AES(AES) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2025 was $830 million, up from $698 million in the previous year, driven by growth from new renewables projects and rate-based investments in U.S. Utilities [19] - Adjusted EPS increased to $0.75 per share compared to $0.71 in the prior year, influenced by similar drivers as adjusted EBITDA [22] - The company has realized the majority of the $150 million in cost savings for the year and is on track to achieve a $300 million annual run rate in 2026 [20][26] Business Line Data and Key Metrics Changes - Renewables EBITDA saw a 46% increase year to date, primarily due to the organic growth of new projects and the maturation of U.S. Renewables businesses [6][30] - The U.S. Utilities segment is focused on maintaining affordability while addressing increased demand, with a rate increase request that is less than the cumulative impact of inflation since the last adjustment [14][17] - The Energy Infrastructure segment's higher EBITDA reflects the acquisition of the remaining ownership in the Cochrane coal plant and the commencement of operations at the Gatun gas plant [24] Market Data and Key Metrics Changes - The company signed 2.2 gigawatts of new Power Purchase Agreements (PPAs) year to date and expects to sign an additional 1.8 gigawatts by year-end [5] - The U.S. backlog is 7.5 gigawatts, with an additional 4 gigawatts in the pipeline, all of which are safe harbored [11] - The company is experiencing strong demand across the sector, particularly from data centers, with a focus on time to power [10] Company Strategy and Development Direction - The company is committed to executing its plan and is well-positioned for growth into 2026, reaffirming its full-year 2025 guidance and long-term growth rates [4][30] - The strategy includes a focus on larger, more profitable projects, with an average project size increase of over 50% in the past five years [7][53] - The company is leveraging its safe harbor pipeline and robust domestic supply chain to meet growing energy demand [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strategic and financial objectives, highlighting a clear line of sight to EBITDA growth through ongoing construction projects [30] - The company anticipates a strong step-up in growth rates over the next two years, with a long-term growth rate of 5% to 7% through 2027 [26][27] - Management noted that the energy infrastructure segment's drag from asset sales and coal retirements is expected to lessen, allowing for more robust overall growth [39] Other Important Information - The company has a capital allocation plan that includes returning over $500 million in dividends to shareholders while investing approximately $1.8 billion toward new growth [28] - The company has repaid approximately $400 million of subsidiary debt, maintaining a strong balance sheet consistent with its investment-grade credit ratings [29] Q&A Session Summary Question: Long-term growth outlook and asset sales impact - Management reaffirmed the 5% to 7% growth guidance through 2027, with the $400 million in EBITDA expected from projects coming online in 2027 and beyond [36][38] Question: Parent funding and balance sheet capacity - The focus is on strengthening the balance sheet and maintaining investment-grade ratings, with no plans to issue equity in the near term [42][44] Question: Demand acceleration and data center interest - Strong interest from data centers is noted, with a focus on larger, more profitable projects rather than just the number of gigawatts [51][53] Question: Energy storage demand and opportunities - Energy storage is critical for meeting growing demand, with strong demand expected for both behind-the-meter and grid services [56][57] Question: Utility opportunities and IRP update - Advanced negotiations are ongoing, with expectations to announce deals soon, focusing on building transmission and generation capacity [65][66] Question: Powered land opportunity details - The powered land solution involves co-locating data centers with existing power projects, providing a site for development along with an associated PPA [68][100]