is under consideration[487](index=487&type=chunk) - In Brazil, AES faces a public civil action related to contamination at a former pole factory, with estimated remediation costs of **$3 million** to **$11 million**[480](index=480&type=chunk) - The company and its subsidiary are named as defendants in a putative securities class action lawsuit against Fluence Energy, Inc., alleging violations of the Securities Exchange Act. The company has filed a motion to dismiss[491](index=491&type=chunk) [Risk Factors](index=93&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company states that there have been no material changes to the risk factors previously disclosed in its 2024 Form 10-K - There have been no material changes to the risk factors disclosed in the 2024 Form 10-K[494](index=494&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=94&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not repurchase any of its common stock during the second quarter of 2025, with $264 million remaining available for future repurchases - No shares of AES Common Stock were repurchased during the second quarter of 2025[495](index=495&type=chunk) - As of June 30, 2025, **$264 million** remained available for future repurchases under the company's stock buyback program[495](index=495&type=chunk)